What's up, everybody? This is Cortland from IndieHackers.com, and you're listening to
the IndieHackers podcast. More people than ever are building cool stuff online and making
a lot of money in the process. And on this show, I sit down with these IndieHackers to
discuss the ideas, the opportunities, and the strategies they're taking advantage of
so the rest of us can do the same. I'm here with Lee Jin. Lee, how's it going?
Good. It's nice to be here again. Thanks for having me.
Yeah, it's nice to have you. I think you were last on the show in February of this year.
It was about 10 months ago. And I think I introduced you as the patron saint of the
passion economy back then. So the passion economy, very similar to the creator economy.
It's a sort of explosion of individuals moving onto the internet and making a living online
by creating things, whether it's YouTube videos, or tweets, or blog posts, or courses. But
since then, you've had a lot of stuff going on. You've raised a lot of money, been investing
more money than ever. Even at the New York Times, you're really cool, sort of huge profile
on you. And they called you the investor guru for online creators. So maybe that's your
new title. What was that experience like?
They also called me the It Girl in venture capital, which people have really glommed
on to hilariously.
The It Girl in venture capital. It's a lot.
It felt nerve wracking and exciting. It's one of those moments that I think you never
even allow yourself to envision can happen because it's just so far fetched. And it feels
like how many people really get the privilege of being profiled in such an international
forum like that. But it was an awesome experience. I did it remotely. I was calling in from Greece,
Athens at the time. Taylor Lorenz wrote it up. She is an amazing reporter who I've learned
so much from over the past few years. I think she's really on the cutting edge of writing
a lot about the topics that I care about, but from a news angle. And so it was just
really, really such an honor and a privilege to be written about by her.
What is that process like of being profiled by a huge newspaper? Is it like an arduous
thing or is it super quick, efficient, like a podcast recording?
Well, it is pretty extensive behind the scenes. A lot of it I did not even see because essentially
what happened was I had a normal conversation like this with her. But then after that, she
contacted and talked to a lot of people who had interacted with me or worked with me over
many years. It's kind of like getting a new job. And then your employer is like, by the
way, I'm just going to call up some people that we know. And you're like, okay, but this
is like on a next level. It's like literally everyone. And it was so funny because I was
like, oh gosh, who is she talking to? What did they think about me?
I hope they say good things.
I hope they say good things. I hope they don't remember that time that I like left my dishes
in the sink in the office and hate me for that. No, but Taylor, yeah, I think she knows
like half of all my friends now because you talk to everyone and she was like, everyone
just said the nicest things about you.
Yeah, it was a pretty glowing article. It was definitely like I read through it and
it was like 100% positive as far as I could tell. But then it's the New York Times, so
you get some like comments. And I was looking at some of the reader comments. And there's
like various degrees of pessimism, especially against tech in general, when you get to like
sort of like the peanut gallery commenting. And one of the comments stood out to me. This
person, their name is Anders, I think. Hard for me to applaud anything that perpetuates
this tech driven consumerism cycle we currently seem to be spiraling into. I hope for humanity's
sake, we all wake up from our YouTube and Instagram hypnosis soon. Do you see that comment?
I didn't because I usually try not to. Like it's everywhere. Like on Twitter, on comments,
like responses to my sub staff newsletter, like the tech lash is very real. And I don't
go through all of them in detail because a lot of them are kind of not substantive. And
and so I try to just focus my energy on more constructive uses. But I do acknowledge it's
out there. I mean, if we look back in history, for every single wave of technology, there's
been people who have been vehemently against it. Like there's a podcast that I really love
called Pestmas Archive, which chronicles the tech lash throughout history. It didn't used
to be tech lash with the social media platforms. It used to be tech lash against like telegrams.
There was a tech lash against telegrams because it was like, well, why, why is this thing
being invented? Now I need to be plugged in and like responsive to my customers over the
weekend or like they can contact me whenever they want. There was tech lash against bicycles
being invented. It was unnatural for men to go that fast or against the subway because
why would you want to go underground if you're still alive? Like it's unnatural for people
to be underneath the ground. And like why would we invent a mode of transport that had
you digging up the soil? So like with every wave of technology throughout history, there's
been people pushing back because I think the root of it is like change is really uncomfortable.
And technology requires us to change the way that we live and move throughout our lives.
And that can feel threatening and different and force us to adapt our ways. But I think
it's a perennial thing. And if history has taught us any lessons, it's that there will
always be resistance against change. But overall, like technology, I think it's an arguable
that technology has raised the quality of life for all of humanity since we started
making tools as a species.
I kind of feel the exact same way that you do. Like we've played this game before. It's
sort of on repeat. You know, if you're a student of history, it's kind of like played out to
resist whatever new technology comes about that's scary and threatening because another
generation that will just be mundane and sort of how things have always been. And if humanity
can do anything, it's adapt to new environments and whatnot. But I don't know. Not everybody
shares this opinion. And I wonder like what do you think it is about you that makes you
more optimistic about these kinds of things? And why aren't you like part of the tech lash?
