ep 28 – Financial Freedom, Company Building, More

Transcript

[Music] Welcome to Web 3 with a16z, a show about building the next generation of the internet from the team at a16z crypto. That includes me, your host Sonal Chokshi. Today's episode is a wide-ranging conversation on company building big to small, including how often and when to ship, to the relationship between centralization, decentralization, and platforms, to moving from Web 2 to Web 3 in both crypto and payments, as well as why Bitcoin, views on remote work, and much, much more. Because it's an interview with David Marcus, CEO and co-founder of Lightspark, which is building infrastructure for the Lightning Network to extend the capabilities and utility of Bitcoin. Marcus was also a co-creator of Diem, aka Libra, the cryptocurrency

project initiated by Facebook. Before that, he was vice president of messaging products there, where he ran the Facebook Messenger unit. And prior to joining Facebook, Marcus was a former president of PayPal. Our format is a conversation where I just helped kick things off, but I left more time midway for a rich and interesting set of questions from the audience, as this originally took place live on stage at our crypto startup school a couple months ago. As a reminder, none of the following should be taken as investment, legal, business, or tax advice. Please see a16z.com/disclosures for more important information, including a link to a list of our investments.

Thank you so much for joining us today, David. My pleasure. We're really honored to have you here today. And just to kick us off, I want to spend some time just laying the ground. When people hear about your career, it seems kind of random. Like, what ties it all together? I'd love for you to share with us the throughline. Yeah, it actually all makes sense. There's a method to the madness. Yes, there is a method to the madness. So, basically, look, I started companies, tech startups, when I was back in Europe. And the last one that I did was actually at the intersection of messaging and payments, because it was a payments company that uh built on top of mobile operators uh billing capabilities, and was integrated into premium SMS and

mobile messaging. And in 2007, when the iPhone came out, I was like, okay, you know, we're not going to sell ringtones and wallpapers Yeah. anymore because you have an actual device that has access to the internet. So, I moved to the US, built the company into a payments company, that was Zong, that got acquired by PayPal. At the time it got acquired by PayPal, I thought I was going to stick around for a year and then go back to building a startup, but the CEO of PayPal then left to run Yahoo, and unexpectedly to me, I was asked to replace him and run the company. And so, I had to go from managing 250 people at most to 17,000 people, Wow. which was kind of an interesting thing. Yeah. But then, I realized that

after a while that actually there's this political campaign expression of shaking hands and kissing babies. That wasn't really for me, you know, just managing processes and just culture and not being closer to the product. So, I was ready to go back to building startups when Mark asked me to join Facebook and join him to start building uh messaging product at Facebook. And so, I did that. And then after a few years, it basically reached its uh cruising altitude. We had like about a billion and a half users. We had found a business model for messaging in the West, which, you know, wasn't that obvious. And it felt like it was really

going to be doing well on its own. Yeah. And that's when I got really excited about this idea of building an open payments protocol for the internet with Libra, and sold Mark on the idea. And then, you know, we tried to actually sell this to governments and regulators, who were not super enthused with the idea, to say the least. And when we failed, I left to actually come and do what I'm doing now with Lightspark. So, so it it has like a little bit of a a method to the madness. I want to probe you a little bit more on some more specific connections between payments and crypto. But before I do, I do want to ask about Libra. I think many of us in the room are probably very curious.

And I know you've talked about it before, but like, why do you think it didn't work? So, actually, I don't know whether I said this publicly before, but my original pitch to Mark was actually to do it outside of Facebook, and for Facebook to own a minority stake into a company that would go and develop the idea. And I remember saying actually, if we do it from here, it's going to be a very, very difficult uphill battle. Yeah. And that's was in early 2018. And Facebook's reputation after that got even worse for a period of time. I think now it's a lot better, but for a period of time got really worse.

And it was still worth a shot, right? Because when do you get a chance to actually go build the standard protocol that might be adopted in the world because Facebook had 3.5 billion people using its products every month. And as such, like if we were to actually succeed, it would have truly become the open payment protocol for the internet that we all hoped should exist, right? And so, it was worth a try. Yeah. And we sure did try. That's the one thing. I feel like I have no regrets. I was about to ask you if you did.

