Apple Nears $3 Trillion + The Truth About Web3 — With Benedict Evans

Benedict Evans is an independent analyst who covers big tech and the broader technology landscape. He joins Big Technology Podcast to discuss Apple's move to $3 trillion, how the rest of the Big Tech companies stack up, what Web3 is really all about, and his former employer Andreessen Horowitz. Stick around for the third segment where he answers questions from Twitter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

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• 0:43Alex Kantrowitz?

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• 1:18Alex Kantrowitz?

  Hello and welcome to the Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. We have a great guest for you today, someone I've really been excited to read and now to speak with. It's Benedict Evans. He's an analyst. You can find his writing at ben-evans.com. Formerly of Andreessen Horowitz, now independent. Welcome to the independent life, Benedict. And I am thrilled to have you on the show. Thank you for inviting me. So I definitely want to start with a spin through big tech. And let's do that in the first segment, and then we could talk about everyone's favorite topic, Web 3, in a second, and get to some Twitter questions towards the end. But first, how's independent life for you?

• 2:03Alex Kantrowitz?

  And you know, you've left a big, very prominent venture capital firm. Now you're going at it on your own. Are you enjoying it?

• 2:11Speaker 01

  Well, one answer is yes. I mean, I think Marc Andreessen said before when you're at a startup, absolutely nothing happens unless you do it yourself. So I think there's certainly that feeling where you think, I have spent sent 75 emails today, but I'm not quite sure what I did.

• 2:29Speaker 01

  I didn't actually write anything. There was a Russian surrealist who said today I wrote nothing, and I'm sure you can emphasize that feeling.

• 2:37Alex Kantrowitz?

  Definitely.

• 2:39Speaker 01

  But I don't know. I mean, there's different ways to answer this. One of them is, you know, there's a business and the business is doing fine. Another answer is I was at one of the best venture firms and all the cleverest people in the world came and told us what they're working on. And I'm a venture partner at a VC in London and I see lots of clever people, but you know, it's not quite the same as a flow at Andreessen Horowitz. Another is Silicon Valley is sort of a college town. And when you're there, everything is about tech. And when you're not there, the way that you think about tech and hear about it is different in ways that are good and bad. And then, of course, I left and landed into the pandemic. So that was obviously a shift in, in, in, you know, lifestyle that makes it kind of hard to, hard to compare. You know,

• 3:23Speaker 01

  all things, all things being equal, it's been a good change, but it's, you know, it's the change itself is kind of interesting in trying to examine, well, what do I know now? What am I interested in? What would I be interested in if I was in a different place?

• 3:36Alex Kantrowitz?

  Yeah, definitely. And I also, like I was at BuzzFeed, I left the bubble in San Francisco, came to New York. I've been independent for a year and a half. And it does sort of shift your focus in ways that are interesting. And, you know, I, so I put a call out for Twitter questions before we spoke. And there were a lot of questions about Andreessen Horowitz. So I hope we can get to some of those as the podcast goes on. But first, you know, why don't we dive right back into the bubble and talk a little bit about the big tech companies? You've done a lot of writing about them, a lot of analysis on them. And I think that's a good place to start. There was definitely some interest from folks in the audience about, about Twitter, about Apple. Sameep Ashetti from CNBC, you know, one of the Twitter questions,

• 4:21Alex Kantrowitz?

  we'll just kick off the discussion with that. She said it's a great opportunity to get deeper into Apple. You know, she wants to know if you have thoughts on Apple. It's soon to be a $3 trillion. And as you put it, elephant in the corner. And, you know, you have this great essay, a number of great essays about Apple. But one is

• 4:40Alex Kantrowitz?

  Get the title. It is a decade of the Tim Cook machine. And it's interesting because you talk about how Apple isn't part of any of the controversies. It silently ships. And that's worked quite well for it, but I couldn't quite tell whether you're pro Apple or anti Apple, whether you're bullish or bears on the company because you know, the subhead that you had is, is there another Jesus phone? And we know that there, you know, there hasn't been a monumental product shift from Apple. Maybe since the iPad, I mean, maybe since the iPhone. And the things they're working on now, AR glasses and the car are very much behind. And there's really no sign that they're going to ship those anytime soon. So what is the state of Apple today?

• 5:23Alex Kantrowitz?

  And, you know, I'd say the market is pretty bullish on it.

• 5:26Speaker 01

  Three trillion dollars, I would, I would certainly think so, yeah. I don't, I mean, you could sort of make a similar point about Google and Amazon and to some degree, Facebook, you know, there's his business and just turn the handle and you get more. And that's, you know, Google search, which is sort of invisible, but yeah, it's magically better every year without you quite knowing. I mean, I think somebody the other day said, um, you know, I Googled crazy fat guy in New Orleans novel. And I got a Confederacy of Dunces by John Kennedy O'Toole. And I imagine doing that into a search engine in 2000. You would never expect that to work. And now you just kind of presume it will work. So you could kind of make that point about, about all of these companies. But, you know, I thought the thing that struck me particularly about Apple is, you know,

• 6:07Speaker 01

  they do this stuff that's objectively amazing, that they ship a new operating system, new hardware every year, more or less on schedule, a little bit, a few things slip around the edges. But, you know, they, they do a processor transition, they replace the file system on every phone without even telling everybody, anybody. All these sort of monumental engineering achievements just kind of happen on this kind of tick tock, tick tock cycle. And there they are, this, you know, 1.1, 1.2 billion people have got iPhone today. And in parallel to that, they're sort of not in those giant arguments about privacy, about, you know, control of the ad market, misinformation, you know, labour laws,

• 6:50Speaker 01

  mostly absent from antitrust. And where they are on antitrust conversations, it's in the App Store, which is, you know, if they lose every App Store case, it's only fifteen billion dollars. It's actually not a lot of money for Apple, all things considered. So they're sort of not in most of those arguments. I mean, the one where they are obviously is in China, but that hasn't really cut through to kind of public consciousness. They just kind of sit there and ship and ship more and more boxes every year. More, you know, and they do them better than Intel and better than Dell and better than Qualcomm. So that was kind of interesting. The counter to that is, as you say, well, is there another Jesus phone? You know, what's the next device? And, you know, that's always a sort of an unfulfusible statement because, you know, you could have asked that the day before the iPhone. It's the iPod company, boring.

• 7:33Speaker 01

  What next? Steve Jobs has forgotten how to innovate and you could have said that. And you could look at the watch and and someone and say, well, it's kind of okay, but, you know, what's next? And you could, you could almost plug that into a much broader conversation around Metaverse and Web three. Because there's one narrative of tech that says you have this sort of fifteen year cycles. So you get mainframes and then you get the PC and then you get the web and then you get smartphones. And so what's the next cycle? You know, clearly smartphones are now kind of boring. Like they're mature, it's a maturing space. Like, we get it, we get how the App Store works, we get how apps work. Okay, now what?

• 8:12Speaker 01

  And the two candidates in that space would obviously be, on the one hand, some combination of AR/VR. And on the other hand, something about Metaverse, sorry, something about Web three. Like as another way of building websites that like that will fundamentally change how you build software on the one side. And on the other hand, sort of fundamentally change what the screen is on the other. And those are both, we can kind of talk about both of those ideas. And clearly, Apple is playing in the AR/VR space. There's a conversation about whether that's the next universal device or whether it's kind of an accessory. Again, unclear. The counter argument would be to say the kind of progression of the tech industry has been what's a computer and who has one? And the answer is it's a smartphone and the answer is everybody on earth.

• 8:57Speaker 01

  Five billion people have got a smartphone now and there's only about five point seven, five point eight billion eight people aged over fourteen. So like everyone's got one, more or less. And so the next question is, well, what happens when everybody has one? So the analogy I used in the presentation I published a few weeks ago is, you know, first fifty years of the car industry is what's a car? And who has one? And the second fifty years is what happens when everyone has a car? Which is like Walmart and suburbs and freeways and McDonald's and all bad stuff and good stuff. So you could say that doesn't have to be something after the iPhone. You could say it's unfalseifiable and they'll announce the AR glasses at WWDC and we'll go,

• 9:37Speaker 01

  oh my God, this is amazing. Actually, well, ten percent of people will say amazing and ninety percent of people will say this is garbage, is what happened with the iPhone.

• 9:43Alex Kantrowitz?

  Right, Steve Ballmer left.

• 9:45Speaker 01

  Yeah, exactly. Yeah, most of tech left, like.

• 9:49Speaker 01

  Or it might be that it's an accessory, you know, which is a broader AR VR conversation. Is this universal or is it an accessory? Or it might be that they actually, there isn't anything and they do something else in five years' time. I mean, remember when everyone was saying Apple was going to do a TV? Like maybe they might even do one now, but no one really care because TV is such a bad, so irrelevant to the tech industry. And so maybe we don't, maybe it doesn't matter. But whatever it is, meanwhile, there's this enormous business churning out hundreds of billions of dollars and a hundred million devices a year. So that's a very long answer to your question. Sorry, but you know.

• 10:25Alex Kantrowitz?