You know, it's funny that you say that word because optimism because I just got a reply
to my latest newsletter that I just sent out two hours ago where a reader said, I wish
I could be as optimistic as you, but you're wrong for all of these reasons.
I love the internet.
I think optimism is a traumatic experiences and coming through them. Also, the fact that
I grew up between cultures helps a lot because a lot of the technologies that we commonly
take for granted and that get vilified here, like social media platforms, I see the silver
linings of them all the time because my dad, my paternal grandparents, they're from like
super rural China, like 13 hour train ride plus like car ride plus tractor plus walking.
The last part of it, there is no road, so you have to walk through the rice paddies.
So they're from like that kind of rural environment. And when I was younger, there was just no
way to communicate with them. You had to send a letter that probably took like a month to
get there or three months from the US. And then telephone poles got installed there only
when I was like 11 or 12 years old. And I remember that moment clearly when I could
finally pick up the phone and call my grandmother. And then later on, they got cell service and
now everyone has a smartphone. And the fact that you can hold up your smartphone and talk
to them face to face now using the social platforms that are free for all of their users,
that's a magical moment that I feel like we don't acknowledge and recognize as often as
we should. I remember them telling my mother, it's crazy that we can still talk to you after
all these years from this distance. And I just thought, wow, there are benefits to social
media.
Yeah, I made so many good points there, which I think are worth sort of recapping. One of
them is I think that kind of highlighting the point that it's easy to take these things
for granted. You know, like we have like, okay, people likes lives being empowered by
technology, etc. And it's easy to sort of ignore those and look at all the bad, but
like, when you appreciate like the simple things like being able to communicate with
your family, like that's pretty revolutionary and life changing. And it's easy to say technology
is bad if we just ignore all of the good. But there's a lot of good that it does. And
the other thing I think is that, you know, on one hand, optimism can come from like unique
personal experience, surviving difficult or even traumatic things. And then seeing that
life can be okay, I think is a good sort of proof on a personal level that like, there's
a reason for optimism, but also you can like, logically make the case for optimism. If you're
a student of history, and you look back on things, you see like there's been so many
different things that people over the decades have been afraid of that have seemed like
existential threats that actually, you know, despite maybe being kind of dangerous, like
we adapted or we worked through because generally speaking, people want things to be better.
And whenever something threatening comes about, people go to work trying to fix the problems
and make things better. So I think there's a great logical case to your sort of highlighting
for optimism.
Do you feel like the tech lash has been exacerbated? And like, how do we ever mitigate that, especially
in an era of social media and people, right? I think things were engagement.
I think that it peaked in 2020. I think that there was a lot more written about it back
then. But the fact of the matter is like technology is sort of entrenched. It's sort of just here.
I think as much as people crave novelty, it gets sort of played out to like be like, you
know, the 50,000th newspaper article about why Instagram is bad and how it's ruining
us, you know, and it's like, well, actually, like we're still kind of okay. And humanity
still sort of working well, and people seem to be more or less surviving. Like we've even
adapted to like a global worldwide pandemic, you know, it's not great, there's negatives,
but like we seem to be able to adapt. And so I do think that like, there will always
be voices out there that are sort of sounding the alarm or, you know, complaining for lack
of a better word. But I don't think that it's necessarily a bad thing. I think it's fine.
And I don't think that it's like overwhelming and it's going to lead to any major changes.
I just think people will sound the alarm and sort of complain and like, you know, that'll
just be there. It'll be the sort of persistent undercurrent until like humanity is just used
to this stuff. And we'll just complain about new things.
I'm already seeing the cycle happen again, where there's now this like burgeoning nostalgia
for the last wave of internet technology. Like with crypto, I'm seeing people now being
like, actually, maybe Facebook and Google aren't that bad. Maybe it's not that bad
that they have all of our data, like I trust them. And like, if we're going to trust any
one of their data, like it's probably Google. So maybe we should just go back to that.
Maybe it's so boring, but like every situation is nuanced. You know, there's always ups and
downs. There's always a cost benefit analysis. And so I'm not shocked to see those opinions.
And I spent a lot of time in Hacker News where there's like, it's always sort of like curmudgeonly
nostalgic. Things were better the way before. And so there's a lot of that there too. Like
I hate this way.
It's so funny how that has become the Hacker News community.
It's weird, right? Because it's supposed to be sort of a technologically like Ford looking
place. And yet I think no, I think every group is susceptible to sort of being curmudgeonly.
You know, like that's kind of maybe the only condition in a way.
I think we need to resist being curmudgeonly. That is like a lifelong resolution for everyone.
I agree. Stay young, stay hungry. I recently had like a sort of deep dive into like Web
3, because I was also kind of like, ah, what is this stuff? I'm sort of resisting. It seems
like a flash in the pan. And then like earlier this year, I'm like, you know what, like I
should, this is not the way to be. This is not how I want to be. Like I should deep dive
and learn. And it's been super fascinating. And I've learned a ton. At the very least,
it's very intellectually engaging and fun. And so I agree with you. It's something like
to strive for. Yes. Yes.