I have no regrets because I feel like, first of all, I've learned a ton. Yeah. And it was the most intellectually stimulating almost 4 years of my life, hands down. And, you know, I met amazing people, and we went to battle together, and, you know, many of these people are actually with me at Lightspark now. Mhm. And you asked why it failed. I think, you know, the association with Facebook was just too much Mhm. for regulators and governments. And it was definitely a political kill job, 100%. Yeah, based on who was the promoter of the project.

That's good to know. Okay, I think that scratches that itch. I have to just also ask a quick kind of curiosity check, because a lot of people in the room right now are building their companies. They're probably thinking about branding and naming. Why did the project go from, I don't even know the order, but like, Libra to Diem to Novi, or the other way around? What's the story? that I don't want to rename anything for the rest of my life, cuz I've done enough of it. Yeah. But a lot of people said the narrative was actually a lot around like, oh, this thing got rebranded so that it becomes more palatable, right?

Yeah. But actually, it wasn't that. It's like, let me put it in a short way. Someone really messed up. Uh-huh. And as such, we needed to change the name. Got it. So, given the thread of your career so far, payments, messaging, crypto, in shifting to crypto full-time, and of course, you did that at Facebook, but as a startup founder, it's most definitely a different game. What is the biggest sort of, oh my god, I really didn't expect this for you? So, for me, what matters at the end of the day is, and I think that applies to probably everyone here in the room, is you need to find the thing that really pisses you off about the world, the

thing that is really broken that you want to go fix. And for me, I've reached the conclusion that the one thing that I'm going to dedicate the rest of my life to at this point is really making an open protocol for payments on the internet happen. Mhm. Because it's an anomaly in the world. Mhm. It leaves too many people behind. It's unfair. And basically, the world of payments right now looks like the telecoms industry pre-internet. You had a bunch of large companies that were the only ones that had access to the underlying transport network, Yes. were able to set the prices. And at the time, we used to pay a dollar a minute for an international call, Right.

I remember those. 25 cents per text messages. And then the internet happened, and it enabled the innovation that we're all benefiting from right now, and consumers benefited greatly. And right now, the underlying infrastructure that we use for the vast majority of payments in the world today, in 2023, was built in the late '60s and '70s. And that's unacceptable. And so, when you find something that really, really fires you up every morning that you want to go fix, and especially, you know, if you've had the opportunity, let me put it this way, to be in a position of failure Mhm. after having tried really hard, then that doubles down the amount of energy that you want to put in to actually make it happen. Yeah, you

really want to make it work. But also, what I'm hearing you say there, it feels cliché, but it's not. You have to really believe so strongly in that mission to deal with the ups and downs of a startup. Because if you're doing just like a spreadsheet, and then, I'm going to identify this business to solve, you may lose your mojo after a while. There's a lot you have to do. Yeah. So, on payments, I love thinking about the infrastructure and the analogy, especially of like, this is what telecoms were then. But as a user, I am pretty satisfied, personally. Like, I like going to my store, just Apple Pay. I actually love PayPal. Like, what's really broken about payments?

Because Well, look, fine to me. you know, I think that if you'd asked people whether they had a need for better communications at the time they were sending faxes, they would say, no, it's fine, it works. I can send a message, it comes out in a piece of paper on the other side of the world. Why would I need email and WhatsApp and video messaging and all of these wonderful things, right? And I think the same is true. But you bring up a good point, which is in the US, Mhm. we have a very distorted vision of what the vast majority of people in the world are experiencing.

Mhm. The vast majority in the world would love uh Chase account denominated in dollars, but they don't. Like the vast majority of people around the world are experiencing super high inflation, hyperinflation. They're experiencing governments that are basically screwing them again and again and again because they're devaluing their currency. And they don't have safe and sound money. They rely on the cash economy. They get mugged all the time because they live in high crime areas and because there's no technological solution to address this, like a good sound safe digital money that you can transmit over the internet, right? And that's the reality that most

