Tag: a16z

• Crypto is really hard to explain, but things are happening

  I was at a dinner recently where the topic of crypto came up. Only two of us at the table were full-on believers, and the rest were generally sceptics. So naturally, the two of us started talking about why we think crypto is important. But in moments like this, it always becomes immediately clear that crypto is really hard to explain in a succinct and compelling way. Like, I don’t know how to do it. Thankfully, venture firm a16z just released their latest State of Crypto report, and so here are a handful of interesting takeaways.

  

  The number of crypto addresses continues to grow. Currently it’s at an all-time high of approximately 220 million, which roughly mirrors the adoption curve of the internet back in the 90s (log scale). It is, however, important to note that one crypto address does not necessarily correspond to one human being. For example, I have many different crypto addresses. So if you dig a little deeper, you’ll see that their net estimate is somewhere between 30-60 million real human beings transacting using crypto every month. This is the estimated active user base and it continues to grow.

  

  The number of mobile crypto wallet users is also growing rapidly outside of the US, namely in countries like Nigeria, India, and Argentina. This is the result of a number of factors: population growth, mobile phone adoption, government support, inflation, and many others. I mean, since 2010, the Argentine Peso has lost basically 99% of its value against the USD. So of course you’d rather put your money somewhere else, such as in stablecoins.

  

  Stablecoins are cryptocurrencies that have their value pegged to something else, such as a fiat currency. Today, they are one of the most popular crypto products and virtually all of them (more than 99%) are pegged to the USD dollar. This is viewed by some as an opportunity to strengthen the dominance of the US dollar at a time when it’s waning (see above). But more importantly, stablecoins already serve two important functions in the market: one, it’s as stable as the US dollar; and two, the cost of sending a stablecoin anywhere in the world is now basically free. Say goodbye to bank wire transfers.

  It’s worth reiterating that a16z is a venture capital firm that is heavily invested in the crypto space. And so reports like this are naturally a form of marketing and a form of lobbying. Still, there’s a lot of great information in here that you can use to form your own opinions about the sector. It may not be succinct, but if you take the time, I think you’ll find it compelling.

  2024.10.16

• How to make the internet more like our cities

  I am halfway through reading Read Write Own and I can confidently say that you want to read this book. If you’re already a believer in this “next era of the internet” (like I am) it will make you a true believer. And if you’re not a believer, maybe it will make you one. Or not. Either way, I am thoroughly enjoying it.

  One chapter that will be particularly interesting to all of you is the one where Dixon makes a comparison between the internet and cities. Cities, he argues, work because of a delicate interplay between public and private interests. And the private side works because, among other things, we have the rule of law and the construct of ownership.

  If I own an asset, like a piece of real estate, I’m only going to be confident to invest in it if I know that someone won’t take it away from me (or dramatically change the rules on me), which is why if this prerequisite doesn’t exist, you typically see a lack of investment.

  The same is true on the internet. But currently, the dominant form of networks are centralized corporate networks. In city terms, you can think of these like an amusement park. Once you enter through the gates, you’re in their world. You could maybe rent some space, but at the end of the day, the owner makes the rules. And if they don’t like what you’re doing, they can remove you.

  It’s a pretty stark contrast when you think of it in these terms, which is why it’s hard not to feel compelled when you consider that similar dynamics are playing out on the internet right now. Cities thrive because we have rules, ownership, and the freedom to innovate on top of the foundations laid by government.

  So I’m all for making the internet more like our most successful cities.

  2023.11.15

• Decentralization and public infrastructure

  

  Decentralization, in the crypto/blockchain/web3 sense of the word, is a crucial thing. Here is an excellent article talking about why it is the key innovation of blockchain technology and why it is a central feature in this new emerging web3 world.

  But of course, it can all get very complicated. So I thought this — and in particular the sentence in bold below — was a good way of describing the benefits:

  “…decentralization enables web3 systems to be credibly neutral (they cannot discriminate against any individual stakeholder or any group of stakeholders, which is critical to incentivize developers to build within ecosystems) and composable (to mix and match software components like Lego bricks). As a result, web3 systems function more like public infrastructure than proprietary technology platforms. In contrast to the gated software of Web2, web3 protocols provide decentralized internet infrastructure on which anybody can build and create an internet business. Crucially, in web3, this can be done without the permission of the original deployer of the protocol or the need to use a centrally controlled interface.“

  This resonated with me because think about how important public infrastructure is to our cities. Most of us take it for granted that, when we need it, we can just plug in and access electricity, water, sewer, and other public infrastructure.

  But throughout history, these services have been fundamental to the growth of our cities. They empowered scale and better health outcomes, among other things. So it’s exciting to think that we are now living through the creation of something kind of similar in tech.

  Image: a16z

  2023.06.12

• A discussion about Adam Neumann’s new residential apartment startup — Flow

  This an interesting discussion about Adam Neumann’s new startup Flow (which I recently wrote about here).

  More specifically though, the discussion is about venture capital firms backing “failed” entrepreneurs, and whether or not Flow can really be that much more valuable than your typical apartment REIT.

