Dialogue with LinkedIn founder Hoffman: We are in the first stage of Web3

Source: Greylock Blog

Compiled by: Biscuit, Chain Catcher

As the next phase of the internet rapidly develops, what are the core principles that differentiate Web3 from previous eras, and how is it influenced by the depths of human nature? Additionally, how have lessons learned from the early days guided technological advancement, or hindered it?

In this article, LinkedIn co-founder and Greylock partner Reid Hoffman, along with his co-author of "Blitzscaling," Chris Yeh, discuss the current state of development in Web3.0.

In a previous article, Hoffman described how the "savage idealism" of that era led to significant advancements that had both positive and negative impacts on the world, and how humanity's "seven deadly sins" form the basis for many technological pursuits. For example, while greed may be the most well-known "sin" in the business world, in practice, it is far more complex and nuanced than a simple base desire.

Hoffman said, "Just because you have something we would describe as sinful or negative emotions, it doesn't mean you're a bad person or anything else. It's how you deal with them that matters."

Based on this idea, Hoffman and Yeh discuss the ethical considerations entrepreneurs and investors can bring to Web3; the core similarities and differences between Web3 and previous eras; and how human vices and virtues continue to provide a framework for innovation and investment.

"We are in the first phase of Web3," Hoffman said. "So having wild idealism is a good thing, and of course, you should always be aware of where things might go wrong and strive to guide positive outcomes away from negative ones."

Here is the full translation of the article by Chain Catcher:

Chris Yeh : Hello, I'm Chris Yeh, co-author of "Blitzscaling." I'm here again with my co-author and old friend Reid Hoffman, who is a co-founder of LinkedIn and an investor at Greylock Partners.

Reid, back in October, you wrote an article about your experiences with Web 2.0. In it, you elaborated on your heuristic approach to investing based on the seven deadly sins.

I think it was a great philosophical piece, reflecting on how we should embrace challenges, using Adam Smith's other great work, "The Theory of Moral Sentiments," to leverage humanity's deep-rooted desires for the benefit of society.

Later, Bloomberg reporter Joshua Brustein reached out to you after reading your article, asking how some lessons from previous internet eras could be applied to the development of the virtual network world we see today, particularly around the hot topic of Web3.0. I think Joshua raised some very smart and provocative questions that we should explore more deeply, so please feel free to share your thoughts with us.

So, let's start with the first question. Joshua observed that the core principles of Web 2.0 you described are quite similar to how people talk about the spirit of Web3. I think he was referring to your statement, "Wild idealism is the lingua franca of Web 2.0. There is a general belief that fewer regulators, freer flow of information, and peer-to-peer connections are destined to create positive effects for individuals and society."

I wonder if you see the similarities. What are your thoughts on these views?

Hoffman : Well, first looking back at history, I think even Web 1.0 (the internet) had that kind of wild idealism. And there's a point today that says all of Web 1.0 was wrong, but I think it was right at the time.

The advantage brought by the internet in its creation was redefining the concept of this space, where people could communicate and find each other, and information could flow through this space.

What I mean is, for example, now anyone with a data-generating mobile phone can basically access Wikipedia, along with various other types of information resources that are not easily found in daily life. I think these issues have led to a series of positive changes in society, such as the exposure of the unequal treatment of Black individuals, which comes from the ability to upload videos and other types of content. I believe the wild idealism surrounding the internet communication system provides an effective way to deliver justice, fairness, and health to society as a whole.

And I think this is part of why we transitioned from Web 1.0 to Web 2.0—Web 1.0 was about entering a pioneering online space where you might have an alias because the places you were going were unknown. So, I might be an anime fan, and you might be a pop culture guy, and that’s how we communicated with each other.

Then, Web 2.0 brought in your real identity and real relationships. Clearly, LinkedIn allows people to trust and help each other by verifying your real name and connecting you with people you have real relationships with—not just browsing the internet world, the network world—but also the real world.

