Investing in decentralized infrastructure with USV's Albert Wenger
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Investing in decentralized infrastructure with USV’s Albert Wenger

The future of decentralization depends on the development of entirely new systems and regulations. Albert Wenger is a key figure in building this decentralized infrastructure. As a partner at Union Square Ventures, an author and an innovator, he invests in groundwork startups that will bring far-reaching changes to society.

Albert Wenger: Hi, I’m Albert Wenger. I am a partner at Union Square Ventures in New York and I solve the problem of helping founders build successful projects and companies – the operative word being helping. They do the work and I help them.    

How do you invest in decentralized infrastructure?

Our role is twofold: one is to find projects that we think are interesting and are building potential important pieces, to help give them some capital, and then to guide them along the way. We believe we’re very much in the infrastructure phase so a lot of the projects we’ve invested in are building pieces of infrastructure. So we’re here today at the Blockstack conference in Berlin. Blockstack makes possible decentralized namespaces. That’s a foundational ingredient for decentralized systems, whether that’s domain name resolution, whether that’s personal identity, so that is a foundational piece that we will need for decentralized systems.

We recently announced an investment in a team out of MIT that’s building a new foundational blockchain called Algorand that’s aimed at trying to be more scalable than the existing systems, all the while remaining secure and decentralized as well. Scalability is another foundational element that needs to be solved in order for these systems to reach hundreds of millions or billions of people.

How would you describe the decentralized future?

To me actually, there’s a broader question and the broader question is what comes after the Industrial Age. In the book that I’m writing, which is called World After Capital and which you can find online, I call it the Knowledge Age. And building decentralized systems, to me, is one input or one technological capability that will enable us to create a successful Knowledge Age.

But there are many other things that need to be part of that. Technological capability – decentralization makes very good things possible. I just gave the example of self sovereign identity. But it also makes very bad things possible like, you know, political bribes that are really hard to detect or maybe impossible to detect. So just because it’s decentralized doesn’t mean it’s good. We need to decide as a society what we think is good and that’s a much broader set of things that has to do with values and with governance at large. I don’t believe that this is a problem that can be solved through technology alone.

Albert Wenger on investing in decentralized infrastructure

What are the values of the decentralized future?

I believe we’re in this transition period. We are firmly in the Industrial Age and, in the Industrial Age, the scarce factor for humanity with capital – I mean physical capital – who can build factories, who can build cars, buildings – that match the markets needs. And I believe we’re still very much concerned about capital. So in the original phase of the web, we tried to build the next big thing that was going to have a lot of servers, and they were going to own those servers, and they were going to own all the information that was flowing across those servers, so that they could extract maximum value for their shareholders to create financial capital in the financial markets. I believe for us to really get into the Knowledge Age, we need to recognize that the scarce factor going forward is not capital but attention. And so we need to build systems that enable humans to be more free in how they allocate their own attention.

So if you think about a system, many of the systems that we’ve created today – whether it’s Google, Facebook, Amazon – their value goes up the more of your attention they hog and the more of it they use for value extraction. Like Facebook, it’s not in Facebook or Twitter or any other system’s interest to say, go study this specific thing – learn something really hard and difficult – by the way, time that you’re not gonna spend on my system instead. It’s in the interest to say, here’s a cheap emotional story that’s gonna keep you glued to my screen. And so I believe attention is that very scarce factor. And so, to me, the most important value is how can we make people be more in charge of their own attention going forward.

Does power dissolve in the decentralized future?

With a decentralized future, does power dissolve automatically? I don’t believe power dissolves automatically. I think we are gonna need to make changes, both of a regulatory and a self-regulatory nature, to dissolve power. What do I mean by that? I think there are three freedoms that I think are very important, that we help enhance, and in my book World After Capital, I call these economic freedom, informational freedom and psychological freedom. So how free are you over your attention if you have to work two jobs, which many people in the US have to do just to be able to live, basically. Well, you’re not very free in your attention. And I’m been the proponent of some form of universal basic income to solve that. And by the way, we might wind up creating such a universal basic income through a blockchain, crypto, decentralized system, which would be awesome because it would create it across national boundaries.

