Naval Ravikant and Chris Dixon Didn’t Explain Any Web3 Use Cases

Yesterday’s web3-themed episode of Tim Ferriss’s Podcast didn’t provide the one thing I was hoping for

I just listened to the October 28, 2021 episode of the Tim Ferriss Show podcast, titled Chris Dixon and Naval Ravikant — The Wonders of Web3, How to Pick the Right Hill to Climb, Finding the Right Amount of Crypto Regulation, Friends with Benefits, and the Untapped Potential of NFTs (#542).

I’ve been a fan of Naval’s blogs and podcasts for many years, so I was cautiously optimistic going into this 2.5-hour podcast. I was hoping to come away with just one good example of a situation where web3 differentiates itself from web2 by uniquely enabling some kind of product or service to be built. But alas, I came away empty-handed.

There were a handful of moments where I felt like Naval and Chris were coming close to presenting a good example of such a situation, but they just never got there. It was really frustrating.

The rest of this post comes from the notes I took during those frustrating moments where I was hoping for an example of a situation where web3 differentiates itself from web2 by uniquely enabling some kind of product or service to be built, and I didn’t get it. Consider it a followup to Chris Dixon’s Crypto Claims Are Logically Flimsy.

0:26 — Marketing

Chris says: “If you look at people in these web3 communities, no web3 company, no crypto company has ever spent a dollar on marketing. Including Coinbase, I was on the board for years, no marketing.”

But according to its page’s ad library, Coinbase is currently marketing itself heavily on Facebook’s ad network.

I’ve already explained my confusion with Chris’s claims about how web3 supposedly eliminates the need for marketing:

[Chris’s blog post is] selecting the top projects, the ones that broke out and achieved viral growth. If we consider the whole ecosystem of crypto projects and NFTs, most projects are languishing with zero users. Just because 0.1% of blockchain projects and NFTs have gone viral, that doesn’t mean the blockchain has a magical marketing engine that millions of musicians can all simultaneously take advantage of.

0:35 — Composability

Naval says: “All the apps in web3 can team up to create any app needed. For example, there was an innovation in DeFi called Automatic Market Makers. Instead of having to have an exchange where you have paid market makers and firms on the other side ensuring liquidity[…], in web3 we created this innovation with DeFi called Automated Market Makers where you can just do it through code[…] Now once you’ve done that in code, and the most famous company is Uniswap[…] then it can just be plugged in / dropped into any application. So if you look at games that are going to come out, games that are web3 based, they’re going to have entire market economies in them. They will have custody solutions. They will have NFTs built inside of them. They’ll be completely composable in that any piece from any other app can plug into any other app permissionlessly. And so you’re building an edifice… it’s almost like building a civilization or a city of interconnected apps, instead of these silos in which the data’s not portable, the code isn’t portable, users aren’t portable.”

And Chris adds: “I think that was great. All I can say is, composability is to software as compounding interest is to finance. It’s sort of this magical thing where if you get it going, it has a sort of exponential hockey stick.”

When you read the above quotes, I hope you can notice which statements are abstract vs specific. The part that I highlighted in bold was the only attempt to describe a specific example of a scenario where web3’s composability magic creates value. Everything else was abstract reasoning.

To support the claim that web3’s composability makes it better than web2 for various use cases, the one example that Naval provides is “market economies, custody, and NFTs inside of games”. Unfortunately, the example is somewhat incomplete, because it doesn’t contrast Naval’s vision of these awesome web3 games with the best possible in-game market economy that Epic Games could create without using any web3 technology. Pitching a new solution without contrasting it to an intellectually-honest description of the next-best-alternative is the most common failure mode of telling value prop stories in general. It’s the failure mode that a big chunk of this blog is dedicated to documenting.

By the way, some context about me personally — I’m actually a huge fan of composability! I can prove it. In early 2015, when React was still a young technology that hadn’t yet made the list of most popular technologies, I tweeted:

How did I know React was such an improvement over previous frameworks? Because I appreciated that its component model was vastly more composable than jQuery or any of the other web frameworks at the time.