Regarding the view that Web3.0 is impacting the world, I think the answer is positively optimistic. That is to say, "Hey, there is a lot of very interesting potential here, and there are many spectacular things to be done. There are many engineers and developers around the world working on this."

You might ask, "Well, what kind of things? I haven't seen anything yet." Some things have happened so far. There are assets that are referred to as gold 2.0 or digital gold. This is a good thing, diversifying our assets. Because in reality, part of the reason we maintain stability in the modern financial system is that I have many different diversified assets and other types of things to keep the financial system healthy and prosperous, as you balance between assets.

I think you’ve seen that the protective measures of the banking system have many identification and authentication procedures, and those with a very good banking system in the West would say, "Well, we don't need those." But places like Venezuela, Argentina, and others really need these because Web3.0 provides a place where corrupt governments cannot stifle your banking system, and the same asset diversification can be a very good thing.

Ultimately, we can create a cheaper banking system and bring billions of currently unbanked people into its modern value. To this day, if you want a cross-border cash solution, it has actually become one of the best cross-border cash solutions. And I think, as smart contracts develop, you will see all sorts of new things.

The theory that people talk about in Web3.0, I think is interesting: "The internet technology has changed our mindset, teaching us how to activate those dormant data to reflect their intrinsic value." As an article or a piece of information, or a video, song, they may have great value.

Web 2.0 introduced identity systems into this communication and collaboration, primarily through LinkedIn, social networks, and other types of real identities. Then Web 3.0 now introduces this open ecosystem where you can create platforms or develop asset value systems, such as digital gold or currency, for payments or contracts, for doing things or building new systems.

And I think what you see is a Cambrian explosion that requires a lot of effort. By the way, a large part of it, just like Web 1.0, will become cannon fodder. We have to be more careful about this due to the financial system. But some of it will persist in very interesting ways.

This is also part of why I spoke at Davos in 2015 and wrote an article for Wired UK, stating that the world will hope to have what I call a "crypto capital system"—it leverages currency, asset platform caps, and capital systems—that will actually facilitate business and trade on a global scale. I think this wild idealism is the right starting point.

Chris Yeh : If I heard you correctly, I think besides believing that this wild idealism has real positive significance, there will also be a revisionist impact on us, because we have become accustomed to the wild idealism of Web 1.0 or the internet era, and the ideas brought by Web 2.0, "Oh, it just brought us YouTube and Amazon, nothing major."

We would reflect, "No, wait a minute, what was the world like before these things existed? These were actually very significant challenges. Just getting used to all the good things while still focusing on the things I can't forget is human nature."

Hoffman : That's true, but human nature is also why we make progress.

Because we overlook all the benefits we have gained from Web 2.0. The fact that Black Lives Matter has developed successfully, and that we have made progress in same-sex marriage, and all the other understandings and sympathies, and the voice that comes from within, "As a part of cultural change, we are just a bunch of ordinary people."

So, people would say, "Because of this bad thing, we should turn back the clock." The answer is no; we should always push time forward, and we should fix those bad things along the way.

This is why revisionism tends to say, "That was wild idealism," rather than "Look, that was wild idealism, but we didn't realize we would encounter these problems later."

But by the way, you still have to have that kind of idealism. The question now is not to look back and say, "Well, that shouldn't have been wild idealism." The answer is no; we should always be idealistic about how to solve potential future problems, and I think that is key.

We are in the first phase of Web3.0. Therefore, having wild idealism is a good thing, although of course, you should always be aware of potential problems and strive to steer towards positive outcomes away from negative ones.

Chris Yeh : If you have an idealistic view that things will only get better and everything will be 100% good, you will be disappointed when you realize there will be some unforeseen problems. But we can discover them and improve, even though the future may not seem so bright.

Hoffman : Yes. And there are many challenges ahead. But the issue is, if you don't work to make it better, you will almost certainly end up with pessimistic results. To think we can just worship the past is a naive and extreme idea. This doesn't mean regulation will have a positive impact. I think it can have very negative effects, or its impact on the future can be very limited. The essence of the problem is how we shape the future.