  Yeah, that was a great answer. That's given me a number of follow-ups, but let's start with this. I'm going to try to pin you down then and like what your true belief is on Apple because you have given a number of different views of it. Okay, maybe they're behind, maybe they're, you know, just doing fine. So, you know, what's your? Is it fair? I'm just going to ask you, what's your one sentence sort of summary on Apple? This is a strong company that's getting stronger and well positioned or?

• 10:51Speaker 01

  It's a very strong company. It's a very strong company. The question is, is there some generational next leap into the future? I mean, and I slightly, my one paragraph answer might be to draw a box between Apple, my opinions of Apple and Facebook. Because my opinion of Apple is I love the products, but I think a lot of their politics is bullshit. Whereas my opinion on Facebook is that I think I don't actually like the products much at all, but I think a lot of the politics around Facebook is bullshit.

• 11:17Alex Kantrowitz?

  Expand on that.

• 11:18Speaker 01

  So I think that when Apple talks about privacy, I think about half of this is bollocks, especially given it doesn't apply in China. But I love the products, whereas there's a lot of people in, you know, hardcore people in tech, you don't much like the product. Whereas on Facebook, I'm the other way around. You know, I actually think most of the criticism, a lot of the criticism of Facebook is kind of weakly founded, but I don't actually like the products much.

• 11:35Alex Kantrowitz?

  Yeah, and that's sort of my perspective on this too, is that these companies, people like, why do people, why does Facebook get this hard time and Apple seems to sail by? And I do think it's because people generally feel icky using the Facebook product, or they start to feel that social comparison that a social network forces them into. Whereas Apple, it's, they love the product, and so Apple's kind of Teflon and immune to criticism.

• 11:59Speaker 01

  I don't know. I mean, I think there's an interesting line you could kind of pull here around, you know, that Apple does these very opinionated products that really push hard to get delight in a sort of singular experience. And sometimes the tech behind it isn't great, like Maps, you know? And sometimes the product's been kind of forgotten about for years, like Apple Music. And, you know, the reality of it is, you know, it's just people and, you know, there's priorities and sometimes nobody's touched that for years. But the Apple product, when it's perfect, is all about the delight and the vision and the experience. Now, it's a big contrast with Google, say, where the perfect Google product has no experience. You just ask the question and get the answer. And the more that they try and do something that has delight, the worse it gets.

• 12:42Speaker 01

  Whereas now look at Amazon, you know, the perfect Amazon experience is the thing arrives before you orders it, before you order it. But if you go to Amazon and actually want to buy children's shoes, or want to buy a book that was issued five years ago, and say, wait a minute, why is someone trying to sell this for $800? Then it all kind of falls apart. I think one of the Twitter questions is what's Amazon bad at? And the answer is retail. I think it sucks as a retailer. It's a brilliant logistics company. Facebook, you know, I think a lot of where Facebook goes, right and wrong, is that it's brilliant at sort of surfing user behavior and being ruthless and iterative and generative at following and tracking and optimizing. But every now and then, that gets you a product that looks like Microsoft Office.

• 13:26Speaker 01

  You know, it gets you a million clicks.

• 13:29Alex Kantrowitz?

  Yeah, and so it's ruthless in

• 13:31Speaker 01

  Yeah, and that's what happened to Facebook. There's a million menus. And it's sort of what's happening to Instagram now, like, there's a million tabs.

• 13:39Alex Kantrowitz?

  I know, it's like hamburger, they call it the hamburger menu, when there's like three lines, you tap the three lines and it expands, and you tap another three lines, it expands, and it's

• 13:46Speaker 01

  So yeah, it gets more like it's a hamburger and there's a kebab and there's a meatball.

• 13:52Alex Kantrowitz?

  That's right.

• 13:53Speaker 01

  And you don't want to be in the hamburger basement, like, which is

• 13:55Alex Kantrowitz?

  No. Oh, my God. Yeah, it's a full schwarmistan. So let's go back to Apple quickly. Don't you think they deserve a little bit more scrutiny? I mean, I think about some of the stories that have come up recently. The stuff in China, right? Tim Cook promising, you know, development for Chinese Communist Party, the fact that their data centers are stored. We've done an episode with Jack Nears in the past about their data centers, you know, basically owned by Chinese Communist Party subsidiaries. The fact that they, we had Horacio, Horacio Gutierrez, who's the general counsel of Spotify, where they squeezed Spotify to give them this 30% cut, and then they released Beats, and it's, you know, the same service without the 30% cut. So something anti-competitive there.

• 14:40Speaker 01

  I mean, I think

• 14:41Alex Kantrowitz?

  But everybody loves Apple.

• 14:42Speaker 01

  I think, I mean, I think the lens for a lot of this is like, most of the stuff that we're talking about here, there's nothing wrong with it at all, except that Apple keep claiming to be Jesus.

• 14:54Alex Kantrowitz?

  Right.

• 14:55Speaker 01

  If Apple didn't keep going around talking about privacy being a fundamental human right, no one would care what they did with the data center in China. I mean, there's an old joke from the TV show Yes Minister, where a character says, so this is an irregular verb. I give confidential briefings. You leak. He's being prosecuted under section 2B of the Official Secrets Act. And it's kind of the same thing here. Like, we personalize our product. You track your users. They violate fundamental human rights.

• 15:28Speaker 01

  And I'm not sure that that's cut through. I mean, the whole Apple has mostly got away with all the privacy stuff that they did this summer, some of which was backed by genuine, and I think it's important, you know, this is, most of this is genuine, like, it's not like they don't believe it. I think Apple has this thesis that privacy on your device is like malware, security on your device, and that the operating system provider should stop malware. Equally, they should stop your private information being, being given around where you don't like it. The problem is, it's not malware. It's the New York Times trying to make a living.

• 16:06Alex Kantrowitz?

  Right.

• 16:06Speaker 01

  And they have the privilege of not having to worry about that dilemma because they don't have an ad business or don't have a meaningful ad business. It's very easy to say that you don't collect user data if you don't have a product that would benefit from user data. It's very easy to make these decisions when Apple's business doesn't actually require them to make that decision, you know, where they don't have to make the, make the choice. You know, I would love to see Mark Zuckerberg start making kind of passive aggressive comments about how no consumer electronics company should sell products in China.

• 16:38Alex Kantrowitz?

  Right.

• 16:40Speaker 01

  Apple, sort of Apple, and this is the essay that you mentioned, you know, Apple's business model means that they don't have to make those kind of difficult decisions around privacy or around user, you know, around advertising. And so they don't, but then they boast about it like it's a moral choice.

• 16:56Alex Kantrowitz?

  What do you think about the, so they, they stopped, they allowed users to opt out of tracking, which seemed to be, you know, having apps track them on the web. So Facebook, you can say, don't, as not to track, then Facebook can't ostensibly track you when you go to a webpage off of Facebook, which causes problems for advertisers. And Apple's doing this, you know, quote unquote, in the name of privacy while building their own ad business, while kneecapping Facebook, one of their main competitors. And apparently there's reporting last week that came out from the Financial Times and others.

• 17:30Speaker 01

  Oh, yeah, that they're backing off.

• 17:31Alex Kantrowitz?

  Yeah.

• 17:34Speaker 01

  Yeah, I mean, I think there's a lot of framing to this, which is kind of my point, is it tracking or is it personalizing? Yes, it's both. So maybe kind of a specific and a general point. I think the specific point is you could certainly argue that the Apple stuff about, you know, tracking within apps is basically applying cookie laws to apps. We've got all these cookie laws, but they didn't, somehow they didn't really apply to apps. And now Apple is saying, no, you have to apply them to apps as well. It's not an unreasonable position. The problem is, well, how do you ask? So if you go to like San Francisco Chronicle, you get this screen with 150 checkboxes. That doesn't seem like a great experience. Maybe you should make it simpler.

• 18:16Speaker 01

  Well, you know, I made this point and Adam Mosseri replied to me on Twitter, said, I'd love to use Adam's language for my own product. And I think this is the problem is Apple decides that we're going to define what other people do as tracking and, and tell users that it's bad. While also doing a different kind of tracking and say, that's not tracking and not really tell users that we're doing it. Or opt in by default or hide it, but in any way frame it so that it's somehow different. And I thought the, um, the C sound thing was really interesting here. Because again, you know, Apple is sincere in some ways. Apple thinks that if it's on the device, it's private.

• 18:55Speaker 01

  Now we could have this argument, why is it that if my, the computer in my pocket is trying to work out what I'm interested in and show ads, that's private. But if a computer in a Google center, Google data center is trying to work out what I'm interested in and show me ads, that's bad. Like, why, what is the like the consistent logical theory behind that? But either way, Apple has this theory. So they think, well, scanning for C Sam on your device is private. And a whole bunch of other people got really upset and say, that's not private at all. And I think that speaks to a deeper point, which is we want like, we want privacy on the internet, but we don't really have like a carefully worked out logical theory of what privacy action means.

• 19:30Alex Kantrowitz?

  Yeah.

• 19:31Speaker 01

  And you think you do until you get problems like that. And you say, well, wait, wait a minute, why is that not private?

• 19:35Alex Kantrowitz?

