Ending The Crypto Winter with Garry Tan and Brett Gibson of Initialized Capital

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In this episode we sit down with Garry Tan and Brett Gibson of Initialized Capital and discuss emerging technologies such as cryptocurrency, blockchain, and what sets them apart from other venture capital firms.

“People are conditioned for 200 milliseconds at this point. Even waiting 5-seconds for a little spinner is not going to cut it.”— Garry Tan

“Privacy is going to be a big deal for the blockchain and crypto technologies.” — Brett Gibson

“It really is about those users, and what’s their experience. We want to help other fellow hackers who are builders.” — Garry Tan

“We’re sitting on a bit of a systemic landmine here, and security is going to have to be figured out for the future of computing.” — Brett Gibson

“That’s one thing that is very much missing, but could be the inflection point that pops us out of this crypto winter.” — Garry Tan

“There is too much money chasing too few deals, too few ideas, and too few good people. That’s insane to me. Definitely there’s too much money, but an infinite number of incredibly smart people. If you’re paying attention to Hacker News and Hacker Noon and you’re reading this stuff — this is the stuff I read when I was working for someone else’s startup. You and I are not different, we’re the same.” — Garry Tan

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Transcript

Trent Lapinski: Welcome to the Hacker Noon podcast, I’m your host Trent Lapinski. In this episode, we sit down with Garry and Brett, from Initialized Capital. They’re a venture capital firm, here in San Francisco, that’s invested in companies such as Coinbase, Reddit, Instacart, Patreon, and Cruise. In this episode, we discuss emerging technologies and what makes them different from other venture capitals.

Trent Lapinski: Today’s show is sponsored by Datadog, a monitoring and analytic platform that in-grades with more than 250 technologies, including all AWS services. Such as Lambda, Kubernetes, and Docker. Datadog unites metrics, traces, and logs in one platform, so you can get full visibility into your infrastructure and applications. With powerful dashboards, anomaly and outlier detection, and distributed tracing, Datadog helps you get a handle on the performance of your server less applications, as well as their underlying infrastructure. Try it for yourself by starting a free 14 day trial today: http://bit.ly/2CTelt7

Trent Lapinski: Welcome to the podcast, I’m here with Initialized Capital. Tell us a bit about what you guys are working on.

Garry Tan: Hey, my name’s Garry Tan. I’m managing partner here at Initialized.

Brett Gibson: Hey, I’m Brett, I’m a partner at Initialized.

Garry Tan: And we actually met 10 years ago through Y Combinator. Brett ended up becoming a co-founder of my first startup, which was a company called Posterous, it was a simple blog platform. We’re, kind of, accidental VC’s.

Trent Lapinski: I joke with people, there’s only … Well, maybe it’s not a joke. There’s about 4 jobs in Silicon Valley. You’re either a venture capitalist, a founder, an executive, or an employee, so you guys just, kind of, naturally fell into the VC seat, it seems?

Garry Tan: Yeah, more accidentally than not, I would say. It is a very big responsibility, too. We’re pretty psyched to be able to do it. I mean, there can be a lot more startups that actually can succeed and be successful with the right backing, with the right people behind them. Lord knows that we have a lot of difficult stories from people that are venture capitalists.

Trent Lapinski: You guys have separated yourselves from Y Combinator a little, and you’ve, obviously, got your fund now. Can you, kind of, explain what went into that decision?

Garry Tan: Yeah, absolutely. Being able to work at Y Combinator was a crazy treat, honestly. I ended up becoming designer and resident in 2011. Paul Graham and Jessica Livingston basically ran that whole place for the first 6 years, before bringing on their first outside partner Harj Taggar, who’s now a very close friend. And I’d heard that Harj and their team are looking for designers. So I said, “Oh, I can do that.” And all I did was office hours, helping people design their homepages, and their first-time experience. Talk about being at the right place at the right time, that was when the second building of our company emerged. You know, why combinate your portfolio with AirBnB? And so in the valley, as they say, “One, you’re lucky, and two, you’re good.”

