Ben Horowitz and Balaji Srinivasan on Netscape and Network States

Can a country be built from the internet up? Not as a metaphor or an online community, but as a system that replaces institutions we usually think of as fixed, money, law, and governance. In this conversation taken from The Network State Podcast, a16z cofounder Ben Horowitz joins Balaji Srinivasan to explore how internet native institutions are beginning to mirror and challenge traditional state structures. Drawing parallels to China’s early special economic zones, they discuss how constrained experiments like Shenzhen tested new rules without rewriting the entire system, and why similar experimentation is now happening online. The discussion examines crypto, digital identity, and network states as attempts to turn code into coordination and coordination into legitimacy, while grappling with a core tension. Code is deterministic, but societies are not. Ben and Balaji explore where these systems work, where they break, and whether network states are a curiosity or the next phase of governance.

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

• 0:00Ben Horowitz?

  Countries are now seeing kind of tech policy as a way to really compete, but it tends to be the countries that want to grow. A huge strength of the US has been rule of law and the amount of case law and like the predictability of the law. But that kind of presumed that you didn't have people who were above the law, who were judges and prosecutors and these kinds of things. People who want the network state in their territory are probably the exact countries that are interested in kind of pushing forward into the future. What the state cares about is power.

• 0:40Ben Horowitz?

  And as tech kind of rose in power to the level of the state, then they got very, very interested.

• 0:50Speaker 01

  Can you build a new kind of country from the internet up? Not a metaphor, not a community, but something that actually replaces institutions we usually think of as fixed: money, law, governance. A few decades ago, China experimented with this idea physically, carving out special economic zones to test new rules without rewriting the entire system. Shenzhen was once a fishing village. Today, it's a global tech hub. Now, the experiment has moved online. Crypto, digital identity, internet native communities, and what some call network states are trying to turn code into coordination and coordination into legitimacy. But there's a real tension here. Code is deterministic. Societies aren't. So the question isn't whether these systems are clever, it's whether they can actually scale and what they replace if they do.

• 1:35Speaker 01

  In this episode, A16Z co-founder Ben Horowitz joins Balaji Shrinivasan on the Network State Podcast to examine how internet-first institutions form, where they break, and whether network states are a curiosity or the next phase of governance.

• 1:51Balaji Srinivasan?

  Ben, thank you for speaking at the Network State Conference. Good to see you, Balaji. Ready to go. Awesome. So, you know, Ben, you've been a mentor and I think, I'd say a friend, hopefully, for many years now. And, you know, one thing is in The Hard Thing About Hard Things, in that book, you wrote about your time at Netscape. And Netscape in many ways was like the first internet company. And because it had downloads and so on and so forth. And it went viral and you guys went public and you had an acquisition, all the drama, right? And then we worked together on the rise of Bitcoin, which was first internet currency. And obviously, we've been very heavily involved in that with the A*Z crypto and everything, and blockchain base and all that stuff. And now we're building internet communities. So I'd love to hear your thoughts on that.

• 2:36Balaji Srinivasan?

  As you know, I think of them as the third kind of thing, star societies, internet communities, network states. I'd love to hear your thoughts. Do you think they're the next big thing or could be?

• 2:44Ben Horowitz?

  Yeah, so I think they're very kind of parallel in the development in that, you know, kind of before Netscape, which was the first thing that kind of brought all of the internet pieces together. You know, there were, there were many pieces. You know, there's FTP and TCP/IP and Gopher and this and that. But you needed something to unify all the technologies. So it, it was a little deceptive in that a lot of people deep in the tech kind of saw it as, well, what's new here? You know, like, it's just like you're just putting an interface on it. And I think that what the network state is, is in network school is, is very much like that. And that we have all the primitive building blocks of community.

• 3:29Ben Horowitz?

  We've got, you know, Discord and WhatsApp groups. And, you know, we've got, we have Bitcoin now. We have many kind of different currencies, stable coins and so forth. But, and you know, nobody's brought them all. We have VR, but nobody's put the whole package together. And that's really when it gets unleashed. I mean, my, in my experience, that's kind of where you hit the knee and the curve. When is that the integration? And it doesn't seem, in a way, it doesn't seem like a lot because all the pieces were already there. But the pieces as pieces just aren't, you know, it's not, it's not actually the thing. It's not the product.

• 4:09Balaji Srinivasan?

  It's funny because you're right, the system integration. And the thing is, that actually has to happen after all the other pieces are mature. Because if any one piece of those is wiggly, then the whole thing doesn't work. You have to wait for that to be there. So only when all those pieces are mature can you snap them together.

• 4:24Ben Horowitz?

  Right, exactly, exactly. And, and that's kind of the deceptive thing because until that point, you know, people might have tried it and failed or, you know, it's kind of like this, oh, no, that doesn't work.

• 4:36Balaji Srinivasan?

  Right.

• 4:36Ben Horowitz?

