Ramy Adeeb of 1984 joins Nick to discuss 2022 Predictions Part 2: Web 3.0 Dorsey vs. Andreesen, Crypto’s Killer App, Omicron’s Staying Power, Which FAANG Co. Loses to Anti-Trust First. In this episode we cover:
The Web 3 Twitter War What Nick thinks about Crypto’s Killer App Omicron and Labor Market Dynamics Inflation Expectations Regulation for Big Tech and Crypto & More!
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Transcribed with AI: Welcome back to TFR! Ramy Adeeb is back for part two of our VC predictions for 2022. In this part we cover the web three Twitter wars Crypto’s killer app, omicron and the endemic, and what it means for the future of work, what to expect regarding antitrust and regulation for tech giants. And finally, we wrap up with our optimistic thoughts for the coming year. Here’s part two of our 2022 predictions with Ramy Adeeb. Alright, now we get to the fun stuff. So we mentioned somewhere that Metaverse is somewhere between a and z. Elon Musk famously tweeted, you know, has anyone seen web three? I can’t find it. And Jack Dorsey’s response was it’s somewhere between a and z, of course, referring to Andreessen Horowitz a16z, quite a battle on Twitter, between Jack, Chris Dixon over web three, why don’t you kick us off, give us an overview of the play, maybe the early play by play and then some quick thoughts on it. So I have tremendous respect for the folks involved here. I’ve known Olfi for a long time, we when I was at Khosla, we invested both in Square, which is Jack Dorsey’s company, and obviously, Marc Andreessen is an investor and us as an investor in every other fund, but I gotta say, when it comes to this particular feud, I have a lot of respect for Jack Dorsey, I think Jack is, is calling a spade a spade. He is, let’s take a step back. I look at Twitter, and other social media companies. Twitter is the only was the first company to attempt to regulate speech, like every other social media company is about because of the regulations around being not liable because you’re the first person saying Wait, here’s a two by two matrix, this content create harm, or does it not create harm? And is it truthful or not truthful? Or the card full, it’s not truthful and creates harm, it deserves regulation. Twitter did kind of stand up to Trump from speech in certain ways, in ways that I thought was very interesting and bold. I think we’re all like people in tech, I really think Jack Dorsey is the most he just doesn’t give a, he tries to do what he really just and I really respect, and I look at all the hype, look, you got to give it to him recently, they invested in Columbus before all of us. So nothing but respect, incredible returns, think back to 2013. Everybody is betting on like Google Glass and 3d printing. And the investing point is not random. They didn’t invest in a request fund. But they didn’t invest in Coinbase, right in the drawer. And they have been early backers of so many other parts of the hyping of NF T’s and crypto. Like it’s the only thing that people should have when you really look at it. And it just every application right now is a big factor in its scheme. So you look at something like xe infinity, which Andreessen just invested in like a billion dollars or something, the foregoing valuation, just a massive pyramid scheme. That’s all it is poor people in the Philippines go, they take a loan for $500 to buy a stake into this company. So they can make $15 a week hoping that the next person would pay $7, which they can’t afford, but they also take a loan, take that money out to play the game to make money and they keep hyping it. And as it’s going to enable creators and whatnot. And I find it to be way too height. And Jack Dorsey standing up and saying all of these promises don’t make a lot of sense. Yeah, so his initial tweet was you don’t own web three, the VCs and the LPS do it will never escape their incentives. It’s ultimately a centralized entity with a different label, know what you’re getting into. Right? That’s what kicked it off. And it’s it’s kind of funny, considering that Jack Dorsey was the one that in the sell like an NFT of his first tweet on Twitter. And that’s fine. Yeah, he did. But I think all of that hype, everybody should move to NFT because it frees you from corporations, and corporate control, which is the vial of BS. It’s a pile of BS. If it truly freed you from corporations, VCs wouldn’t be encouraging it. You know, a second really funny tweet. Actually, there was a tweet just yesterday from Chris Dixon was Jack Dorsey about who owns web two, right. And it listed all the investors of the Airbnb or today, which is like, you know, all of us publicly tweeting like, you know, fidelity and all these large funds. And Jack Dorsey responded to him and said, Next, please list your LPs, which are going to be the owners of web three. Like, again, if a VC is trying to get so much, I have a hard time imagining they won’t be big meaningful exits, that would actually be a lot of reward. So the premise that I think that the Jack Dorsey is very right in calling out the BS on saying web three is this platform where users will own the web, unlike web two, where companies do I think that’s it Probably yes, they will say you own your own data, right instead of these large companies, but the data on the blockchain is, is public. So, you know, companies are going to use that to their advantage. And yeah, it’s