people, the vast majority of people in the world are experiencing. But even here in the US, like there's still no interoperability protocol for money. If you were using the cash app, then you can send to only other cash app consumers or users. You can't go and send money across apps the same way you send an email from Gmail to Yahoo or any other domain, right? Not a neutral open protocol. Yeah, there's no open protocol for value, for money, for payments on the internet, which is nuts. Yeah, it is nuts. And gosh, what do you think, especially given your former role and what you're doing now, of PayPal's, you know, moves to essentially deplatform users in payments? I never thought I

would see a day where this would happen in the US. Like I was pretty shocked. Yeah, well, I think this is just a sign of times. And why crypto in general is actually very relevant to the world right now because you need to decentralize the decision-making on what someone likes or what someone doesn't like, whether it's speech, money, and you know, freedom of speech is something we talk a lot about, but financial freedom is as important if not more important. And, you know, it's one thing that you get censored off of a platform that you use to communicate.

It's another if people take your money away. So, the work that we're all doing in this space is actually super important for humanity in general and for our society. Great context. Let's now go a little deeper into the specifics to those of us working in crypto specifically. Another question that's top of mind, and obviously huge Bitcoin fan, but why Bitcoin? What does it give you that you think you can't get elsewhere? You know, as probably the only a16z investment in Bitcoin, I can talk to that. Look, I feel like it depends what you're building.

If you're building in web3 and you're trying to build functionality around that, then Bitcoin is probably not the right choice. Yeah. But if you're building for money and payments, then it's the only choice in my mind. And I have absolute conviction. Tell us why. Well, I mean, first of all, when it comes to money and payments, as we've experienced with Libra, I still like to call it Libra. You can't offer any surface of attack because otherwise that's going to be leveraged to stop it. And when it comes to money, people are highly motivated in not enabling money to move in a free way. And as such, if you look at any

other chain, you have people that you can get to, that you can apply pressure to. You have companies that are very prominent and Bitcoin is the only chain that doesn't have a visible leader. I hope we'll never know who Satoshi was or is, and is the most decentralized chain out there. And arguably, I think that for money application, proof of work is a far superior consensus algorithm, if we can call it that, than any VMs and others. So, I think that the only way that you build a true open payment protocol for the internet is to build it on something that is as decentralized and as leaderless as

Bitcoin. Yeah. And you know, just for clarification, I mean, technically, any decentralized cryptocurrency is leaderless in that it could operate just fine, but your point is well taken. And again, if you're building NFTs or gaming applications, all kinds of different applications that look for decentralized platform, then Bitcoin is not the place. Ethereum and other EVs are the places to actually go build that. I think that money is a whole different story and uh the level of opposition that you'll find as you're building money things is just far greater than any of these other things.

Yeah, I like what you said about how there's this built-in resistance to money moving around. It immediately made me think of gravity and this idea that money has this inertia associated with it. Just have to do so much to the system to be able to enable it to move simply because of how nothing is interoperable by default for all the reasons you just outlined. I never thought of it that way. There's a reason why money still moves on infrastructure that was built in the '60s and '70s, and that reason is not technological. Is it regulatory capture? It's, you know, yeah, you can call it that. It's pretty clear that there's a lot of vested interest in things staying the way they are right now. Let's put it this way.

So, a lot of the people in this room are also thinking in terms of product. When you think about this particular application that you're building, and given your entire vantage point of everything you've worked on until now, people tend to say design, UX. You talk about in your guys' work about enterprise grade. What do these things mean, and what do you think builders in the space need to do? And I would love to hear an answer that goes beyond we need better design and UX because I love that answer, but I hear it all the time, and so I I challenge us to build better on that.

feel that in our industry, we've taken a very inside-out view of the world. Basically, a lot of times it's a solution in search for a problem. Yes. And not something that is actually mainstream. It's also not really internalizing what the expectations of either consumers or enterprises actually are. And so, you have to meet people where they are. You have to build a product and an experience that is actually what people need. And so, in our case, we're building on lightning. It's a fast, open, interoperable, dirt cheap protocol for payments that is really great, but it's really amazingly hard to use. It's a channel-based payment system, and no

one understands what that means to actually lock up liquidity in channels, find other parties to open a channel with them with inbound liquidity so you can receive payments. All of these things are not things that people or enterprises have come to expect or are prepared to even deal with in terms of the level of complexity. And so, you have to go and really see what you need to do to get to mainstream adoption, not what you can do or what you think you should do. And I find that in our industry, not enough people are actually doing that.