Garry Tan: And that was exactly the moment when Paul Graham and Jessica Livingston decided, “Hey we need to scale our operation.” So I was part of that initial set of partners who got to join and help make the magic that is Y Combinator. Along the way, Brett came along and wrote a lot of the software that, actually, now runs YC. So the application, recommendations … If you’ve ever applied to, or recommended, or gone to that apply.ycombinator.com site, you’ve seen Brett. You’ve used Brett’s-

Brett Gibson: There’s a little symmetry there, that you ended up at YC through design, and then I ended up there as a programmer.

Garry Tan: Yeah, of course.

Garry Tan: Basically, it wasn’t something I ever thought that I would even work at. One thing we really did discover is that it’s just really fun to work with founders who were really great. So YC is, sort of, this very intense experience. Both for the founders who go through it, as well as the partners, themselves. I’d never really appreciated that second part until I was going through that experience. One thing that I realized is, when you’re YC partner, you actually have, more or less, very little control over your calendar. So, back then we were funding between 40 and 80 companies per batch. Basically, your days during the week to help the companies were in a form of office hours, just like whatever cluster we put up. And so, we would put up some hours and it would be a grab bag, you wouldn’t actually know who you were going to meet. Sometimes it was awesome, and sometimes … Often, you were running into people on their worst day of their startup.

Garry Tan: One thing that we really did realize is that it’s really, really fun to have much more control over which people you get to work with. We started investing, basically, as a way for us to do place folders, that way. Being to work with Brian Armstrong at Coinbase very early, helping him think through engineering decision, how to hire his team. That was the kind of thing that we loved to do.

Trent Lapinski: And, Coinbase is now worth … 8 billion dollars? Is that correct?

Garry Tan: Yeah, that’s the rumor, anyway. Not confirmed.

Trent Lapinski: I don’t think it’s a rumor. Is it a rumor, or … I don’t know, are we getting into territory you can’t discuss here?

Garry Tan: Yeah, cannot confirm or deny, but…

Trent Lapinski: Okay. And, you’ve got a number of other pretty large investments here, in companies like Instacart, Reddit, Patreon, Cruise. What else are you guys investing in right now?

Garry Tan: Well, the really cool thing about this job, is at the end of the day … And this is why it’s such a treat to be sitting down with you and to be talking about Hacker Noon, simply because it does start with hackers, at the end of the day. I mean, when we funded Brian Armstrong, it wasn’t that I had gone out and said, “That’s going to be the future.” Actually, it was Brian Armstrong who quit his job at AirBnB, as head of anti-fraud. In 2011, 2012, right at the moment where that company was blessed as the next billion-dollar company. Now, I didn’t know that it would be a 30 billion dollar company, but I know that I was trying to get my wife to go get a job there. It was going to be something very, very, very special. For someone to leave that situation, and we knew that they were a great engineer, that became clear that we gotta figure out what the future is, based on what really smart hackers decide, “I’m gonna devote my life to go work on that.”

Garry Tan: So, whether it’s Instacart and the on-demand space, that era basically happened right at the moment when a smart phone penetration went from 10 or 20 percent in society, to 80 percent. So suddenly, there was this idea that you could have a large workforce being deployed purely through smart phone. Apoorva came up with that idea, and basically built the real demo. He built something that he deployed to his first 100 friends. At YC you get to see a lot of people with a lot of ideas. We saw a ton of people who said they wanted to do it, but Apoorva was the first person who actually sent me the test flight link. Then when that didn’t work, he actually sent me a six-pack of beer to my door at my common office hours. That was, actually, the craziest thing. So, to us, it really does come back to you and your readers, and your listeners, and your viewers. But at the end of the day, that’s where it comes from. It doesn’t come from us as the VC’s.

Garry Tan: And then, in terms of both my background and Brett’s background, I wish that I had time to code, and then … Brett still gets to. We hope to not ever be different.

Trent Lapinski: You’ve touched on something really good there, that I think is good for entrepreneurs to hear, it’s about execution. You can have the best idea in the world, and sometimes, ideas get recycled. It’s really about matching those ideas to an entrepreneur that can actually execute on them. It’s a lot harder to actually execute on creating a successful business, to actually achieve that valuation, and to actually potentially achieve that kind of revenue, as well.