just it’s very curious. You know, it feels, to me it feels a lot like open source maybe 15 years ago, yes, there are more idealistic ways to do things, and in some cases better, but there’s reason why open source hasn’t dominated the world in Microsoft beat Linux. And because you know, people appreciate curated specialty products that really deliver on a problem instead of just something. Yeah, and even on Microsoft open source example, you have GitHub vs get labs, right. GitHub, was acquired by Microsoft, and then get Labs is originally an open source project, but are now it’s open core. And there is a company on top, which was git Lab, which just IPO wonderful, incredible company that’s really giving people an opportunity to to have an alternative to Microsoft’s tool run a lot of this code on prem as opposed to in the cloud, which is to real benefits. But there’s a company that is, you know, worth $10 million and $15 billion today doing that. And I’d be free. Yeah, you’re not going to be free. And there’s a huge sort of decentralized peer to peer element here as well. And, you know, you think back to the original sort of p2p movements and marketplaces online, and even things like eBay, you know, eBay had success, but it didn’t become the de facto medium of exchange for all physical goods, right? It’s good for certain applications in certain use cases. But I don’t know, I feel like web three is saying it’s going to be an end all be all in this decentralized web is going to become sort of the de facto standard. And to me, it’s still in search of killer apps that make sense. So in light of that Rami, what do you think will be the killer app of crypto or web three? Look, I don’t know what it is. But definitely the one thing I know about it, it’s not in the news today. Look, you don’t know. All the killer apps, the killer apps are never look when Coinbase was being funded in 2013. All the news was about what 3d printing and Google Glass, you know, when Uber started, and just how the nine, we were about like clean tech can carbon neutrality and solar and wind, whatever is being hyped, like the next big startup is being born today. But it is not on the news. And users always, always backward looking. It’s only when that company becomes successful. The news covers it, and then try to predict the next one. Right? Right. And then it’s always rock. Like think of the scooter many. Why did we invest? why was scooter such a big hype in 2017? Because everyone was looking for the next Uber. Right? Because Uber was IPO overnight. Great. Uber, what is the next thing? Oh, what is the next form of transportation? Well, it turned out, you know what the next Uber was that had nothing to do with transportation. It was delivered. It wasn’t the move from car to scooters, it was to switch from moving you to move in your food. Right? It was DoorDash. Right? But didn’t didn’t see it. Even overdone. See, even Uber was investing in scooters, more than invested in Uber Eats, right? Like it is just so again, it’s always there, but we don’t really see it. And love the comments, I have to disagree with you that I think the killer app is there. And it’s revealed itself. And its naming is a store of value, especially in this inflationary environment that we’re in. The killer app for crypto is in my mind, it’s Bitcoin. And it’s obvious, right? And it’s no longer like a hot take, or an interesting viewpoint, but with the environment, we’re in stable coins and Bitcoin feel like a transformational change to currency and store value. I actually really agree. I really agree that Bitcoin is a killer app for store of value regulatory arbitrage specialist store values across borders. No, I couldn’t agree more. And I would say that in of itself also is a great manifestation of the early backers of Bitcoin really wanted, advocated, for it as a medium of exchange, not as a store of value. I remember all my buddies wanting to use it, to trade back and forth, right, right. In fact, all of the Bitcoins I own, I won at a poker trick. Very little. I wanted a poker tournament in 2013. It’s done well, very well since but it was a corporate tournament. And people just like paid me. It was like, not a tournament it was even like a poker session. And then people paid me they’re buying in in a Bitcoin because the early advocates were really trying to use it as a medium of exchange, but then they realized exactly what he said. It’s not a medium of exchange store value. Very close, but not quite what it was thought it was. I couldn’t agree more. I hope you still have the keys, Ramy. I still have. Yeah. Alright, so So Fred Wilson also predicted, you know, he said back in spring of 2017, that Ethereum is market cap would surpass bitcoins in that year. Now he says, you know, he was five years too early, and that theory is market cap will surpass bitcoins this year. What do you think? I have no idea. No. Idea. Look, I own Bitcoin Aetherium and Solana. I think Bitcoin is a store of value. I think Aetherium has a promise of defiance. Ilana has The promise of up ending Aetherium to become the platform for Defy? Yeah, but I have no idea if defy will even materialize or if I mean, again, people wanted smart contracts that then people don’t use them. I tell you what, if gas fees were included in the market cap, then fear here might have a good chance of being worth more. I mean, if there is not a lot for 50 billion, I have no idea