Chris Dixon: prediction

Transcript context

…Yes, so the core thesis of my book and the core thesis of my career now is that the internet began as a decentralized network, which meant that if you created a website, or let’s say you were a musician and you created a website and you sold your music, you would sell directly to the consumers, and there would be no intermediary in between taking money from that transaction. The challenge with things like Spotify and YouTube and just generally the structure of the modern internet is that you’ve had these services pop up, which are very dominant. It’s very consolidated. Ninety percent of the internet traffic runs through less than 10 services and companies. They have very high, what we call take rates on the internet business. The take rate is the percentage of money flowing through the system taken by the network intermediary. YouTube actually is the most generous of the social networks. They give roughly 50 percent to the creators and take 50 percent for themselves. Now, that’s actually a low take rate in the internet in any other area of the economy, as I’m sure you’d know. Fifty percent for an intermediary is generally a very high rate. Spotify is 30 percent, but then, of course, for musicians, there are many other layers of fees on top, including the music labels. Spotify’s own statistics — it’s on their website. I guess they’re glad about this. They think it’s a good stat. It’s something like — I don’t remember the exact number — it’s like 8,000 of the 8 million artists make more than $50,000 a year, so a very, very small percentage make something like the average American living. The question is, is that because people aren’t paying for music? People are paying for music. Advertisers are spending a ton of money on YouTube. Meta, and Google, and these companies are making a ton of money. The problem is, in my mind, primarily economic. I go through this, by the way, in detail in the first part of my book. I go through the history of the internet and how this happened. Basically, why I got into the internet was, it was a very exciting vision. Of course, it came out of academia and government and things, but this vision that you’d have an internet that’s owned and operated by the people that use it, where, if you visualize a network, the money’s flowing to the edges of the network. There were all these great ideas, like there’s a famous blog post by Kevin Kelly called “1,000 True Fans.” The idea was — because you’re removing intermediaries — musicians and creative people can now make a living with only a thousand customers. If you do the math, someone’s paying $10 a month, and you have a thousand of them, that’s 10 grand a month. That’s 120 grand a year. That’s a pretty good living for somebody doing something they love. That was always the vision. That’s what I got excited about. I got started in the internet in the ’90s, and the internet was like that in the ’90s, and it was like that in much of the 2000s, and then I go through this. e vision. That’s what I got excited about. I got started in the internet in the ’90s, and the internet was like that in the ’90s, and it was like that in much of the 2000s, and then I go through this. I think because of the incentives, of the way these services were set up, because of venture capital, because of a bunch of things, you essentially had a bunch of incentives to consolidate. And network effects, of course — that these services get more valuable, the more people that are on it, which has a winner-take-all effect. You look around about 10 years ago, and we got to a place where there’re roughly 5 to 10 services that are dominating the internet, taking all the money, taking all the economics. And also have control — that’s a whole separate topic. This is going to this topic of de-platforming and rules. If you go on YouTube, there’re all these debates around demonetization. In the book, I go through this. It’s the history of the internet, how this happened, and then what are the effects. There’re economic effects, there’re governance or control effects, and I think, more broadly, what it does is — for example, as you mentioned, YouTube and Spotify — it creates real challenges for creative people. Now, throw in artificial intelligence, which I think is, obviously, an amazing technology and incredibly powerful, and I’m generally very excited about what it will do. I think, left unchecked on its current trajectory, it will likely lead to even further consolidation and reward companies with large amounts of data and capital and things like this. The reason that I’m involved with blockchains and crypto is, I see blockchains as a potential counterbalancing force to those consolidation trends. But there is a reason why the older internet dwindled, right? For me, as a listener, Google, Alphabet — they’ve upgraded YouTube in some very significant ways. The search function is amazing. The algorithm, to me, is useful. It used to be you had to download a YouTube video, and then you’d watch it much later. And now it’s all seamless and great. Why aren’t I just better off in this new world? I left the decentralized internet behind, and my music listening today is much better than it was 20 years ago.…

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