The Blog of Author Tim Ferriss

The following guest post is an excerpt from Read Write Own: Building the Next Era of the Internet, the brand-new book from a16z partner Chris Dixon.

Additional resources and potential next steps have been added to the end of the blog post. 

Chris Dixon (@cdixon) is the author of Read Write Own: Building the Next Era of the Internet, and a general partner at Andreessen Horowitz (“a16z”). He joined the venture capital firm in 2013, where he made early investments in Oculus (acquired by Facebook), Coinbase (which went public in 2021), and many other successful companies. Chris now leads a16z crypto, which he founded in 2018, and which now has over $7 billion in committed capital dedicated to crypto and web3 technologies—with investments ranging across applications such as decentralized finance and decentralized media, to infrastructure, social media, gaming, and more. He was ranked #1 on the Forbes Midas List in 2022. 

Before joining a16z, Chris placed early bets on Kickstarter, Pinterest, Stack Overflow, and Stripe—all of which have products in wide use today. He had also previously co-founded and led two technology startups, SiteAdvisor (acquired by McAfee) and Hunch (acquired by eBay).

Drawing from his first-hand observations, mental models, and experiences with startups and the internet industry, Chris was an early and prolific blogger and has been a long-time advocate for community-owned software and networks. 

Chris has Bachelor of Arts and Master’s degrees in philosophy from Columbia University and an MBA from Harvard Business School. He started his career as a software developer. He lives in California and grew up in Ohio.

Enter Chris…

In his classic 2008 essay, “1,000 True Fans,” Kevin Kelly, the founding executive editor of Wired, predicted the internet would transform the economics of creative activities. He saw the internet as the ultimate matchmaker, enabling twenty-first-century patronage. No matter how niche, creators could discover their true fans, who would, in turn, support them. 

The reality is creators do, generally, need millions of fans, or at least hundreds of thousands, to support themselves today. Corporate networks got in the way, inserting themselves between creators and audiences, siphoning away value and becoming the dominant way for people to connect.

Social networks are probably the most important networks on the internet today. The average internet user spends almost two and a half hours a day on social networks. Next to text messaging, social networking is the most popular online activity.

The design of the dominant social networks explains what went wrong. Powerful network effects locked users into Big Tech’s clutches, and that lock-in led to high take rates. It’s hard to know precisely what take rates many major corporate networks charge, because their terms can be opaque and noncommittal, but it’s reasonable to estimate they charge around 99 percent. With the combined revenue of the five biggest social networks—Facebook, Instagram, YouTube, TikTok, and Twitter—at about $150 billion per year, that means these networks pay out on the order of $20 billion to users, with the overwhelming majority of that share coming from YouTube alone.*  

Corporate networks won out because they made it easy for people to connect—more so than protocol networks like RSS did. But that doesn’t mean corporate networks are the only, or even the best, way for people to connect. The alternative to today’s world would be one where social networks are decentralized and community-owned, meaning built with either protocol or blockchain architectures. This could have meaningful economic effects for users, creators, and developers and could revive Kelly’s compelling vision for internet patronage.

To understand the effect of a different network design, let’s do some back-of-the-envelope math. Protocol networks have take rates that are effectively zero. Sometimes companies build apps on top of these networks, providing easy access and other features. 

Let’s pretend the top five social networks charged a similar amount. If they all had take rates of 10 percent, their share of the $150 billion in annual revenue would drop from $130 billion to $15 billion. That would put into the pockets of network participants such as creators an extra $115 billion per year. How many lives might that change? At the average U.S. salary of $59,000 per year, that extra $115 billion of redirected revenue could fund almost two million jobs. This is a rough estimate, but the numbers are clearly big. 

As new technologies like AI automate work, social networks can be a counter-weight that provides people with fulfilling career opportunities.