if bitcoin will end the year at 100,000 or 10,000. So Ramy, VC into crypto VC invested into crypto in 2020 was around 5 billion a little north of there. And this year, it looks like 17 ish, billions. Yeah. Why is that hype? Right? Chatting out there? But specifically, what is it? If I go to my office right now and say, What are you doing monthly for crypto fund? We probably close you know, $100 million? Yep, three months, and I know nothing about crypto. That’s to imagine, you know, you just go out there and you will raise money. And so then you need to deploy it. Ramy we as humans are programmed to chase returns and chase hype, but I think we’re paid to do the opposite. Amen. So any other thoughts on web three? Mr. Dorsey? Andreessen? Mr. Musk? Oh, I don’t space travel is fucking joke. I mean, you kidding me? Who wants to do that? Like, it’s, I can’t believe people, I get all these like VCs, like, what do you think about space? I’m like, what, what is the problem trying to solve space travel emission space travel? I’m like, would you rather spend $4,000 to go to Tahiti or spend 40,000 You’re in a capsule eating canned tuna. So you can get a view of the Earth that would probably get old? And like after six minutes, and then come back to say you did it first, though. Exactly. Exactly. There was a great YouTube video called the problem with dicks and space. Everybody should say, That’s me. It was a Saturday Night Live show making fun of all of those people who are trying to say we were there first. Yeah, well, you know, every good company needs a big vision and needs a reason to get a lot of people excited. And to some degree, I feel like both with Tesla and SpaceX, Elon has projected sort of a vision of the future that gets a lot of people very excited and enthusiastic. And it helps serve the cause, which is building a core business in areas that maybe aren’t quite as exciting. If you know all the details. Well, 100%, I think he did for electric cars, give him the leeway to do whatever he wants. All right, let’s finish it up here, man. Let’s talk about some macro factors. Of course, we have the COVID Omicron situation upon us right now, let’s start out with the virus. Fred Wilson. Of course, we’ve talked about him a couple times. Today, he published his 2022 predictions. He says as the pandemic evolves into an endemic in the first half of 2022, companies will reopen their offices and employees will largely opt to go back to working together in offices. I guess the first part of his comment is that he thinks, you know, he’s basically resigned to the fact that this isn’t endemic. Do you? Do you think the same endemic meaning it would just be here to stay? Perpetual? Yeah. Yeah. I mean, I think with viruses mutating to become more, I mean, my understanding is that the flu is basically the influenza, you know, the 19 1718, right like that, right? Basically, basically, viruses mutate in something that’s more suitable and less lethal. So yes, I absolutely do buy that. I don’t know if they want to go back to what it was before. I think my biggest concern actually, about the future of of work is less about remote work or homework or office or not office, it’s, it’s about the fact that we have because of the pandemic, we have introduced Americans to European style, leisure, stay at home government will pay you hang out with your family convocations set morning and coffee at your leisure. And now we want to take that back. And I think that’s a disaster. It’s a catastrophe. It’s really the biggest threat to this country’s economic dynamism in the past 50 years. Wow, you’ve got me thinking web three killer app, maybe something involved with labor? What do you think will be the lasting versus the fleeting effects on tech and VC of this virus? Lasting things? I mean, the future of work to me is mind boggling. Yes, there is older mod companies like GitLab. They’re very successful. There are some small businesses going back to in person. Bigger companies that are trying to do a hybrid between remote and in person, I think are going to struggle. Because it’s very hard to do that. It’s very hard to have people at the office who are talking to each other who are communicating things verbally, but then there is partners to the remote where communication is not onerous. And It’s very hard to effectively do remote work if you have a passionless workforce. Yeah, absolutely. If they need motivation, external motivation. Yeah. I mean, I think it is a question like, you know, if we revert to a 25 hour work week, effective workweek, I mean, nobody’s gonna say they’re working 45 hours, but if everybody’s working 35 hours Some tasks need to be done in person. And I really think the cost of labor is going to increase because of remote work opportunities, if I could stay home and do something, and you want me to get out of my house and go drive in winter, well, you better pay me for that. And I think that’s going to contribute to inflation, the reduction in labor force will contribute to inflation, the Americans in their 60s and droves are all contributing to inflation. So work in 2022 is probably to be employment, remote in person labor shortage, wage inflation is one of the most interesting things for me, and it’s gonna set the trend for the next decade for this country. Yeah, we better have a cost effective labor force, if it doesn’t exist, it’s gonna be very troublesome. Let’s finish up