  Well, it's, it's amazing because so many of the, the problems on the internet are super complex. Like the folks that say, ban the ranking algorithm. Well, first of all, there's multiple algorithms that are filtering a feed, not just, not just, you know, one Facebook algorithm. Second of all, when you do that, you know, it starts to come apart, like these simplistic solutions end up leading to some of like bigger problems that, um, you know.

• 19:59Speaker 01

  I think, I mean, I could make a list of like.

• 20:03Speaker 01

  A sort of a list of tech arguments and there could be a kind of a categorization. What are the categories would be reasonable, people can disagree on this. And another category would be, no, this is a really dumb argument.

• 20:15Speaker 01

  Amazon doing private label products is basically an argument that tells me you understand literally nothing about retail. And banning ranking algorithms, I think, is another one of these. It tells me you really have never actually thought about how social products work. What it is that they're doing. Regulate them, control them. Yeah, all sorts of arguments, say, but ban them, no, you're an idiot. You genuinely haven't thought about this. I mean, I think there's a, I talk quite a lot to policymakers in Europe about some of these questions. And one of my sort of mental analogies I use is imagine it's the early seventies and we've just read our Jane Jacobs and we're all thinking about cars. And we say, well, we have to regulate cars. It's like, okay, that's quite a lot of different things.

• 20:57Speaker 01

  Because when you say regulate cars, do you mean that we should build more light rail? Or that we should mandate seat belts and catalytic converters? Or are you talking about teenage boys getting drunk and driving too fast? Or about American cities building freeways through the middle of their cities? Like, yeah, these are all problems, but they're all different problems. And the answers to most of them are kind of complicated.

• 21:20Alex Kantrowitz?

  Right. And Adam Mosseri was on Peter Kafka's Recode Media podcast talking about how like, Instagram can be like cars where like there are some downsides, they are regulated and we love cars now. And everyone killed him for it, but it's actually like, okay, maybe, you know, you know, this is not a terrible analogy because if you're able to put in sensible regulation, you could actually make life better for a lot of people.

• 21:43Speaker 01

  Well, I think the other analogy that it sort of intrigues me is to go back to, I mean, I think the car analogy is useful because, you know, there's precisely because, no, there are like 20 different questions here. And particularly not all of them are anti-trust. You know, pedestrianizing a city and building a congestion zone, that's not an anti-trust question. You know, putting seat belts into cars is not an anti-trust question. But I think, you know, the other analogy that sort of struck me is cities. That, you know, everyone moves from the village to cities, particularly in the seventies, eighteenth century. It's not really a police department. There's no sewers. There's mob rule. You get, you know, explosion of crime and all sorts of social problems. In the end, you get the French Revolution and a whole bunch of other stuff.

• 22:28Speaker 01

  We get a police department, but we do understand that there are still murders. And one of the challenges in talking about this is we kind of don't know what success would look like. I suppose that's the point, and it's also kind of the point of cars is we sort of understand that you can't have no accidents. And we understand that the police department doesn't hasn't failed if there was one murder last year. But we don't really know what success would mean, or what it is that we want them to do, or how you'd achieve that, because this all happened so fast. I mean, it took seventy five years to put seatbelts in cars. But we're not going to get to take seventy five years to regulate Instagram.

• 23:02Alex Kantrowitz?

  Right, exactly. Well, you would imagine also that that you'd have to move a little faster, because just the speed of tech and the speed of getting cars on roads and the transformations that they led to, tech is way, way faster.

• 23:13Speaker 01

  It is, but it also means we sort of didn't grow up with it. So we don't have lots of innate understandings of this. I mean, we look at something like, you know, something where we out, sorry, probably everyone listening to this will agree is the question of end to end encryption. Um, you know, so one, as I said, it's the one thing where everyone in tech agrees with Facebook. And generally, everyone kind of agrees with Facebook. I know you can't have secure end to end encryption that the police can read. You have to choose, too. So we get that. But the point is, the reason I mention this is, like, you know, if I was to say, General Motors has to make car have to make cars where the gasoline doesn't burn, we would all understand, like everyone, you don't have to work in the car industry to get that you can't have that. But because this happened so quickly, an awful lot of people who are

• 23:56Speaker 01

  not in tech actually don't understand, no, you can't have secure end to end encryption that the police can read. Because it happened so quickly.

• 24:05Alex Kantrowitz?

  Yeah, and it's definitely, sorry, go ahead.

• 24:06Speaker 01

  I was gonna, I mean, one of my favorite sort of sets of statistics is just to kind of remind people how small tech was until quite recently. You know, when Netscape launched, there were less than a hundred million PCs on earth.

• 24:16Alex Kantrowitz?

  Wow. And now, what's the number?

• 24:19Speaker 01

  There's about one.

• 24:20Alex Kantrowitz?

  Oh, you said.

• 24:21Speaker 01

  There's maybe one and a quarter, one point three, one point four billion PCs. There's probably five billion smartphones.

• 24:25Alex Kantrowitz?

  Five billion smartphones. Yeah.

• 24:27Speaker 01

  So, I mean, this stuff was, this stuff was always interesting and exciting. But it actually wasn't a very big part of the world. Most people didn't have a PC. And if they did, they didn't use it very much. It wasn't a basic part of how we all live. And it became a part of how we all live so quickly, that like, our innate understanding of it hasn't caught up with the technology.

• 24:48Alex Kantrowitz?

  What do you think happens? So we talk a lot about the US companies, right? Facebook, Amazon. What do you think happens if TikTok or another Chinese company were to take hold in the United States? And what would, how would the regulation conversation change there? Doesn't need to change. Is the US kind of powerless when it comes to that stuff? And are the fears, so like Facebook, for instance, likes to fear monger and say, hey, it could be China, so just deal with us. Are the fears overblown?

• 25:16Speaker 01

  So there's so many different ways, things one could talk about there. I think one of them is, to my previous point, tech is so much bigger. It's also so much cheaper to create some kind of tech company today. Therefore, there are far more places where tech companies are being created. And so you can't just presume the next thing will be in the San Francisco Bay Area. You know, I mean, Snap was in LA. You know, I always used to joke that people in Silicon Valley say the East Coast, they mean Oakland. You know, nobody, where's that?

• 25:46Alex Kantrowitz?

  Right.

• 25:47Speaker 01

  And so you get that kind of shift that, yes, and you know, China is obviously a big place that creates lots, lots of stuff. Therefore, big stuff comes from there. But it might be Turkey, it might be Brazil, it might be, pick a name, it might be, might be India or Vietnam or something. So you just need to sort of presume systemically. Sorry, hold on a second. So companies will, technology will increasingly be created everywhere outside of Silicon Valley. So you just kind of need to presume that this stuff won't necessarily be from America. I mean, the problem is the rest of the world has had to grapple with this for the last 25 years. You know, your kids are using something that wasn't made in your country and they won't come to parliament and answer questions about it. Suddenly, Americans have to deal with the same concept. And so that gets you to this idea that, no, actually, you need a privacy law.

• 26:32Speaker 01

  You can't just beat up Facebook. You need an actual systemic law that applies to everybody. You need a law on X, you need a law on Y, you need regulation. Whatever you think the problem is, you need to do it in a generalized way rather than just apply it to one company. I think the other interesting aspect of this is that you have other countries doing their own regulation. And you always sort of used to entertain me when I would talk to Americans and they would say, oh, but the First Amendment. And I would say, is that the one that says black people are worse two thirds of a white person? Or the one that says I'm allowed to buy a machine gun? Because I'm British, I don't know what the American Constitution is. Nobody in Europe cares a bucket of warm spit what the American Constitution says. They will pass their own laws. And quite often, those laws will get applied in America as well. And you're seeing

• 27:16Speaker 01

  this now with the UK's laws on child safety. Instagram is building stuff based on a UK law, but it's applying it in America as well. So there's a sort of this interesting dynamic that like, America can't pass laws that ban certain kinds of speech. Everyone else can. So guess what's gonna happen? We're all gonna pass those laws and you're just gonna have to deal with it. Or at least you'll have to think about what it means that Europe or Britain or Japan have passed a law that says Facebook has to do X.

• 27:44Alex Kantrowitz?

  That sounds messy.

• 27:46Speaker 01

  It is. I mean, going back to the car analogy, like there are treaties on how car regulation works that try and harmonize it. And you get these kind of weird anomalies, like, you know, for 30 years, you couldn't sell a car in America that had modern headlights. And they couldn't headlights couldn't be behind a fairing. So like the G type Jaguar and the Citroen DS had to take the fairing off the headlight to sell it in America. But generally, car regulation is sort of harmonized. But again, that's a slow moving industry. It's going to be very messy as, you know, the EU or the UK or Japan or Brazil and India pass laws and Twitter and Facebook kind of have to work out what they think about that.

• 28:22Alex Kantrowitz?