In some cases, you have crypto products that are so hard to use, come to wonder whether it's almost like a rite of passage. Like if you figure it out, you're one of us. Yes. So, you can actually use the product, but if you can't figure it out, like you're really not. I think that's absolutely true, especially if on-chain gaming currently, but in the case of payments, that would be absolutely awful. So, when you sell your product, then like who are the customers? A lot of people in this room are figuring that out. So, right now, we don't want to touch consumers. We want to stay at the center of the network and try to make it really, really easy to use this wonderful open payment protocol. And right now, there are a number of builders that are building on top of Bitcoin things that were not existing,

like ordinals, and the equivalent of ERC-20 tokens that are being built on top of Bitcoin, and that's clogging up Bitcoin because it was not really designed for that. And the fees are going up, and the mempool is getting backed up. And as such, you need an escape valve, and lightning is great for that. So, right now, the clients that are onboarding our platform are exchanges, they're wallet operators. And, you know, we shipped our product 3 weeks ago, and then this happened literally last week, and like this is amazing. Like when do you get such a a good alignment of stars? Oh, that's really great. So, early on, you mentioned that you went from 250 people at PayPal, I mean, to

your your startup that was acquired by PayPal to suddenly 17,000 people. Then you were at Facebook, where you started this separate project, you ran it, massive business unit. And now you're at a startup again with like 29 people. Yep. What would you say, when you think about this transition from small to big to small, what kind of takeaways do you have for people, especially again, in this room? We're all kind of in the same phase of just starting out. But small is great. It's really the best. It's uh you know, no big team Yeah. has ever built in software anything meaningful. That's right. It's always a small team. It's always a small group of people. It's always a small group of people that has

zero process or very little process Yeah. and flat organizations, and those are the best times. For instance, we're very principled in how we hire. We are really hiring only the people we need and we know we're going to need for a very long period of time rather than over-hiring prematurely because I think that that in nine times out of 10 leads to premature death of companies. And so, staying small for as long as possible is really actually a massively underrated competitive advantage. You know, when you scale past a certain stage, you don't have 100% of the people who are there because they believe in the mission, you start to have people

who are there because they think it's a good paycheck and they have stability and good health care plans. Right. And, you know, that's when you know that you've entered a different phase, but I personally really enjoy no overhead, small teams, hardcore types of experiences and that's where I have, you know, the most fun and I feel that you get the most stuff done. That sounds like for everyone in this room, this is your time to enjoy that phase. Okay, so lightning round before we open it up to questions. I'm going to give you like a quick prod or prompt and I would love to hear like a super quick like lightning style answer. What is the worst advice you've ever received as a founder either now or in your early days when you were

starting out? I got so many bad advice. One interesting story. So, at some point I got an invitation to join in very, very early days the board of Shopify, which is a company that I really admire and I think the world of Toby and the team there. And one of my mentors at the time was like, "Oh, you shouldn't join a board that's not in the same time zone or in the same place because otherwise, you know." And so I'm like, you know, maybe this guy has a lot more experience than I do because and so I turned that down at a time where it was pre-IPO. Yeah.

been a great, fun, valuable ride and I didn't do it. So, you know, that's one one advice that That's terrible advice. I I can't believe honestly, I can't believe you fell for it. I'm sorry, that's terrible. Time Yeah, right. Like, you know, in hindsight, what do I I'm giving you a hard time. Okay, now what is a piece of advice that you heard over and over again early on, but that you believe that founders will always hear, but they never believe it when they hear it. They kind of have to experience it in order to really realize this advice. Look, I think that stuff like I talked about around like really holding your horses on hiring and overgrowing.

Yeah. But then you're in a thing where you've raised too much money and you don't have the fear of death of your company at the end of the year or at the end of a period of time, which is a great motivator to actually find product market fit, iterate fast, be hardcore, work nights and weekends and get things done. And you believe that to get to that point instead, you need to hire more people. And then you go in all kinds of other directions instead of being focused on one singular thing. And at the same time when you hit a vein and you find product market fit and you have the resources to scale, then you need to do it in a responsible way, not in a an irresponsible way.