  You know, that kind of thing. Yeah, same with, same with Bitcoin, right? Like it put together like a lot of techniques, you know, peer to peer, cryptography, et cetera, that had been around. But they weren't put together in a way where you could actually have money.

• 4:53Balaji Srinivasan?

  Right, because ECDSA existed.

• 4:55Ben Horowitz?

  Yeah.

• 4:55Balaji Srinivasan?

  Hash functions existed, hash cast existed. And in a sense, I think somebody, exactly as you said.

• 5:02Ben Horowitz?

  Yeah.

• 5:03Balaji Srinivasan?

  Remarked, it was a clever integration of existing things, but they all existed before. And they didn't innovate on cryptography, they innovated on the system, right?

• 5:11Ben Horowitz?

  Right.

• 5:13Balaji Srinivasan?

  And, you know, it's funny you say that because I myself actually had not thought of that before in quite that way, as the analogy to the web browser. But once you do stamp all these pieces together, then that itself becomes a platform for other things.

• 5:27Ben Horowitz?

  Yes, exactly, exactly.

• 5:29Balaji Srinivasan?

  And then you have web apps and you had everything else, because then you could, right? And so what we're starting to see is these startup societies, I call them like the parallel physical, are each usually inspired by the parallel digital. For example, there's a startup society that is like a cul-de-sac, which is based on all the micro mobility stuff, and it wants to be a walkable community, right? And then there's, you know, Prospera, which has Mini Circle, and it's inspired by the biotech innovations. And then there's another one that's booting up, which is inspired by all the educational innovations.

• 6:04Ben Horowitz?

  Yeah.

• 6:05Balaji Srinivasan?

  And so the digital is inspiring the physical.

• 6:07Ben Horowitz?

  Yes, yeah, no, exactly. And I think that's gonna...

• 6:12Ben Horowitz?

  I think the number of ideas around that is really gonna multiply, because, you know, one of the things that, if you look at the primitive version, it's all a kind of, you know, a community around an idea. But what about a community around the intersection of many ideas?

• 6:31Ben Horowitz?

  You know, just for my own sake, it would be great if there was a tech hip hop community. But, you know, you could imagine many, many dimensions. Yeah, just sort of, if you think of every policy that you might be interested, anything you might be interested in, or any policy you might vote on, if you took the intersection and found all the like-minded people in the world and put them in a community, that would be a kind of very powerful thing.

• 6:58Balaji Srinivasan?

  Yes. And, you know, one thing is, some of the other folks were having Speak the Conference. For example, the CEO of Angelist read the Network State book, and they've just opened this Angelist Founders Cafe in San Francisco. And he said he was kicking himself for not doing it three years ago.

• 7:12Ben Horowitz?

  Yeah.

• 7:13Balaji Srinivasan?

  Because it, on the one hand, it seems an obvious thing, but it's also like a non-obvious thing, because people drop in, they give customer feedback, so you can materialize the cloud into land. So many, many digital things that we have, that we think is purely digital, have some physical manifestation that might actually be non-obvious.

• 7:30Ben Horowitz?

  Yeah, no, that, for sure. And then, when you add the physical, it does add a whole nother dimension of possibility, for sure.

• 7:40Balaji Srinivasan?

  Yes.

• 7:41Ben Horowitz?

  That's very interesting.

• 7:44Balaji Srinivasan?

  So, you know, one way that we've, we started to establish a few templates in the space. For example, the pop-up, which is somewhere in between, let's say, a conference, which is like a one-day thing. And what we're doing in Network School is a permanent, where it's like a permanent setup. Yeah, exactly. That's right. So a pop-up, like a one-month thing-ish, right? And so it's longer than a conference, because people, you know, they have to bring, you know, change of clothes, laundry, you know, it's more than that. So do you have any kinds of things that you've been thinking? So you mentioned a tech hip-hop thing. And obviously, we're used to thinking about, okay, we could solve this with a new tech company. We could solve this with a new currency.

• 8:28Balaji Srinivasan?

  Have you thought about communities that you'd like to see?

• 8:31Ben Horowitz?

  Well, there's so many, you know, like, there's the kind of, I'm part of like, many primitive communities in, you know, the form of WhatsApp groups and so forth. And it would be really like to, nice to see those be much more highly dimensional, maybe have a physical incarnation. You know, it's everything from like, you know, the LLM community to, you know, various different kinds of things. But they're all so primitive, because there's no money in them. There, you know, there's no crypto in these communities. There's no physical dimension. There's no virtual reality dimension. There's, you know, all you can really do is chat. Which is, you know, one of the things you'll do in a community,

• 9:13Ben Horowitz?

  but there's many, many, many more ideas that you could have.

• 9:20Balaji Srinivasan?

  Yeah, it's funny you say that because the WhatsApp and Signal groups, what I like about them is you have a lot of busy CEOs and investors and so on, and we can remain in kind of lightweight contact with a lot of people.

• 9:35Balaji Srinivasan?

