Summary: Chris Dixon and Naval Ravikant on The Tim Ferriss Show
Exploring the potential of crypto and NFTs
Crypto Rabbit Holes is a space for me to slow down and pay closer attention to what’s happening and what I’m learning in the crazy, fast-moving world of crypto. If you aren’t subscribed, you can do so here:
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One thing I want to do is to use this space to process and summarise my key takeaways from resources I consume about crypto. With so much happening, I find it easy to skim over ideas without fully understanding them. I thought a great place to start would be this long conversation (2.5 hours!) between Tim Ferriss, Chris Dixon and Naval Ravikant.
They explore the possibilities that are being enabled by crypto and non-fungible tokens (NFTs) and it’s especially helpful because they’re able to articulate a lot of complex ideas in a non-technical way. I could spend a long time digging deep through all their threads of conversations, but I remember when I finished listening to this, I felt super excited by the potential of crypto and NFTs, partially because of their enthusiasm, but also because of what they talked about. So while I won’t provide a comprehensive summary, I'll try to capture the discussion points that left me feeling that way.
If you have any thoughts or feedback after reading this or listening to the conversation, please let me know!
Here’s a full transcript of their conversation: https://tim.blog/2021/10/28/chris-dixon-naval-ravikant-transcript/
Outline
NFTs let us own things on the internet. With NFTs, we can verify ownership and authenticity of digital assets
NFTs create a verifiable link between the owner, creator and community, and there are endless ways this can be used
New technologies often start off looking like toys. The first use cases tend to be “skeuomorphic”, meaning we simply transfer familiar ideas to the new technology, before exploring unique and more interesting use cases.
There are already great use cases of NFTs. Art is a great example. It’s changing lives for artists and incentivising a new generation of creators.
Innovation will happen much faster because we have open code and open data which are composable, like digital LEGO blocks than can be assembled together in any way. Builders can build much faster and users will move around freely.
Crazy amounts of money are being made by people in this space, but be careful to not be too impulsive. You don’t actually need money to get involved to observe and learn. And you can always explore until you find a creator or project or work that you love.
Detailed Summary
Note: if there are multiple quotes below, they could be from different parts of the conversation. I’ve just compiled them together that way.
Non-fungible tokens (NFTs) are a new way for us to represent digital assets, so that we can own things on the internet. With NFTs, we can verify ownership (who owns a digital asset?), and authenticity (do they own the real thing?).
In the real world, we're very familiar with these concepts. Our homes are filled with things we've bought and own, and we usually try to get items from reputable retailers because we don't want fakes. But on the internet, it's so easy to copy and reproduce things. If I uploaded a photo online, anyone could download that file to use, and they could share it around. They could even pass it off as their own. However, if I created an NFT to represent that photo instead, everyone would now be able to see that I created it and own it. If I wanted to, I could transfer ownership of it to someone else by gifting or selling it to them.
Anyone can still come along and "right click, and save as" my photo, and do whatever they wanted with it, so at first glance, that might make NFTs seem pointless. However, the key point is that even when that happens, ownership of the NFT doesn't change.
Naval Ravikant: But basically what you’re saying is that digital private keys enable digital private property. So we finally have private property on the internet and we don’t need people like Spotify or even the studios and the labels to determine who owns what private property and hold it with their database entries and their lawyers.
Chris describes NFTs as a "primitive" because he believes they're a new foundational building block on the internet with endless potential. The point that really emphasised this for me is what Naval says below - that rather than just thinking of an NFT as the digital object that it represents, think of it as a link between the owner, the creator and the community. That's where the ability to verify ownership and authenticity is powerful.
Imagine you owned an NFT created by your favourite singer or band. If they wanted to hold an exclusive and intimate concert for their NFT holders, they could do that, and they'd be able to check if you actually own of their real NFTs. Or perhaps you own an NFT of one of their new songs, which entitles you to a portion of their ongoing royalties for as long as you own the NFT.
Naval Ravikant: An NFT is not really an object, a digital object. It is a pointer, it is a channel, it is a link, a communication between you, the creator, and the community, and any kind of value can be funnelled down that. It can be access into things. It can be recognition and reputation. It can be royalties, it can be copyrights. It can be remix rights, or it could just be you are just sending them money because you want to support them.So it’s completely programmable. We just don’t know.