Garry Tan: Yeah, ideas are merely multipliers on that execution, and so-

Trent Lapinski: Mm-hmm (affirmative)

Garry Tan: Zero execution, the best idea ever, equals still zero.

Trent Lapinski: Exactly. And you guys just raised a 225 million dollar fund, can you tell us a little about that?

Garry Tan: Yeah, absolutely. Well, we started off doing very small checks, you know. It’d be a $50,000.00 check, sort of the first little bit towards a million dollar investment but, we found that we would have to go and send 20 or 30 emails to all the rest of our investor friends, saying, “Hey, this is the one that’s really good. You should do this.” And so, over time, what we’ve realized, is it’s actually easier for both us and for the founders, if they don’t have to do 20 or 30 more meetings. They can meet with us. They can have a unilateral yes-no decision, we don’t really care if anyone else invests. Before we didn’t care, we would just be the yes or the no. So now it’s extra easy because now it’s yes-no, and if it’s a yes, they’re done fundraising. Lord knows that for the people who really enjoy fundraising, maybe there’s something wrong with those people.

Trent Lapinski: Yeah, that was never my thing, when it came to running a startup. Even with some startups I work with right now, I usually defer that to the CEO. It’s definitely a full-time job as an entrepreneur and as a CEO, from the other side of the perspective, to go raise funding. You have to spend a lot of time and energy to find that right fit with an investor.

Garry Tan: Yeah. Having had to fundraise both as a VC, more recently, but as a founder, previously, it’s the kiss of death to have one meeting, then another meeting, and another meeting. And then nobody says no. Not only do they not say no, they don’t actually even tell you what you can improve on. So one thing that Brett and I, and the whole team at Initialized really focus on, is one, we’ll say yes or no. Sometimes we can actually get to a yes within 3 days, which is relatively difficult for a company our size to do. Then if it’s a no, we’ll tell you, and we’ll tell you why. If you can fix that why, we’ll actually be happy to meet again. We’ve actually funded … Last year alone, there are at least two cases of companies where we said no, initially, and we told them why. The why was fixed, and then we did end up funding it later.

Garry Tan: To us, that’s the best possible case. Founders actually get help from a resolute decision, one way or another. Then, just super frank advice on, “What would I do if I were you?”

Trent Lapinski: Unfortunately, I’ve had to explain to far too many entrepreneurs about the art of the soft “no” in Silicon Valley.

Garry Tan: What, the ghost?

Trent Lapinski: Yeah. It’s such an interesting dilemma, especially if you’re a newer entrepreneur and you haven’t experienced this before, you think … You’re getting the meetings, and you’re getting to this next step, and no-one’s saying no, but they’re not going to invest in you. It’s a very frustrating feeling, and it’s a very frustrating thing to experience, because they’re trying to be polite, and they’re trying to be nice. But at the same time, you’re not getting that feedback that you need to be able to say, “Hey, we’re not going to invest in you, but if you do this, maybe we will.” So, is that what sets you guys apart than the other VC firms?

Garry Tan: That’s the beginning part. We want every piece of the experience working with them to be different. One of the things you would get, if Initialized funds you, is Brett actually can come in and weigh in on helping you close engineering candidates, or even doing technical interviews. So, most of our founders are actually technical, but in cases where that’s not true, sometimes that ends up being very helpful. Yeah, who else do we have?

Brett Gibson: In terms of help? We have a pretty wide squad of talent, that could help out on startups. There’s Vince for engineering, or Kim who’s really good PR marketing, or Jen’s an amazing designer. Operational advice, financial modeling, we have an attorney, which comes in pretty handy.

Garry Tan: Yeah, you never know. Sometimes it comes up, and having all this help actually turns out to be really important, ’cause it’s not only what you know, it’s also who you know. Finding the right lawyer at the right time, often is the most important thing.

Brett Gibson: And then, obviously Alexis can get your message pretty far.