  Benedict Evans is here. He is a preeminent tech analyst. You can find his work at ben- Evans dot com and on Twitter. He's at Benedict Evans. We will speak about one of the hottest topics that everyone seems to be debating today and no one seems to understand, or if they do, they're probably making some bad faith argument about it. That's letting them profit. It's Web three. So why don't we take a quick break and we'll come back with Benedict Evans right after this. This episode is brought to you by Avpoint. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data. And most teams have no single way to see it,

• 29:07Alex Kantrowitz?

  secure it, and prove it's under control. That's exactly what Avpoint does. For 25 years, they've been the trusted layer beneath the world's most demanding data, now extended across your entire AI estate. Your data, your cloud, and the agents acting on your behalf. It's how more than 28,000 organizations deploy AI with confidence. So innovation scales without scaling risk. Avpoint, the unifying trust layer for AI. Head to avpoint.com to see how enterprises deploy AI with confidence. Learn more at avpt.co/bigtechnologypodcast. That's avpt.co/bigtechnologypodcast.

• 29:52Alex Kantrowitz?

  And we're back here on the Big Technology Podcast with Benedict Evans, one of my favorite analysts. You can find his work again at benn-dash-evans.com. Sign up for his newsletter, it's a great one. How many people on that newsletter? 160,000 people?

• 30:04Speaker 01

  Yeah, about 100, about that, yeah.

• 30:06Alex Kantrowitz?

  I gotta get your growth tips on this stuff.

• 30:09Speaker 01

  Basically, I've done absolutely no growth hacking at all. I just do it every week and it grows more or less the same amount every year.

• 30:16Alex Kantrowitz?

  Really? So how much does it? Really, so I would imagine that a newsletter would grow kind of like exponentially because once you seed it with like, you know, the 20,000 people will share it more than 5,000 people.

• 30:26Speaker 01

  That's what I thought. It doesn't, well, so that's a net number. So the growth adds do increase because obviously the people who cancel increase because there's more people on the list to cancel. But the cancellation rate has been roughly stable for five years and the net growth every month is roughly stable for five years. I have no idea why. I need to buy Andrew Chen's How to Grow book and then I will discover the secrets.

• 30:50Alex Kantrowitz?

  Yeah, I should. I should buy it too, man. So let's talk about Web three because I feel like it would be a shame to have you on and not discuss it. So this is what confuses me about it. There seems to be two schools of thoughts on Web three. And I'd love to have you, like, in the start of your answer, just like, give a definition of what you believe it is, because everyone has their own definition. Some people, and it's obviously a crypto thing, and some people say this is the future of the Internet, everything that moves, everything moving forward from here on in is going to be Web three, let's bet everything on it. And other people say it's kind of like a branding scam from people that desperately want crypto to happen and is really a solution in search of a problem. So can you define, yeah, from your perspective, what Web three is?

• 31:35Alex Kantrowitz?

  And then do you have a, do you have a feeling in terms of which one of those two camps you think is right?

• 31:42Speaker 01

  Yeah, so I think I can't remember a topic more polarizing than crypto in tech. And maybe iOS versus Android, but Les, I don't think that was as much. And I can't remember a topic that attracted as much bullshit both pro and cons. You know, on the one hand, you've got people saying this is going to end all government and all banks and all democracy. And on the other hand, you've got people saying this is all just a Ponzi scheme. And these are both, and meanwhile, people seem to spend an awful lot of time swapping kind of basic theories of how tech works, like, the technology always improves. Like, no, no, sometimes it doesn't. It's just not, these are not productive conversations.

• 32:21Speaker 01

  So to some definitions, so maybe three sets of definitions. So the first definition is, literally, what is Web, why is the phrase Web three? Well, there was this famous essay by Tim O'Reilly in about 2005, talking about Web 2.0. And this was describing all the cool stuff that was happening in the time, kind of post-crash. And so, you know, what is the second wave of the web, which is like a reasonable time to ask this question? And it's basically what we would now call social, plus a lot of other stuff. It's UGC, social, federation, open platforms, APIs, distribution. Instead of one company writes the content on one website, instead it's you can embed a YouTube on other websites. And at the time, that was a real, like, a mind-blowing concept,

• 33:05Speaker 01

  that the content could exist in different places and it could be shared and linked to and distributed. And reviews could come from the users, not be written by paid journalists, and all of this kind of stuff. And a lot more of other other stuff that didn't ended up not really being a big deal like RSS and so on. Um. And so this is saying, well, this is the next, this is the third generation. And the third generation is also to kind of set of second, second set of definitions. Actually, another wave of open source. And so open source was you, everyone can write the code. And it's freely open and distributed and available and everyone can see the code. However, actually running the code happens inside a piece of software. Or actually, because all software at that point moved from running on your PC to running in the cloud.

• 33:49Speaker 01

  Actually, the software is running inside Google or inside Facebook or inside Salesforce or whatever it is, you can't actually see the code. Uh, there's a webpage where you can go to to download it, but you don't actually know what they're doing with it. And so then, uh, the neat, and so what now happens is, and what a crypto network is, is that the software is running in an open distributed way. So you can go and look and see the software running. So it's not just being written in an open distributed way, it's running in an open distributed way. Um, and a crucial point in this and the sort of previous thing I said is that this is not just a database or just a currency. I mean, the quote I used in my presentation is this line from Voltaire, that the Holy Roman Empire is neither holy nor Roman nor an empire. And so cryptocurrency is not really cryptography, except in a purely technical sense, it's not really just currency.

• 34:33Speaker 01

  It's you say blockchain, that implies it's a database. No, it's not just a database. The same with DLT. No, it's not just a ledger. The most useful way to think about this is it's it's a sort of a distributed, open virtual machine running across millions of computers. That can run code that but that is open and verifiable. So you can see that virtual machine running code. Um, and so then the web three, so that's why, therefore that makes it, that's why you would say this is open source. It's an open source computing system. It's web three because you could build Twitter on that. Or you could build sales or you could build Spotify on that. Here you have this open distributed network where everyone can see what's happening, but all the code is verifiable and secured. And you have payment built in.

• 35:16Speaker 01

  So you could absolutely build Spotify on that if it wasn't for the fact that Ethereum apparently does about twenty transactions a minute. Um, I

• 35:23Alex Kantrowitz?

  And what is why?

• 35:24Speaker 01

  Maybe a second, I forget, no.

• 35:26Alex Kantrowitz?

  How does that impact it? Because? It's gonna be slow.

• 35:30Speaker 01

  So, yeah, like, the entire Ethereum network is running at, like, twenty transactions a minute. Is it a minute or a second? I forget, I'm sounding dumb now, but I think the point is the same either way. You know, you know, your, you know, your, you know, the, your burglar on I O sensor has more compute capacity than Ethereum today. Now, at this point, you know, crypto people will say, yeah, but, like, remember what people said about the internet. It's slow and it's dumb and it'll never work and packet networks were dumb and that was never gonna work. You, you have to separate between what it is now and what it could grow into, which is, you know, another, you know, it's an example of it. The argument, it's slow now, so it won't work, is an, is an example of kind of a bullshit argument. Like, you have to think, well, what would it become?

• 36:13Speaker 01

  The other, maybe another definition is, you could also say this is crypto three. Because crypto one is store of gold, store of value and gold and speculation, and I'm gonna buy Bitcoin because it'll go up and we can store money there. And that's got some.

• 36:27Alex Kantrowitz?

  That worked.

• 36:29Speaker 01

  That's got some validity to it. I mean, it's no more artificial than buying an instrument that says theoretically some gold in a bank in the Fed in New York belongs to you. Like, yeah, theoretically, you could go and get it, but that's not actually what you're buying.

• 36:43Speaker 01

  Crypto two is DeFi, which is.

• 36:46Alex Kantrowitz?

  Decentralized finance.

• 36:47Speaker 01

  Decentralized finance, you buy a token, which is this point of distributed computer. You know, I buy insurance, I lend money, maybe, maybe not, we'll see if that works. Crypto three is now you build Twitter on it, like, you build software on it, not just money.

• 37:01Alex Kantrowitz?

  Maybe this is a dumb question, but why would you do that? Like, why would you build Twitter or Spotify? Because I feel like I like Twitter, you know, dot com and Spotify.

• 37:08Speaker 01

  Maybe this is like, maybe this is like saying, I'm gonna build Skype on GPRS. Like, no, that wouldn't work. I think the challenge in this, so basically what I've just done is reported speech. So this is what all these people will tell you, and I don't see any logical problem in anything I've just said. I think the really interesting conversation for me, and, you know, so I saw this great comment on Twitter, which I now can't find, where somebody said, "A lot of conversations about crypto are like a farmer trying to find out about how you grow marijuana." Like, what kind of soil? How does it deal with frost? What fertilizer? Can I dry it? What kind of barn do I need? And every answer is, man, you just don't get it. Have you ever been high?

• 37:56Speaker 01

  Like every crypto thread is basically, man, you don't get it. You've got to get high. Install a wallet, then you'll understand. Like, no, I have been high. I get it. I get that being high is good and people will pay for that. I'm asking about how it handles acidic soils.

• 38:11Alex Kantrowitz?

  Right.

• 38:12Speaker 01

  And so that's the kind of question that are the questions that I think are interesting. And to go back to open source, you know, I also, I went to university in ninety five. And at that point, all the Kompskis, all the computer scientists were running Linux on their PCs. And they're all convinced it was going to crush Microsoft.