Chris Yeh : Now, reflecting on the .com era, the Web 2.0 era, and now this emerging Web3.0 era, one summary I hear people use is that the .com era was about reading, the Web 2.0 era was about writing, and the Web 3.0 era is about ownership. I think that's a very simplified way to put it, but it’s a clever description.

When I think about this, I wonder if I compare the concept of Web3.0 and ownership with the creativity unleashed by Web 2.0, then we have a lot of new user-generated content in Web 2.0, which is almost like having user-generated assets or user-generated value in the Web 3.0 world.

Hoffman : Well, most of what Web3.0 is about comes from what happens when you have a crypto wallet, like NFTs and other things that I find very interesting. So what applications can we build on top of that?

This clearly includes assets, currencies, banking, and includes unique projects like NFTs that can really see more of the power of the creator or maker economy, where various efforts and companies are doing everything—from subscriptions on platforms like Patreon to new productivity software like Coda, to various places like Piñata for NFTs—you will see all these things playing a role.

I don't think writing and reading are Web 1 and Web 2. I would say writing and reading are like digital content in Web 1. Web 2 is real identity and relationships, and we merge and navigate to that. Then I think, at least in Web3, the concept of digital ownership is introduced.

I think the very interesting part is the various ways of ownership, just as we tend to say ownership is I have this complete right. In fact, I think as technology evolves, we realize that ownership is a complex relationship. If you find a song in a digital good, then do you own the recording of that song? Do you own the written nature of that song? Do you own any of the people who recorded the song or sampled in the song? All these are questions about ownership, and once you have more complex technology, these questions start to emerge. And I think more complex technology will always revolve around it.

For example, if you own a piece of land with a stream flowing through it, can I poop in the stream? You say, "Sure, that's my stream." But the part of the stream upstream from you and downstream from you is not owned by you. Therefore, your ownership of the stream may not represent that you can poop in the stream. It may refer to being able to take some water or do other things; this is a way to illustrate ownership. This is a detailed description of ownership.

I think the most interesting part of Web3 is, "Well, since we have ownership as part of it, how has the concept of ownership evolved?" How has it evolved in our lives? Not just saying it’s just virtual cyberspace, there’s no need to discuss the rights aspect.

Everything that enters our lives in digital space is just part of it. I think its ownership part constitutes the arc of the three words you depicted in the story of the vector, and the interesting part of doing so.

I do believe ownership is one of the keys. However, frankly, I think the defining factors of human society and progress are how we view our relationships with each other: how we find each other, how our identities are defined, how we ally, how we form groups in society, companies, and teams, how we work together, collaborate, and live together? All these types of things.

So one possibility is my ownership of X and how we relate to each other?

If you view what I said about ownership as a complex [concept], it’s because I think ownership affects our relationships with each other. So, based on the perspective of the first book, two people together, I view it as a way of looking at this concept. This is the nuance around ownership in Web3.0, and the kind of innovation, experimentation, and effort I think will take place… we are just in its first phase.

Chris Yeh : Now, one aspect of the concept of ownership is the kind of innovation you are talking about. The other side is the phrase [greed is a virtue]. Clearly, greed is one of the seven deadly sins you use as an investment framework, making you one of the most successful Web 2.0 investors. And Joshua Brustein again inquired about these seven deadly sins, saying, "Using this framework, if we look back at a mature Web3 in ten years, it seems likely that the original sin will be greed."

Given the massive financial speculation around this movement so far, do you see this as a problem?

Hoffman : Yes, but I actually think, in more humanistic entrepreneurship, how do you transform them? How do you seize the initial opportunity and then turn it into something better for society and individuals? That’s part of the theory of moral sentiments, even by leveraging greed, we are serving each other.

Even if I want to make a lot of money—even possibly more than you while competing with you—I do this by providing you with products and services that you can voluntarily purchase, and by doing so, I create a new concept that is both social and value creation, which is how I better serve you to achieve growth.