Garry Tan: Yeah, having one of … The co-founder of the fund having created Reddit, that turns out to be a really insane super power.

Trent Lapinski: Yeah, it’s what … Top 5 website on the internet in the US? Something like that?

Garry Tan: Number 3, now, actually. They just surpassed Facebook, as a website, anyway. My favorite thing to watch is Alexis being able to do cold emails and then have them actually work.

Trent Lapinski: Well, when people know your name, when you send them the cold email, it’s not as cold as if someone doesn’t know your name initially. So, I’m sure that definitely helps to have him involved.

Garry Tan: It is kind of interesting to point out, there are a lot of very, very famous people. And there are lots of very, very famous people who turn into venture investors, but I don’t think I know of anyone else, other than Alexis, who is that generous with both his time, and his network. But that’s also literally a core value for us. We’re here to help, that’s it, really.

Brett Gibson: When we like to talk about it, who we would want to work with as founders. You know, we want to fill that role and be first call.

Trent Lapinski: Today’s show is sponsored by Datadog. A monitoring and analytic platform that in-grades with more than 250 technologies, including all AWS services, such as Lambda, Kubernetes, and Docker. Datadog unites metrics, traces, and logs in one platform, so you can get full visibility into your infrastructure and applications. With powerful dashboards, anomaly and outlier detection, and distributed tracing, Datadog helps you get a handle on the performance of your server less applications, as well as their underlying infrastructure. Try it for yourself by starting a free 14 day trial today. Listeners of this podcast will receive a free Datadog T-shirt. Sign up using the link in the description below.

Trent Lapinski: What are some trends, or new investment opportunities, or markets, that you guys are finding interesting right now?

Garry Tan: Well, we’re obviously very interested in crypto. We’re able to see Coinbase turn out to be, really, a Juggernaut in that space. Since then, we’ve funded, sort of, more picks-and-shovels style businesses. You could probably argue that’s what Coinbase is. Coinbase is not actually making choices necessarily about running a big block chain of their own, but they actually support others. So, in the same way, CoinTracker coming up with a recent Y Combinator batch, they’re one of our favorite crypto seed investments, working backwards from the dream of what crypto is. If you can imagine a percentage of GDP, of good and services going through crypto networks. Well governments aren’t really gonna go away, no matter what Maximus might say; governments are gonna want their taxes. So this is a very direct example of something that has incredibly high utility, that is basically necessary, if you believe in crypto.

Garry Tan: It’s also something that is incredibly technical. So, being able to support every wallet, every exchange, every weird use case, every weird bug in an API, that’s actually an incredible amount of work. We met an incredibly technical team that was able to build that product, and we think that will eventually become a multi-billion dollar company. And that’s just table stakes for crypto.

Trent Lapinski: Awesome. And, what about your thoughts on ICOs? Obviously, in 2017 we saw the ICO, kind of, rise. Now in 2018, it’s kind of, petered out a little bit. Any thoughts on what happened with the ICO market, and where you’re seeing that market going? Or, not going?

Brett Gibson: Honestly, the regulatory thing has been very big, and sort of, gloomed over. ICO is generally … Honestly, there’s been a lot of “get rich quick” opportunities, speculation. I tend to believe there certainly are cases where it makes sense, and you should be selling a token, because of what the value’s gonna do to the token. But, in terms of when it makes sense to do a widespread public sale, it’s probably not that often. I think, if you’re setting up a blockchain the value is going to be in a token, instead of some equity, like a normal company. You need investors to partner with, then by all means, sell them some tokens, it makes sense. But if you assume that at some point the token’s gonna have utility, then you want to sell them to customers, not widespread to the masses. I think in terms of utility tokens, I’m skeptical of a lot of use cases for them.

Garry Tan: Yeah, and then the other thing I’m worried about is … Actually, I just heard this term from Ryan Zurrer at Polychain just yesterday, but I think it’s very, very important and kind of scary, actually, the term is moon rot. Things have an incredibly powerful and … It’s just a life-changing amount of money can come their way in the form of getting to the moon with their token. And then, suddenly things rot, because suddenly people aren’t showing up to work. People aren’t actually updating GitHub anymore, so that goes to a crawl. Or, in a lot of cases, and this is the completely insane part, teams said that they were gonna do X. They never even get to X, they just kind of exit stage left, it’s insane. So, we think that’s a very dangerous aspect of what’s been happening in the past year or two.