• 38:33Speaker 01

  No one would ever pay for software. Everyone would write their own code. And this was going to change the world, and it did change the world. And half of that happened. The iPhone is full of open source. And Microsoft bought GitHub, and yet people buy Windows. And people buy iPhones, and the iPhone isn't open. And yet, the iPhone, but if the iPhone isn't open, why does it have millions of apps and billions of downloads? What do you mean by saying it's not open? And so I think those kind of questions of like, yeah, okay, decentralized is great. Open source is great. Right. What will the products be and where and how will it be decentralized and open? And what layers in the stack and what will you build?

• 39:16Speaker 01

  You know, to your question, why would you do that? Well, why would the Apple make their software open source? That's not really, in hindsight, that wasn't the right question. What happened was the iPhone is full of open source software. But the question is, what points of leverage in the stack? Does it make sense for it to be open source? And what points does it make sense for it to be centralized? And I basically have no idea. We have no idea. I mean, it's like looking at the internet in the early nineties. Like, is it going to be the internet? What will happen to Waze and U U net? And AOL and CompuServe and corporate networks? Will they all exist in parallel to the internet? What will we be doing on the internet? Will it be the web? Well, the web didn't exist in the early nineties.

• 39:56Speaker 01

  You know, it was only one of many things is FTP and Telnet. I've got all these diagrams of like FTP net. Telnet space, email space, Usenet, oh, and the web and Gopher. And it wasn't clear how it would work. And I think crypto now is like, it's amazingly exciting, but we have no idea really what it's going to be or how it's going to work.

• 40:20Alex Kantrowitz?

  Right, and that's why I kinda, that's where I kinda, I'll be honest, this is kinda where I lose the plot with the web three stuff. Because, you know, if this is gonna change the world, I'd like to see some early indication that there's something that people can build on it that will be better than an experience that we're having today.

• 40:37Speaker 01

  Yeah, so I don't, so I don't like this argument because I remember using the internet in like ninety-three, ninety-four. And it like, the only reason to use it was so that you could tell people that you're using the internet.

• 40:48Alex Kantrowitz?

  So there's parallel.

• 40:50Speaker 01

  And then you could, you could email other people, you could talk to other people who are using the internet. And, you know, yes, you could talk about, you know, there were, you know, using that in chat rooms and so on. But like, you couldn't buy anything, you couldn't do banking, you couldn't buy plane tickets. It was really fucking slow, you know, using a nine point six K modem. Like, nothing worked. It was shit. I mean, it was useful for a tiny number of people, and I'm exaggerating to make a point. But like, the idea that it was in all obvious that we would be doing everything we're doing now back now, it really wasn't obvious. And there were not a lot of use cases for it. And it got run much better, much quicker. So I, I don't have, I don't think the sort of there's no use case argument is that strong.

• 41:33Speaker 01

  I mean, it's kind of like looking at Linux in ninety-five and saying, but nobody's using it. Or ninety-four and saying, yeah, but that's not gonna replace Windows. And it didn't replace Windows, but it took over the data center.

• 41:44Alex Kantrowitz?

  Well, okay, so here's my counterargument. Why do we, so we have the internet already, like, all that stuff was early. Like, how can we have the, how can we get, how can we build an internet? Now we have the internet, we have apps, we have mobile operating systems. And so it strikes me as odd that we would need a brand new form of computing to build on top of. Maybe I'm dense.

• 42:08Speaker 01

  Yeah, look, I mean, I think we always have new ways of compute. I mean, you know, so if you think about that cycle of mainframe, PC, web, smartphone, question mark. There's a sort of a parallel process, which is make database, SQL, client server, open source, SaaS, cloud, machine learning.

• 42:30Speaker 01

  And nobody looks at machine learning and says, well, we already did pattern recognition with with with SQL. We don't need this. It like empowers new stuff. And I think the challenge is, and you know, and you, if I go think back to going to kind of looking at, you know, machine learning. When I was still talking to big companies about machine learning in sort of two thousand and fifteen.

• 42:50Speaker 01

  It it remind, the analogy I used to use was imagine you'd gone to a giant company in like nineteen eighty and said, so there's this thing called SQL.

• 42:58Speaker 01

  And that means you'll be able to do arbitrary queries on your data and they'd say, okay, like what?

• 43:04Speaker 01

  Like, the answer is it gives you fucking Walmart and it gives you Zara and it gives you Apple, but not necessarily. And the same thing with machine learning. Okay, I can do image recognition. Yeah, but we don't have any images. Oh, I can do voice recognition. Yeah, but we don't have any audio. Well, that's not the point. It's pattern recognition. The point is pattern recognition. And I think that, you know, and I'm actually now falling in the trap of what I complained about earlier, which is what people. So early that basically what people do is swap mental models for how tech works. Like, what does it look like when it's early? How does it evolve? Why is it hard to understand what it's going to be used for? What are you valid and invalid ways of saying how it will improve? All of which happens because we don't actually have any real use case today.

• 43:47Speaker 01

  Um, I mean, the hilarious thing about NFTs and, you know, again, NFT is a little bit like Facebook. I have this very contrarian position, which is I have absolutely no problem with the theory that a JPEG attached to a verifiable database can be art. I just think the art is all shit. I think this. I think that's fairly. I've got completely the opposite position to NFT people, which I've got no problem with the technology and NFT critics. I've got no problem with the tech, which all the NFT critics complain about. I just think the art shit, which the NFT people don't like to hear you say. But the hilarious thing about NFT is like, you look at, you know, what does OpenSea's use of it? Like, how many people have got an NFT? Two hundred thousand people? Imagine saying that in 2010, the biggest thing on the surface of the earth in tech,

• 44:31Speaker 01

  the hottest topic in Silicon Valley tech will be something that's got 300,000 users. You'd be, what, is that a typo? That's 300 million, right? No, no, no, 300,000.

• 44:42Speaker 01

  So it's, yeah, this is a super early thing.

• 44:46Alex Kantrowitz?

  Right. Okay. But close your eyes and well, you don't have to actually physically close them. But, you know, if you think in your mind, what is it that this new technology could possibly be used for in a way that, you know, would would present like, is there a certain type of programs, certain type of software experience that you think will work much better on a crypto backend than than what we have today?

• 45:09Speaker 01

  So I think the, um, instead of different contexts, is you kind of, one of the ways that I kind of talk about the internet now to old companies like retail is like, imagine you do the McKinsey study in 1995 of what's the internet for? And you would kind of think about what you would say. You would say, well, you remove gatekeepers and aggregation models that were based on physical assets like real estate or printing plants or chains of stores will suddenly matter much less. And then that will unlock one industry after another and it'll probably start with easy stuff like plane tickets or books and it'll 20 and after 20 years you might get to clothes. So you have a very sort of deterministic sense of, well, how would this work?

• 45:54Speaker 01

  And I think the the intelligent conversations here around crypto are like, where would it be useful to have much more sophisticated markets for ownership, for influence, for trading, for shifting financial incentives around? So you could talk about music, you know, what would it happen? You know, the obvious use case is you buy stock in a in a band as it's up and coming and you get a share of future revenue. Now, I mean, I wrote about this this weekend. Is that valuable to the artist? Or is that an advance? Or is that new money coming into the music business? That's probably the wrong question because it's, you know, you'd see, you don't know how that would evolve. But what would happen if you or?

• 46:43Speaker 01

  If me as a Twitter user with 300,000 users that carried some kind of equity stake in Twitter. And if you'd followed me early, then that also conveyed some sort of equity stake in you. And so the aggregate kind of value that was being contributed to the company was translated into some kind of economic ownership in that product, which is it's open source too, partly because it's running, not just being distributed, not just being written distributed. Also because there's a revenue model, which obviously open source never had. Challenge, of course, is how the fuck do you do that on a system that's doing 20 transactions a minute globally? So which again is, yeah, like a lot of people, telco people looked at packet networks in the eighties and said, this is bollocks. That will never work. Certainly IP will never work.

• 47:30Speaker 01

  How do you scale those things so that they can actually run, you know, billion scale, you know, trillion transaction systems?

• 47:38Speaker 01

  Those are engineering questions rather than conceptual questions.

• 47:43Speaker 01

  Which is why I say it's like looking at the internet in 93, like, yes, this could get much bigger. Then what would it be? Who knows? You certainly don't know if it's going to be Gopher or Telnet or Usenet or the web.

• 47:55Alex Kantrowitz?

  Exactly. So it has the potential to grow and be somewhat revolutionary, but it's not inevitable.

• 48:00Speaker 01

  Yeah, I mean, I have this very counter consensus position that I don't think it's going to take over the world. And I also don't think it's bullshit, which means everybody shouts at me.

• 48:09Alex Kantrowitz?

  Right. Look, I think that like this is again, this is sort of like the goal of the pod here is like, let's tackle these questions that like in 280 characters, you know, just cause a lot of yelling because you can't put the nuance in there, but having a conversation.

• 48:22Speaker 01

  I mean, going back to my pot analogy, like I can believe that pot will be a business. I don't think it will replace alcohol.

• 48:30Alex Kantrowitz?

  Right. Oh, it's kind of like.

• 48:33Speaker 01

  And I'd like to know what latitudes you can grow it in and what the irrigation. That's basically my approach to web three.