Let's talk about some of this future stuff. I wrote down like four or five topics we can
talk about. We could talk about DALS. We can talk about social tokens and Web 3. Maybe
a good place to start is sort of a more broad topic, which is this concept that you've been
tweeting about a lot, which is creators sort of taking back ownership from platforms. And
so I think the context here is that like a lot of the internet sort of Web 2, so to speak,
has been these huge platforms like Spotify or Twitter creating sort of a place where
creators can come in and produce content. But ultimately the vast majority of like the
capital that's like, you know, changing hands or sort of like, I guess the reward for that
content ends up enriching and empowering the creators of the platform rather than the creators
creating that content. Yes. And this is not like ideal. It's like it's a little bit dystopian
in a way. What are your thoughts on this? Is this like a fixable problem?
It's really interesting because in the last 10 months that has elapsed since the last
time that I was on this show, a lot has shifted on my side as well professionally and personally,
just in terms of my focus area and where I'm investing both my time as well as dollars.
Yeah. To address like the future of online work. You tweeted the biggest opportunity
of our time is to reconfigure the relationship between capital and labor.
Yes. So I'll start with the founding thesis of my firm that I had started last summer,
Atelier Ventures and trace it to where I am now. Okay. So when I left A16Z, it was because
I became very passionate about the thesis of the passion economy. How do we leverage
online platforms and tools to give everyone the opportunity to start their own businesses
on the internet to earn income in whatever way they wanted to offer up whatever product
or service or knowledge or skill that they had and connect with customers all over the
world? That was the vision that I saw and the shift that I saw that was possible through
internet enabled work. And I wanted to be really on the forefront of that movement.
And so the founding thesis of Atelier Ventures was we should give everyone the ability to
become a capital owner such that they can call the shots and be in control of their
destiny and do work on their own terms, control their customer relationships, determine how
they want to monetize their price points, et cetera, et cetera, like empower them to
be entrepreneurs essentially. And that was very much a reaction to what I had seen play
out in the marketplace and platform worlds in the four years prior to that that I was
investing, which was that platforms mediated that relationship within customers platforms
dictated the prices that they were paid out. They held all of the data, et cetera. And
so like, even though the promise was to be your own boss on a lot of these gig platforms,
that wasn't actually the case. These workers were very much commodified. And so my thesis
was it's possible to build a new generation of tools and platforms that are much more
friendly to online workers and actually enable them to own capital. And throughout the course
of investing, what I realized was by investing in these centralized companies and businesses
that were mostly owned by investors like myself and by early employees, at some point in time,
in order to be worth anything and to generate a turn, these companies needed to extract
value from the users who were using them. And they could extract value at terms they
thought were fair, like through a take rate that they thought was low, but there was still
going to be pushed back from the participants on the platform over how that was determined.
And was that really fair? And so that extractive element that a platform needed to converge
on which Chris Dixon has wrote about in his piece by decentralization matters with the
S-curve and how, as they get more participants, they shift from cooperation to extraction.
I felt like that was this inevitability that presented attention in what I was trying to
invest in and the impact that I wanted to see in the world.
So just to give listeners an example of this, you're talking about something like Facebook
in the early days saying, hey, creators, come build on our platform. And then later on,
locking down your followers and saying, you need to pay to reach these followers. Or Twitter
saying, hey, developers, come build on our API. And then cutting off their API and killing
a bunch of apps and just buying the ones that they cared about. Eventually, they start competing
with the people that they pretended to cooperate with in the early days.
Exactly. Exactly. That's right. That's precisely the dynamic. And I thought, how do I resolve
this tension? How do I actually fund the next generation of products and services that are
going to be much more creator-friendly and not just eventually have to compete and extract
from them? And I ended up going down the crypto rabbit hole. And now I'm a web-free investor
because what I realized is that the toolkit that is offered by crypto in this innovation
of a token actually allows you to transfer and distribute value to all of the participants
in a network much more effectively than equity was ever able to do. And thereby enabling
you to remove the distinction between a shareholder versus all of the stakeholders out there and
make them one and the same. And so a crypto network that decentralizes can distribute
tokens to their community. And that community can be users. It can be creators. It can be
people who are hyping you up on Twitter or whatever. Like anyone who contributes value
in any way can become a token holder. And the network can choose to drive value to those
tokens and confer rights, both economic rights and governance rights, such that everyone
becomes a shareholder in that business. And so that was the strong form of the thesis
of how do we make everyone a capital owner.
So an example of that might be a social network. I think it used to be called Bitcloud. It's
not called DSO. But they had a token that represented their social network. And the
early institutional investors weren't signing special term sheets where they got access
to preferred shares or something. They're just buying the tokens like any human being
could do. Let me just buy this token. Any person could do that. And essentially, you're
not at any elevated status as an early investor. You're doing the exact same thing as everybody
else. And that's kind of revolutionary.
Yeah, exactly. I think there's a little bit of controversy with that particular example
because the initial investors did get to access the token at a lower price than our retail
investors. But the general idea is that eventually the company exits the community or maybe is
community owned from day one via the token. And as an investor, you're investing in the
same asset that is eventually going to be owned by all of the users and creators on
the platform as well.