Trent Lapinski: On the other side, what are your thoughts on tokenized assets? Because I think the tokenized asset model, for everything from digital assets, to matching it to real world assets has a lot of potential. Especially for automating smart contracts, for example, being able to buy a home and execute a smart contract. Being able to do that, and tokenize the equity, and being able to push a button to be able to buy a home, lease a car, do some of these things that currently have lengthy legal processes, and there may even be a fax machine involved. We can actually get rid of a lot of that by tokenizing assets. What are your thoughts on tokenized assets?

Garry Tan: I love the concept of security tokens, I’m a believer in that. The main problem is, how do we get the user experience up, and the compliance up, to a point where it can happen? Everyone talks about infrastructure versus apps. I think this is totally a killer app. To me, it’s pretty obvious that when you sign up for a account, you can go online, and you can actually buy publicly traded stocks in a very standardized way. The promise of a security token is to be able to do that with very, very low cost. With the infrastructure all baked in, potentially all built in, and then standard legal docs, and standard governments, and standard smart contracts that make sure that dividends are split up the right way, and all that.

Garry Tan: Even if you take that example apart, there’s so many pieces that we still need. The user experience part is insane, still. Really, are you gonna try to buy Ethereum and then transfer to your MetaMask. Then you have to download MetaMask, and then you have to wait … Right now, Ethereum confirmation times are relatively fast, but people are conditioned to 200 milliseconds at this point. Even waiting 5 seconds for a little spinner, that’s really not going to cut it. And then you’ve seen dozens of different attempts at this. And then, at the exchange level, there needs to be some sort of exchange, or a clearing house. All of these things have not come together, yet. We all see the fever dream, and how we’re gonna make it a reality.

Trent Lapinski: And what do you think the potential is, once we achieve that reality? Is this a game changer? Is tokenizing assets … I look at, even possibly, the digital asset market. For example, you look at what’s happened with Fortnite. Skins in a game have turned them into a billion dollar plus company, and they’re just literally selling a cosmetic digital asset within a game. So, what do you think about digital assets as a potential in gaming, in VR, augmented reality, is that gonna become a thing?

Garry Tan: Yeah, definitely. Alexis actually recently visited the offices of Fortnite and hung out with the CEO there. It turns out that they’re doing a billion dollars in sales per month. It’s not even an exchange, there’s not way you can exchange this stuff, so-

Trent Lapinski: So, Fortnite accounts on eBay list for thousands of dollars to get exclusive items.

Garry Tan: It’s madness, so I don’t know. I wish Vince were here, but Brett, maybe you can talk about one of our digital asset companies.

Brett Gibson: Yeah, there’s actually a company called Horizon Labs. They’re building a game, it’s called SkyWeaver, it’s like a card-based strategy game, kinda like, maybe it came from Magic the Gathering. But, you actually get to own your cards, entirely independently of the company itself. Given the way that … It kind of matches how cards would work in the real world. You get a pack, and then they’re yours, and you can trade them or sell them, whatever you’d like. But then, I guess, the extra angle in the digital world is that some other company could decide to use the same token and integrate it in their game. So, you have these remixing possibilities that could get really fascinating.

Garry Tan: The thing, again, for you … I hate to harp on user experience. I actually just gave a 90 minute talk at YC Startup School about design, so it’s definitely on my mind. But, I always return that, because it really is about those users, and what’s their experience like? And so, for a game like SkyWeaver, it’s actually incredibly important that a normal user who might not even know what Ethereum is, they need to actually be able to go to the iOS or Android App store and download this game, and just start playing. And then, once they get into it. Maybe they get issued, or magically, you get a rare card, well then maybe you want to trade it. Maybe then, you do a Coinbase connect.