Yeah so And so just trying to really understand the place you're at in the life cycle of your company is really critical. I think, you know, that's one of the things. And then, you know, I feel like the one thing that is actually advice that people can hear, especially if you're a startup founder Yeah. around really manifesting the reality that you want. Because so many times you're actually as a company you're about to die and you need to make magic happen to actually get your company to the next stage. And you have to believe it yourself because if you don't believe it yourself if you don't project it, if you don't see it yourself, then you won't be able

to make it happen. So, really really trying to project where you're going and see through the wall that you need to actually get through Yeah. is really a very important ability that successful startup founders have. Great. I want to make sure we leave time for the room. So, one quick note before I switch into that. You alluded to it subtly. The regulatory aspects, whether for Libra or, you know, regulatory capture in the payments industry or any of these other things. What do you make of the current regulatory environment, especially given where you were when you're at Facebook, where you are now? I mean, you've seen it kind of you've seen it all. Yeah, I look, I think that it's a shame

for this country to be in a place of non-competitiveness for the lack of a better formulation. Some of the biggest technological revolutions of our generation happened here in the US. And right now we're not in a place to compete because we don't have regulatory clarity. Yeah. So, lots of projects are taking crazy amount of risk in building here without the clarity that what they're building is actually going to be approved or tolerated by regulators. And in the meantime, you have a lot of other jurisdictions that are really really driving competitiveness and like you can see it in Singapore, now in Hong Kong

where you see China Yeah. really taking a 180 on the matter because they see Singapore leading and they feel like Hong Kong needs to be back in the game. You see the Gulf countries and the Emirates now like really too. Yeah, the UK. They want competitiveness and we're way, way, way behind the ball on this. That's like really not good. But I have hope. I feel like we have a House Financial Services Committee that is trying to push a few bills that might provide much needed clarity for all of us. And so, I still have hope that things will change, but right now it's really not good. It's funny, many years ago Mark and I worked on an op-ed about regulatory arbitrage and this idea that you could essentially

as an entrepreneur pick your jurisdiction to figure out how to run the experiments, whatever your technology, like self-driving cars in Detroit or wherever the neighbor It was at the time of Arizona, wherever it is or across the world. And on one hand, I think it's kind of also amazing that entrepreneurs have so much choice to decide where to go, where to build, where to, you know, really build these ecosystems. So, Yeah. that's that's exciting and interesting. Yeah, it's good for entrepreneur, but it's bad for America and as as a US citizen and, you know, someone who wants innovation to be here it's kind of sad. Yeah, I agree with that.

So, we kind of did the local and the global to just you, David Marcus, the builder, the person, the entrepreneur. That's fantastic. Thank you, David. So, Let's open it up to questions now. So, everyone please come up and feel free to ask your questions for David. Hey, David. Fantastic talk. You spoke to process when it comes to building up the team and how small teams create like awesome products and then if you grow, you start developing process that slows down the team. Can you speak more to how to avoid having process when you're, let's say, onboarding two, three, four people

onto a team? And then the second point I wanted to get your perspective on is the like the shipping cadence. What constitutes like an excellent product development flow and in like a team cadence versus trying to have something look perfect 6 weeks from now versus like, "Oh, let's have something incrementally better tomorrow." Great question. The first one is you shouldn't think about process too much because when the lack of process becomes a problem, you'll know it for sure. I feel like a lot of people have read business books and organizational things and have listened to podcasts and all kinds of advice. And the answer to this thing is like, you know, don't have process until

you really badly need it and you really know when that actually happens. And it's kind of interesting for me personally because I spent a decade of my life in large corporations and the rest of my time was actually building startups for most of my life and I had to remember and deprogram myself around how I learned how to operate for the last 10 years and go back to actually, no, we don't want process right now. We just want to execute and have people really focused on that and just do the minimal thing right now. On your question around cadence, you never, ever want to ship something that is perfect.

