Shane Mac: Building Messaging Protocol for Web3 (XMTP), Company Culture, and Scaling Trust
What could communication look like in web3? Inherently Economic, Spam-resistant, and Default Public.
This week’s podcast guest is my friend and former co-worker, Shane Mac. Shane is building XMTP, a protocol that could become the foundation layer of messaging in the world of wallets and blockchains – like HTTP or SMTP are today. (The conversation is more exciting than you might guess based on that alone!)
We also talked about how Shane builds unique company cultures by ignoring conventions… like: removing the stock option vesting cliff, and teaching people how to quit on their first day.
Key ideas from the episode:
There is a need for a wallet-to-wallet communication/messaging service in web3. This is exactly what XMTP is trying to enable.
XMTP’s goal is to become a decentralized messaging protocol for developers to build on top of.
At first, this will mean you can send/receive messages to your wallet based on what’s in there – NFT projects or Tokens can communicate with their users!
Developers could rebuild apps like iMessage, Gmail, Slack, and Discord all based on wallet–to-wallet messaging (over the long run)
A decentralized messaging protocol would mean the senders and receivers are be public, but the content of the message stays private.
Most new protocols will start out centralized to obtain funding to hire the best people. But part of the long-term plan that’s clear and articulated is to decentralize later on.
If you want to make people happy, including yourself, make them more productive. Removing blockers is one way to do that.
People in DAOs can trust each other because the blockchain shows everyone has aligned interests and experience.
Managing people who don't want to be part of the company, especially early on, is the worst thing for your company.
A lot of excellent hires do not join startups because their spouses are not comfortable with it–recruit the whole family.
Learn more about Shane Mac:
Additional episodes if you enjoyed:
Podcast Transcript:
Eric Jorgenson: Hello again, my friends, and welcome to Jorgenson’s Soundbox, a sandbox of sounds. I’m spending a lot of time learning and exploring web3, which is all of the new applications being built on the blockchain, and today's an amazing example of that. Shane Mac, our guest, is an old friend of mine from San Francisco. We used to work together back in Zaarly in 2011 and briefly even lived together which was a beautiful chaos. Shane's had an amazing career in tech as a product leader, a founder, and investor. I really admire what he's built and I learn a ton from him every time we get to talk. Today, the meat and potatoes are about XMTP, the messaging protocol he's building, he's the co-founder of today. It's a wallet native messaging tool for the blockchain era. He's building the protocol layer and developers build tools on top of that. It's almost like starting SMS so that new people can start WhatsApp. Stick with me. This is a low jargon conversation. It's not super technical, but it really shows all of the possibilities of web3 in a whole new direction. This isn't about DeFi or NFTs. It's about something that most people aren't necessarily thinking of as a web3 application, how it's going to kind of become decentralized and become inherently economic. And it'll really get your juices flowing about something entirely new. And I think it's a great example of how entrepreneurs that most of us don't know about are actively working on solving the problems, all the obvious challenges, about using web3 apps today. So, we talk about how we'll be able to spam proof the next generation of the web and all the possibilities that kind of come in here, how to compete with world-class companies by building incredible cultures, Shane is amazing at this, and we really get into it about in the second half of the conversation, and we finish with how Shane approaches investing in the space in startups in crypto. He's about as well networked as anybody I've ever met in this world, and I think he's got a really strong long-term outlook, and I love how he articulates things. If you enjoy this conversation, you will love the posts I write weekly about investing technology. A lot of them are about web3. You can find those at egjorgenson.com. Please sign up for the newsletter. And before you put your phone away, please do me the personal favor of a quick review. It is a critical way for new listeners to find the podcast. But please enjoy this conversation arriving at your ears in three, two, one.
Are you still playing any music?
Shane Mac: No, I moved to Nashville and everyone's incredible at music, so I realized that I should stop.
Eric Jorgenson: Oh, I figured part of the Nashville decision was you getting into it, becoming a country star.
Shane Mac: No, I love it. I get to hang out with a lot of country people and go to all these shows, but every single person that walks into your house – we have a piano in our living kitchen area – every person that walks in, sits down, and they're unbelievable, and you're like I should not play music anymore. I would say I was more of an entertainer who could barely sing then I was a singer who was really good to listen to.
Eric Jorgenson: Some of the best parties I went to in San Francisco you performed at. Don't sell yourself short as a maker of parties. That’s a skill in itself.
Shane Mac: Maybe I'm more of just an event planner. I'm just a wedding planner for planning cool events and hosting unique experiences.
Eric Jorgenson: Well, you always bring people together. That's part of your magic.
Shane Mac: It’s still what I'm trying to do here in Nashville. I hosted a thing last year called Off the Farm and flew in about 25 people from all the cities. There were people coming from everywhere, for the first parties out of the pandemic. It was May 20th or so. And it was epic. It was just unbelievable. We had a huge farm, people just hanging out, the best fiddle player in Nashville. This guy is like 75 years old, plays this stomp and fiddle two-hour banjo show in an old beat down saloon on a friend of mine's farm. And it was unbelievable. It was great. So, we're going to do that hopefully every year. And I'm just trying to keep the Nashville scene and connect it to the outside tech scene and keep bringing that together.
Eric Jorgenson: That's awesome. I love these like smaller cities that have like a worldwide brand for something like Nashville and Austin and Denver.
Shane Mac: The music scene is incredible. Everyone who plays everywhere, especially people that you wouldn't know and people that you would have no idea, everyone just gets up and they're amazing. And it's an unbelievable kind of experience in your house or at the local bar. We're going to a show tonight. A friend's a songwriter, he's like, “Hey, I'm just playing songs with four people.” And I just love that. I've always loved that. And so, I find it really inspiring. I love it. I don't play music more. And it's interesting because it's a very also creative and songwriter city. So, everyone's doing originals and playing their own stuff. And when I used to play music, I was always just doing an entertainment show that was the opposite. It was more like wedding band and cover band and just making up mashups and shit like that. So, there's really none of that here at all.