Garry Tan: So that’s, sort of, one thing I think is very much missing, but could be, literally, the next inflection point that pops us out of this crypto winter. This idea of mobile SDKs for Android and iOS. I think that’s going to be a very special moment, when someone can just play a game that might use Ethereum with digital goods, but not worry about all of this Fiat to crypto madness that you have to worry about today. Really, there’s only one company I can think of that has the ability to do that, and that’s Coinbase. So, I think, watch out for that. That’s going to be … Well, I think it’s really just gonna open things up.

Garry Tan: USB just released a really interesting essay literally about this. We’ve been in the infrastructure phase for so long. So, I think the apps are coming, and we’re definitely looking out for them, especially with Lair 2. I think Lair 2 helps us get to handle a few turns of this poker game. We’re gonna get to see usable apps on Lair 2, with these metal SDKs, really as soon as the next 18 months.

Trent Lapinski: What are some other technologies that you guys are bullish on right now?

Brett Gibson: One thing I keep seeing everywhere is privacy issues. So, I think that privacy’s gonna be a big deal in the future of blockchain and crypto technologies, so I just think that I see more and more projects including it strategically. Even in Berlin, the Hackathon from global in Berlin. It seems like a lot of projects were able to integrate some sort of their knowledge-proof technology.

Trent Lapinski: There’s been a lot of concerns, recently, with data breaches and privacy issues, and Silicon Valley is going through a shift right now, in terms of, what it means to protect users’ data. So, do you think, with Cambridge Analytica scandals, and I think Facebook just got hacked again with 50 million accounts. Do you see potential security solutions as being an area of focus in the future? Or, any thoughts there?

Garry Tan: Yeah, absolutely. It’s pretty hard to secure machines.

Brett Gibson: Yeah, but also at the same time, I feel like we’re sitting on, sustainably, a bit of a landmine here. So, security’s going to have to get figured out for the future of computers.

Garry Tan: We got involved in a company called MonoVMs. They’re currently enterprise-only, but I think it’s a very interesting idea, in that there are other direct implementation of this idea Unikernels. I get in Linux and all its variants has, actually, an incredible amount of multi-user processes, and all of these things that come from 40 years ago. So you can think of the bare minimum might have 15, 20, as many as 100s of servers. And you have that part of Unix, more or less duplicated over and over again. So, the idea of Unikernels is interesting in that, if you can take all the app-level code and collapse it down into just the code that you actually need to run for that container, that’s basically what a Unikernel is. It’s funny because it’s a little bit of a forgotten part of a containerization, and if you search online, there’s a lot of debate back and forth about, “Oh, now you lose multiple levels of user permission.” And so, is that more secure? On the other hand, you basically can’t drop to a shell.

Garry Tan: It’s an interesting space which some of our security expert friends have actually just mentioned. In a world of zero days, this actually might be the only solution. Obviously the containerization, and the way that we deploy servers has changed so much since I first started running code. We’re seeing so much evolution there.

Trent Lapinski: You can even apply it to a hardware level, as well. So, as you mentioned, you can run multiple containers on the hardware. So, you can even have cases where you swap out different containers running different versions of the code. That could be the future of updates, for even updating your iPhone or hardware devices, swapping out different containers and different components because everything’s containerized. So, there’s a lot that you can do on the virtualization side of things, especially with Unikernels. There’s Docker and Kubernetes, and all these new micro service systems. When you actually start to apply some of that stuff to Blockchain, that’s really interesting. And then it gets even more interesting if you start applying AI Machine Learning into the equation as well. A lot of these things, you’re gonna combine the technologies, that’s what’s gonna happen over time. Right now there’s Blockchain, right now there’s Machine Learning, there’s DevOps and Unikernels, and all these things. But, once you combine some of these technologies, I think that’s when it’s gonna be really cool, and we’re gonna see some really new use cases and applications that come out of that.

Garry Tan: For us, it’s hard, because we don’t like the tech just on its own. We really like applying … basically, let’s find the problem for a customer, a user, or whatever, and then one of the number 1 things that Brett asks when a crypto company comes in, is, “Well, why Blockchain? Why not just a centralized database, actually?” And then you-

Trent Lapinski: A good way to end half the conversations, yeah.