• 48:39Alex Kantrowitz?

  I think we found our show title, why web three is like weed and you might smoke it.

• 48:45Alex Kantrowitz?

  Okay, let's go to break. Benedict Evans is here with us. We're having a great time talking about tech, Web 3 and all that stuff. And next, we'll come back and read him some questions that were asked on Twitter, hopefully by some of you listeners. And I think they're a really great round of questions. So why don't we take a pause and come back and dig into those on the other side of this break?

• 49:07Speaker 02

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• 49:38Alex Kantrowitz?

  And we're back here for one final segment on the Big Technology Podcast. We're here with Benedict Evans. You can find his stuff, ben-dash-evans dot com. He's also Benedict Evans on Twitter. Benedict, if people want to find your, your recent presentation, is it just in the presentation tabs?

• 49:55Speaker 01

  Yep.

• 49:55Alex Kantrowitz?

  On your website?

• 49:56Speaker 01

  Yeah, my parents had good SEO. Just Google Benedict Evans.

• 50:00Alex Kantrowitz?

  Okay, terrific. And, and you just released that. Was it this, this one, The Great Unbundling?

• 50:05Speaker 01

  So I did, I, for the, for, for the last six, seven years, I've done one a year. I did one in January, which I called The Great Unbundling. And for complicated reasons, I've done my, my, and my, this, the new annual one, I've actually done this December rather than waiting until January again. So the new one, I think I call Three Steps to the Future.

• 50:26Alex Kantrowitz?

  Okay, great. So that's on ben-dash-evans dot com. And you go to the presentation tab.

• 50:31Speaker 01

  Yeah.

• 50:31Alex Kantrowitz?

  To find it. Okay, let's get to the Twitter questions. Yeah, this is a fun one. This is from Chance Kelch. He said, I would talk to him about the impact of the quote unquote, great resignation on the near term tech industry, and how he feels overheated startup valuations will play out. Okay, that's kind of two questions, but let's tackle the great resignation one.

• 50:51Speaker 01

  Yeah, I don't know how real this is. I think it's sort of a macro.

• 50:56Alex Kantrowitz?

  Wow, that, that is a take. Okay, let's hear it.

• 50:59Speaker 01

  It's also kind of a macro conversation that's, that's sort of beyond, that's beyond just tech. I mean, I think a kind of a very general observation on, you know, COVID slash post-COVID is as a sort of pendulum swings back and forth. And we don't quite know where it's going to settle. So, you know, will we all work from home? Will we all be back in the office? Will we order groceries? Will everything be video? Do we go to trade shows? We don't know. We've broken habits. So the habit that you just went there, that you had to be an in-person meeting, as opposed to you asking, could it be a video call? Like, nobody ever did video calls. I mean, outside of Google and a few people in Silicon Valley, you know, video calls were this weird, exceptional thing, and the taboo to that's been broken. A lot of habits and taboos have been broken, but we don't know what the new equilibrium

• 51:44Speaker 01

  is. And I think it's the same for how hard you work, where do you live? Do you live in the city? How often do you go into the office? All of those kind of things. I don't think we really know yet. Tech valuations.

• 51:55Alex Kantrowitz?

  Wait, before we get to that, aren't you a great resignation guy yourself? Like, didn't you leave?

• 52:00Speaker 01

  No, I'm just institutionally challenged.

• 52:03Alex Kantrowitz?

  What does that mean?

• 52:05Speaker 01

  It was just time to do something else. I mean, it was nothing to do with COVID. It was before, it was the end of 99, I left AICZ.

• 52:11Alex Kantrowitz?

  Oh, okay.

• 52:12Speaker 01

  It was time to move back to London.

• 52:13Alex Kantrowitz?

  Yeah. So you resigned ahead of the great resignation.

• 52:16Speaker 01

  Yeah, I left AICZ in the end of 2019.

• 52:19Alex Kantrowitz?

  Yeah.

• 52:20Speaker 01

  Because I wanted to go somewhere that had restaurants and art galleries and, you know, start.

• 52:24Alex Kantrowitz?

  Oh, we have San Francisco questions.

• 52:25Speaker 01

  Yeah, then I arrived in London in a pandemic. It was like, well, I gather San Francisco had a lockdown. I'm not quite sure how they could tell, but, you know.

• 52:33Alex Kantrowitz?

  Oh, Jesus.

• 52:34Speaker 01

  So the restaurants were all closed at nine o'clock. Like, what happened?

• 52:38Alex Kantrowitz?

  Yeah, yeah. Well, it was funny when they did the curfew and it was like, okay, well, this is just how it is here.

• 52:46Speaker 01

  Yeah.

• 52:47Alex Kantrowitz?

  I'll say, I like the city of San Francisco. I think it has some problems, but anyway, we'll get to that in the next question. So this is what always happens. We have a fun podcast about tech and then there's a San Francisco question and it gets totally derailed. It's worth talking about.

• 53:07Speaker 01

  Tech valuations.

• 53:10Speaker 01

  There's clearly a bunch of different things going on here. So one of them is, there's a whole macro conversation that says that we've had 10 years of low interest rates, there's a huge amount of capital chasing returns, tech companies stay private much longer, clearly the, you know, and so all money sort of gets funneled into private markets. There's a lot of new money funneled into private markets and that would previously have been IPOs. Secondly, the opportunity set is now vastly larger. There are vastly more companies created and if it works, it's a hundred billion dollar company, not a hundred million dollar company. And so that gets you to Tiger Global and I think, you know, the number is Tiger Global will probably do 300 deals this year. A16Z probably will end the year with 300 people.

• 53:53Speaker 01

  So, you know, there's a perfectly rational reason why more money goes into tech startups because the opportunity is just vastly larger than it was. But there's also low interest rates and COVID and all sorts of other stuff that sits behind that. You know, pragmatically, whenever you get a surge of investment into a space, then, you know, to mix and metaphors, you know, the, you know, the old line about the tide going out and you see who are swimming without wearing a swimming costume. And, you know, there will have been, you know, in the rush to do deals and, you know, accelerated diligence and founder friendly terms, there will have been fraud and there will be, there'll be stuff that goes wrong for this without fraud and there'll be stuff that goes wrong with fraud. That's just sort of inevitable.

• 54:40Speaker 01

  But, you know, the delta between the world in 2000, when it was all on future promise and the world today, when 5 billion people are online is also kind of pretty striking. So all of which is to say, look, you know, I kind of saw Fred Wilson say, wait a minute, a hundred million dollar seed fund, the seed round is not going well. I don't spend much time thinking about venture mechanics, but I can see that point of view. There's another point of view that says, yes, but 5 billion people are online now.

• 55:06Alex Kantrowitz?

  Right, which is makes a huge difference if you're talking about getting to scale.

• 55:11Speaker 01

  It does, yes. I mean, you've got this kind of your sort of U shaped curve in that, you know, the cost of, you know, the cost of getting something out of the door is down by orders of magnitude since 2000. You know, Instagram famously Instagram had 13 people when Facebook bought it and they had, what, 50 million users or something? So the cost of getting out of the door has collapsed. On the other hand, when there's five billion people online and your competitors' cost to getting out of the door has also collapsed, then the amount of money that you need to spend to get to those, you know, what, it won't be five billion people, but the amount of money you can spend is enormous. And that's even without talking about, you know, last, you know, one hour delivery and all those kinds of things, which are obviously very capital intensive.

• 55:47Alex Kantrowitz?

  Yeah, it's a good time to run an advertising business, actually.

• 55:50Speaker 01

  Yeah, I mean, you know, you could certainly argue that, you know, Spotify or Shopify is a leverage play on Facebook's advertising business. I mean, I think there's a, um, there's an interesting, there's another interesting conversation here, which is that you may have many, you know, the classic venture model is, you know, you aim for 10x. Maybe realistically, there actually aren't any 10x exits, they're 50x exits. And with a very high chance of failing. But you could argue you're going to have a lot of CPG companies and a lot of new retailers, a lot of new gaps and Walmarts and CVSs and Sephora's created, a lot more Allbirds. You'll have a lot of companies that are in a different place on the risk reward profile.

• 56:30Speaker 01

  And so they're not going to produce a thousand X return. They're not going to be a hundred billion dollar company, but there's going to be a lot of 3X companies.

• 56:38Alex Kantrowitz?

  Right.

• 56:38Speaker 01

  That don't have a 50% chance of failing. And how much capital do those need and who funds those?

• 56:44Alex Kantrowitz?

  Man, that's going to be interesting. Watch that shake out.

• 56:47Speaker 01

  I mean, who funds all of the bag companies and the shoe companies? If you think there's going to be lots of bag companies and shoe companies that are online only, and maybe not. Somebody's going to fund a lot of them and maybe there'll be a whole way and they'll fail probably. But just as, I mean, this is my sort of car thesis that, you know, cars created way more retailers. Or change retail. So does smartphones create more retailers? So who funds those? There's those aren't, probably there's going to be a lot of those that aren't really venture businesses.

• 57:17Alex Kantrowitz?