Eric Jorgenson: Yeah. It's cool you can see the culture of a city like that and like why generation after generation, stars come from a place like that, where it's just part of the culture and everybody's a level up from a different city of the same size when it's just in the water.
Shane Mac: Totally. And people move here for that. Quality begets quality, and the best players around make everyone else better. And so, it reminds me of San Francisco in 2009 and 2010 and what that hub was. I mean, there was a reason that it was creating the companies, and that's since moved online and to the internet, but there's always these kind of mecca hubs throughout history that attract the best talent and also allow people to learn from the best, which creates the best.
Eric Jorgenson: When you decided to leave San Francisco, was it more related to your sort of life stage or more related to San Francisco just no longer being essential to that kind of- the culture of creation and raising the bar and being around everybody else in the world who was- like the density of world-class talent there?
Shane Mac: Not the ladder at all. I actually think SF is amazing. I didn't have that foresight to think, oh, SF might be in a decline. I didn't think that at all. And that was in 2019 March is when I left. I always loved Nashville. For me, it was very personal to I felt very deflated, very beat down, very kind of completely under the water after doing Assist. It was the hardest thing I've ever done. It was not a real straight line. It was not an incredible exit. It was a good exit. But I think going through all the ups and downs of being the CEO of a startup for seven years and really doing that and doing it very unhealthy, I was personally not in a good place. I gained a ton of weight while I was doing it. I mentally was drinking a shit load and just kind of lonely and really completely exhausted. And so, Nashville was actually an escape for me to hopefully go like not be around the tech so that I could try to find a work-life balance that I didn't really have.
Eric Jorgenson: Yeah. For all of the kind of like holistic health veneer of San Francisco, it's a fucking exhausting city.
Shane Mac: I think the culture of work scale at all cost comes with a price that, especially as founders and spending time with founders, now being in a much healthier place, I would say personally, it's just a hard thing to manage when you have so much of your insecurities and the things you don't know, and you're trying to mask them, and you don't really know what you're doing, but you're trying to scale up and you're trying to be self-aware, and then you're trying to also have fun, go out and recruit people, you end up drinking at work events every night. Like there's so many things that go into building a company, scaling a company, and that is a tricky thing to navigate. And your anxieties and insecurities manifest in basically stress and outcomes and behaviors that aren't good.
Eric Jorgenson: Having said all of that, you went off and after a brief respite went and founded another company. So, what made you want to kind of take another tour of duty as a founder, knowing how hard it was the first time?
Shane Mac: I didn't know if I would do another venture backed company. I really loved the kind of I don't really know anything else, I don't think I'm hireable, I don't know what I would do as an employee. I was just tinkering around. I had a two-year lock-up that I did. And so, I stayed from March ’19 to March ’21. And in the year before March 2021, I started messing around on Clubhouse in March 2020. And it was because of Clubhouse that I started hanging out with Matt Galligan again, who I lived next to in San Francisco. And we spent the last 10 years kind of going through all the hell together. When his company was struggling, he was running out of money. He ended up shutting it down. I was there every day making him coffee at his house and just kind of talking him through the process of talking to the investors, doing the updates, what do you do with the team, how do you help everybody out while he was shutting down Circa in 2015 I think it was. And we would sit there every morning. And so, we had this trust and relationship that I admired, and also, we kind of understood each other's differences of what we think we're great at and what we think we're terrible at. We were very open and honest about that. And so, we started fucking around on ideas, and we were going all the way from like no code tools to web3 tools. His last company was in crypto that he sold to Kracken. He'd been in it for a long time. I've been in crypto as an investor since, I don’t know, back when we were sitting together in Zaarly, I bought Bitcoin at $44.
Eric Jorgenson: That was 2012ish, I think.
Shane Mac: It bought my house. So, it's like it worked. Basically, people are like it's not about being smart, it's just the ability to do nothing if you believe you're right about a ten-year trend. And I think that's the hardest thing. And so, thanks to Adam Draper for telling me to think of it as a science project that might pay off and never to sell it. It was really hard. I did sell some in the 2017-18 kind of hype when it went to 20 grand. I mean, it's really hard to like- your whole net worth all of a sudden becomes something. And you're just like how do you not sell this?
Eric Jorgenson: Got to lock that in. Yeah, you see a vertical wall that goes up 20% every day for a week straight.
Shane Mac: So, you learn a lot through that. But I'd always been curious about it. And then I just follow the smart people. I find myself in like the forefront of tech and all the developers that I respected were all tinkering in it and building companies and starting, and all the best investors that I respected from Andreessen's to Sequoia's to Paradigm, they're all kind of like going into this space. And so, we start looking at it of where are opportunities that aren't financial because everything seems so financial. And I've spent my career mostly in social and messaging. And so, when we started diving into it, something happened probably about a year and a half ago. Robert Leshner, who's the founder of Compound and one of the top five DeFi projects, he was like, “Listen, I have $15 billion in a smart contract, and I can't talk to 90% of the people who own it.” It was like a light bulb. We’re like that's a real problem. He's like, “I have the problem. I will fund the problem. I have this problem.” Then in NFTs hit. And regardless of what you think about the NFT space, people who have wallets see what other people own, and they want to communicate, they want to trade, they want to negotiate, they want to understand, and they want you to prove that you own it. The first thing people say when they get onto Discord is don't check your DMs because it's spam. Well, if you could have the wallet be a mechanism for understanding if you are the person who owns something and that's the person I'm talking to, and the wallet is the way in which we send and receive messages, all of a sudden, you have a new messaging communication protocol that is wallet authenticated. And we were like could that change everything? Could that be something that isn't possible today? Is that different? And we started just asking people. And Matt was really running around in March of last year and he was just like, “Hey, would you think this is a problem?” And every single person, I think 49 out of the 50 people we talked to, all of them invested. We had one investor tell us no. And you probably are like who is that? Gary V.