Right. And so that sort of aligns incentives because everybody's sort of participating
in the same way. There's a question though, isn't access still sort of a power sort of
disproportionately favor just like the earliest people or the biggest investors? Ultimately,
if you own 50% of the tokens in any of these things, you still sort of control things in
the same way as if you're on the board of a traditional startup. So what is the change
come in that's so revolutionary?
Yeah. So ultimately, I think these things aren't black or white. When I outline the
thesis of giving users ownership of these platforms, a lot of the reaction that I'll
hear from people is like, but where does that put you as a VC? Like what are you investing
in then? How do you get a return? And the truth is that we are investing in these networks
as well and we need to make a return. And so the idea is that at a later point, what
we invested in will be worth more than what we invested in initially, hopefully.
Ideally.
Yes, ideally. And that means the network grows and it attracts more users and the token price
appreciates, et cetera. But if you look at the substantive difference between the old
style model of funding a startup through equity all the way through to IPO versus one of these
decentralized networks, what looks really different is the percentage of ownership that
goes to VCs versus goes to the community. Like in a traditional company startup that
is funded via equity, selling equity, they'll probably raise many, many rounds of venture
financing to the point where probably by the time at IPOs, it's mostly owned by investors,
by outside investors and a team owns, I don't know, like a third of the company or something.
And then at IPOs and that's when all the retail investors can finally get access to this company
that is now probably worth already a lot. And that at that point, like the venture investors
exit and the retail investors kind of pay what they're exiting to versus in a decentralized
network. Usually if it starts as a centralized company before doing a token distribution,
they'll probably raise like one or two rounds of capital maximum. And then investors will own 15%
of the business or so. And then the team will own, let's say 10 to 15% of the business as well. And
the remainder of it goes to the community. Cool. And so much larger portion of the token network
goes to the community much earlier, enabling people to benefit from the price appreciation
of the token thereafter from a much earlier stage. And then there's the added part, which
is that a lot of people don't even need to buy the token with their own capital. They can earn
it through doing various actions that the network dictates are valuable.
Right. So you can get on the ground floor, even if you don't really have any money by working or
posting or tweeting or whatever the product sort of incentivizes you to do.
Yes, that's right.
It's just so fascinating. So essentially, as a VC, what you're basically saying is like,
hey, in this new future world, it's technically not as good as the past world was for VCs. We're
not going to take home the lion's share of the equity. But this is where the world is going
anyway. And so it's either adapt or die, adjust to this new reality, or try to hold on to this past
reality. And they see that pattern with lots of things. Like in the 1990s, if you're a media
organization, and you hear about the web, and you're like, anybody can publish to the web? I
enjoy my privileged position on TV stations and having privileged distribution at newspaper
stands. Why do I want to go on the web? If you had that mindset, you would have just died. You
kind of had to adapt and say, OK, in the future, I'm going to have more competition. I'm going to
have less power. But that's where the world is going, and I have to go that way. So maybe as an
investor, sort of getting on the crypto, sort of Web3 decentralized train is the same sort of
thought process. We're like, accepting that this is just how things are going to be.
Yeah, I would say a corollary to that is, yes, I definitely feel like this is the direction the
world is headed. But B, I actually think this alternate way of building a platform through
community ownership is potentially even more powerful. And the end result is a network that
grows to be much more valuable for everyone, such that the pie expands. And so even if we end up
with a smaller share of the pie, it could be worth right just as much or more as it did in the old
equity world, because you're turning over ownership to users who are thereby much more
incented to stick with the community to take actions that are valuable to see it grow more.
And so the thesis part of the thesis is like ownership is going to enable networks that grow
bigger, faster than what was possible before. Right. Okay. And so if we come full circle to
this idea of like, reconfiguring the relationship between capital and labor, this future that we're
headed toward potentially is basically the labor like the workforce, like just owning a much bigger
share of these companies. And what does that like ultimately like accomplish? Does that mean that
we have better healthier companies? Does that mean that like, there's like a more sort of
income inequality and wealth distribution? Like what's what is it that makes us a noble goal,
I guess? I think different people see different things in this. But what I personally see in this
is the potential to solve income inequality, which is one of the most pressing issues of our time,
I believe. So if you look at the reasons driving in income inequality and widening the wealth gap,
it's because too few people are owners of assets that are appreciating in value. They're living
paycheck to paycheck, they have no savings, they don't own assets like stocks or equity,
they're not accredited investors. And so they're not privy to the same opportunities to invest as
like this other rarefied tier of investors. And so people are falling behind. And then other people
are able to amass ownership and get better access to like more attractive investment opportunities
and the wealth gap continues to widen. And so I think of crypto and the ownership economy idea
as like this really powerful force pushing back against that, which ultimately creates a healthier
society. Yeah, there's just this term of kind of idea of the rich get richer. And I think technology
is like played into this so much, especially with the web where it's like, you know, on one hand,
you have this very empowering, like exciting story of like, just a small group of people can create
so much value and wealth, you know, using code that can reach so many people. And it's like really
inspiring. But then it's also like, well, doesn't that just mean like a lot of wealth is going to
be concentrated in very few hands in the future, you know, when you don't need, you know, 10,000 mom
and pop stores, but you can actually just have like one e commerce business that serves everything.