  Yeah. Speaking of venture businesses, the most favorited question for you on Twitter came from Alex Wilhelm, and he says, do you think Enthris and Horowitz, the venture capital firm we reference, is making smart choices as an organization?

• 57:33Speaker 01

  Well, so I actually have Margaret here, so she can kind of give you the answer.

• 57:36Alex Kantrowitz?

  Okay, I'm the head of comms.

• 57:39Speaker 01

  But, you know, I left the firm two years ago. And actually, if you follow me on Twitter, you know, I'm actually not very interested in venture, you know, and the mechanics of venture. I don't spend too much time thinking about, you know, how do the management, how does the, how are your structures changing? And what is Tiger Global doing? And how does this stuff changing? You know, what does it mean to have a $200 million fund? And what does it mean to have a $5 billion fund? I think the, the original, there were sort of two original A16 theses, and one, well, three A16 theses. One of them is if you're going to be a new fund, you have to break into the top 10, otherwise there's no point. And so you have to think systematically about how, that's all the returns are. So how would you actually break into the top 10 as opposed

• 58:23Speaker 01

  to just creating a fund, a good new venture fund? And how would you think fundamentally differently about breaking in? That was thesis A. Thesis B was, you have to make a fund that the best entrepreneurs, so the best entrepreneurs come to you. And so you have to think about how you would be entrepreneur friendly, and what you could do to make yourself a fund that they would want to come to. And the third thesis was tech is just going to be way bigger, and the opportunity is much larger than a lot of people realize, which got them to, you know, it's before my time, but you know, there was this whole argument they were bidding up Airbnb and Pinterest and so on, and overpaying. And it turned out that they probably weren't overpaying because they, they realized, or they had the thesis that, no, the opportunity is bigger than it was in 2000. I think all three of those theses were probably correct.

• 59:07Speaker 01

  Then what you do after that is you just have to keep changing because like the venture landscape looks totally different to whenever they were founded, two thousand and five or two thousand and eight or something. Tiger Global and Tiro and the size of the market and global expansion. And so you have to keep moving and iterating around that. I mean, I then I sort of said on Twitter, you know, they have three, they, the company web team page that they have three hundred people on it, which is ten X more than this typical venture firm. They might go with a thousand people. That doesn't seem like an unreasonable thesis. No, you go full spectrum technology investing. Will they do that? I don't know. I haven't had that conversation with Ben and Mark. Apparently they've moved to Vegas.

• 59:52Alex Kantrowitz?

  That's the word on the street. Yeah, I recorded a property in Nevada.

• 59:57Speaker 01

  I have no idea.

• 59:59Alex Kantrowitz?

  Yeah.

• 59:59Speaker 01

  But.

• 1:00:00Alex Kantrowitz?

  Okay, but yeah, go ahead.

• 1:00:01Speaker 01

  There's a sort of generalized question of what does it mean to invest in a space where you no longer have X IPOs a year for a hundred million dollars. Instead, you have ten X IPOs, a ten X billion dollar companies being created every year. That means a different venture landscape.

• 1:00:20Alex Kantrowitz?

  Right. So just to quickly follow up on that. So do you, I mean, they're, they're all in on, on the crypto stuff. They've, they almost feel like a crypto firm right now. So do you, people, yeah, I guess like that, that was what, how I read the question. It's like, do you think that there's emphasis on crypto? I mean, they're also just sort of like, you know, lighting fire to the media, blocking every journalist and going all in on crypto, doing their own publication and expanding the firm, you know, add that together. Is giving that a thumbs up or a thumbs down or a thumb sideways?

• 1:00:56Speaker 01

  I think the best comment on some of this was from Jessica Lessin. He said, because some people spend way too much time worrying about what people say on Twitter. I'm guilty of this myself sometimes.

• 1:01:05Alex Kantrowitz?

  Yes, same.

• 1:01:07Speaker 01

  I think, you know, and there's an interesting, you know, kind of Ben Smith sort of conversation around what does it mean to be a journalist at a brand name title that also creates their own persona on Twitter. It did sometimes surprise me how many journalists didn't really seem to understand that I couldn't answer that question. And if I spoke to them, the way they spoke to me, Mark, it would fire me. And not because she's Mark, like, anybody at any firm would get fired if I spoke to you the way you've just spoken to me. Not, so not you literally, but like, a journalist who didn't quite understand, no, I would get fired if I replied to you like that, if you spoke, if I spoke to anyone like that. Like, like what?

• 1:01:50Speaker 01

  I don't want to go into, because it becomes very high school. And I think that's, but that's kind of the point. Oh, I see. The tech Twitter, tech Twitter gets very high school. It does. And some journalists don't quite understand that they have a freedom to talk and behave in certain ways that somebody who works for Google or Andreessen Horowitz or Facebook doesn't. And they would get fired if they said that to you the way you said it to them. And you don't seem to understand that. And it's just, you know, just as, as an aside, you can, the whole, that I think one can spend way too much time worrying about this stuff and way too much time worrying about who Mark blocked or what so and so said to so and so. I'm kind of, Jesus, guys, what is this? Like, is this a food fight in a canteen? You're like, you're all highly

• 1:02:33Speaker 01

  educated people in their thirties and forties. Like, grow up. I mean, I think the, the more substantive thing is, you go in all, all in, go all in on crypto. You look at the portfolio page, you wouldn't know that. You know, there's a whole bunch of enterprise SaaS deals happening there. There's a whole bunch of other stuff. You know, they did Clubhouse and they did Substack. And Yep. Those are both useful, as is the crypto story, in how often people sort of forget that a VC's job is to do deals that will probably fail.

• 1:03:08Speaker 01

  You know, they went all in on Clubhouse. Clubhouse has clearly hit an air pocket. Will it come back? I hope so. It was interesting. If it doesn't, that doesn't mean they, that was a bad investment. You know, that's business, is you invest in stuff that might not work. So Right. The Coinbase deal returned that fund however many times. Will one of the deals that they're doing now return the fund enough times? Probably. Yeah.

• 1:03:37Speaker 01

  Why do you think there's such a Meanwhile, they'll do an amazing enterprise SaaS deal that will also be a $10 billion exit. Right. Why do you think there's such a lightning rod?

• 1:03:47Speaker 01

  So I said at the beginning that, you know, you asked me about leaving Silicon Valley. I feel like living in San Francisco, living in the valley is kind of like being in a college town. In all the ways that that's good and bad. So you want to do a PhD while she's doing a PhD, well, the expert is sitting behind you. Of course, you're doing a PhD, everyone's doing a PhD. And so there's both the physics, just mechanically, the support network, but also just the ethos and the sense of, of course, the expectation that, of course, you're going to do amazing stuff is very powerful. If you're not in that world, it looks like kind of a cult of people who don't understand the real world. But when you're there, like that, that sense that, yes, of course, you know, you want to do that, everyone, you know, that, that sense of positivity.

• 1:04:32Speaker 01

  You know, it's like the cliche about the middle class kid who will never recurse to them, then they won't go to university. You know, just having that expectation is very powerful. And the same, the expectation and the support network and the access to your expertise, being in the valley is extremely powerful. The counter to that is you're at a college town where there's only one subject and the nearest city is a six hour plane ride away. And so you will never meet people who don't know what you're working on. And so that can get a bit, I mean, sometimes you don't have external perspective. Sometimes there are businesses that maybe wouldn't get created there because those people just wouldn't see that as a problem. I mean, I was used to say that you would never have created Etsy in Silicon Valley because those people just don't live there.

• 1:05:15Alex Kantrowitz?

  Correct.

• 1:05:17Speaker 01

  And, you know, you can get very sort of into like, who said who to what in the high school lunch queue? You know, they threw food at my friend and my three friends pulled their hair and like, you're going, oh God, look away, walk away.

• 1:05:38Alex Kantrowitz?

  Yeah. Yeah, it does, it can get way too high school, from, from all sides. It's frustrating. We're over time.

• 1:05:47Speaker 01

  That sense of like you're in this very enclosed hothouse. Where, you know, you will not, I mean, if you're a lawyer in New York, you'll go to parties and maybe there won't be any musicians there, but there might be a banker. You know.

• 1:06:00Alex Kantrowitz?

  Right.

• 1:06:01Speaker 01

  There might be somebody who isn't in your world. Whereas if you're in tech, it can be very easy to just only talk to people who are absolutely in your world. And that's very powerful, but also sometimes not so great.

• 1:06:13Alex Kantrowitz?

  Yeah. I mean, that's why I moved to San Francisco to begin with is because I wanted to be in the bubble. And then six and a half years in the bubble, I had a pretty good understanding of how the tech world worked. And I think it's important to spend some time out of the bubble. Now to remember. Yeah, how people in other fields think, how, yeah, sorry, go ahead.

• 1:06:32Speaker 01

  Yeah, well, this is the interesting thing is, is A C D Z opened an office in San Francisco and I was, wow, so far away.

• 1:06:41Speaker 01

  Apparently they've now, apparently they've taken space in, or they had a small office in New York. Apparently they've now got a big space in New York, which we'll see this. The, you know, our conversation, that's where a lot of the fintech is, a lot of the crypto fintech stuff is in New York.

• 1:06:53Alex Kantrowitz?

