Cai Wensheng: I firmly believe in the explosion of Web3; investors are investing in their own dreams

Interviewee: Cai Wensheng, Angel Investor

Organizer: Wanwu Island

On June 17, at the third module of the Wanwu Creation Camp in Hong Kong, renowned investor Cai Wensheng held a 2-hour dialogue and sharing session with 65 entrepreneurs from Wanwu Island. As an entrepreneur and investor who has traversed the three generations of the internet—Web1, Web2, and Web3—how has he captured the benefits of these three waves, and how does he view the transformation of the internet? What insights can this provide for Chinese entrepreneurs? Below are some highlights from the Q&A transcript:

Wanwu Island: Why choose Web3 and AI?

Cai Wensheng: In Web2, users continuously click to agree while using a product, and all this consent belongs to the platform. Even if one day you decide to leave the platform, all the data you generated there still cannot be taken with you because you agreed to it long ago.

Web3 aims to solve this problem; any open platform in Web3 cannot prevent you from registering, and all your accounts and assets belong to your own wallet address.

The concept of AI was popular a few years ago, and everyone thought AI would change the world. However, before ChatGPT came out, people were quite confused because the applications of AI had reached a dead end. Why did ChatGPT excite everyone? We can compare AlphaGo and ChatGPT. Lee Sedol had an excellent memory and learned hundreds of thousands of ancient Go games, so he immediately knew how to respond to any move. But AlphaGo could learn more games in a short time. This was the problem with earlier AI; it first taught, then learned, and played to continuously train a model. If you wanted it to do something else, you had to teach, learn, and start all over again.

Now, ChatGPT starts off knowing nothing and does not specifically teach it content in a certain field; it just continuously exercises its logical thinking, much like teaching a child. It first builds a model and develops logical abilities before teaching content, based on this underlying logical model, which then has general applicability.

AI is more about the development of productivity, while Web3 is about redefining production relationships. The reason Web3 has been controversial from the start is due to the change in production relationships, which aims to alter existing corporate structures and financial systems. Web3 and AI may complement each other; OpenAI is a good example. In 1600, the East India Company was born in the Netherlands, which greatly propelled the world, making the Netherlands a world power. Much of the Netherlands is below sea level, making agriculture and manufacturing impossible, so they could only trade. A large number of merchant ships went to the East to earn huge profits, and just three years later, in 1603, the world's first stock exchange was established to allow more people who could not board ships to share in the trade profits, while also using capital leverage to expand the scale of merchant shipping.

The corporate system that has existed for hundreds of years is no longer suitable. For example, some large internet companies have already allocated their share structures. If these companies continue to survive without selling stock to others, does that mean we will work for these companies for our entire lives? This is unreasonable.

So how to break this? We spend so much time on social media, but the platforms are selling us ads, and all that money goes to a few major shareholders, with no benefit to the users who contribute the data. Therefore, in the era of Web3, users who contribute data should be rewarded. The challenge lies in how to reasonably quantify the corresponding contribution behaviors. The reward system needs to be a key focus, so whoever can establish a more reasonable and sustainable distribution reward rule for Web3 will be a significant innovation.

The improvement in productivity brought by AI is already visible; many designers have been replaced, and soon programmers may also be replaced. AI is reforming various industries, but some worry that with so many people unemployed, the world will become worse. I believe this is unfounded. It's like the shift of the manufacturing industry in the U.S. in the 1970s, where many people lost their jobs, but they naturally transitioned into the tertiary sector of information and services. The AI revolution will eliminate many existing jobs, but I believe new jobs will certainly emerge. Perhaps these jobs will involve watching movies, playing games, or hiking; what we previously thought required spending money for entertainment may become work in the future.

In traditional games, perhaps only a few dozen players contribute 80% of the revenue, while the rest are just playing along. This is unreasonable; these players, while enjoying themselves, do not earn money. They should be compensated because they are also important contributors to the game ecosystem.

Parami Protocol: Will the platform incentivize users through tokens be driven by mature large companies using part of their revenue and shares to change the status quo, or will it be the native Web3 startups that disrupt these platforms?

Cai Wensheng: Historically, the birth of a new model often emerges from innovative companies; it is difficult to arise from giants because they have too many existing structures and vested interests. For example, if a CEO of a giant wants to do something, other shareholders and the board may not agree. The three major portals in China did not succeed in creating a search engine, even though their traffic far exceeded that of the early search engine startups. Why did ChatGPT emerge from OpenAI? Google has been working on it for so long, and even giants like Apple have not reached the level of ChatGPT. History has proven that it is very difficult to create something new on an old structure.

