David Needle compares blockchain to early internet protocols like TCP/IP, not Netscape, arguing 99% of on-chain activity is speculation. He invests based on three long-term bets: immortality tech, space colonization, and blockchain as digital gold, using a ten-year horizon to filter both companies and founders.
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Discussion with— and what a great conference, by the way— is it's the start of the baseball season, and seems like an apt metaphor for that. If you look at blockchain as a whole, or maybe cryptocurrency in particular, comparing it to a baseball game, what inning are we in, and why do you feel that way?
This is a perfect American analogy, right? So, is spring training considered as an inning? You have to take the field, is that what you're saying? With due respect to the current entrepreneurs in blockchain, I think what I mean to say is, we're probably in the early stage of a 7-game World Series championship, so it's a long journey ahead. While I think we have done a lot of good work, but this is merely the beginning, and I often compare this to, Yep. This is either in '97 or '99. I'm not sure. But if you take sort of the 10-year view, it really doesn't matter because it's such a foundational shift so that if you have a 10-year investment horizon, whether it's your money or your career, it's pretty interesting in 2003, 2005.
Now, we would be farther along with crypto in particular, versus blockchain as a whole.
That's interesting. I mean, you see there's the technology innovation, there's also the speculation. I think the speculation piece is quite active. If you compare the amount of transactions on the chain, how much of that is due to natural traffic conducting blockchain business, versus people just trading tokens for speculative financial gain, if I were to guess, it's probably 1 to 99%. So, it does mirror '99, '97, these internet stocks start trading pretty actively before the internet business really taking off.
And are you comfortable where— let's drill down on Bitcoin a little bit, to the extent To the extent that that's a standard bearer of where crypto is, and you think it is, is that always going to be the case? You're kind of comfortable looking at 5 years, say, I mean, you're kind of comfortable where things are now, because it's gone up and down?
Yeah, it's hard to say. I would say in '97, '99, there was Netscape, that certainly seemed like a pretty awesome tool, right, or you could even say in '99 there was TCP/IP, Right, and there's still TCP/IP today. So, is Bitcoin Netscape or TCP/IP? Most people will argue it's TCP/IP, but I would say it's still early. It certainly has a commanding lead, and that lead— and it's got a lot of challenges, but I do think you can't underestimate the brand power and then the early mover's advantage.
There's that arrows in the back of the pioneers argument, but being first, you know, as an investor, being first is not a bad position.
Right. It happens both ways. It's awesome. So you could have the mindshare, you could have the branding, but sometimes you do become the pioneer for the next group of winners.
Well, let's pull back a second because I want to talk to you as an investor. You know, we heard AI mentioned at the end there in that fascinating talk. There's a lot of investment opportunities. How do you decide what to invest in, and how does blockchain fit into that mix?
Yeah, great, so we, I mean, I essentially look at, and just kind of take a step back, I have 3 primary investment theses. I mean, I love blockchain, but my world doesn't evolve around blockchain. I have 3 sort of crazy investment theses. One is, Immortality, right, so we're looking for things that keep people living for a long time, or longevity. One is colonizing space, and the last one is chrysopia. Chrysopia is basically the art of turning lead into gold, so that's another way of thinking about blockchain. Gold has been a very important discovery in the human evolution. So, blockchain is something that could potentially replace that in trade. So, we look for 2 main things in all of these areas, 2 main things. One is the market has to be big enough, and second, the team has to be the right group of people. Why is that important? So, market, oftentimes the startup risk itself is so high that if you get lucky, all the stars align that you're successful in attacking a business, Then the outcome has to be big enough to justify the risk, right? So in other words, most of these venture calculations is actually very simple. It's potential outcome times the probability of success, right? So if the probability of success in most ventures is so low, right, the potential outcome has to be big enough for the expected value to make sense. That doesn't eliminate the investment, but the upside has to be you. Exactly, exactly, yeah. And then the team, of course, we oftentimes lose a lot of investments because of team reasons, whether the team don't get along, the team's family may not be supportive after year 5, all kinds of team issues.
You talked about staying power initially, just to drill into that for a second. And 10-year horizon, that kind of thing. I mean, that is obviously part of the evaluation, right? Whether does this thing have legs? Clearly you're not looking at how can we make money in a year. It doesn't seem to me anyway.
In fact, that's almost a negative signal because you know that there are too many temptations, right? The kind of people who are extremely good at making the expected value calculation in the short run would almost opt for a big company job versus startup. If you take the expected value of anyone's time, it's actually most valuable if you go work for a big company. But if you take an expected value of a much longer horizon, like 10 years, then the startup is better. So you can naturally screen out certain people who are actually more suitable for large companies, and we like those people too, because these are the people who are our business development partners and whatnot. It's just not a good fit for startups.
We've all seen the startup driven by the technical CEO who really isn't the person to run a company long-term.
Yeah, we actually like those kind of CEOs. We think those CEOs oftentimes are passionate about technology and want to take it to the marketplace. There's almost a little bit of irrational devotion to the business, and that's the kind of sentiment that carries you from year 3 to year 7, right? And oftentimes the business sort of die in year 3 because you build a prototype and the customers take a long time, you can't raise money. The rational thing is actually to quit, to shut down the company, but it's an irrational thing in the short run, but the rational thing in the long run that kind of carries them through. And that's how you build really big companies.