Eric Jorgenson: It was before he decided to remake his entire brand in NFTs.
Shane Mac: No, he actually was already in it. I mean, he's more playing a different game where he wants to be the lead and kind of buy up the rounds. So, he was just like- he was playing a different game where he wants to be more of a co-founder, more involved, and put more money to work, and it's a percentage allocation thing for him. And it was like too small of a thing. Which is funny, when you get into investing, it's like having a little bit of the investment isn't what you really want. You want to have a big percentage of something that actually is big. So, nothing, we're actually still working with them. They're awesome. But it was just funny that it was Gary who've Matt and I have known since like 2008.
Eric Jorgenson: And who is so big in the space and clearly understands the problem because he's got one of these NFT projects where he's messaging like all of his followers.
Shane Mac: Yeah. So, we talked to everyone, and everyone's like this is a huge problem. And so, for me, I was like I spent the last 10 years doing messaging, building on top of protocols. How cool would it be to take one more big venture swing and try to be the protocol and make it great for developers to build on top of us and get the entire network and community altogether to believe in a future where we have a central- not central, a decentralized messaging protocol, we have a universal backend that we all use, but we can all be an owner of. And imagine if we all were owners of SMTP or an owner of SMS. Like if we all owned that, the amount of companies that are massive that are built on top of just SMS is hundreds – like Twilio to SendGrid to PagerDuty to Attentive, WhatsApp, like all of it. And so, it's like can we enable that again? And I personally was like coming from a world now where I've seen venture, I've seen venture gone wrong, I've seen venture land in the middle, which is sometimes the hardest. That would be Assist. We just got acquired by Verint for $50 million cash after a nine-year run and merging with Conversocial and doing it. That's the hardest actually. When you kind of get out, no one's happy. The investors at the last round have a preferred, there's so many stacks, there's layers. No one's happy. The Assist people aren’t happy. Some people make money. Founders’ stock is actually worth something. It can be good for some people, but bad for others. And that's just not my goal. Like that sucks actually. And it's really, really hard and stressful. And then people are like, oh, you sold for 50 million bucks, like cool. And it's not the outcome anyone wanted. And then you sound like an elitist fuck saying shit like that. And so, it's kind of like a weird dichotomy. And so, for me, I was like if I do- and then I co-founded Squared Away five years ago. The company did almost 8 million ARR last year, almost 2 million in profit, just a couple owners and no investors. And it's an incredible company, and it's meaningful to me, meaningful to Michelle. We have a couple other owners, all the employees and we're able to like really fund, and we have almost 230 employees now and fund so much money to that team and support military spouses. The point of saying it is it's not a venture company, and that's great. That's actually like really awesome, and you should know if you're not. And so, I was very aware of the landscape of venture and what's not venture. And I think 1% or less companies in the world should be venture. A network that could be the next communication protocol was clearly to me a venture or not venture break type business. And I was like if we're going to do another company, it should be something that should be venture backed, has network effects, can grow exponentially, and be on a 10-year paradigm shift. And so, Matt and I kind of sat around and first investors were like let's go, and then we're off to the races.
Eric Jorgenson: That's awesome. How do you go about building a protocol? Like that's one of those things we kind of take for granted that like HTTP exists, POP3 exists, but they came from somewhere, but in web1 and 2, they're mostly kind of open source things that get built. I don't know if you've got a whole history lesson in you here, but what is the distinction between like, oh, we built a platform versus we're building a protocol? And why is that maybe a company now where it didn't used to be previously?
Shane Mac: Yeah. I mean, the main differences are interesting, and there's a lot of good posts on this on how it can be harder today to think about a protocol beating a centralized platform. A protocol really is a stateless piece of technology, which means every time something happens in it, it doesn't remember the past. Most of the big platforms are stateful, and they get smarter over time and very unopinionated because most of the complexity is actually at the layers above the protocol. What's changed today is a couple things. One, it's still open source. So, our company in February is going full open source. Xmtp.org is launching. Everything from that state forward can be forked, changed, done, whatever. Our goal is to just create a network of people with aligned incentives that actually everyone agrees with and wants to build on top of. And that's kind of like how it works. And so, that's also exciting for me. It's like we have to actually make it really valuable to everyone that's involved, and everyone can be an owner of it, which is a whole other kind of cool thing about it. And the second piece is thinking of in the future in this space, people now with the history of protocols can now apply this to a public blockchain which didn't exist before. And the idea that the network of the protocol can be seen publicly and built is very different than the past. In the past, only Facebook knows who you're talking to on Facebook messenger. In this world, if I send a message to your wallet, that's public. The network is actually giving value to anyone who is using it, looking at it, and the community of it. The message itself is encrypted, so it's private what you're saying, but who you're talking to is actually known. And that's a very fundamental difference. You think about it, the first time there was a tweet, the innovation of the protocol of Twitter before it was thinking about actually becoming a centralized company was really that there was no receiver. Before that, communication was thought of in a way where you had to send a message to a receiver. Twitter was like what if I just send a message, but there's no receiver, anyone can subscribe to that feed. That was like a crazy- it came out of like RSS thinking. In this world what's fundamentally different is you have senders and receivers that are public, but the content is private. And I think those are the fundamental differences of what makes this interesting, unique, different, and really exciting.
Eric Jorgenson: Yeah. I imagine people might tighten up about that at first, but then you ask yourself, well, if Facebook knows and if Google knows, what are they doing with it that it matters that it's public or not? And who cares who I'm talking to as long as the content of the messages is private. Do you hold out hope-?