  And then you have the physical, like, you know, maybe there's a coffee and you put in an invite there, a Luma invite, and 20 of the people or 10 of the people from the group show up there. And you could just pick up right where you left off with this long-running group chat conversations. There's definitely this amazing thing there.

• 9:51Ben Horowitz?

  Yeah.

• 9:52Balaji Srinivasan?

  But, you know, what's interesting is when you say what you just said,

• 9:59Balaji Srinivasan?

  you kind of want to be able to, boom, hold a meetup within the chat or like hit a button and create a meetup or boom, hold a meetup and do maybe like a quick VR talk or something like that. I don't know, maybe the chat interface will get there or maybe we'll need something completely new.

• 10:14Ben Horowitz?

  Yeah, yeah, because right now, you know, you can do that, but it's a little bit of a heavy cognitive and like social lift, right? Like, it's a little more risky to say, hey, let's all get together. You don't want people to go, nah.

• 10:32Balaji Srinivasan?

  Yeah, yeah, right. Well, you know, there's something, you know, one thing that's interesting about that is, you know, with WhatsApp, you know, a very modern question is, where are you?

• 10:47Balaji Srinivasan?

  Because, you know, probably if you analyze text in the 1800s, for example, it's very rare for someone to ask, where are you? Where are you? I'm on the other side of the table from you.

• 10:58Balaji Srinivasan?

  You know, because there's not that many times, you know, maybe you sent a telegram, but the telegram, you know, or, you know,

• 11:05Balaji Srinivasan?

  You sent a postal message, but it's rare that you wouldn't know the other person's physical location.

• 11:09Ben Horowitz?

  Yeah, you would certainly know where they are if you're sending a postal message.

• 11:13Balaji Srinivasan?

  Yes, that's right. So, but one thing that's interesting, WhatsApp itself is location aware, but an interesting thing that happens is people cycle around the globe and they're kind of, you know, they're in the Spain airport or they're here and they're just kind of sending messages and we sort of take for granted the level of mobility there, even though they're in one place in the chat world, they're moving around the physical world. So maybe there's something that would suggest, you know, to reduce the social overhead, as you mentioned, that, oh, these people are nearby, you guys should meet up, but you need to allow it to do that location tracking. That's like one concept, for example.

• 11:48Ben Horowitz?

  Yeah, that would be, that would be super convenient because then you'd also not have to worry, oh, hey, let's meet up. Oh, I'm in France, right?

• 11:55Balaji Srinivasan?

  Right.

• 11:56Ben Horowitz?

  That's gonna be hard. Okay, well, that was a waste of a message for me.

• 12:00Balaji Srinivasan?

  Yes. The thing is that the people would have to also want to be location tracked. It has to be done in exactly the right way that they feel, they feel good about it.

• 12:08Ben Horowitz?

  Yeah.

• 12:09Balaji Srinivasan?

  So, okay, so internet communities, I mean, there's another angle on this, which is, for example, things like self-driving, things like many of the biotech things that we're interested in. We can potentially have those within special economic zones. And, you know, did you see my post from a few months ago on the special Elon zone?

• 12:33Ben Horowitz?

  Oh, I didn't see that. I gotta look at that. That sounds like a good post, yeah.

• 12:38Balaji Srinivasan?

  Yeah.

• 12:39Ben Horowitz?

  Where just all Elon's tech gets to work for free.

• 12:41Balaji Srinivasan?

  Exactly.

• 12:42Ben Horowitz?

  Yeah, restriction, yeah.

• 12:43Balaji Srinivasan?

  Exactly. That's right. So my thought was, what is the sort of westernized version of the Asian cause of the special economic zone, the special Elon zone, or more generally, the special founder zone, would be find some swath of territory.

• 12:59Balaji Srinivasan?

  Maybe it's in the US, maybe it's Elon Salvador. Okay, so Elon gets, you know, because Tesla's a global business and so on. So some country gives, or some state carves out a piece of territory and says, "Okay, Elon, you can move at the speed of physics rather than permits. You can crank out all the humanoids you want. You can mine stuff out of the ground." And what they would do is they'd import existing regulations on, I don't know, graffiti and stuff like that. You don't have to rewrite every single law. You just allow, however, quick changes to existing laws. And the crucial thing being that it's like, essentially an uninhabited territory, as close to Burning Man as possible.

• 13:38Ben Horowitz?

  Yeah.

• 13:38Balaji Srinivasan?

  What are your thoughts on something like that?

• 13:40Ben Horowitz?

  Yeah, no, I think that's a, by the way, I think it's very doable. There's so many states in the US that would want to do that. I know Nevada would want to do that. And, I mean, they have Burning Man. They would certainly rather have something that was productive. So I think that's super viable. You know, there are certain states, of course, you could never do it. But, but first of all, and I think it could be,

• 14:10Ben Horowitz?

  it could not only be really productive, but it would also kind of create a very special community, almost of kind of both like-minded people and then people who knew how to build things.

• 14:22Balaji Srinivasan?