If you do, that means you're too late. And at the same time, you have to ship something that you know you can fix forward pretty rapidly when actual people onboard the product. So, you need to find that balance of finding the right moment, but remember that every iteration of your product is a massive competitive advantage. So, you have other people who think that they know, but you don't know until you have real customers onboarding your product and using it for the first time. And as many iterations as you can get is as competitive as you'll be compared to whomever is building the competitive product right behind you.

So, ship often, iterate fast and, you know, try to move as fast as possible. Thank you. Welcome. Iteration is innovation. Love that. Yeah. Hey, David. Thank you for the awesome awesome talk. My question concerns your role as a founder. I'm curious how that has shifted from the very, very beginning when it was idea stage, when it's like three to five people, seven to 10 people and where the company sits today. So, you know, I feel that the first few turns of the wheel is really crystallizing the problem that you're going to solve and getting people excited about that. So, can you actually recruit co-founders? Can you recruit the first few people that are going to sign

up on this vision of yours with actually very little clear path towards the upside that they're going to generate with you along this journey. And that applies to investors and can you get investors on board? And then, you know, from there can you scale? But I think the first few phases are really the most fascinating phases and often the hardest when you live them but when you look back those are always the best because we're talking about manifesting things you have to manifest something that really only exists in your head and then get all the people and the capital and the structure you need to actually go after it and those are formative moments they're often the best moments actually

because everything's possible. Then when you come and you face reality then you you know you realize that not everything is possible. Wait. Thank you for the fantastic answer. Hi David, thanks for the great talk. I have two questions. The first one is mostly related to the payments part of this. Personally, I work at Airbnb payments handling the global transactions and then as an immigrant I experienced different payment system. I deeply understand how broken the payment system is and I believe that what you are doing is very important and I'm glad to see that a lot of people like you are building the solution to help simplify the payment system globally. But my question is as we know different region

have different consumer behaviors. America is very credit card basis Europe is debit card basis Asia is more like a mobile payment. So what are most use cases that the Lightspeed's clients are targeting like the application level? Do you see any major obstacles to push the crypto payments adoption globally? That's a very good question. Let me unpack in a few little modules. The first one is what we aim to do think of it you know as one or a few satoshis which is basically one satoshi is a hundred millionth of a Bitcoin on top of lightning we see it a little bit like a TCP IP packet for value

right? So just making that vision happen like having an interoperability protocol where you can actually move value and attach whatever you want to it to actually transact globally is dial tone for money basically and that's the baseline that we want to establish and what we hope is that if you have the lowest cost fastest settlement time openness to build payment protocol for the internet that actually happens then you'll have a lot of companies building on top of that because the next best thing is actually a lot worse right? So we hope that a number of companies will actually build a lot of experiences on top of this new protocol for payments

because it's going to be the best protocol for payments. And then the regional applications will actually be in the hands of people who are actually in those regions building the best solution but the interoperability is really the key. Money moves not in an optimal way domestically here in the US and in a number of other countries but cross-border it universally doesn't move the way it should. It's expensive and it's complicated and cumbersome. So mentioned that you've had an experience as managing payments in a large organization that not only needs to accept payments from consumers but also pay out to a lot of people in the world.

This is extremely complicated costly people who work very hard don't get paid as fast as they should be. That creates all kinds of capital inefficiencies in the world so we believe that actually providing that net settlement layer for money on the internet is going to unlock a lot of value and regional differences will be handled by different players. Got it and then the second question is about the time zone as you mentioned you reject the offer because time zone. So I'm curious on how's the Lightspark operating right now? Is the team like remote or at the same place? Do you encounter any problem managing like distributed system?

Yeah so I've been called old fashioned that way for a while because I actually like to have a team in an office. I hated every single minute of COVID and working remotely staring at a screen for 12 hours a day. I actually get energy from interacting with people and I think people do their best work especially in creative phases of a startup in person. That doesn't mean that some companies are not going to take advantage of having the ability to tap into a global pool of talent and organize in a global way but if you have an opportunity to actually build in person in my mind and my personal preference is a much better way and so we're 90% of our team of Lightspark is actually here in the