Shane Mac: I think it matters to talk about the problem. So, the problem is there's no way to communicate to a wallet. I hold things. I know you hold things in your wallet. There's no way to get to it unless you tie your identity to that. If the future is more about the activity we do not the identity we are, does identity switch where today it's identity before activity and your identity is how you get opportunity and that lives within the means of how the web was built. Facebook was your identity is this, I'll send you a message. This world is the activity I'm doing can drive the interaction and opportunities I get before I disclose my identity. That fundamental switch is like a very, very big switch. And so, the activity of the network actually drives the opportunities that are present to everyone in the network, which is incredible. And it actually opens up so many things for the world if you think about it in that way, which is only possible in this way of being able to see the interactions of the network. But the thing about it is can there be problems? Can there be things that go wrong when you have this new paradigm? For sure. That's why clearly showing people like when you send a public Tweet and you know that everyone can see I'm talking to Eric, just your interaction there has content. This is a new paradigm, as long as that's clear. I think it's very important to make that so clear that your interactions are public, your content is not.
Eric Jorgenson: I think that's a super- the like activity before identity is really, really interesting like helpful switch because I can hear myself being stuck in the old like thinking about turning email public instead of what does messaging need to be in web3. And I mean, as far as the problem, like I think we can keep going on the problem statements because there are a bunch more things that get solved. For example, like I remember learning about XMTP for the first time and feeling immediately like, oh, I have felt this pain point as an individual participating in these projects. It is hard as hell to keep up with all the changes that are going on with every token or every NFT that you own. And it is kind of your responsibility right now as the owner to go check the Discords, go check the Medium, go follow up and understand what's happening with all these projects, which is also functionally impossible once you get past like five or ten. And I kept getting frustrated, like you guys should be telling me when there's updates or when there's new opportunities or when you ship new stuff or when I'm supposed to be like trading out old tokens for new ones. And then I realized that they don't have a way to do that. They don't know who I am. They only have my ETH address or whatever. And I immediately was like, oh, XMTP solves this problem or someone building on XMTP solves this problem probably more accurately.
Shane Mac: Yeah. I think there's a slight twist to what you're saying though. It's not about your ability to get communication from other people in your wallet, it's about your ability to get communication to your wallet from the person that you can prove that is the person saying the message to you. The problem today is the spammers and the new accounts and the identities on web2 don't have verified authentication that they are the person that actually owns the Compound treasury, or they are the person that actually owns the NFT. All day long, what you see is, oh yeah, no, I'll give you that, I'll trade that, let's go here. And that message is a new username that looks like it. And that's where this all goes south. And so, because you use the wallet as the login mechanism, that actually allows you to see this token is owned by them, they are the treasury that has 900 million tokens of Compound, they do own that, and that's the person I'm chatting with. That's really where safety and protecting people comes into this space of why this needs to exist is around that. But take Compound, for example, perfect example. Robert Leshner is the founder of Compound. Compound is now a decentralized protocol for getting yield and a Defi platform. They got hacked. $90 million of Compound or something was hacked about a month and a half ago. What's Robert do? He starts Tweeting. He's our first investor, and he told us this is the problem. He starts tweeting – “Hope people see this,” etc. What you want is the wallet from Compound to message your wallet that holds Compound tokens, and they know everyone who holds Compound tokens, and tells you when there's a flaw in the network, a governance decision, something's changing, the price is falling, all those things that like think of SendGrid for this space. Like that's one of the projects that we want to fund, we want to help someone else build; there needs to be dApp notifications to wallets that help you understand when things like this happen. And even if that Twitter from Robert was seen, the minute that someone else pops up and they're start DMing you, “Hey, I work for the Compound team. I'm here to help,” all of a sudden, you're desperate. You think something's going bad. People are arbitraging that with spam. And then you're getting these people that are basically coming in, being bad actors with no verified to the thing, but people are in need and they're actually getting hurt. And they're sitting there saying like I need help, it looks like something's going wrong. And that's where in that moment of panic, a lot of people get fucked in the space. Because that's where the people come in and they're DM-ing you, and they're there to help you, and it's not real. And we need a verification system, and the wallet is the best identity mechanism we have for this space so far.
Eric Jorgenson: I fucking love this because there are so many reasonable valid criticisms of web3 today where people are like-
Shane Mac: I honestly agree with most of them.
Eric Jorgenson: I agree with them too, totally.
Shane Mac: I think web3 needs a really harsh dose of self-awareness and being more critical. I think Benedict Evans and Aaron Levie and all the people that are kind of mocking it right now but also asking the good questions in my mind are definitely worth paying attention to. And I think we need to ask ourselves harder questions. I sat in the rooms when we were doing Jist, and I got to fly down and sit with the Twitter people and the Facebook teams in like ’07, ’08. And those times where we were taking the APIs, we got to take all the data, there were no rules around that shit back then, we were all delusionally optimistic about the future of letting everyone in the world have a voice. And I think we all had good intentions, but I think none of us asked the hard questions. And I think a lot about that because we never thought about what if this went wrong? What if you did give everyone a voice, including bad actors, including governance, including different kind of businesses or movements or ad platforms or whatever? What if we did add algorithms to that? What if they did become biased? What if all these things could happen? We didn't sit back there and do that because we were so small. I don't think it was anyone's fault. I don't think Zuck had malicious intent back then. I don't think- maybe different now, I don't know. But like I don't think Jack did. I don't think anyone in that room, I believe all of us back then were like inspired as fuck about the social internet. We have that history now, and the same people working on web3 were working on web2. They're all leaving those companies. I bet Aaron Levie at Box is like shit, no one wants to fucking work on Dropbox files anymore. Like this shit's boring. I get it. I would be like freaked out too that all my employees were going to leave and work on this thing that like I'm just going to make it a joke. I think I would do what he's doing and maybe like it's probably a joke. But it's not. And I think what's interesting is it's not how you keep employees, the curiosity about it could be something is why people that are going to leave leave anyways. So, it doesn't matter if it we’re all right or wrong, it matters that it's new, interesting, and fundamentally different. The point being is when you think about that, I think we need to ask harder questions. I think we need to be more self-critical. We need to say what if this went wrong? How could this go wrong? Where's it going to go wrong? How do we fix that? And how do we do things differently than we did 10 years ago when we literally forgot about all this, and then social media ended up having a lot more harm and bad things than we probably all predicted?