  In its simplest form, Flow might just end up being an apartment company with a strong national brand and a consistent resident experience. But maybe that’s all it needs to be.

  If the link doesn’t already do it for you, jump to the 7:19 mark to start with this discussion. After Flow, the podcast moves on to housing policy in the Bay Area, Houston, and Miami. So you may also want to stick around for that.

  Thank you Ocean Jangda for sending this over.

  2022.09.01

• Adam Neumann raises $350 million to revolutionize the apartment market

  Today it was announced that venture firm a16z has made a $350 million investment in Adam Neumann’s new residential rental company called Flow (which is kind of ironic).

  The company is set to launch in 2023 and nobody on the outside seems to be entirely clear on how it plans to revolutionize the multi-family rental market, but supposedly this funding round values Flow at more than $1 billion and supposedly Neumann will be rolling in the 4,000 or so apartments that he has been buying up.

  In any event, here’s how a16z described the opportunity (I think the key sentence is probably the one about creating a system where renters become like owners):

  Only through a seismic shift in the way industry relationships are structured and the mechanisms through which value is delivered can we hope to address the underlying problems of the current system and build the solution. Doing this requires combining community-driven, experience-centric service with the latest technology in a way that has never been done before to create a system where renters receive the benefits of owners. This means rethinking the entire value chain, from the way buildings are purchased and owned to the way residents interact with their buildings to the way value is distributed among stakeholders. And given the fragmented nature of the ecosystem today, we can only hope to accomplish any of this by bringing every aspect of the living experience together.

  What I will say is that I think it’s great to see this amount of innovation-focused money flowing into the residential real estate space, which is, after all, the biggest asset class in the world and one that could certainly use some fresh ideas. Apparently it’s also the biggest funding round that a16z has ever done.

  But I also find a16z’s characterization of the problems a bit odd. Renting an apartment is described as this soulless and profoundly lonely experience where you’re so ashamed of where you live that you’re even hesitant to invite friends over. They also conflate house with home, as if to say that you can’t have the latter without the former.

  On second thought, maybe these are exactly the right problems to be solving. It is our biases that we need to do something about.

  2022.08.15

• It’s time to build, but not here

  Oof.

  Let’s assume for a second that you penned an article back in April 2020 called, “It’s time to build.” And in this article, you argued, among other things, that we’re not building nearly enough housing and that home prices are skyrocketing as a result.

  Now let’s assume that a new multi-family zoning overlay is being proposed for your own neighborhood in an attempt to increase said housing supply and alleviate some of the concerns around home prices. And in response to this proposal, you pen this:

  

  One might call this being hypocritical. But I’m not here to name call. I think the real lesson is what Jerusalem Demsas points out in her recent article, “The Billionaire’s Dilemma.”

  What we have is a macro-micro disconnect that policy makers need to be more aware of. At the macro level we know what we should be doing in order to achieve our stated objectives. But if we allow people at the micro level to veto these efforts, they often will, and sometimes using ALL CAPS.

  2022.08.05

• A headquarters in the cloud

  Venture firm a16z just announced that it will be “moving its headquarters to the cloud.” At the same time, it announced 3 new offices in Miami Beach, New York, and Santa Monica. These will be in addition to their existing offices in Menlo Park and San Francisco.

  Part of their argument is that hybrid work is weakening the network effects and agglomeration economies associated with being right in Silicon Valley. So they’ve deiced to be virtual, but still have offices where they can “materialize physically” when needed.

  They acknowledge that physical presence is important for developing a company’s culture, building relationships, and helping entrepreneurs (their core business).

  What’s interesting about all of this is that it’s further validation for Miami (Beach). Here is one of the most important venture firms out there saying that when they quickly materialize in real life, they want to be able to do that in Miami Beach.

  It also raises some interesting questions. Because even if the network effects of Silicon Valley are weakening when it comes to tech, this announcement still speaks to the importance of agglomeration economies. These three new office locations were chosen for a reason.

  2022.07.21

• Happiness vs. satisfaction

  I have heard from some of you that you don’t like it when I write about crypto and NFTs. This personal blog is supposed to be largely about city building after all. So today I thought I would write about crypto and NFTs. More specifically, this podcast episode, which I watched last night.

  It’s with Marc Andreessen and Chris Dixon of the venture firm a16z, and it’s actually less about specific things like NFTs and more about the reinvention of the internet in general. Why I found it particularly interesting is that Marc co-invented the first widely-used web browser. Anyone remember Netscape?

  So he was around for what we are now calling web 1 and he is around for what we are today calling web 3. And there are lots of parallels between then and now. Similar to today with crypto, the early internet had lots of critics and lots of people who thought it was dumb and that it would never amount to much.

  Oops.