  That's right. And actually, the thing about this is, if it worked for Elon, then it could work for Palmer Lucky to have the drone zone. And, right, and you could have, you know, different kinds of-

• 14:35Ben Horowitz?

  Kind of, you know, like a more mundane thing, manufacturing.

• 14:38Balaji Srinivasan?

  Exactly. So on that point-

• 14:41Ben Horowitz?

  Rare mining, mining.

• 14:43Balaji Srinivasan?

  Exactly. That's right. So like, if you know about how Deng Xiaoping reformed China, when he took over, the country was like, all brainwashed, total communist. And he couldn't like reform at all at once. So he just set up a few special economic zones, especially Shenzhen, near Hong Kong. And actually, he didn't allow everybody in. They actually, there was like a membership process or an admissions process where only the most capitalist sympathetic people were allowed in and- weren't going to make trouble. They weren't still diehard Maoists, right? And and of course, that became this gigantic, you know, Chinese city there. And this way they could gradually reform communism rather than try to change it for the whole country at once. They could experiment with new laws and so and so forth.

• 15:23Balaji Srinivasan?

  So for manufacturing, all of the OSHA, you know, EPA type stuff, right? You could suspend that in this one zone. And everybody who came in signed a new social smart contract. That would basically say, guess what? I'm coming into this totally desolate peace territory and I'm coming because of new rules.

• 15:45Ben Horowitz?

  Yeah, yeah, yeah, no, I think that, but I think that's a great idea. That would be very good for the, it would be amazing for the US if we could do it here.

• 15:55Balaji Srinivasan?

  Yes.

• 15:56Ben Horowitz?

  So here, not there where you are.

• 15:59Balaji Srinivasan?

  Well, well.

• 16:01Ben Horowitz?

  Do we could do it in Singapore?

• 16:03Balaji Srinivasan?

  Yes, so I'm, I want to, of course, it'd be amazing if we do it in the US. And in a sense, if you can do in the rest of the world, then that gives you a template to bring into the US. Yeah. Potentially, right? So, so we can, we can pursue a parallel path potentially. So, OK, on the, on that topic, actually, relatedly, there are a bunch of countries that are pursuing interesting kinds of pro-tech legislation, like digital nomad laws, crypto laws, DAO laws. I'd love to know your thoughts on the progressive, for example, in Wyoming, they had, they did the first DAO law. Tennessee had followed up with the DAO law. I'd love to know your thoughts on the jurisdictions, politicians, et cetera, that are kind of pursuing the most

• 16:47Balaji Srinivasan?

  progress, technologically progressive interactions with not just tech companies, tech currencies, protocols, startup communities. You must have some thoughts on this.

• 16:56Ben Horowitz?

  Yeah, so, so, I mean, you know, in the US, it does tend to be the, like, the, the states that want to do that do tend to be the red states or the purple states at least. So, you know, Wyoming, Nevada, Florida, Texas, to some degree. A lot of the southern states are very kind of open to manufacturing and these kinds of things. You know, around the world, it's been interesting. So like WorldCoin, I think their most kind of active country per capita is Argentina. And I think half the citizens of Buenos Aires are active users on WorldCoin.

• 17:36Ben Horowitz?

  And then they also made a lot of progress, surprisingly, with Malaysia, which is pretty good. You know, of course, in the UAE, Dubai's been very, very aggressive. And so they've been good. So I think countries are now seeing kind of tech policy as a way to really compete. But it tends to be the, you know, it tends to be countries that want to grow as opposed to, you know, what's going on in Europe or, you know, some, some other places or in,

• 18:16Ben Horowitz?

  you know, California even, where they kind of are like, well, we're rich enough and now we need to divide up the pie and protect our, our children, the people.

• 18:28Balaji Srinivasan?

  That's right. They're basically unfortunately taking prosperity for granted.

• 18:32Ben Horowitz?

  Yeah.

• 18:33Balaji Srinivasan?

  And then they're the, you mentioned this thing about places that want to grow. One of the things I've been most pleasantly surprised by over the last five years or so is small states putting themselves on the map, like El Salvador.

• 18:49Ben Horowitz?

  Yeah.

• 18:50Balaji Srinivasan?

  But also like, like small cities like Palau, Marshall Islands, you know, they've taken very pro crypto kinds of, you know, approaches. And my, my general pattern on this is actually that, you know, there's 190 to 193 UN members. And it's, it's a little bit like a reverse merger or digital asset treasury company, where you've got kind of a listed company and it's got a symbol and you've got a coin and then this guy has a symbol and a sense of political legitimacy, but not capital. And this has capital, but not legitimacy. And then they merge together. That's a digital asset treasury company or reverse merger.

• 19:27Ben Horowitz?

  Yeah.

• 19:28Balaji Srinivasan?

  And that, that can now be done at the level of the state or whether a sovereign state or like a US state.

• 19:32Ben Horowitz?

  Yeah. No, that is a, it's a very, very smart move, I think, by, by those states. I mean, I think it's a. It's really interesting that you can differentiate just by thinking about how to grow and how to maintain prosperity, that there are whole societies that have given up on that idea.