Eric Jorgenson: And the most important piece of that I think, what you said is, and what are we going to build to solve the problems that we're identifying? Like there is no shortage of challenges or risks or failures of UI and clarity and education around web3. But I also have met many, many of the smart people working on tooling of various types, of which this is an amazing example, and saying like these things will get solved. These were all problems- These are analogous to problems that we had in web1 and web2 that all got solved when hoards of developers showed up and started hacking on stuff with new and interesting platforms and tools. And you’ve got to believe that these problems will get solved.
Shane Mac: And they will. And I think we have to ask harder questions and not bullshit ourselves. Like XMTP is a messaging protocol for wallets. That isn't novel and new. What is novel and new is a public interaction on the blockchain and economics can now be built into it and part of it. All the rest is the same. It's sending a message package back and forth. The new layer is an identity that's different than the past, which is a wallet, and not everyone ties their real identity to the wallet. Or they don't want to tie the Facebook identity that's being mined to send them ads to their wallet. Because the wallet is more like a bank. And so therefore, maybe I don't want to attach my bank to Facebook. I wouldn't. And so, I think that's an interesting switch, which is it just needs a new way to do things, and there are new use cases that that allows. If you know that I'm an investor in something, and I own a token, or I own a piece of art, that adds to my identity on this blockchain in this space, which is a reason that people would contact me, much like having a website and an email address consociated to that, and the people reach out. But it's just a new fundamental identity destination, the wallet. And that enables, I think, a new communication protocol to be built, but I don't think we should bullshit ourselves and be like, yeah, it's going to be this fundamental different thing. I'm like, no, it's SMS or email just with a new delivery mechanism because whenever there's a new identity created, I think that's the key, there needs to be a new way in which we communicate. And I think those are the fundamental differences.
Eric Jorgenson: Interesting. Okay, so there are two kind of- the two that I heard, correct me if there's a longer list, like the breakthroughs in the blockchain that kind of underlie those opportunities are sort of the public nature of the blockchain and the ability for the blockchain to hold like some record of economics. And I'm curious how both of those- we talked about the public piece a little bit already. So maybe we can get into the economics. Like what is different about protocols in the sort of like blockchain era since they can now- protocols don't hold state, but also, I don’t know, is it fair to say blockchains hold like the state of the economics? Like that's kind of the point of Bitcoin, right?
Shane Mac: Forever.
Eric Jorgenson: Yeah. And the whole history of the state, but they hold it publicly.
Shane Mac: To the point that it's really hard to change any of that once you start. Because you can't revision history. And so that's one of the hardest differences about the space, where a centralized platform can just change everything and launch new UI for it and blow up the database and change it all. But I think your question is more around the economics, is that right?
Eric Jorgenson: Yeah. How do the economics and the protocol sort of work together? Like what's new about these protocols in the web3 era, the blockchain era?
Shane Mac: They have node operators that aren't centralized organizations that run them. So, no one's running this except the node operators that are in the network that are validating it. So, you have to incentivize node operators. How do you do that? You have to have fees or postage. We call it postage, because in a messaging context. How do you do that? Well, you either have your own token or they work for another type of token. So, if we have our own token, imagine in a world where to send a hundred thousand messages from one wallet to the others, there's different fees based on all of that message delivery within the system. Okay, how would that happen? Well, we know the interaction history. So, if it's the first interaction with someone, assume maybe in the future, there's a fee to reach that person. Maybe that person though, because it's a network that has economics built into it at the core, that person who owns a million dollars in ETH actually has a 20 ETH bounty that it takes to actually send the message because they're like I don't want to receive messages from random people. So, every party in the network now can have control over we call it like economic spam control. So, what's different in this space is the ability for economics to be at the core of it based on what you hold, based on the tokens you have, based on the bounties or the pricing you set, I think is very interesting. And so go to a space where you both hold bored apes, popular thing in line. Everyone who's a bored ape, people are like if you have a bored ape, you can send me a message – token gated messaging. That's happening all over the space. I think what's more interesting is the fees and the economic system to be created, which allows for automated and dynamic pricing. So, imagine a marketer today wants to send out a hundred thousand emails. It's a flat rate. MailChimp makes money, the protocol, everything below it. There's like 20 layers to sending an email. And then you go to SMS, it's even crazier. I tend to make money, Twilio makes money, SMS makes money, AT&T makes money. And then there's- there's so many stacks to actually who makes money at every single message sent. So, if you think about that, that's now the owners of the protocol. Like that's a huge opportunity from an ownership we all own the protocol together perspective. But the key is what's different, and what's different is what if every single wallet costs a different fee. The one I've talked to a hundred times that loves hearing from me is way cheaper than the one I've never talked to. The one I've never talked to might have a fee of one ETH to even send a message. We might have a if they open it fee, they might have a delivery fee. I don't know. There’re all these things that we're exploring that I think are fascinating to think about, that then all of a sudden, to send a hundred thousand messages costs me, I don't know, say $12,000. How much does it cost to send a hundred thousand emails? It's like, I don't know, five grand a month or something for MailChimp, probably more than that at that level. Imagine it's dynamic, it's built into the governance, and it's actually built into the protocol. That's the things we’ve got to get right because that is actually how you pay for the other use cases that might need to be free. Maybe Shane and Eric have always talked, once your interaction has opened up, that actually is a free interaction because it's peer to peer, could be, depends on if the marketing messages pay for the network at that scale. Like those are a lot of the things we have to figure out. But do the node operators make money and does the system incentivize good behavior and good network behavior so that you get less spam, you get more meaningful interactions, and the ability to have wallets connected to the network allow more interactions and opportunities to happen that wouldn't have happened before because everyone can understand who owns what and connect people within those ecosystems and communities based on what they own.