Given how early the technology is, it's hard to know how it will be used in the future and where it'll go. Right now, it's easy to dismiss what's happening with NFTs given a lot of it doesn't make sense, looks pretty silly or just has so many problems around privacy, security, the user experience and more. However, Chris Dixon mentions that disruptive innovations often start off looking like toys and describes some of the existing use cases as being "skeuomorphic" - this idea that we often start by similar transferring familiar ideas to new technologies before eventually exploring ideas that can only be achieved with the new technology.
Chris Dixon: So I think it was a Steve Jobs word, that he used this word. And he used it to refer to visual design. So if you remember the original iPhone had like a book app, and it had like wood grain bookshelves, okay? And so it was this concept in design of taking something from the offline world, and using that design in the online world to make it look more familiar. I don’t know, for whatever reason me and my colleagues started using this word all the time internally, three or four years ago. I’m not sure if we invented it or got it — I mean, not invented it, but ported it over from the design world. I don’t really remember.
But we’d always use it to mean like, essentially, here’s the idea. So when you go back and look at early films. And early films look like plays. They put people on, and they would walk around, and they’d stage it like plays. And then over time film developed its own new grammar, right? And so you had a closeup, and you had an establishing shot. You go look at the old movies, they would just show Grand Central Station for 10 minutes. And then they learned over time, you could just show it for a second and the human brain would figure it out, right? And so it took them a long time to figure. And this happens with every new technology.
In saying that, there are already great use cases for NFTs. One example of this is art. In the traditional art world, artists are only paid once for their work, and they don't benefit from secondary sales. With NFTs, artists can automatically earn royalties from secondary sales. This is especially valuable if the NFTs grow in value over time, because now artists can capture some of that value, forever. For artists today, this can be life changing, but it's also interesting to think about the implications of this. As Naval says, "you're going to incentivise a whole new generation to go do these cool things."
Tim Ferriss: If you are an artist and your work is resold and then resold again and resold again. Well, if you’re operating in a traditional art world, you get paid once. That’s the end of the story. Instead of that, now people are making the lion’s share, or many of them, of their income from these secondary sales and it’s all done automatically. They don’t have to trust some agent or a broker or a rep or a curator to pay them. They don’t have to audit accounting because it’s all on the blockchain.
Naval Ravikant: I think it’s one of the cool things here, is when you create a better business model for art, let’s say, or for music, step one will be: you take the existing artists and they get more money. Step two is: you’re going to incentivize a whole new generation to go do these cool things. With the generative art, now you have a way to make money on it. There’s just going to be all these smart people attracted to creative things, which I think is a great thing. I think we were just dramatically underpaying creative people in my view, and we’ve now figured out a way to pay them properly, and that’s going to lead to a huge new wave of creative activities, not just technology. And not just paying existing musicians; maybe we enter a world where there’s, instead of eight million musicians on Spotify, there’s a billion.
What we can expect is that innovation will happen at a faster pace. This is because code and data is composable, meaning that they're like digital LEGO pieces that can be assembled together in way. This is the opposite of what it's like with the internet today, where code and data sits in silos of big companies which aren't easily accessible. With open code, if someone solves a problem well or builds a good product, anyone can easily re-use or build upon that.
Imagine you wanted to build a new version of Instagram, and rather starting from scratch, you could just take a copy and add your tweaks. With open data, users aren't locked into any one platform. Now on your version of Instagram, any existing Instagram user can move over and still have all of their data (their account, posts, followers, followings, etc). They don't need to create a new account and start from scratch. So with composability, users can move around freely, and new products can be built faster.
Naval Ravikant: One of the reasons why the Web3 revolution is going to be so non-linear and so unexpected and so fast is because open code means these applications plug into each other like LEGO blocks. You go buy a LEGO for your kids. Well, it connects to every LEGO piece that your kid already owns.It connects to all the other LEGO pieces of the kids down the block, and they can build anything they want out of it and that’s how code on Web3 works. That’s how data on Web3 works. That’s how even ownership on Web3 works, where I can own a little piece of every platform that I contribute to and this is absolutely a revolution.