  Right. It's a, it's a good moment for New York. You have Google, you know, Facebook and Amazon all expanding here.

• 1:06:59Speaker 01

  Yep.

• 1:07:00Alex Kantrowitz?

  Um, and then, yeah, you have fintech and some of the crypto energy here. It's a good time to be in New York.

• 1:07:06Speaker 01

  Well, not literally in December, but yeah.

• 1:07:09Alex Kantrowitz?

  Yeah, no, no, it's a good time to take a vacation, but to live here, yeah. Uh, let's see. I guess we're over time. I could ask you a couple more if you want, but otherwise.

• 1:07:17Speaker 01

  Yeah, a couple more and then I'll, I'll have to go.

• 1:07:19Alex Kantrowitz?

  Okay, uh, let's go with two more. Um, let's see. So we also have a question. Chris Messina asks, um, do you think there's any regulation likely to come out of Washington? Related to big tech. Um, you know, we talked a little bit about, about the potential for regulation, but let's just like kind of handicap the probability. Uh, do, do you think that the current group in Washington are going to do anything? Or do you think it's a lot of bluster? I think it's a lot of bluster.

• 1:07:43Speaker 01

  So certainly you've had a lot of very populist and, um, sort of. Pointless laws that wouldn't actually solve. I mean. If, you know, most people know, like, I'm generally on the side that this is complicated, not that the, well, as opposed to the side that says these companies are evil and we need to make vast changes. But if you think Facebook is evil and online advertising is evil and Google should be broken up, none of these laws would actually solve anything you're worried about. You know, we've got a bunch of laws that really wouldn't solve any problem that anybody's upset about. Like, let's ban all M and A by five specific companies. Like, what problem is it you think?

• 1:08:22Alex Kantrowitz?

  That one is terrible.

• 1:08:24Speaker 01

  You know, I feel like these are laws whose sole purpose is to generate a press release and a soundbite for the politician responsible. Um, so you discount all of that. Um, you know, have some residual faith that the process will work and the dumb stuff will mostly get filtered out. I mean, obviously, AB five in California is a counter answer to that. You know, again, that is a perfect example because you can certainly reasonable people can certainly believe that an Uber driver should be in a full time employee Uber. You you could disagree about that, but no, that's a perfectly reasonable position to take. But what California actually did was ban all freelance work.

• 1:08:58Speaker 01

  Which is not what any reasonable person would think was a good idea. And they just did were told they were doing this and didn't listen and did it anyway. Um, and a lot of the the laws that are in DC at the moment kind of look like that. Um, so second answer is, um, I have a thesis. A, as I sort of said earlier, it's actually very hard for the US to regulate speech. And so that tends to, which gets you all this massive kind of displacement activity arguing about section two thirty. It's not at all hard for other people to regulate speech. So Facebook is going to get speech regulation from the US, from the UK and the EU. The only question is whether it ends up applying it in the US as well. And it may have to, just for of kind of operational reasons. Third answer is, um, I feel like the structure of US regulation.

• 1:09:44Speaker 01

  So US regulation, on the one hand, you have these regulatory agencies, the FCC, the FDA, um, EPA and so on. Um, that have these sort of narrow remits on particular industries. Everything else, it's on DOJ and criminal law. You know, it's like, did you break the Sherman antitrust act passed in seventeen twenty one? Um, and or not, which is sort of a parody. It's like the way Americans joke about Britain, but actually, no, that's not how Britain works. That's how America works. Everything is based on a law written on parchment by guys in wigs. Um, and so that means that the US tends to do this stuff by antitrust sort of because there's no other way of doing it.

• 1:10:22Speaker 01

  And so it's a lot easier to break up Facebook than to pass a law that requires them to moderate speech, because you can break them up, but you can't pass a law that requires them to moderate speech. And so you break them open, hope that that will fix content moderation, and it won't.

• 1:10:37Alex Kantrowitz?

  It won't. Yeah, it won't.

• 1:10:39Speaker 01

  And so I don't know. I mean, it's it's a struggle to see a Facebook breakup, actually. Um, you know, so much would have to happen. I think there's also, I mean, there's a devil's advocate point here, and then I'll probably have to go, which is, you go look at the last Y C batch and ask how many of these companies in a field where any of this matters at all. If you're doing an H R, an enterprise SaaS company that manages DevOps, maybe you need to think about data, where your data is stored, if it's stored in you, if you've got your opinion users. But basically, none of this applies to you. You know, if you're Instacart, well, maybe some of the gig economy laws apply to you. Otherwise, content moderation, you know, Facebook antitrust, now Instagram,

• 1:11:22Speaker 01

  like, nothing to do with them. So I think you could kind of make a thesis that, like, the majority of Silicon Valley is basically not, it's not relevant, because it's, it's not affected by any of these problems. Um, the problems that people can actually care about. Secondly, that most of the rules are basically the equivalent of compliance in investment banking, in that it's just a pain in the ass, and it's expensive, and it's good for the incumbents, because you can afford to do it. A small number of it will basically shut down companies. So, like, some of the law, employment law in the UK could basically make food delivery impossible for some kinds of company, because you just can't do it if you've got to employ those people.

• 1:12:04Speaker 01

  Um, even the dramatic stuff, like make Instagram a separate company, I'm not sure if that actually does anything. Like, it doesn't make it easier to build an Instagram competitor, does it?

• 1:12:15Alex Kantrowitz?

  Not at all.

• 1:12:16Speaker 01

  A separate company, that doesn't actually make it easier to compete with Google Search or YouTube.

• 1:12:20Alex Kantrowitz?

  Might make it tougher.

• 1:12:21Speaker 01

  Yeah.

• 1:12:22Alex Kantrowitz?

  These companies would have to be.

• 1:12:23Speaker 01

  They'd be more aggressive. I mean, what's your, I mean, I don't get the theory that if Instagram's an independent company, it becomes less aggressive to compete with. So I think all of which is kind of saying, A, I'm not sure how much law will actually happen. B, I'm not sure how much of it would actually affect, like, the vast majority of actual tech companies. Like, most people don't have a social network. And like Okta doesn't have a social network. They don't care what the content moderation laws are. And I think you could propose even the stuff that's directly targeted at you. Might not actually result in a like fundamental structural change in the world. That's just an interesting kind of devil's advocate thing to poke away at.

• 1:13:06Speaker 01

  Like if you broke up Facebook, what would actually change? Like Donald Trump's people would still be saying vaccines kill you. Like making Instagram and WhatsApp separate companies doesn't change that at all.

• 1:13:23Alex Kantrowitz?

  No. And again, it probably makes them fiercer competitors than they were.

• 1:13:27Speaker 01

  Yeah. And it's not like Facebook don't care about that either anyway, which is again, a very contrarian point because obviously Facebook are evil.

• 1:13:35Speaker 01

  Most of these people are just people.

• 1:13:37Alex Kantrowitz?

  Yeah, well, okay, but you know, people are what they what they do.

• 1:13:40Speaker 01

  Yeah, exactly.

• 1:13:41Alex Kantrowitz?

  Yeah.

• 1:13:41Speaker 01

  So I don't, I think that that sense of like, how much would this matter to how many people in that is kind of interesting.

• 1:13:49Alex Kantrowitz?

  Yeah.

• 1:13:50Speaker 01

  Just the.

• 1:13:50Alex Kantrowitz?

  Yeah, it's fascinating. Yep. Well, Len Sherman from Columbia Business School said we should expand the podcast to eight hours, then I should ask you. So what's new? And then settle in with a nice Pinot Noir. Well, we could have done that. But I feel like we're we're happy with the hour and 10 minute episode. This has been amazing, Benedict. I really appreciate your.

• 1:14:11Speaker 01

  I have a thing.

• 1:14:13Alex Kantrowitz?

  Yeah, I mean, it's fascinating. It really is fascinating to. A, read your newsletter and B, well, maybe I'll switch it. A, get a chance to speak with you about this stuff after reading your newsletter. And having some conversations in the past. Really appreciate you coming on and speaking about all this stuff. And please come back. Would love to have you on again in the new year. So. We should. We should definitely do it again. You could find, do you want to just let folks know one more time where to find your writing and?

• 1:14:40Speaker 01

  Yeah, if you Google Benedict Evans, you will find my website and then I write. And I do a weekly newsletter with my notes for the week and then I do a big annual presentation that sort of gives some ideas for what's going on in the world.

• 1:14:52Alex Kantrowitz?

  Right. And it's just up on ben-evans.com.

• 1:14:57Alex Kantrowitz?

  Amazing. Well, thank you again, Benedict. Great having you on. Thank you to Nate Gwatney, who's editing this and mastering the audio. Thank you to Red Circle for hosting and selling the ads. And thanks to all of you, the listeners. If this is your first time here, hit subscribe. We do these every Wednesday with Tech Insiders and Outside Agitators. And if you're a longtime listener, and you've made it to this point, there's a rating, something that you could do. If you can't, just tap five stars on Apple Podcasts, and that will be forever in your debt. Well, that will do it for us here on Big Technology Podcast. Thank you again to Benedict Evans and to all of you, the listeners. We will see you again next week.

• 1:15:44Speaker 02

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