Eric Jorgenson: This is super, super interesting. And I think this is exactly why I wanted to have this conversation because it’s the most interesting and clear non sort of financial way to visualize what can happen with widely distributed web3 technology. I think it's super, super interesting. It's just like the market caps and the coins and stuff get all of the headlines right now, but there's so many interesting pieces of this as it kind of grows. So, is XMTP going to have its own token at some point, does it already?
Shane Mac: For sure, it does not already, and it will in the future. That's why I actually, just to reiterate, I said it could be, it might be, I didn't say it is. It's literally not cool to talk about. I think it's illegal to talk about the future as if you're marketing it or this is what will happen. So, these are just ideas about what could happen in the future.
Eric Jorgenson: Got it, okay. Well, one of the questions that you didn't use to have to be asked is like why a company? So, there's so many people starting DAOs and protocols and non-profits, like there's innovation happening at the organization level. So, what was the decision when you and Matt started XMTP to be like we are a company? I understand venture backed versus not, but like why not a DAO or something like that? Because that's a fork in the road that is a new piece of the decision.
Shane Mac: That's already planned and that's how it all plays out. The only way to do this is as a decentralized company. So, the way that this works is, this actually comes out next month in February, and I talk about it now because we want people to be aware of this. If we were a centralized company building this and that's how it was going to play out, you should not participate in our network because we would benefit from that and we would probably centralize it. And therefore, why would anyone want to build on top of this? Why would a thousand developers want to let one single backend exist that we own? So XMTP in the next month, we've always had the plan in the last term sheets with our investors, we already have the token conversion built into the term sheets for the decentralized future where we don't own more than a majority of it. And so how this plays out is xmtp.org launches in February, xmtp.com today turns into XMTP Labs the company. The protocol is where the token will live. It's where the open source lives. It is where the entire project lives. All of us that are involved in the company, the reason we raise money there is to hire a bunch of people to help build a protocol. But the protocol itself is where all the value will be created. And we will all be working on that together. And we will be part owners in the protocol like everyone else. And all of the investors and us actually convert into the token, which is more managed as a token in an ownership like an ENS, like a DAO like that, that is more of a treasury. And that's how the future will look. And the only reason to actually everyone be involved with this as a universal backend that we can all use is if everyone can be an owner of it. And we, as the founders, don't own more than half of it, the majority of it. And so, it's got to be a thing that we all kind of own it. So, it's always been the plan. And by the way, it's interesting for you and anyone listening, most of the projects that I think are building really interesting stuff are starting out this way. They start out centralized, they need some funding to get the best people, and then they have a plan that's very clear and articulated and written down to decentralize. So once we launch all this and all this is public, we're using the playbook of a lot of other people, we're not like innovating. This isn't like an innovation, and this isn't a thing. This is what a lot of the projects are doing now. And I think starting centralized and then really being clear on the decentralization path and the schedule in which that happens is kind of how we're approaching it and also how a lot of the good projects are. So, when you see a project and you're like that’s a company, that’s not going to be involved, I wouldn't look at it at a surface level. I would maybe ask more questions to the founders.
Eric Jorgenson: Yeah. It seems like the sort of increasing decentralization is a theme. Like even for stuff that starts in DAOs by name, a lot of times it starts with a few people that then sort of carry forward with airdrops and sharing and selling tokens and all kinds of stuff.
Shane Mac: Totally. There's a lot of laws around that too. So just be more curious and more open-minded and also be more aware, too, and skeptical because no one can say stuff about tokens in the future because you can't talk about things that are real and you can't market those and stuff like that. So, there's a lot of laws there, and I think it's really important and interesting to understand that. But also, there could be bad actors here. They could say like we have plans for decentralization and then they don't. And it's hard to reverse that if something centralized kind of takes off.
Eric Jorgenson: Or be well-intentioned and just like flub it. There's a lot of people, just like it's not that hard to launch a project these days, people just forking code and starting new things up. So, let's talk about some of the stuff that you- maybe, I don't know what you can talk about specifically, but we can stay in the hypotheticals of like what do you see getting built on XMTP? Are there going to be clients? Is it going to kind of fork between- like are email and sort of SMS going to feel different? Is there a chat room situation? Are you expecting kind of all of it in the fullness of time? How does this play out?