Saame Protocol: As a Web3 entrepreneur, many traditional investors often do not understand what you are doing. How do you solve this problem?

Cai Wensheng: This problem existed in Web2 and Web1 as well. Entrepreneurs like Jack Ma, Pony Ma, and Zhang Yiming faced many doubts from investors. If they really understood, it would not be reasonable; they would quickly tell the previous projects they invested in to do the same. So it is normal for investors not to understand a new startup project. However, if you still want to raise funds from them, you should try to speak in terms they can understand. Investors are not investing in the entrepreneur's dreams; they are investing in their own dreams. They will only invest if they believe what you are doing is changing the world. Therefore, you need to let them know that what you are doing can help them achieve their grand dreams, rather than trying to force them to buy into your dreams.

Investors usually have about 45 minutes, so you must clearly articulate what you want to do, what you have already accomplished, and you must not lie about the data of completed tasks. For future endeavors, you should present a logically coherent vision that can inspire the investor's imagination. The best way to converse is not for you to keep talking but to let the other party ask questions.

CHE DAO: There aren't that many Web3 users right now, and a large number of users are still in Web2. This may rely on large Web2 platforms to guide users into Web3. Do you think the explosion of Web3 will be driven by entrepreneurs or guided by large companies?

Cai Wensheng: I firmly believe that Web3 will explode; it is just a matter of timing, which is hard to predict. As I mentioned earlier, AI also went through many years of dormancy before the explosion of ChatGPT. Regarding the issue of Web2 users entering Web3, the centralized benefits of large platforms are that they retain users, and the cost for users to leave is high due to the accumulation of a lot of user information.

However, if we look at Web3 products like MetaMask, users do not have data stored in it, yet it still has high stickiness. This is because it does not retain users through data; users can transfer their assets to another wallet at any time. It retains users through usage habits and better experiences from internal third-party collaborations. The question of how to transition Web2 users to Web3 is not fundamentally a problem. Just like when the first generation of the internet emerged, there was no effort to pull traditional people in. As long as something new emerges, there will naturally be users who accept it.

Cell Protocol: One potential issue with tokens is that they may create a large number of low-quality users who exploit the system, even driving out good users and affecting normal usage. How do you view this issue?

Cai Wensheng: This problem also existed in Web1 and Web2. Just like many people used to run bots on QQ, we can use basic product functionality to limit such behavior. Of course, Web3 can use rewards to restrict it. Most projects make the mistake of rewarding users too much at the beginning, leading to unsustainable follow-up. Therefore, the release of rewards and the mechanism model must be well-designed to avoid this issue to some extent. However, we must also be aware that too clean a mechanism may not necessarily help your ecosystem; it’s about finding the right balance.

Createra: What advice do you have for teams with a strong foundation in Web2? What kind of Web3 startup team model do you find promising?

Cai Wensheng: In both Web1 and Web2, games were the first to rise, followed by social and e-commerce applications. The reason Web3 games have not developed on a large scale is that Web3 is a financial system, which is also its biggest challenge. How to ensure the stability and sustainability of games within this financial system is a significant issue. Once this financial system stabilizes, I believe games will be the first to rise, followed by social and other fields.

Returning to AI, ChatGPT now resembles iOS and Android. We missed the operating system of Web2, but we developed many applications on it. Our strength as Chinese people lies in creating applications; building the underlying systems is really challenging. Therefore, my suggestion is to develop upper-layer applications based on large models like ChatGPT, which may provide an opportunity for a leapfrog advantage.

Wanwu Island: What is your dream?

Cai Wensheng: Dreams are constantly changing. I posted a Weibo in 2010, and out of the three dreams, I have achieved the first two. The first dream was to invest in a company worth 10 billion USD, which I achieved with 58 and Meitu. The second dream was to travel to 100 countries, which I have mostly completed. The third dream is to write a book because my experiences are quite unique; I only studied until the first year of high school but later entered the tech industry, so I hope to write a book to summarize my experiences.

Recently, I have added a new dream related to entrepreneurs. The Garage Cafe in Beijing has greatly promoted the development of blockchain in China. I found that the cost of starting a business in Hong Kong is quite high, so I am considering finding a venue in Hong Kong to provide free space for early-stage entrepreneurs to communicate and support young people in starting their businesses.