with a couple others interest rates, everyone’s speculating that they’re going up. Let’s assume they’re going up. What does that mean for us? Well, let me start with the present, we have inflation of 5%. But you can get a mortgage for 2.7%. Now, back to economics 101, real interest rate, equal nominal interest rate plus inflation is the nominal interest rate equal to the interest rate plus inflation. So you can borrow money right now from your bank at minus 2.3%. Literally, you can borrow money, people are paying right now to borrow money. So if you could go get a mortgage, or go get a mortgage, I would just go and take advantage of this ridiculous moment in history. Better than what’s up better than free. It’s way better than free. It’s unbelievable. I think inflation has always been underestimated in this country, like we took out health care, education and housing out of the measures of inflation in the early 2000s. And kept just like tracking inflation is 000. There’s no way inflation is zero. I moved to San Francisco and I was paying X 20 years ago, the official inflation is actually being you know, x times point two, maybe, but in reality of being like 3x. So where is that gap? The answer is, oh, it’s housing. It’s not any accounting for restaurants are not, you know, if you buy flour, and sugar and milk, it’s roughly the same price as in 2008. Who bought I mean, these are, these are basket of goods that are intentionally meant to hide inflation, the real inflation and labor cost, they’re real. And anyways, so long story short is scarce resources versus non scarce on a percent, you know, imports from China flat, because China will manipulate they want to own global trade, and then the password to they will also like, oh, actually, finally, was everything else in play, some of those basic cores are score products are trying to go up a little bit in price and in labor is shooting up in price and realize, Wait, we have an aging population that doesn’t want to work anymore, we have fewer and fewer labor force, but we our demand for products and we just pull the same, what happens more pressure servers are going to go up. So what does that mean? In fact, let’s assume interest rates are raised. What does that mean for VC and tech do the exit windows closed is that in theory, as the more you can get interest rates out capital, more capital will go back into sort of debt as opposed to equity. Right? If I can make 5% of my capital, then prices of stock will drop. But if you know interest rate to zero, people take that money and buy stock. So they jack up the prices of stocks. So yes, there could be some public market correction as a result of a rising interest rate. But I don’t view it as a concern as a significant contributing factor to the price of tech. I think a bigger question is, was all this money going into tech right now? Are we getting commensurate exits commensurate m&a, commensurate IPO’s? IPOs or not, especially with valuation expansion right. And to me, the question is much less about what interest rates are going to be and more, if so much venture capital and so much intrapreneurs are going into entrepreneurship, or the number of exits also, an opportunities increase, or will they remain limited, pushing VC to turn to down as a result? I will say this, I’m not super deep in corporate life in businesses and acquisitions as I once was 10 years ago, but I have noticed a significant change in the temperament in the interest in tech companies in purchasing tech companies versus a decade ago when predominantly skepticism in corporates needed to be won over now. It’s a very defensive part of its fear, but part of it is embracing new tech as a key part of the future for a lot of these cash cow oriented large public companies. What is your biggest concern with cash cow companies? They can’t innovate? 100% I think there’s so much it’s tougher going after antiquated industries software going after those 500 s&p 500 companies, probably 450 of them don’t know how to innovate, which is complementary and contributes to both of our theses. Right? If these folks are paying a premium and more excited about the the companies we’re backing, that works well. Absolutely. And they need to either acquire them or get a replacement Okay, so super hot topic going to transition Ramy legislative policy. Right. We’ve had a number of things that risk any thoughts on future legislative policy and in respect to some aspects that have been very favorable to venture in tech historically that could come under threat. The only time in history that Ted Cruz retweeted it is at this forum was when she tweeted about the need to to regulate Facebook. Now, I just want to take a moment to appreciate that Ted Cruz retweeting Elizabeth Warren. There is no topic that both parties are more in alignment on than regulating tech. I think that’s great news. I think it’s a mistake for people in tech to think that we want less regulation. Why? Because a lot of the regulation, I believe, at the end of the day will focus on anti monopolistic behavior by the big tech companies and the big tech companies for capturing value and are stifling innovation. Facebook, had Facebook not acquired Instagram, we would have had massive amount of value created by Instagram. Although the FTC, the new FTC Commissioner went head to head with Facebook last year. Yes, and they did. But I think it’s, you know, I came to