Shane Mac: Yeah, I think if you go back to the mission of we want to be the decentralized communication protocol for wallet to wallet communication. If you ask a question of what can that look like, you could say everything. I think that's never helpful. So, I like to focus on the problems that I think are most apparent now that we're getting pulled by people asking for us every day and then I think what it could be in the future. So, to start on thinking about what today looks like, what problem are we solving, and where do we feel like everyone's asking us for help, I'll give you a few examples. DApps communication, much like SendGrid today, where the developers of dApps can send notifications to all token holders to allow them to know about X, Y, Z that happened and make sure that everyone has a permissionless and a wallet authenticated way to receive those, very, very powerful use case. I definitely see a SendGrid-esque company getting built on top of this, and we would love to support that. I think it's a killer use case. If you think about network effects too, it's a use case in which the interaction success rate is really high and the interaction failure rate is really low because someone who's a trusted authority is telling everyone else they want to receive messages here. So, if you say Robert Leshner says, “Hey, we want to make sure that everyone gets information about their tokens and their money. We're going to send messages via this client called messages.com pound.com. And by the way, it's powered by XMTP,” everyone's going to go do that because they want to receive that. And I think that's very important in starting network effect businesses is to understand where to reduce the interaction failure. Because when you have people sending messages to wallets, they never get a response back, the recipient wasn't on the network, all of a sudden, it doesn't work. You're like this is stupid. So that's very important for us to think about. Until we have like the entire Ethereum community and everyone's receiving messages on XMTP, I think we need to be very strategic about the network effects we create out the gate. The second one I would say that is really interesting to us is communities in which their identity is important, and they want to communicate because of wallet content. So, take ENS, .ETH names everywhere. A lot of trading happening, a lot of stuff happening around people trying to buy .ETH domains. You go to them, it's new people. They're starting up new identities, they're holding a bunch of names. And then you see them flying around Discord and Twitter all day long, trying to find out who owns that wallet. The ability to, one, create an incentive that's really simple which is people who hold domains want to be contacted for them because they want to sell them, so they have a high benefit to receive messages. And then, two, the community itself, we know everyone who has an ENS domain, and so working with Brantly and activating it and saying, hey, let's let the whole community know. So whenver we have someone who is a leader of a community, where we can really support that community that has the dynamics at play, where if we can actually get all of the ENS community to know that they can talk to each other, I think that's a really powerful use case. The NFTs and like who owns what token gate messaging is another big one. A lot of people are doing that. A lot of social network type products are happening around that. So, we're focused mostly on the private one-to-one, one-to-many type messaging now. To your other question, could a Discord be built on top of this, for sure. Many-to-many is way more complex in a nuance way. And I think the problem today is I've never met you, but because of your activity, I want to. Or I know that we own something that I need to talk to you about, Compound, etc., and I need to talk to you and I never have. That use case is very different than the problem being solved by many-to-many Discord. And also, it's spammy as hell and it's noisy as hell, but it's noisy as hell and spammy as hell for a reason because everyone uses it and it works pretty well for group chat. And so, I don't really know if competing with that use case in a decentralized way where messages need to be signed and messages are on chain, like I don't know if that's solving a problem yet, but I totally see a future where having your wallet authenticated and you are communicating from that identity, not as a bridge to my Discord connected to my wallet, makes a ton of sense. I don't know what that looks like yet. And definitely, we get asked about it but not in a market poll problem way, not in a like, hey, I need to do this. It's more of a wouldn't it be cool if Discord was decentralized? Like, yeah cool, who would use that? Or like why? And I don't think it's clear yet on that besides a philosophical thing. And you know me, I'm not very philosophical- Like I'm very philosophical, but I'm not very philosophical in the reason why people use products. I’m like, oh, I'm only using this because it's decentralized. I really love the pain it causes me, and it makes it so much more complicated. No, it's really like I need to reach that wallet because I want that shit and I can't talk to that wallet. So, we're focused mostly right now on helping enabling the things that we see as really current pain points that have a high likelihood at an interaction success, not an interaction failure, of building the network effect because we can retroactively basically reverse engineer Metcalfe's law of building networks because the whole networks are public. So, if you have the entire ENS community, I can look at that and draw a map, and we've already started doing this, of where does everyone in the ENS community also hang out? Well, let's go get the other community that 70% of th em are already in that community. And you basically can plan your entire community rollout strategy to manufacture network effects by reverse engineering that because that's all public.
Eric Jorgenson: That’s amazing. That feels like one of the things that is going to be the most different in this era. Like the stuff that is public that didn't use to be public is going to change all the playbooks about building companies. And it's just starting to actually get deployed I think. You're one of the first people I've heard actually articulate it well.
Shane Mac: I mean, that's all I think about. So that's why we hired, I don't know if you've ever heard of Peter Denton from Pioneer Square Labs in Seattle. We hired Peter, one of our first hires, and it's like you're hiring a head of growth and you haven't had the protocol yet? I was like we need Peter on our team. He's one of the best web2 data growth engineers that can manufacture network effects. And he was doing it by getting access to private APIs, the Twitter, Facebooks, and the LinkedIns and mapping them all. And your emails, you want to do outbounding, and then you want to get LinkedIn data, and then map that, then target your ads. And then once your ad’s there, you want to send the follow-up emails. And that whole engine that is how do I manufacture and drive paid acquisition of a web2 funnel down to the exact person I want, that's there, that's done. And so, when I went to Peter, I was like are you doing the same playbook you've been doing for five years? Pretty much. And he's really perfected that. I'm like, well, look at this new data set. And so, I just showed him Ethereum and Dune Analytics, I think. And two weeks later, he was like, “I'm done with web2, I'm out.” Like fighting APIs, trying to convince Twitter, they have a rate limit, all this bullshit, and all of a sudden, he's just like we can- He came to me and he's like, “We can manufacture network effects in a way that is unbelievable.” He's like, “This is all public. How is this public?” And that's everyone's kind of first reaction, which was fascinating and the coolest thing about it. And anyone who really gets it is like, oh, is this legal? It's like people have that kind of reaction to it because it's all been hoarded behind an API that is throttled and also because it's not public in a way that everyone can use it, all the value was derived by the people who held the pipe. And so, Twitter and Facebook and LinkedIn and Snapchat and all of the social ad networks control that pipe, and that pipe is all the value. And so how do we turn that so that the value actually can be seen by everyone, created into things that are useful, and then, if you're an investor, you can invest into that and you know that data is very useful and that network is very useful and it's transparent of who's doing what with it.
Eric Jorgenson: Yeah. I think the public piece of it is going to create this total meritocracy. So, there was moment where I was dreading doing all my crypto taxes and shit. And I just dropped the addresses into one of these tools and-
Shane Mac: Which tool?
Eric Jorgenson: I used Koinly at first. It seems like everybody has a gripe with whatever one they use, but Koinly was pretty solid and showed me all this stuff. But basically, like drop in my addresses, go away for 20 minutes. I come back and it has pulled in every transaction that I've done, it's all public, and like run all these processes against it and come up with here's your export. And I was like, oh, that's fucking incredible. That should make this significantly easier over the long run. And then I realize like the QuickBooks of the future or TurboTax of the future is like it had all this data to train on and test constantly. And when they can message me, now thanks to XMTP, basically they should be reaching- like the tax problem alone should just be flipped and someone should reach out and say, “I have done all of your crypto taxes. Here's your report. I'm charging, pay $50 to access the download.” And you should just get one from the five companies or ten companies or whatever, pick the best one for you or the first one or whatever, and like go for that. But when the data is all public, there's so much value that can be created. And the companies that can operate off it, it becomes this meritocracy, not as you said, somebody holds the pipe and gets to decide what companies live or die based on API access.