office in LA. And it's an amazing experience and you know we're very lucky that a lot of people actually moved out of the Bay Area during COVID and found themselves here in LA and in other places so we've been able to recruit a really solid team in person. And I'm very happy for this and so we don't have to manage time zones. Good to hear thank you. Hi David. I have a question around like what you think is the number one reason why something like a WeChat has not emerged anywhere outside of China? I feel like what happened in China especially around like all of the innovation that happened on WeChat is basically that the country leapfrogged because it didn't have a solid app store

at the time. It didn't have credit card penetration so QR code based payments and all these things were able to actually start to exist because most of transactions were cash based and not credit card or electronic based and so it leapfrogged. The question actually can apply to a number of other topics here where we need to leapfrog to the next version of things when it comes to in in our case payments or other experiences but it's really important to understand in a certain market what are the ingrained habits that might actually get in the way of changing things. So when you're launching a new product for instance are you actually displacing an ingrained habit that is mainstream? Because if you have to do that that's really hard

right? Or can you actually leapfrog to the next version of the experience and start a brand new behavior? That's an awesome answer. I was just curious around like Elon and what he's trying to do with the everything app. What do you think are some of the challenges he's going to run into given your experience? Well it depends the graph matters. One of the things that we've experienced when we were building Messenger is that we had a graph that was name based and identity based rather than phone number based. So for some applications the nice thing with a phone number based graph is that you actually have an explicit permission that you give someone to actually contact you because you share your phone number versus someone random finding you on Facebook and starting to

communicate with you. And so the usage is different like so your high value communications actually happen more in a phone graph where you have explicit authorization of who can chat with you versus loose connections that don't have your phone number. You know that's one of the things that you need to internalize when you're trying to build a network effect of any kind for specific application. So the question then becomes okay so what can Twitter be great at? In the case of Twitter I think you know all of the creator monetization stuff and getting people to actually reach an audience and monetize that audience on Twitter I think that'd be great. Are you going to pay your plumber on the Twitter graph? Probably not right? So I think those are the the

different types of use cases that I think different graphs will lead to. Awesome thank you. Hi David. I'm wearing my lightning hat for the occasion. Much appreciated. We are doing multiplayer creative experiences so basically people get together to make art together. So for us is very important that interoperability make things on chain. We started build everything on Ethereum but the moment ordinal kind of came in we started to work with it so you're not the the only one working on Bitcoin we are like deep on it.

So my question is to you how do you see right now Bitcoin? Do you think that Bitcoin has another chance because this is the way we see it like this is the last chance for Bitcoin to become important again. It was taken from from us just put it this way and now we can build another layer on top. So I don't have a really religious dogmatic view about Bitcoin. I just think that for certain things it's really the only way especially for money I think it's really the only way. I think ordinal is kind of interesting because it can also tap into the immense liquidity of Bitcoin which is still by far the most successful asset by market cap standard. So I

really think that there's also a lot of energy coming back to Bitcoin because the time of issuing a token and making a lot of money really quickly by not delivering a lot of value is just behind us now and people couldn't do that on Bitcoin because the asset was already there right? So I feel that you see a lot more development energy coming back to Bitcoin but I think that we shouldn't undersell what it is. If you have digital gold at scale plus the global money protocol or payment protocol for the internet running on top of this thing that in itself is huge as in like humanity changing huge. Like you have a

sound and safe decentralized store of value that no one can take away from you and you have an open interoperable internet for money that anyone in the world can access that has access to the internet that's a huge deal. For me I would be satisfied with just that becoming a thing and payments running on top of Bitcoin as a global thing and becoming mainstream I think is good enough. That being said I think it's good that there's a lot more developer energy coming to Bitcoin again because for certain applications I think it'll be a great place to build.