age at the time I was in college in the late 90s. In the biggest topic back then was the government trying to break Microsoft and Bill Gates, I remember him talking about how I worked at Microsoft at the time that the internet really spoke about how in 97, he dropped everything, he dropped everything. And his entire focus became make sure that Microsoft doesn’t break us. That became his number one priorities for the next three years doing nothing but fighting the government. And he succeeded in keeping Microsoft together. So there’s been a trend in pattern, I think the world is different. Now, back then Tech was young and loved. Now, big tech evokes probably the same origin as big oil or Big Pharma in the minds of the younger generation. So I think the tide is stacked against big tech. And that’s great for VC, I wouldn’t fight it. I do think crypto is a fascinating older regulation, we need to have clarity on like the US already, we have one more integration right now, where this two is very, in the basically tree, the stock directory is very clear that if you buy something descriptive, that’s considered a gain, so you need to then pay taxes on that. So in essence, crypto is being treated as a stock. But we’re still don’t have we have somewhat it’s not clear what our regulation of crypto look like a like in China, we’re just very clear banned. Don’t do it go to jail. In the US. There’s lack of clarity, we need clarity for innovation there. And I would say the last thing is we need better collaboration between God. Even though on the one hand, there’s going to be a lot of breakdown between sort through breakup of big tech or attempted breaking up. And it’s not like massive breakups that you put on Instagram or Facebook, who cares? I think the biggest thing we really need as a country is better collaboration between big tech and government in areas like AI, you look at what’s happening in China. And it’s all very tight collaboration between Alibaba and the government between Tencent and the government, and you look at the US, and it’s like, you know, Google wants to approach the government and there’s like an employee, you walk out like the government’s some like evil entity, we have got to have a stronger public private partnership around tech and innovation, especially with cybersecurity especially being such a big threat to us, especially with AI being such an important area for innovation for the country. If the FTC goes after one of the big FAANG companies, who do you think they go after? And who do you think they take down? Dude, I mean, that’s done a phenomenal job just doing one thing and doing it well and standing for consumer privacy or not. So it’s not a very easy target. Google is kind of like not really in the news anymore. Nobody hates on YouTube. So they’re kind of like it seems to be that Facebook for one reason or another is is the one that was with the market. It’s back about Amazon. If we continue to have labor challenges, that could be a prime target. No, I was gonna say Amazon’s in labor force is its biggest Achilles heel. I mean, that means basically USPS on steroids. That’s I could totally see. I mean, Starbucks just unionized. Wow, I can do that. Yeah, there’s a first Kenyan in Starbucks just this past month. No, Starbucks is not Amazon, but down the street up in Seattle. Romney, what are you excited about in 2020, to give us some hope, and some optimism as we close the show, there’s never been a better time to be an entrepreneur, it really has never been a better time to be an entrepreneur, consumer are so much more willing and open to embracing tech and embracing new innovation products. That makes life more comfortable. Businesses are dying for ways to save on cost, get better visibility, better data, better predictive analytics, better AI, whatever it takes for them to be more efficient and more competitive, and then capitalism will be more abundant. So it’s a great time to be an entrepreneur to go build a business, build a product, and I also think it’s a great time to be an early stage venture capitalist, great for working with all this. There’s just so much opportunity to go and build amazing things irrespective of you know, interest rates going here and there or the government breaking Facebook or not breaking Facebook. or, you know, the story of Tech is one of a lot of hypes, a lot of busts, but also a lot of data being created. And so whether web three or MFTs, or crypto gets hyped or blows up or that becomes an expletive that becomes the next 3d printing versus the next Google Glass versus the next coin base, which would be a good thing. We don’t know, but there’s gonna be a few big wins for sure. Founders out there, chase the passion, not the hype. He is Ramy Adeeb. The firm is 1984. You’re the man Thanks for doing this and giving us some thoughts and predictions for the next year. Appreciate it, Ramy. Thank you, Nick. A special thanks to all of you out there who have left us a review on iTunes or Spotify. And for those who haven’t yet left a review, it would be awesome at the beginning of 2022 If you help us with a quick five star rating. I appreciate you all and I’m super grateful to you for making this podcast. One of the most listened to media in all of VC. Thank you so much and I hope you have an amazing 2022 full of new adventures and successes. We’ll see you next time.
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