Garry Tan: It ends a lot of conversations, yeah. But, Brett just stares at them.

Garry Tan: Yeah. It’s something that’s so ingrained in us as builders in our normal investment. Like, who are you, we can’t help but help … ask the similar questions in crypto pitches. It’s a weird thing, where you have to accept, certainly if you’re playing the new Layer 1, you have to decide things ahead of time, because it’s intentionally going to be out of your control very soon. It’s, kind of, a different way of building things than, I’d say, we’re used to in a lot of monitor investment, being recruiters and builders, so-

Garry Tan: I’m not gonna lie, it’s fun. If you like awkwardness, it’s fun.

Trent Lapinski: Today’s show is sponsored by Datadog. A monitoring and analytic platform that in-grades with more than 250 technologies, including all AWS services, such as Lambda, Kubernetes, and Docker. Datadog unites metrics, traces, and logs in one platform, so you can get full visibility into your infrastructure and applications. With powerful dashboards, anomaly and outlier detection, and distributed tracing, Datadog helps you get a handle on the performance of your server less applications, as well as their underlying infrastructure. Try it for yourself by starting a free 14 day trial today. http://bit.ly/2CTelt7

Garry Tan: My favorite thing is that we’ve already talked about some of the interesting scenarios that could not happen with just a centralized database, right? Clearly, if game companies could release a centralized server, they probably would’ve already. But clearly you do need some sort of decentralized marketplace for these additional goods. So that’s a novel use case that does not exist yet, and that actually requires the blockchain, a couple blockchains, so that’s compelling. Or, decentralized exchanges for security tokens, that’s novelly interesting, because that’s something that could not happen, necessarily with that centralization. There’s a whole wave of crowdfunding, where that just turned out to be something.

Garry Tan: Once you have the commitment on the website, it’s still de-evolved to literally paper and pencil. Literally, people still sending in faxes with IDs. It fell back to something that was totally broken, which is the non-software way of doing things by hand with individual contracts and lawyers, right? And this is crowdfunding for companies, crowdfunding for real estate, for all manner or things. It just de-evolved into something that would be … Try to get some Google juice, and try to buy some ads on Facebook, and then do the cap to LBT arbitrage. And, that’s not interesting. What’s interesting is a standalone decentralized marketplace. Let’s do it. Where is it, you know? That’s the dream.

Garry Tan: That’s how crypto goes from something that is basically a toy, all for speculation, which is where we are today, to something that actually encapsulates some large percent of goods and services in GDP.

Brett Gibson: For me, a lot of the hardcore crypto centralization talks about things like censorship resistance and a strict Bitcoin. This is as centralized as it can get. But, there’s this whole other tier of things, and I think that this is a where the security token thing comes into play. Where someone could’ve rewritten the systems that run securitization. But, in a decentralized way, it’s a lot easier to ignore standards, because no one owns it. It’s inherent, so you don’t need these weird things like web consortiums, where these big companies are trying to hash things out, and there’s all these players that can never agree.

Brett Gibson: Everyone’s already on the same page, and no one owns the network, so they can just buy in to it as this thing that works across multiple learning …

Trent Lapinski: So, I’ve gotta ask, this is the Hacker Noon podcast, so, what is a time that you guys have hacked something.

Garry Tan: Well, what’s funny is YC has been such a big part of my life, that it’s hard for me to remember a time where it wasn’t a part of my life. But, from the outside, when I was just reading Hacker News and I hadn’t applied yet, and I went to a startup school in 2008. I was a really big gadget buff, so photography is one of those deep, dark, infinite holes that you can just fall down. So I got into photography, and I brought my big 70–200 millimeter Canon lens, I basically went and plopped myself on the aisle and took really good high quality photos of all the speakers. When I got done, I put it on Posterous, which was our blog platform at the time, and I posted it on Hacker News. I got voted to the top of Hacker News. So, a month later, I applied to YC and we showed up in Mount View and got our interview.

Garry Tan: The first thing that Paul and Jessica mentioned was, “Oh yeah, thanks for coming. We picked you out because we thought you took very nice photos, so just yeah whatever.”