Naval Ravikant: The beauty is this is all open source, right? So it’s not even APIs anymore. I don’t have to access through the very limited APIs that Twitter might impose or expose and then take away later on as they’ve famously done. I can literally connect to the code at any point that I want to. Then, in open source, you only solve each problem once. So if somebody has built a good version of how to solve a certain problem, I’m just going to reuse that and reuse it again. Maybe I’ll fork it, maybe I’ll improve it a little bit, maybe I’ll put it to a slightly different system, but essentially at the fundamental level, each problem only has to be solved once. So composable means that it’s like LEGOs or it’s actually digital LEGOs, where I can just copy the LEGO and then build on top of it. So to the effect to a competitor is like a composable type thing, where all of a sudden all the apps and Web3 can sort of team up to create any app needed. Example is, there was an innovation in DeFi
There's no guarantee that anything happening in this space will become something meaningful over the long run, but one of the signals that there might be something worth paying attention to here, is the number of intelligent and ambitious people dedicating their time to this space.
Tim Ferriss: I have never seen so many highly intelligent, ambitious, capable people drop whatever they’re doing, in many cases really attractive things, to dedicate all of their time to this. I’ve never seen anything approaching it en masse. It’s not a trickle that slowly builds to more than a trickle. I mean, it’s people immediately deciding this is what they want to spend 24/7 on. I don’t know, perhaps I just don’t have a macro perspective over a long enough period of time. But certainly in all of my time in or around technology, I’ve just never seen anything like it. And at the very least that means it’s something that’s worth taking a very close look at.
Getting involved doesn't mean you have to invest all your money, or any money at all. It's easy to feel a temptation to do that, as you watch people make millions selling pictures on the internet, but it's important to remember that there's a lot of risk involved too. It's possible to observe and explore and learn until you find a project or creator that you love, or whose work you love.
Tim Ferriss: Just because you missed the opportunity to buy JPGs for a dollar that are now worth a million dollars, and there are examples of this, it doesn’t mean that you missed all the boats. Maybe you missed one boat. Secondly, it doesn’t mean all of those NFTs are going to maintain or appreciate, so be patient. I really feel like with the amount of exploration and experimentation that is happening right now, and I mean, Chris, you tell me if I’m completely delusional here, but I really feel like even though there is an impulse to rush and there’s an impulse to be in Discords 24 hours a day and on crypto or NFT Twitter 24 hours a day, ultimately you run out of hours.I do feel like there is a place for watching, for learning, for getting educated, for kicking the tires in ways that are low-risk or no-risk and looking for fat pitches, whether that is as a user or a fan, looking for a real fit with a creator or an artist or an entrepreneur who you love personally, or whose work you love, or whose project you love or looking for investments. I feel like it is a huge mistake to just impulsively from the driver of FOMO, dump a ton of money in hoping that you win the next Willy Wonka golden ticket. Because ultimately I think that is — at least for me — is too high risk.
Naval Ravikant: I think with NFTs is that now everybody will get to play in Web3. Everybody will get to play in crypto. You’re going to have a lot of creators making money. You’ll have a lot of fans making money. You’ll have fans expressing their devotion and their interest, which is really where it comes from. Because underneath, even though some of these art projects will turn into larger franchises that will launch movies and games and books and all of that stuff, many won’t and many will just be a patronage link between the person who’s collecting or buying and the artist.And that’s great. I want to be able to support an artist without having to buy a sneaker in the way that they market it. You know, I should just be able to support them directly. I want to be able to support a fitness expert online without having to buy some BS vitamin that they have to stamp their name on to some supplement company that they have to start. I want to be able to support a singer or musician without having to just pay Spotify 10 bucks a month and hoping it finds its magic way to them. I want to be able to support somebody on Twitter instead of just retweeting and liking all the time. So we are establishing direct linkages, economic linkages, and governance linkages between communities of fans and artists. And I think that’s wonderful. So if you want to go buy NFTs, buy the stuff you like, because at the end of the day, what you’re probably going to end up with is a cool JPG.
Thanks for reading! What did you think of this post? I’d love to hear any thoughts or feedback you have.