• 19:54Ben Horowitz?

  Yeah, we, Mark and I just had dinner with one of the kind of potential candidates for Prime Minister of the UK and she was going through like, you know, like, what's your differentiation? She's like growth, like we can grow the economy. And I was like, wow, that's a very interesting differentiator.

• 20:16Balaji Srinivasan?

  It's interesting also because, you know, historically, people have said natural resources is a differentiator. But I actually think it is, um, you know, human resources, so to speak, or capital, like basically.

• 20:29Ben Horowitz?

  Right, letting the human resources do their thing, yeah.

• 20:33Balaji Srinivasan?

  Yes, and we should come up with a term for that, but I'd like to at some point organize a conference of small countries and pro-growth jurisdictions. And that's kind of like one side of a two-sided market, then we have all the tech founders and venture capitalists is the other side of the two-sided market and put them together. I mean, Network State Conference is like the V1 of that, right? And we've got a bunch of, you know, folks here who are, who are doing that.

• 20:59Ben Horowitz?

  Yeah, yeah, no, for sure. Well, I like, think that goes together, you know, people who want the network state in their territory are probably the exact countries that are interested in in kind of pushing forward into the future.

• 21:11Balaji Srinivasan?

  Yeah, because we can bring talent and capital there, just like crypto, just like, you know, just like tech itself. So now, are there, um, what has,

• 21:24Balaji Srinivasan?

  you know, what has surprised you about, um, the last five, 10, 15 years in terms of tech and policy? Or did nothing, or maybe, maybe there's so many things. But what have you found to be, uh,

• 21:41Balaji Srinivasan?

  To be interesting or something that we should look at, pursue, pay attention to?

• 21:44Ben Horowitz?

  Well, so I think the big wake up call for me was first kind of how interested, you know, nation states got in technology policy, which is very like all of a sudden because we ran my whole career, nobody cared. I mean, you know, like what were the issues? Stock option accounting, H1B visas, like real, like relative fringe stuff compared to, you know, the like, we're going to ban crypto or we are going to call Google and

• 22:26Ben Horowitz?

  Meta and tell them what they can publish. You know, that, that was a real change. And I think that, you know, my big conclusion is what the state cares about is power. And as tech kind of rose in power to the level of the state, then they got very, very interested. So like, you know, it's always under the guise of, of safety, but it's really power.

• 22:57Balaji Srinivasan?

  Right.

• 22:58Ben Horowitz?

  And, you know, it's been, it's been quite interesting. I mean, like, it took us a long time to unravel like why the Biden administration was so keen on banning crypto and like taking the US out of a whole technological space. Probably, you know, one of the two most important kind of technology platforms for the next 25 years.

• 23:22Balaji Srinivasan?

  They're also anti-AI.

• 23:24Ben Horowitz?

  Yeah, yeah.

• 23:25Balaji Srinivasan?

  The other one too.

• 23:26Ben Horowitz?

  Yeah, and AI. Well, both of them, right?

• 23:28Balaji Srinivasan?

  Yeah.

• 23:29Ben Horowitz?

  Why would you withdraw from that? And it really has to do with, well, you know, control. If we can, if we can't control the money, then we can't control the speech. And if we can't control the speech, then we can't control the people. And, you know, both AI and crypto are like, well, We better shut them. We better have control of those things. Like, they better not be in control of somebody else. And that's, you know, it's just a really interesting learning. That that's, I guess I had to grow up and learn how the world works. But that is how it works. Yeah.

• 24:02Balaji Srinivasan?

  It is interesting because, you know, for, you know, you're, you're a little bit older than I am, actually. I'm maybe 15 years, and, you know, during the period where, for many years, we had to convince people that tech was important.

• 24:19Ben Horowitz?

  Yeah.

• 24:19Balaji Srinivasan?

  And then, suddenly, they're like, it's too important. And that happened right in the mid 2010s or thereabouts, after about 30, 40 years of building the internet.

• 24:27Ben Horowitz?

  Yeah, yeah, yeah, no, crazy.

• 24:33Ben Horowitz?

  It is, it is, it's just so, so we were probably, you know, it's the same with all the, I mean, the first thing, the first sign I got of it was, um, you know, the big push for like, women in tech. And like, which was always surprising to me because it was like, well, you guys are discriminating against women. There's enough women in tech. But like, nobody wanted to go into tech. Like, going into tech was like a weird ass thing when I went into it. Like, I got like ridiculed and my friends, like, what are you doing that for? Like, you know, like, really, computers, this and that.

• 25:12Ben Horowitz?

  You know, it's so hard and like, you know, there's not that much money in it and this and that and the other. And like, all you do is work. And, and so like, going in in that world and then all of the sudden, you know, Google and Meta hit and people are getting so rich. And, uh, and then people, all of a sudden, it's like, well, you guys are discriminating. You're not letting people in. And it's like, oh, okay, you want in, okay.

• 25:37Balaji Srinivasan?