Trent Lapinski: You’re the photo guy.

Garry Tan: That’s my story. Just as Apoorva sent me a six-pack of beer to get the interview, I took photos and tried it that way. And the funniest thing is, it worked. I was just interested in cameras and photography anyway. I think that’s always the thing that’s really cool about being a nerd, is I can get infinitely deep on almost any subject, and if you actually just practice it the way you want to practice it, really amazing things will always happen in my life because of it.

Brett Gibson: That’s funny. I, kind of, have like an alternate of the same story. I applied to YC a couple times before I got in. The second to last time was the same idea that eventually got funded. We got rejected, but then we built the thing anyway, and it was Reddit, before Reddit. And they needed a system to gather questions for startup school. So Jessica reached out and they used it for startup school. Then, when we got there for an interview, the first thing he said was, “We’ve actually used your software.” So-

Trent Lapinski: It definitely helps if they’ve already used your code. Do you guys have any final thoughts?

Garry Tan: Well, at the end of the day, for Initialized, we want to help other fellow hackers who, basically, are builders. Literally, the only reason why we’re doing this phone, is actually that we think that there is infinite capital in the world. That was the most shocking thing for me coming into this. As founders and as engineers, who worked for other people most of my career, until I applied to YC.

Garry Tan: Once I got on the other side, I really was shocked at how much … You turn on the news and they talk about negative interest rates for bonds. What does that really mean? It means that there’s too much money in the world, and everyone wants yield. So, the really crazy thing to realize is that the only very, very pure type of deal is exactly the kind of value creation that engineers, designers, and product people can do. Is sit in front of a computer and make a thing that, possibly, a billion people use, and it changes their life, ideally for better. When that happens, it’s magic, and the magic happens. It’s the worst thing about working in finance today.

Garry Tan: There’s this obvious and extreme mentality that is in the hearts of, not every finance person I ever meet, but a good deal of them. And they really do think there’s too much money, chasing too few deals, too few ideas, and too few good people, and that’s insane to me. Definitely there’s too much money, but there’s basically an infinite number of incredibly smart people. Your listeners and viewers right now are capable. If you’re paying attention to Hacker News, and Hacker Noon, and you’re reading this stuff … This is the stuff that I read when I was working for someone else’s startup, and working for Microsoft before that.

Garry Tan: So, you and I are not different, we’re the same. You are capable of building things that actually go and change the world. That’s why Paul Graham was so incredibly meaningful to me and so many other people in our community. Hey, he was the first one to write these essays that made us realize, we’re capable, we’re not different. All of the finance people in the world, all of the money in the world is actually seeking exactly us. It’s actually seeking people who can create. That’s the thing that’s the limiting reagent.

Garry Tan: Software engineers. It’s not the money, and that’s the freaking craziest thing. So that’s my thing, is like, hey Initialized, we want to find great people just like us. We want to be the investors to help you get there, and we always want to help.

Trent Lapinski: Where can people find you?

Garry Tan: Initialized.com, and on Twitter at @GarryTan, G-A-R-R-Y-T-A-N. You can also email me at garry@initialized.com, Brett?

Brett Gibson: I’m on Twitter at @brettdg and then brett@initialized.com.

Trent Lapinski: Well, thank you guys for coming on the show, it’s been a pleasure.

Garry Tan: Thanks for having us.

Brett Gibson: Thanks a lot.

Trent Lapinski: Hey-o, you got a great catch story you want to get published? Maybe something about Fox taking over Twitter, or how Bitcoin actually works? Or maybe you just have a story about how to build a great software, or a great team. Get your expertise published on Hacker Noon. Email us, stories@hackernoon.com, and a real human will review your submission.

Trent Lapinski: This concludes another episode of the Hacker Noon podcast. I’m your host, Trent Lapinski. Please don’t forget to subscribe to us on iTunes and YouTube, and follow us on social media. You can also find us at hackernoon.com and podcast.hackernoon.com for more episodes.

Trent Lapinski: Thank you for listening.

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