And so it's like this idea of the Matthew effect, or, you know, essentially, advantages
accumulate. And like, it's almost as if crypto is like sort of an antidote, like, oh, we can have
this technology that reaches everybody. And yet we can have another layer of technology that makes
sure that like all of the wealth doesn't accumulate into just a few hands. Right? Yeah, I remember
reading this analysis around the Facebook IPO years ago, which was studying like the revenue
generated per employee at Facebook. Compared to I forgot, it was like some very traditional
offline business, the revenue generated by some offline manufacturing business. And you could
clearly see the distinction where like every Facebook employee had so much more leverage and
generated so much more revenue. But then you think about that more. And it's like, well, yeah,
because they're leveraging the creations of this worldwide network of users who are contributing
the content and making the network entertaining and attractive in the first place. So this whole
generation of like, multi sided platforms and user generated platforms, they have gotten to be really
valuable with very few employees, because there's this widespread network outside of the confines
of the company that are also doing work for the company contributing to its value. If you think
of the term user generated content and all of these user generated platforms, there's something
insidious about that terminology. It's like this class of users who are generating the value. And
yet they're not owning anything. Yeah. So it's true. I feel bad because I'm trying to do this
with indie hackers, like I want the indie hackers form to be awesome. And then I like go away. I'm
like, look at all these people making all these posts. I don't have to do anything. They're making
the website great. And I don't have to do anything. But like, on one hand, the other hand, it's like,
maybe this is a little exploitative, you know, with any hackers, at least I don't generate any
revenue. So like, there isn't anything that I'm capturing in particular. But like, I do think
that there is like, you know, legitimate argument that these companies have found a way to leverage
the work of so many people, but aren't necessarily, I guess, needing to compensate them for the work
that they're doing due to network effects. Yeah, exactly. And even if they wanted to compensate
them through giving them stock in Facebook or Uber or whatever, like the existing regulations
just wouldn't facilitate that. Like there is no way to distribute value in mass to three billion
users all around the world. You really need a digital way to distribute value, i.e. crypto.
Right. And so the other question that springs up is like, okay, well, you've got crypto, you know,
presumably, like these future apps and platforms that take over the web are going to be based on
tokens, and anybody can buy a token. Whereas in the present day, like it's very hard to like,
invest in a company, you need access, you need to be sort of an angel investor, you need to be sort
of connected, you need wealth, there's literally laws about being an accredited investor. So you've
got to have like, a million dollars in net worth to be even like, trusted or allowed by the government
to be an investor, which is kind of crappy. But there's an argument to be made that like, well,
when you open up tokens, and it's this huge digital casino, people are just gonna like lose
money in mass, people are like, you know, buying, what was that the squid game coin that came out
and was like a huge scam, like, people aren't necessarily sophisticated, people don't necessarily
know what's worth investing in and what's not worth investing in. And so like, perhaps we're
just creating a world where the sort of disadvantaged people just get taken advantage of even more,
and you know, miss out and the people who already have the advantages and the connections still
win because they're just making sort of, I don't want to say unfair decisions, but like better
decisions through better access and through better connections, etc. Which I think is a
real downside. So like, the question in my mind is like, does this downside, you know, is it worth
the good? You know, are we really fighting against this sort of inequality? Or are we just sort of
exacerbating it and giving the people who already have the advantages even more ways to win?
I just don't agree with the patronizing nature of investor protection laws.
You don't know what to do with your money.
Exactly. Like the fact that only accredited investors could invest in our fund or in a startup,
that's just absurd that there's some dollar cutoff beyond which you're sophisticated enough to know
what you're doing and below which like, you're dumb, like go invest in the stock market, like,
yeah, like go invest in a mutual fund, which gives you 2% return year over year. I think
that's just so unfair. And it's this pretense that's being used to lock people out of financial
gains. It's really protectionist for the upper class of individuals who want the best investment
opportunities for themselves. Agreed.
That's what it is, plain and simple. And so this whole, like people who are leveraging the charge
that like crypto is going to cause so many retail investors to lose their money because, I mean,
the undertone of that is that there's not smart enough to do their own research. It's usually
coming from people who are really wealthy and probably have an incentive to protect those
opportunities for themselves.
Yeah. Again, like this is a sort of analogous to like media companies in the 90s. You know,
people were saying, oh, the internet, anybody can write and publish anything and we can't
trust people to go find real information there. And this is being said by people who own like
these huge media corporations and have an incentive to people only read their stuff
rather than allowing it to be democratized and allowing sort of everybody to play.
So I agree. Strong incentive to keep people out.