So I’m actually highly receptive to Naval and Chris’s claim that composability is a “magical thing”. The difference is that with React, I could point to specific web apps I’d personally built where the React-powered code looked amazing — shorter, cleaner, faster to write, and less buggy — compared to the same web app if I’d written it as best I could without React. I was able to support the abstract claim that React’s composability made it superior to other frameworks by showing specific examples (Value Prop Stories) of web code with React vs with the next-best alternative to React.

0:39 — Composability of Media

Naval makes one more attempt to offer an example of how web3’s composability enables better value props than what’s possible in web2, as it pertains to media instead of software:

“You want people to recompose your ideas. Akira the Don takes stuff that I say and remixes into music, and there’s Smart Nonsense out there making videos and cool animations out of it, and Jack Butcher does visualizations, and this is all free. Or Erik Jorgensen does the Almanack, and I don’t have to do any of it. This is all composability around media. Now I don’t have an underlying monetization mechanism, but if I wanted to, I could issue NFTs against the original content, and there are collectors and people who will pay for that, and my content is just becoming more and more famous. So that’s an example of composability in action that extends beyond just software.”

Great book, by the way

Ok so again I ask about this alleged value prop story (the part I highlighted in bold): How strong is the next-best alternative you’re differentiating against? What can you already do in web2, and how much worse is it than the new thing that you can do in web3?

Naval’s example use case is that he wants to make his content free for anyone who wants it, but he wants to monetize by having “collectors” pay him, or perhaps more generally, “true fans”. It seems like the best alternative in web2 is to have a Patreon page? Like, every time someone remixed or “composed” Naval’s content as they’re already doing today on their web(2)sites, Naval could sell exactly 100 “collector edition copies” of that particular remix in the form of a Patreon support tier limited to 100 supporters.

Admittedly, my description of using Patreon like this sounds awkward. It sounds less “cool” than NFTs have become. For this reason, the coolness and social-acceptability factor, I believe NFTs might actually become the future of art and collectibles, because I’m not a meatspace chauvinist and I do believe that purely-digital art and collectibles are inevitably a thing.

My point isn’t that Naval can’t successfully monetize his remixed content by selling NFTs to collectors. My point is that the abstract argument for composability being web3’s differentiator is still lacking a strong supporting example. My web2 Patreon comparison, as awkward as it was, is still just as “composable” as the NFT solution. Erik Jorgensen put together (“composed”) the Navalmanack with Naval’s content, and Naval can use web2 technology to monetize infinitely-composable things. If you prefer NFTs to patreon, it’s not because Patreon wasn’t composable enough, or that web2 as a platform lacked the composability that you required.

(By the way, notice how much composability of media web2 is already serving up for you right now: You’re reading a Medium post referencing a podcast. If I wanted to, I could even monetize this composition using Medium’s paywall, Substack, Patreon, etc. It’s mind-blowing how web2 technology makes everything so composable; it’s like I’m stacking LEGO bricks!)

0:51 — Apple’s 30% Cut

Chris says: “‘The web2 companies convinced you to give away your creations in exchange for little hearts, but yeah, tell me how NFTs are the real scam’[…] it’s kind of amazing that they’ve convinced everyone… like Instagram, what do they pay out? 0. Facebook: 0. Twitter: 0. YouTube: 50%. Apple: Just for having the phone, they take 30%.

Right, Apple’s 30% in-app purchase fee is for having the phone, so isn’t this a non-sequitur when you’re making claims about web3’s differentiation vs web2? Apple convinced a billion users to buy their phone because their hardware is great, and as a result, they’re currently in a position to aggressively monetize their app store. But at the same time, you can literally go create any software or any media on web2, let iPhone users use it, and pay zero cut to Apple. Conversely, you don’t get a license to circumvent Apple’s 30% fee policy by adding web3 technology to your iOS app.