  No one cares about the demographics of plumbing, for example, right? Like, they haven't, yes. So, now, but the other part about that is, tech is actually, in a real sense, very globally meritocratic. Because we've got people from just about every country that are participating in tech in some sense.

• 25:54Ben Horowitz?

  Well, that's how we always thought of it, right? Like, it's like, oh, there's all these Jews, Chinese, Indians, like, all these people are coming from all over the world. They're doing tech, you know, like, it's, it's not the, you know, kind of canonical, white man or whatever who's doing it, but. But it was all self-selected, you know, it wasn't like there was no, nobody ever cared. Like, there was never a conversation in any of the companies that I worked at like that would get you to think anybody cared what race or gender you were like, like it just was never a thing. But nobody wanted, but, but nobody applied. You know, this was one of those things. And look, if you were kind of not Jews, Chinese or Indians,

• 26:39Ben Horowitz?

  you would definitely feel low on the outside because that's what most people were. I mean, it's just like that. Yeah. Well, yeah, I think about Midwest too, I guess.

• 26:49Balaji Srinivasan?

  Yes, that's right. So we, I mean, basically we have many different demographics, but you know, the thing about this is one thing I've been formulating is the thesis of the internet is to America as America was to Britain, like the version 3.0. It's like 10x bigger and in particular, lots of traditional American values like freedom of speech or protection against search and seizure. You can protect them on the internet with encryption in a way that is, is stronger than the protections of a law, for example, right? And so like a smart contract is rule of law, you know, for example, Delaware is melting down, but smart contracts are booting up.

• 27:28Ben Horowitz?

  Yeah, yeah, yeah, yeah. We just actually moved the, we reincorporated the firm into Nevada.

• 27:33Balaji Srinivasan?

  And that's an opportunity, right? For many countries. I mean, I know you guys are like are in Nevada now, but the fact that, you know, Delaware was, was a stable jurisdiction for, for decades, maybe centuries, depending on, you know, how long you think the Chancery Court was, was the main event. And so now I think there's sort of a jump ball where if, you know, there's some jurisdiction that could say, hey, guess what? We've got a better Dow law and we're better than Delaware because we allow you to port your company from place to place. We've got the crypto stuff. It feels there's a real opportunity in rule of law integrated with rule of code. If maybe you'd agree with that.

• 28:08Ben Horowitz?

  Well, I definitely think so because the thing that we've seen, you know, in the US over the last.

• 28:16Ben Horowitz?

  Probably mainly over the last five years is, you know, we've always kind of, a huge strength of the US has been rule of law and the amount of case law and like the predictability of the law. But that kind of presumed that you didn't have people who were above the law who were judges and, you know, prosecutors and these kinds of things. And so then what's happened in the last five years is, particularly in the Delaware Chancery Court, is the Chair of the Delaware Chancery Court just chose to completely ignore the law and make up her own law, which, you know, it was quite stunning.

• 28:57Ben Horowitz?

  You know, like the Board of Directors didn't have a say and then even the shareholders didn't have a say in how the company- This is the Tesla case, the Elon- Whatever she imagined would be the right thing. And, you know, like it took a lot of us by surprise. It's like, okay, wow, so Delaware doesn't have rule of law anymore. Right. Which it doesn't, like it absolutely doesn't. And it's hard to even get to a point where you think it does. But, you know, there was also, if you look at, you know, there was the prosecution of Trump over the real estate deal, which was also, you know, like, forget about the law.

• 29:40Ben Horowitz?

  Like, I, the prosecutor, and I, the judge, will just go, like, the law about, you know, what it means to have an agreement with a bank to get a loan is no longer the law. It's what I believe. And because I believe that they shouldn't have given you a loan because I don't like you, then therefore you were cheating other people. But it's like, well, if I go to borrow money, I disclose the thing, you kind of evaluate my collateral and I lend you the money. That's not legal in New York, or it wasn't legal for that case. So you get into this, we're in a different world where the law has been very politicized, I would just say.

• 30:23Ben Horowitz?

  And as a result of that, you're kind of, we're in like uncharted territory a bit. So I do think that creates an opening.

• 30:31Balaji Srinivasan?

  Absolutely. I mean, yes, my view on that is if you imagine like a house and there's two factions and they're fighting over the territory, that house is now a battleground and it can have a window blown up here, or some guys can take it and shoot down from here. And so all of these formerly neutral institutions are now political battlegrounds.

• 30:52Ben Horowitz?

  Yeah.

• 30:53Balaji Srinivasan?

  One side, and then maybe another will weaponize.

• 30:56Ben Horowitz?

  Yeah, I mean, I think it's on now, right? Like I think we've got, we've, we've gone through a bit of a one-way door on this because I think that once one side does it, like I don't think the other side is like morally higher, on higher ground. I think that it's going to be the same kind of thing, but in reverse for sure.

• 31:17Balaji Srinivasan?