Yeah you're right when my friends with did the double wizard our mission was to teach people about Bitcoin. One of our requests was to use lightning so we kind of like I did the record transaction on lightning. So, I think being said that bringing the culture to Bitcoin also bring users because I think a lot of people that like NFTs they want the NFT they don't want Ethereum. But this is what Ethereum benefit from it. So, that's our point of view on that. Yeah, I agree. I feel that it's kind of an interesting time and I know this is a very Bitcoin-centric network but if you spend time on Nostr right now and you see the amount of activity around zaps and people basically sending like you know 10 cents here, 5 cents here just as

a way to tip people for comments and posts. It's pretty fascinating to see the adoption. So, like that's one example of bringing a cultural type of behavior to a network such as Bitcoin and seeing it come to life. I'm all for that. I think that there's an interesting world where sats or satoshis become like native magical internet money for a lot of things which would be a great outcome. But I don't think we can bank on that and that's why you know we're building the ability for people to actually transact on top of lightning with any currency that you want and enabling people to to move value and look at it just as a protocol to settle on the internet rather than an end-all

meets all where people are going to buy coffee with Bitcoin, you know. Great. Thank you. Great. Welcome. Thanks so much. Wanted to ask about how you think about the tradeoffs between a relatively more unopinionated or agnostic base layer as well as the sort of diverging regulatory requirements of bringing that to the end user and how that kind of bakes into that more like protocol design process. Yeah, that's a great question and when I get that kind of questioning I always come back to what has worked in other protocols basically. And so if you look at the internet and the way that the internet has been organized and protocols on top of the internet have been organized, the protocols themselves are pretty open or mostly open in most

parts of the world. And then you have companies that are building on top of these protocols that then are held to regulatory standards and they have to adopt and adapt those regulatory standards to continue to exist otherwise people go to prison and doesn't end up well. So, the same is true here. SMTP for email is not regulated as a protocol but if you're a big spammer, then you get in trouble. Then I think the same should be true for other forms of decentralized protocols that are being built which is don't constrain the core protocol. Let it do its thing but then hold companies that are building on top of these protocols that are interfacing with consumers and others accountable to regulatory standards that will protect

consumers and enable that industry to flourish. Thanks so much. By the way, there's a neat parallel to the history of the internet. I don't know if you remember this when there was a phase when Van Jacobson put the TCP into the TCP/IP when the internet it wasn't ready to support like this multi-media use case. Anyway, it's really fascinating because the story that I understood from what you just shared is that innovation is about things kind of coming together like by taping things together. Like it's not beautiful intelligent design. Exactly. It's like you're kind of figuring it out as you go along. That's American innovation.

Thanks so much for sharing your incredible story. I've always been fascinated by lightning and I feel further convinced by this talk. I guess my question was if we were to zoom out on like a 100-year time scale, what do you see as the optimal relationship between decentralized organizations, corporations, open source projects, and governments around the solutions for identity, payments, and communication? Well, I mean if you look at the way that those networks have been built over time, it's been largely a sort of tacit public-private partnership where the governments basically set the rules of the road but largely let the private sector innovate and build the

capabilities. Even our payment systems right now, the most successful fintech startup of all time is Visa arguably and it's a private company and it's very centralized but they've built a very large-scale payment network and it's a private company that operates within the rules that have been set by the various regulators and governments. So, I think that's a good model. The interesting thing with crypto especially and decentralization is that it offers an alternative and the alternative is going to keep the more centralized versions of these things honest because people will have a choice of where they communicate, where they actually bank or move money and

they'll have a choice and that choice will actually put more pressure and will benefit everyone because you have an alternative that is decentralized in nature that can't be controlled in the same way. And I think that's very important for speech. It's very important for financial freedom in the world. And I think that escape valve of sort is really critical especially now at this time. I think people talk a lot about how crypto used to be the cool thing but now it's all AI. You know, I love AI. I think it's fascinating what's happening right now and how fast it's moving but I also think that the importance for society as a whole of having decentralized forms of systems as an

alternative has never been more important in the world. And so, I think the work that we're all doing in this industry is really immensely critical in my mind. Thank you. Awesome. Well, David, thank you so much for taking the time. You're welcome. My pleasure. [Applause] Thank you for listening to web3 with a16z. You can find show notes with links to resources, books, or papers discussed, transcripts, and more at a16zcrypto.com.

This episode was produced and edited by Sonal Chokshi. That's me. The episode was technically edited by our audio editor Justin Golden. Credit also to Moonshot Design for the art and all thanks to support from a16z crypto. To follow more of our work and get updates, resources from us and from others, be sure to subscribe to our web3 weekly newsletter. You can find it on our website at a16zcrypto.com. Thank you for listening and for subscribing. Let's go. [Music]