  Here are a few other thoughts and ideas from the podcast that I found interesting (some of them even relate to city building):

  • No matter how many times we have seen the same movie, humanity seems doomed to repeat the same mistakes when it comes to, among other things, embracing new ideas and innovations. I agree with Marc in that part of this is generational. Younger people are often more open to new ideas because they view it as a way for them to establish themselves and make their mark on the world. Whereas older people (established people) often view new ideas and change as a threat to their current position in the world.
  • Marc drops a number of books throughout the talk and one of them is The Mystery of Capital — Why Capitalism Succeeds in the West and Fails Everywhere Else. This is a well known book by Hernando De Soto and the big idea is that property ownership and property rights are really the fundamental ingredients in our modern world. People need to know that if they hold title and invest money into something, it’s not just going to get taken away by someone. And it is this underlying legal structure that has allowed people to leverage property into wealth.
  • This is a fascinating observation in its own right, but it also relates to crypto. Hear me out. Chris Dixon makes the argument in the episode that web1 democratized information (anyone can search for stuff), and that web2 democratized publishing (anyone can share stuff through platforms like Twitter or the blogging platform I’m writing on right now). He then goes on to argue that the promise of web3 and crypto is really to democratize ownership of the internet. Anyone can buy crypto tokens.
  • Why might this be a big deal? Well if property rights in our offline world are a fundamental ingredient to modern society, it seems logical to me that property rights in our digital world(s) might also be equally transformative. And this is precisely one of the things that blockchain technologies enable for the very first time.
  • Finally, on a mostly unrelated note, I liked Marc’s comparison of happiness vs. satisfaction in life. Happiness, he explains, is like getting an ice cream cone on a hot summer day. The first and second feel great, but after that you move on. Satisfaction on the other hand is enduring. It’s the feeling you get from working on something really challenging and then finally succeeding. And that’s exactly how I feel about real estate development. There are lots of shitty days and lots of grinding. But in the end, I do feel very satisfied.

  2022.06.02

• State of Crypto

  Everybody wishes that they bought companies like Amazon way back when they first went public, and then held them until today. If you did that, you would of course now be rich. But what would you have had to deal with along the way?

  Well, for one, you would have had to stomach an 80% decline in its share price when the dot-com bubble burst. And so while hindsight is always 20-20, do you really think that, faced with this cliff, you would have held on, not freaked out, and not sold? Yeah, who knows.

  Moving to today and the crypto space, the price of Ether is down 51% over the last 6 months. That’s not quite 80%, but 51% is still a big number, especially if you dumped all of your savings into it and/or borrowed money to do so.

  But does this decline really mean that crypto is rat poison?

  Last year when the market cap of crypto was rising, I believed that crypto had the potential to become the next big thing for the internet. And I still believe that today, which is why I continue to dollar cost average and why I continue to collect NFTs that I like.

  I may be wrong with the conviction I have (and this post will serve as permanent evidence of it), but it’s what I believe. And my conviction doesn’t depend on today’s price. It depends on what I think it could happen with crypto in the next 10 years.

  So with that, here is an interesting “State of Crypto” report that venture firm a16z just published. I think the key message here is that this is a longtime coming. And while it is still early days, momentum continues to grow. But of course, you should decide for yourself what you believe.

  2022.05.17

• A universal language for global trade

  This article by Ryan Petersen is a good history lesson on how shipping containers came to be. Here is an excerpt:

  The idea for containerization came from a trucker, not a shipper. Malcolm McLean started out hauling empty tobacco barrels with his family in North Carolina in 1935. At that time, entire trucks would drive onto ships, wasting both a ton of potential cargo space, plus a chassis that could be on the road moving goods. McLean developed plans to use the so-called trailerships for travel from North Carolina to New York, but U.S. regulations didn’t allow one person to own both a trucking and a shipping company at the same time. So McLean did what any innovation-minded entrepreneur would do: He dumped the trucking company, took out a $22 million loan, and, in January 1956, bought two World War II T-2 tankers. 

  The magic of shipping containers is that they created a standard. Now all of a sudden you had standardized boxes that were intermodal. They could fit on ships, rail, and trucks. Ryan refers to containers as the “unsung hero of logistics.”

  He also likens them to the HTTP standard that helped give us the internet that we know today. Before HTTP, computers could only communicate with each other if they were on the same local network. Now we are, of course, connected globally.

  But while containers standardized a part of our physical infrastructure, there’s a lot that remains fragmented and manual:

  The same way data passes between devices via the internet, goods pass between ocean ports, airports, warehouses, and other entities to reach their final destination. Without a logistics standard to act as a request-response protocol, all the players — suppliers, drayage, ports, warehouses, buyers — have to stitch their networks together manually. 

  Information gets lost; layers of redundancy, designed as backups given low visibility, slow the exchange: connections end up being very brittle. Let’s say there’s a shipment scheduled to arrive in Long Beach on Tuesday. But which terminal exactly and what pier number? What time is pickup? How long before late charges are incurred? Finding these answers is labor-intensive and imprecise. Logistics managers end up consulting different sources on websites, via email, or in person. 

  The dirty secret of the industry is that no one really knows where their stuff is.

  I’ll be honest in that I was expecting the article to transition into talk of blockchains. But that’s okay. The underlying message remains the same. Better software and more standardization is needed to improve our physical world.

  For some added context: Ryan Petersen is the founder of a company called Flexport.

  2021.11.17