As for the claim about Instagram, Facebook, Twitter and YouTube taking “too big of a cut”, I explained in detail here why I don’t think those claims have been supported with logic or evidence, and I also agree with Ev Williams’ comment:

When you look at Twitter “100% take rate,” for example, its worth pointing out that they also cover 100% of the costs. The infrastructure alone to run Twitter is $100s of millions/year. That leaves very little “take” — a few pennies per user.

0:55 Owning Something On The Internet

Chris says: “[NFTs are] a core new concept, the idea of owning something on the internet[…] Imagine if in the real world we couldn’t own anything[…] and every time you go to a hotel or a restaurant, you gotta change your clothes and buy a new outfit — this is how the internet works today. And then when you leave, you gotta give that stuff back. And then one day somebody comes along and they say, no you can take it with you. Imagine the amount of innovation that would kick off.”

Ok, in the real world I do like keeping my clothes on throughout my day, so I’m following so far. Where I get lost is: which specific web2 content do I currently want to “keep” that I can’t? Where am I currently being made to inconveniently “take my clothes off”?

Let’s consider Twitter. Is Twitter supposed to be an example of having to “leave my clothes there”? Because throughout this Medium post, I’ve had a totally smooth experience embedding my tweets. I didn’t have to leave my Tweets with Twitter, did I?

I suspect that my present experience with the portability of tweets generalizes broadly: that in any situation where it’s sufficiently valuable for users to seamlessly work across multiple sites, the web2 ecosystem is already providing a comfortable level of interoperability between those sites.

Why did Chris leave this open-ended analogy as an exercise for the listener? How hard would it have been for him to complete the analogy with a single compelling example of when web2 sites are currently holding us back by making us “leave our clothes there”? Is it because he’s stuck in the well-known failure mode of making purely abstract claims devoid of supporting examples?

Chris should support his claim with at least one good example, the same way I just supported my counterclaim with one.

I’ve seen many other people tweeting about how exciting it is that web3 lets you “own something on the internet”, and what’s always lacking is the quality of the examples. For instance, this claim about how “unlocking the power of ownership to users” differentiates a web3 project that’s trying to compete with YouTube doesn’t seem fully thought out:

1:21 — Zuck Owns the Metaverse

Naval says: “If you’re deeply skeptical about the idea of owning digital property, you’re not only denying capitalism on the internet, you’re a metaverse denier. […] There is property in the metaverse. And obviously some people own property and there’s jurisdiction within that property[…] This is my room. These are the objects in my room and I can shuffle them around, I can control who comes in and out, I control what happens when someone ‘sits on my metaverse couch’. Are they allowed to do that or not? So all of this programmability comes from ownership. And it’s a bizarre idea to think that the only people who can own items in the metaverse are big corporations. You’re basically saying ‘Only Zuck[…] is allowed to own the metaverse. Only he can own the entire metaverse.’ Why can’t we each own our own room, our own space, our own property in the metaverse?

I’m struggling to understand the picture that Naval is painting of a non-web3 nightmare scenario. He’s concerned that without web3, Zuck will dictate the objects in Naval’s metaverse room, and who gets to enter Naval’s metaverse room, and who can sit on Naval’s metaverse couch?

Naval’s nightmare scenario seems disconnected from my own experience with web2 platforms. When I’m using Zoom, CEO Eric S. Yuan has never tried to control who comes into my meeting or whether I’m allowed to use the Golden Gate Bridge as my background. But maybe he might do that tomorrow, and that’s why we need to move most of our activity onto services powered by web3 technology?

I don’t intend to straw-man Naval’s point. I’m just not getting what Naval is actually concerned about when he talks about “Zuck owning the metaverse”. My best guess is that what’s happening here is that ideas which feel to him and Chris like they make sense on an abstract level turn out to have no coherent referent when one tries to make them specific, a pattern that I see often.

It’ll be interesting to go back and listen to this podcast in the 2030s, ’40s and ’50s. I believe this podcast is a great time capsule of the early-2020s web3 mania we’re living through.

If you liked this post, check out Why Web3’s Shared Data Across Applications Doesn’t Matter.

Founder/CEO of Relationship Hero