  Exactly. So that is why my view is with crypto, with the blockchain, with the internet, with these special economic zones, we can potentially rebuild a new internet-first version of those things, which now puts more of the, or as much as possible of the rule of law into rule of code. So that, for example, the property can't be seized since the private keys, you have to break encryption in order to seize the property. For example, to break the contract, you have to break the smart contract.

• 31:50Ben Horowitz?

  Yeah, if the contract, then a little bit by definition, there's no room for a judge to say the contract was invalid, which is kind of the case in both the Delaware courts and in the kind of Trump New York real estate case where there was a contract. And that's all of a sudden, for whatever reason, that contract, the state decided the contract was invalid.

• 32:17Ben Horowitz?

  Okay, that's interesting, but if it was a smart contract, then there's no, you know, there's no third party.

• 32:26Balaji Srinivasan?

  That's right. And, you know, one of the things I think about a lot is when I'm at a tech conference in, for example, Dubai or in Singapore, the vast majority of people there are not American, often not white, they're from Africa, they're from the Middle East, they're from, you know, Asia, but they all trust Bitcoin, they all trust smart contracts. And so that is something which actually addresses the concerns of both the left and the right, because clearly people of every race, religion, ethnicity, and so on, trust Bitcoin and smart contracts and so on. But it's also fair, certainly to the right, because it's now, like, it is, it is sort of provably fair, which is new, and that's like a new standard

• 33:11Balaji Srinivasan?

  that can, you know, outweigh what, you know, what is, what is no longer thought to be fair by, by both sides.

• 33:17Ben Horowitz?

  Yeah, I, the, this is actually one of my kind of favorite ideas of yours is, you know, they are called consensus protocols, and they are a way of getting kind of mathematically strong consensus to the point where everybody in the world agrees to the penny who owns every bit of the, whatever it is, three trillion dollar Bitcoin market cap. Like, that's a hell of a magic trick, if you think about it. I mean, get everybody in the world to agree to a thing like that is, is quite spectacular. And I think that the, I think

• 33:58Ben Horowitz?

  it's probably the only future that works, given, you know, what's, what we're seeing now with the US interns at the law.

• 34:05Balaji Srinivasan?

  I think that's so, and the reason, part of the reason also is, everybody from every culture can read code, can diligence code, can do the math, can determine for themselves it's correct, whether they're, you know, Pakistani or Indian, Japanese or Chinese, right, Democrat or Republican. And so that is, I think, a part of the goal of Network State is to come up with a series of templates that can sort of restore order from the cloud. You actually, you know, you guys pioneered this in some ways, like reboot from the cloud.

• 34:37Ben Horowitz?

  Yeah, yes.

• 34:38Balaji Srinivasan?

  Right? Like in a, in a data center, you know, right?

• 34:40Ben Horowitz?

  Yeah. Yeah, yeah, no, for sure.

• 34:43Balaji Srinivasan?

  So restore from cloud backup is kind of how I think about a big chunk of what we're doing. But not simply the state of a server, but the state of a society. You know, we can, we can do that.

• 34:56Balaji Srinivasan?

  And, you know, an interesting question is how far we can take that because you can, you can have like minus one and plus one Bitcoin. And you can have a smart contract that governs identity, but actually many other kinds of contracts. For example, you could have a marriage and a birth registry on chain. People have started to do things like that. You can even have a jury of peers where people all turn their keys like Claros and, you know, or things have done, things like that. So I think a really interesting question is see how creative we can get, how much of the old world we can replace, or, or at least partially replace with internet first variants. I don't know if you have any thoughts on that.

• 35:30Ben Horowitz?

  Yeah, I, I mean, I think that.

• 35:35Ben Horowitz?

  I think we have to get. The infrastructure deployed more broadly for us like, so I do think step one, you know, the, the biggest challenge. Right now, you know, a big challenge for the world is like we, crypto is not pervasive. Like not everybody has a wallet, not everybody has keys. But it's really important that they do. Yeah, first of all, just from a security standpoint, like having all of your.

• 36:04Ben Horowitz?

  PII in the cloud and 400 different websites is the most dangerous thing. People are going to look back on that and go like, that was crazy. That was much worse than driving without seat belts and smoking three packs of cigarettes a day like that. Like me and saying, like, what are you guys doing? But we have to get that underpinning in order. You know, and I think that needs to be the way that money gets distributed to citizens and the way people vote and the way. And then, you know, when you have that basis, then there's a basis to move the law on chain. But I think it's, the, the trickiness of it now is. It's just not pervasive. And, and we really need it to be private.

• 36:49Ben Horowitz?

  We need it to be like the internet and it's not quite there yet. And then, you know, a lot of that has to do with. You know, the kind of assault on it over the last four years from the Biden administration. And so it's fragmented around the world and so forth and so on. But I think like it's definitely the future. The question is just how fast.

• 37:13Balaji Srinivasan?

  So, yeah, I think we have

• 37:14Ben Horowitz?

  Exactly.

• 37:15Balaji Srinivasan?

  Years and years. But by some measures, we have hundreds of millions of crypto of holders at least.