When I give these talks about the seven deadly sins to different students, I would say, "What is LinkedIn?" I would say, "Greed, because it's economics." The question is, how do I double my salary? How can I make more money? What methods can I use to achieve that? Of course, I think most people approach LinkedIn out of "greed," seeking better development, with dollar signs imprinted in their brains, seeking economic satisfaction.

In fact, this drive is part of socioeconomic progress. For instance, how do you pay for education? How do you pay for medical expenses? By creating productivity that allows us to afford some service costs.

That’s why when humans primarily worked in the fields, you didn’t have this distress. The only people who could afford doctors were the nobility or luxurious merchant kings. And as the web developed, we can now provide doctors for more people. This is part of social progress. So, greed started, but it transformed into how we fundamentally build a more noble society.

So now to answer this question. You say, "Well, I do think that despite a lot of speculation, one of the deepest original sins is how you make a lot of money?" Now I think when you look at Web3.0, one interesting thing is that projects can be categorized. I have always supported entrepreneurship, like a missionary, saying, "The world becomes better this way, whether you agree with our specific mission or not, but it can still change them and possibly help them make more money." Some people more purely ask, "How do I make a lot of money?"

Greed does not determine whether a person is good or bad. There are different kinds of rhythms, goals, things, and forms, and who is working on the project and what comes out of it. But I think all of this creates new infrastructure.

You might say, "Well, does financial infrastructure benefit the workers of modern society?" The answer is yes, "But just like many people enter the banking industry because they just think, 'I like being close to money; money is my favorite.'" This is clearly a manifestation of greed.

When you grasp it, transform it into a drive, and turn the theory of moral sentiments into something else, that’s the beneficial thing.

Now our challenge is that this is very early, and there is a lot of crazy speculation. Some of it may even have fraudulent, misleading, or bad behavior in some direction. We want to get rid of it and promote positive things. But we also want to ensure that we always aim for good outcomes.

Just like people say, "Stop developing," well, you might be correcting a wrong behavior. But by the way, if all you do is walk around saying, "Stop that; you are not shaping a beautiful future," saying that does not benefit any of us. The advice should be "more of this, less of that." This is the future we should build."

So I think, as builders, shapers, critics, and commentators, we all have a moral obligation not just to say, "Not like that," but to build a dialogue that says, "This is positive. This is the direction we should head towards."

So now there is a lot of speculation, some of which is really bad, but among them, there are also things that can help us build some new value tools and banking systems, helping elevate the financial part of our society to a new level.

Chris Yeh : I think one thing you wrote in your Knight Foundation paper that impressed me is that doing what you just mentioned is not easy. Transforming these basic human emotions into something valuable. I think one thing you wrote is very important, that it requires hard work.

You said, looking back, "What I did not fully consider in my heuristic of the seven deadly sins is that the seven deadly sins are long-term indicators of human behavior. Because restraining behavior is very difficult, effectively transforming grassroots participation and advocacy, jealousy and compassion is not an easy task. It requires persistent effort."

Working hard is risky. If you cater to or even just passively draw from people's negative emotions, then as a platform developer, you will instinctively shy away from this work. Your economic returns may be lower.

So I think again, this goes back to the theory of moral sentiments. This is a moral choice people need to make. This is not a purely economic choice. We will choose something that may be slightly negative economically but more beneficial to society.

Chris Yeh : It sounds like if you consider the ongoing transformation of Web3, these tech experts, entrepreneurs, and investors, they may be leveraging greed as this drive. But if they carefully consider how to build not just based on the results of greed, then they can leverage negative emotions or desires to drive positive outcomes.

Hoffman : Yes, exactly. This is a problem; just because you have desires, or just because you have something we would describe as sinful or negative emotions, it doesn’t mean you are a bad person; it’s how you view them that matters.

For example, if you feel anger towards society and because of the anger about what is happening in society, you go out and volunteer, then you are channeling it into goodwill. If you get angry and go out to break windows and attack people, then you are directing it towards a bad outcome.