The second factor is informational freedom. I think it’ll be very hard to transition attention out of a system like Facebook or Amazon, as long as we have very little control over computation on our devices. So if I have a very high-end phone, I have a supercomputer in my pocket – like all the world’s money couldn’t have bought that much computational power, let’s say 40 years ago – it’s connected to everybody in the world, but when I hit the Facebook app icon or the Twitter or the Google, whatever it is, they take complete control of my phone. I have no control of the supercomputer that’s in my pocket. That requires some regulatory changes because I’m a trained engineer, I could figure out how to get some of the encryption keys out, then drive my own version of the apps. In the U.S., I’d be breaking three separate laws, two of which are felony-mandated prison sentence offenses. So we’ve created a system today where it makes it very hard for me to interact programmatically through code that I control with these systems. That’s something we need to change.

And then what I call psychological freedom is, as long as we are not cognizant that we have brains that evolved in a world where when you saw a cat, there was an actual cat, we will be very susceptible to systems that are willing to show us millions of cat pictures in a row just to hog our attention. So that’s kind of work we need to do ourselves. So I think there’s a lot of work that has to go into it that’s not just building technology, but that’s also coming up with the regulation, and that’s coming up with the right self-regulation.

What kind of regulations do decentralized systems need?

I don’t think it’s in any way, shape or form too late, right. I mean, I think governments around the world are thinking about this question now. By and large, they’re going to their existing toolbox, and that’s an Industrial Age toolbox, so they’re like, oh, what do we have in the toolbox – oh, it’s antitrust regulation, which is an Industrial Age regulation. So I believe we’re going to need to come up with digitally native regulations.

So here’s an example: Every system that has more than a million users by law needs to provide an API for end-users. That would be a new type of law that, to me, would be digitally native regulation, that would take power away from the current center and shift it back out to the periphery and to the edge. And that edge could then say, okay, now that I have power I can put some of my data simultaneously into new systems that are decentralized, that are blockchain-based, that don’t have a central choke point. So I’m optimistic that we could come up with the right regulation. I don’t think we have failed. I don’t think history is over and we’re done and our only recourse is to build new technology. No, I think we have the ability to regulate and we should make good use of it.

I always think of the car. The reason the car was successful, ultimately, was not because government got it right in the first go-around. There was a lot of really stupid early automotive regulation – like automotives can’t be faster than horse-drawn carriages, or have to be preceded by a person waving a red flag. The first attempts were clumsy and wrong, but eventually we want it with the rules of the road, which are important because, for instance, if you’re not agreeing on which side of the road you’re driving on, you can’t really have cars. So eventually regulation was actually useful and, so, I think the same is true here. I don’t believe in some libertarian anarchist view where there’s no regulation. I believe we need the right form of regulation.

Now, this problem is made more complicated today because ideally we’d love to come up with something that works globally. So I do think regulators ideally would take a first do-no-harm approach, kind of see what goes wrong, and try and come up with digitally native regulation. I’m optimistic that that can be done.

The decentralized future requires digital infrastructure

How will decentralization change our lives in the next 10 years?

I like to dream. It’s important to be optimistic about the future, it would be impossible to be a venture investor if you were pessimistic, you’d be like, well that’s not going to work. So my optimistic view of these blockchain and crypto systems is that we will have some form of self sovereign identity, some online identity that I control or that I can delegate to somebody I really trust, and that’s not controlled by either nation state or by the very large players like Google or Facebook. I think that will be something that’s very important because it means I can use that identity for my online interactions. So that, I think, will be a fantastic outcome.

I think another fantastic outcome would be if we are making some progress on a global cryptocurrency that has a universal basic income built into it. I think that’s well within the realm of the possible. That is very much a dream. I don’t think it’ll be fully deployed in ten years where we all have a blockchain-produced basic income. But I also think there’s nothing in the fundamentals that says that’s impossible. So that seems like a very worthwhile project for lots of people to be working on.

How do we not screw it up?

Lots of things can go wrong along the way. I think the one I’m most focused on, personally, is that at the levels of government we remain stuck in trying to protect the Industrial Age. And that because the governments try to protect the Industrial Age, they see blockchain and cryptocurrency as a threat. And so what we effectively wind up with is nations at war with their own citizens over who can use technology for what purposes. I think that’s a very real danger and what I do is, I speak at events like this, I invest in companies that I believe are building crucial infrastructure, and I write in my book, and I talk about it now. Those are my contributions to this to trying to minimize that danger.

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