• 37:21Ben Horowitz?

  Right? Yeah, I know.

• 37:21Balaji Srinivasan?

  And it's funny because it is whatever trillion dollars and it's a big enough deal that it was like a major campaign issue and, you know, blah, blah. But it's a weird thing where like on a like, I use it actually quite a lot for wire transfers and other stuff. But my view on that is where we have Solana and Base, which basically means you could just blast transactions on chain as well as other L ones. And we have USDC and Sable Coins Legal. We have Apple removing its issues where it's blocking a lot of apps in the App Store.

• 37:57Ben Horowitz?

  Hey, Apple is a huge problem.

• 37:59Balaji Srinivasan?

  A huge problem, right? And we also have the regulatory assault has been pulled back. So there should be like, you know, a spring of a bunch of stuff that was pent up that should come out there. And then two other things.

• 38:11Ben Horowitz?

  But I do think we need more developers back in the field. So one of the things it did is that, you know, the combination of the assault from, you know, the administration and the power of SFB and then the rise of AI kind of shifted a lot of the software development energy over to AI from crypto. And we need to get a lot of that back to rebuild.

• 38:38Balaji Srinivasan?

  Well, so I actually think AI is going to subsidize crypto in the sense that AI makes everything fake and crypto makes it real again.

• 38:44Ben Horowitz?

  Yeah. Ah, right. Right.

• 38:46Balaji Srinivasan?

  Right? So because how do you know?

• 38:48Ben Horowitz?

  AI is probabilistic.

• 38:50Balaji Srinivasan?

  AI is probabilistic, crypto is deterministic, and that wallet allows you to digitally sign something to show it came from you.

• 38:57Ben Horowitz?

  Yeah.

• 38:57Balaji Srinivasan?

  And then you can have, you know, essentially a content ID on everything. And I actually think Exactly. We're going to have proof of human social networks. I think WorldCoin could help boot something like that up, for example. So I think that that is another subsidy here. And then your point on privacy, I've talked with some of the folks in the Ethereum community, Zcash community on HTPZ, like HTP, HBS, HTPZ, which is conceptual, whether it's literally HTPZ, but it's basically zero knowledge.

• 39:29Ben Horowitz?

  Yeah, zero knowledge. Very good. Yeah.

• 39:33Balaji Srinivasan?

  That's clever, right? And so we could, a lot of the privacy, that's another major potential subsidy for crypto, is the, all the zero knowledge techniques that have been built up for not just privacy, but also scaling, could be applied. For example, homomorphic encryption and secure multi-party, all that kind of stuff is now starting to be something that you might be able to use in traditional web apps with the right packaging of it. And that packaging has to be done. Maybe we can put out some prizes or something to...

• 40:03Ben Horowitz?

  Yeah, there's definitely work that's going on, on the packaging that's getting better. I mean, right, the usability of being on-chain, that was one of the big, the two things that, you know, when the assault started that we needed to get better at were performance and usability, and they kind of are related. We made a lot of progress on performance, not as much on usability.

• 40:29Balaji Srinivasan?

  Yeah. And I think, hopefully, we can get a lot of that over the next year or so. I think starting to see the front caster with Base and so on. And ns.com/urn, it's back. Yes. Let's go.

• 40:43Ben Horowitz?

  Good idea then. It's a good idea now.

• 40:45Balaji Srinivasan?

  Yes. You know, what's funny is, my view on this is, you know how Evan Williams, he did Blogger, he did Twitter, he did Medium, right? As iterations on a theme. And so I think urn 2025, 2026 is kind of like that. It'll be iterations on a theme from everything we learned from six, seven years. Because lots of stuff works now that was only, just barely starting to work back in 2017, 2018. So we'll see. Okay, cool. All right. So anything else that people who are building startup societies, so actually, if you're building a startup society, inter community, network state, should you come to Anderson Horowitz and pitch Anderson Horowitz?

• 41:26Ben Horowitz?

  Yeah, I mean, I think that for sure, we're very interested in it. We're...

• 41:33Ben Horowitz?

  You know, we're investors in NetworkState.com.

• 41:38Balaji Srinivasan?

  NS.com, exactly. Yes, that's right. So yes, exactly. That's right. So.

• 41:44Ben Horowitz?

  No, we believe in it. We believe in it. We believe in the whole thing from the sovereign individual on up. So we want to be part of it for sure.

• 41:54Balaji Srinivasan?

  Awesome. Well, thank you very much, Ben.

• 41:57Ben Horowitz?

  All right. Thank you.

• 42:00Speaker 01

  Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening, and I'll see you in the next episode.

• 42:26Speaker 01

  This information is for educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. This podcast has been produced by a third party and may include paid promotional advertisements, other company references, and individuals unaffiliated with A16Z. Such advertisements, companies, and individuals are not endorsed by A H Capital Management, LLC, A16Z, or any of its affiliates. Information is from sources deemed reliable on the date of publication, but A16Z does not guarantee its accuracy.