I mean, I will grant there are definitely scams and stuff going on. Like with any nascent
technology, it's been used by all sorts of actors for all sorts of different purposes, but
it's no different from the early uses of the internet or for email for bad purposes. Like
we've gotten those emails from people pretending to be Nigerian princes or whatever where we have
to send them money. And no one ever talks about regulating email or maybe they did. And I missed
that, but the technology will be used how it's used. Like our job is to try and paint the picture
for how it could be used for good. And I don't think we should be overly overbearing on people's
lives. So let's talk about DAOs, DAO, a decentralized autonomous organization. I have sort of been
doing a bit of crypto research. This is an area I haven't looked into quite as much as other things
like NFTs and social tokens. What exactly is a DAO? And how do you see this sort of new type
of organization playing into what we're talking about? Sort of the businesses of the future of
the organizations of the future and like sort of, I guess, decreasing inequality and helping sort
of owners and laborers kind of merge into one class. There's so many different types of DAOs.
The term has almost become kind of meaningless because everything is a pending DAO to the end.
I just tweeted about this over the weekend just because it calls itself a DAO doesn't mean it's
actually a DAO. You're right now I guess on the Indie Hackers podcast DAO. Yes, exactly.
Change in the name. Indie Hackers is DAO. All of my chat groups are DAOs. Okay, starting with
basic definitions, so a decentralized autonomous organization. Essentially, I think of them as
intranet communities that share resources and are aligned towards a common goal or mission.
And importantly, all of the members of the community are bonded through ownership in the
community via tokens. There's a DAO native token that every member of the community holds that
points them in the right direction and aligns everyone's incentive, kind of like a digital
cooperative. Just like in an offline cooperative, everyone was a member owner if they were a worker
at the co-op. Similarly, in a DAO, all of the members are owners of the DAO token, which
represents their ownership stake. And right now, there's hundreds if not thousands of DAOs popping
up each with their own missions and goals that they're trying to do. We saw a constitution DAO
which pulled together capital to try and buy this copy of the constitution. There's other DAOs that
are pulling together capital to invest in other types of assets like NFTs, almost kind of like
mini VC funds, but going after crypto native assets. There's DAOs that are joining together
and deciding to like build products and ship software together. An example of this is like
Party DAO, which built Party Bid, which is this tool that you use to buy NFTs with your friends.
Others are just like social networks where people are vibing and hanging out and meeting friends.
But the commonality between all of them is this layer of ownership through the DAO token where
all the members in that group are owners in the community and get exposure to the upside that's
generated. And so tying it back to our conversation about work, the model that has been pioneered by
Silicon Valley over the last few decades is that you can use incentives to create a more successful
company than would have been otherwise possible by giving your employees ownership in the company
itself through stock option grants. And so this has now become prevalent in Silicon Valley,
like every startup gives out equity grants to their employees. It's unheard of not to do that.
And the idea, which I think is true, is that by giving them equity, your employees are that much
more incentivized to see you succeed, to see the company that they're working for succeed,
because that represents upside to them. And a DAO is very much similar to that, except that
everyone who is contributing value in different ways can be a part owner of the DAO. And then
there's this other added element, which is that outsiders can also speculate on the DAOs token
and buy it, even if they're not really active members. So if I think like FWB, which is this
social- Friends with Benefits.
Yes, Friends with Benefits.
The most famous DAO, probably.
Probably. Yeah, one of the OG DAOs out there. If I'm just a passive investor and I think,
oh, I think FWB is going to be the future of social networking, then I can buy their token
as a way to invest in their future without even joining the group or talking to anyone or doing
anything. And so what that means is these communities have a way of bootstrapping
themselves through speculation that wasn't really possible before for a cooperative.
Yeah, it's super cool. I think the speculation part of the crypto craze gets criticized a lot,
but it's actually a really good way to bootstrap stuff off the beginning. You have a lot of people
who are like, I don't know, I think I could make money from this thing. And suddenly they put their
money into it. And now this nascent organization has way more power to get going really quickly
than it would have, as you're saying, if it were a traditional Silicon Valley company.
And that's the competitive advantage to starting a DAO. If you can market yourself well and generate
a lot of excitement, you can raise crazy amounts of money. How much money did the Constitution
DAO raise? $40 or $50 million in weeks? That's unheard of for a group of people to just get
together and do. And I think speculation gets a bad wrap. I'm actually a fan of speculation.
I think it's a necessary component to technology development. My whole job is speculation. The
entire venture capital industry is speculating. We expect to lose our money in a lot of cases,
but for some of the companies to be successful and to generate a return,
I think people are speculating with their careers by joining a startup as well.
This notion of betting on a future outcome is a critical element to attracting capital
to certain causes. Right. So I think the other part of a DAO is, a lot of the DAOs that I've
looked at, they have a shared bank account. They're like, okay, this is our, it might not even be a
traditional bank. And in many cases, it's not. We don't want to form an LLC and have a bank.
We are this almost magical entity on the internet that is not registered with any government
entities. And our bank account is actually just a crypto wallet. We have maybe hundreds of millions
of dollars worth of crypto. And I guess we use smart contracts or technology to vote on things
as a collective that we're going to do with this money, which is just crazy. It's this future
internet business that governments don't even know how to regulate. It's just like anything goes.
And part of me wonders, well, okay, the competitive advantage here is that you can raise this money
really quickly from speculators who are excited about what you're doing. I put money into DAOs,
for example, and I'm like, I don't really keep tabs on what they're doing. I just think I'm
optimistic about this thing. Let me put some of my money in here. And I delegate my votes to other
people who I think will do a better job voting and who actually care. The downside is, okay,
doesn't this amount to running a business like almost by consensus? Can a business that needs
to vote on all these major decisions really compete with an organization that's got a clearly
defined CEO and a board and people making sort of top down decisions very quickly and very
accountably? It's a really great point. I think, first of all, what I'll say is that the playbook
for running a decentralized organization is still being written. I think no one has really figured
out how to take a huge community that's maybe hundreds or thousands of people and to make
everyone clear on what they're supposed to be doing and what the valuable activities are.
It's kind of like community management. No one really knows for sure what the playbook is and
every community is different. And DAOs are similar to that where you're managing a huge base of
people who could be contributors, i.e. could be doing work on behalf of the DAO. But some of them
are speculators and they don't want to do anything. And you have a lot of diversity in that number
base. So, A, I think it's still being figured out, but B, on the running a company by consensus
point. So right now, what's usually happening is that DAOs resemble, I think the future of DAO
governance is going to converge on what we see in the cooperative world. So, if you look at co-ops,
worker-owned cooperatives, which are kind of like companies, but every employee is also an owner of
the company, in the real world, the most successful co-ops in the world have management structures
that are similar to centralized corporations. So, the most successful co-op in the world is the
Spanish co-op called Mondragon. It has a lot of different lines of businesses, but essentially,
they have different business lines that each have their own manager that reports up to essentially
CEO, who reports up to a board of directors. And so, it's not that different from the day-to-day
operations of a normal company. What is different is that those leaders get elected by the workers.
And so, there is this kind of democratic accountability of the leadership to the
people who are working at the company. I think DAO governance is going to look like that,
where it's not literally every single business decision goes up for a vote and every single
person votes on it. It looks like a startup, but there is this accountability element.
It makes a lot of sense. It's fun talking about this stuff, just thinking about these crazy
possibilities and what the future might look like. It's a very unexpected, I don't want to
say renaissance, but just technological transformation of how things are working.
Two years ago, obviously, crypto was still a big thing, but I hadn't heard of a DAO or an NFT or
social tokens. I didn't see the real applications of how these things could supplant the current
organizations and means of investing, et cetera. But now, it's pretty clear how, if this all works
out, the world could change and we could be in for very different things. I think there are some
concrete implications of that too. For example, the last time you came on the show, we were talking
about this article you wrote about the missing creator middle class, which is kind of like we
still have these crazy power law distributions where on YouTube or Spotify or any sort of network,
there are creators making money, but it's like the top 1%. They're crushing it, they're taking
home all the gains, and the vast majority of everybody else on these platforms is trying
to make a living. They're just broke. They're not making a middle class wage.
I've heard a lot of optimism in the crypto community that basically Web3 is going to fix
this. We're going to have platforms that distribute more money to owners, and that will mean that the
average artist can make a living or the average musician can make a living or the average writer
can make a living instead of it all going to the top 1% to 2%. I haven't yet seen a convincing
reason why this is true. I'm not sure. I'm not convinced, but I'm also not that skeptical. I'm
just curious. Do you think this is true? Do you think that crypto is sort of a path toward it
being much more likely that a creator can make a living on the internet?
I actually just published a subsac newsletter this morning outlining how crypto can be used
to create a creator mobile class. It's called the Web3 Renaissance. It was the article that
someone responded to me saying, I'm too optimistic. I'm as optimistic as I am. It does paint this
optimistic vision of what is possible with crypto. I talk about how crypto can introduce all these
new dynamics to make it possible for creators to be more successful than they were before.
I talk about how NFTs introduce the scarcity dimension, which fans really value. If they
really care about you and love you, they care about the product that you create that's rare,
and they want to own that rare thing. It's just an element of human nature. We like to
collect rare things. People are earning more through NFTs now than they would have through
getting tens of millions of streams on their Spotify songs. There's also this added element
of supporting a creator no longer just becomes an act of altruism. It becomes an act of investment,
and people are much more willing to spend on things that benefit themselves than what benefits
others. You're tapping into this new spending behavior that didn't really exist in the Web2
world. There was no such thing as investing in a creator in Web2, but now all of these NFTs and
social tokens represent investment vehicles in addition to just showing your support.
Then I outlined the idea of programmable economic models where everyone in the chain
of creation who contributed to collaborative work could potentially see the upside from that final
content being successful. Today, there's the issue on social media, which is that a lot of the
attribution is missing. The creator who ends up being successful economically is usually the one
who was successful in going viral with something, not necessarily the original creator of it.
This has been a huge issue on TikTok where the initial person who invented a dance is usually
not the person who did the dance and got all the views and gets all the brand sponsorships.
Envision a world in which all those pieces of media are tokenized and transparent,
and you could build upon them. That end product just bakes in all the royalty payments to everyone
that came before. You can do this with NFTs. You can use the blockchain with any NFT to be who's
the originator, and it can be programmed into that thing. Basically, any money made off this NFT,
some percentage goes to the original creator. That's pretty cool.
Yeah. Then ultimately, I think the creator middle class is going to come about through this idea of
platforms exiting to their community and turning over ownership to their community because a lot
of the value before had been locked up in these platforms, and it went to the shareholders,
not to the actual people using the products. When that shifts, I think there becomes a lot more
economic resources and assets that are controlled by creators and users.
Right. Yeah. That makes a lot of sense. Do you think that means that we can have a world where,
I don't know how many artists are successful, but let's say there's a thousand artists,
random never, it's obviously higher than that, who are very successful today. Basically,
the accumulation of everything you're talking about mean we can have a world where there's
a million artists? Because I wonder, okay, yeah, it is possible to make sure the originators of
these things get paid royalties. It is possible to leverage scarcity to make sure that artists
can make more money than having to beg Spotify for pennies on their streams. But also, doesn't
the power law still exist? What most people just invest in the top 1% of the most famous artists
or creators? Yeah. It's interesting because one of my portfolio companies' mission statements is
actually to let a million music artists live off their work. It's called Sound. It's a music NFT
platform. So that is their express goal. So I think a million is possible. We can get there.
But I think another element of it is perhaps not just letting nature take its course,
but users and creators deciding collectively that actually we do want to do more to spread
the wealth around. We don't want it to be that we're on this platform and five people get all
the earnings. We want it to be that there's universal creative income that everyone who
is producing work gets some guaranteed minimum monthly income, hypothetically. In that world,
you can more easily create the infrastructure to distribute that value and to create a universal
creative income than what exists today. So I think part of it is these new monetization models and
new economic models that do make it more possible for people with fewer followers to be successful
economically. But part of it is also going to come down to our choices that we make as users and as
participants in society as to what the end distribution of wealth we want to see and live
in is going to be like. And if we make choices such that we want a million musicians to be
successful and to be able to live off of making music, then we can more easily do that now than
before using this new technology. I think one of the things that's very consistent about you
is that you're not blindly opportunistic. You're not like, I'm putting money into whatever works.
You're much more mission driven. Here's what I want to see happen in the world. You like the
passion economy because you want creators to benefit from and enjoy and flourish in their work.
And even when it comes to Web3 and crypto, you're not like, what's making the most money? You're
more like, how do we reduce income inequality? And that's where you're putting your money.
And I think this is something that a lot of founders can learn from. Because when you start
a business, your business is not just a means of making money. It actually has some impact.
If you're doing something, you're creating a product, people are using it, they're exchanging
money from it. It's changing the world in some way, even if it's only a small way. And I think
that people underestimate the degree to which they can pick something that's beneficial. They
can literally say, oh, I want the world to be literally better in this way and start a business
that does that. And I guess in my opinion, people are afraid to do that because they think it
constrains them. They're like, well, it's already hard enough to be successful. How can I have this
other constraint as well to make the world a better place? I'm just struggling to make something that
succeeds. So I guess my final question for you is, if I'm an entrepreneur listening to this podcast
and I'm like, I really would like to make the world a better place, but I really primarily just
want to be able to pay my own rent and income and not have to have a job. Is there a way for
them to accomplish both without making the journey much harder? There's a really funny quote from
this business analyst or professor. I forgot who had this quote. I'll need to look it up
afterwards. But he said, investment analysts think that companies make money.
Companies don't make money. They make socks. Something like that. I'm probably butchering
it. But it was like, yeah, people who work in Wall Street or investment firms, they think
companies exist to make money. They're trying to make the product that they're making.
So in terms of words of advice for founders, I think it's more possible now than ever before in
human history to do what you love and to go after the mission that you want to see in the world.
And for the outcome of that to be financial gain for yourself. I think that's almost guaranteed
now because chances are there's going to be someone out there or a group of someones who
see what you're doing and really value it and are willing to support it in different ways and give
it a viable business model. That's the whole thesis of the passion economy is you can do what you
love. You can just put your skills and knowledge out there. And there will be customers around the
world, at least probably 100 people or 10 people hopefully out of many billions who value that
thing and are willing to pay for it. And that's all you need because you don't need that many
people to buy your product or service in order to make a living. And so I think founders should
just allow themselves to be led from their hearts and to pursue the visions that they want and trust
that the business model and economics will flow from that versus being too MBA-ish in their
upfront analysis of opportunities. Lead with their heart and there's reason to be optimistic that
that can work. Lee-jen, thanks a ton for coming back on the show. Can you let listeners know
where they can go to find out more about your investments and your ideas? Because you do,
you're absolutely prolific. You're everywhere. Tweeting, blogging, it's a lot of stuff.
Yeah. Thank you so much for having me. People can follow along on Twitter. I'm ljen18 on Twitter.
My substack is lee.substack.com. And then to find out more about the fund or to submit your pitch,
we're at variant.fund. All right. Thanks, Lee. Thanks so much.