Shane Mac: But even take it a step further and give more to the people. So, here's what's fundamentally changed. For the exact scenario you just said, if you just let that be a free for all market with public data, your inbox of messages on XMTP would be the worst inbox in the nature of the history of inboxes because of the spam you would receive because of the value that they know that you- say you had 500,000 in crypto, the value of helping that person do their taxes is massive. Therefore, you're going to get fucking spammed like crazy. So, what happens today? All the social networks convince you to get on the platform, to give you all their data. They don't even have that much data. All they have is kind of like some economic status data and where you live data and some other data, and they can make a bunch of assumptions about your identity to power that ad network. What do they do with that? They then don't let people reach you directly. And they charge people for that data to get out. The data is actually public on top of Facebook and Twitter. It's just not able to get it out of there because they control the pipe. What do they do? They allow you to target anybody in the world. And then they charge the brand of fuck load of money to reach you. Why don't individuals create that fee for themselves? And so, the future then is your getting money for every single time they contact you, not Facebook. That's the switch.
Eric Jorgenson: That's what I want. I want that. Sign up, sign that petition.
Shane Mac: Why would you not? They always find my inbox, so fuck them. And if you want to contact me, there are ads that are good. But if you want to put that ad on Instagram and take over my feed, put the money in my pocket. Put the money in my pocket, I'll set the fees for the businesses, and then they can contact me. If it's a person-to-person interaction, that's where the interaction of the network, hey, I want to reach Erik Jorgenson's wallet. Erik Jorgenson's wallet has actually been interacting lately with a wallet that I've interacted with. Great, that changes the network fee, maybe reduces it to nothing. Maybe your settings don't care. Maybe one degree away connections are fine. That's very different then Turbo Tax has a new crypto product based on what you own who's never contacted you before and they want to reach you. But that fee today goes to all the central platforms. They've mapped your identities. They have everything they think they know about you. And the truth is about this space, when you get into money and it's more like a bank, then what they know about you is a lot. And that's where people need to be careful and they need to understand it, but they also need better controls so that you're getting rewarded for being on the network, not the central player of Facebook and Twitter and the ad platforms that take all the money today.
Eric Jorgenson: And the other thing here that I learned from Sky King actually, he cares deeply about this. He's like there's the principal agent problem involved too. Like Facebook doesn't give a shit about my attention, so they're willing to sell it to the highest bidder for 5 cents. To me, like a minute of my attention is worth a shitload more than 5 cents, but to Facebook, it's worth nothing- It's worth whatever the highest bidder will pay for it. And so, there's this huge disconnect between what it's worth to me to get a spam phone call versus what it's worth to Facebook to sell my phone number or whatever.
Shane Mac: Totally. And think about the opposite of that. What I think is so exciting is to flip the tools to the receiver. Today, the Facebook ad platform is the most powerful thing on the planet earth. It is insane. It is the coolest thing you'll ever see, but it's used in a way which is like delivering ads, which has value. Like there's not no value to it. It's just it's such a level of personalized individual that there's no value to you except getting the right ad at the right time. So, what's interesting is to flip it. The controls are in your client. Imagine the client in the future is you setting it. And then Turbo Tax says, “Hey, I want to send people that have a $5 or less fee.” Great, if you're the $10 fee, you're not getting Turbo Tax. But some brand is going to be like, you know what? I want to reach the people that actually had the $10 to $50 fee because I want the people with the $10 to $50 fee with $500,000 minimum in their wallet. Great, I'm happy to pay $40 lead gen for that. But you get 40 bucks. And that's a different- and there's a fee, that's where our network makes money. But it's a little fee of that enabling the receivers to make money, not we're the middleman of Facebook building the arbitrage engine that then takes your attention and charges the site.
Eric Jorgenson: And really when you say we, you mean XMTP the protocol, which is owned by anybody who owns this hypothetical future token and the node operators who are providing- to compute, I assume, and among other things probably and anybody staking tokens-
Shane Mac: They are delivering the messages. The message moves through the node operators to make sure that it is actually sent to the public you said it gets sent to, and the node operators are what make the message packets be delivered across the network. And there's going to be tons of those. So how do you incentivize them? How do you incentivize doing to the work? People are like I hate gas fees; well, without gas fees, there's no way of incentivizing it. And without a third party that's not actually human that's an algorithm that can show that the commitment of trust built online is real, like that thing takes computing power and people to actually do that. And so, it's similar, hopefully it's not as expensive as gas is today. But there'll be different- I think this is where the figuring out the economic engine that is the variable transaction fees based on the interactions is very important.
Eric Jorgenson: Talk to me a little bit about- we've been talking through this kind of crazy new paradigm of flipping control and access and how the economics are different in web3. Like you're living about as far in the future as anybody I know on this. Like to what extent does web2 get like torn down and rebuilt on web3? And to what extent does web3 kind of like get layered on top of web2 tools? Is that a sensible question? Like how far can you see and how do you think those two things interact?
Shane Mac: I mean, there's web2, web3, there's centralized, decentralized. I don't like labels. I think labels simplify something to something that everyone can argue about. That’s why politics are hard. I can believe in one thing and say I'm a Republican or believe in another thing and say I'm a Democrat. And both of those things instantly label me. And then the labels turn into a less than useful conversation. I think the same is true here.
Eric Jorgenson: Strawmen everywhere.
Shane Mac: Yeah. So, if you think about it, I honestly don't think about the words. I see a lot of consumer applications coming into the space that could be centralized or decentralized. The challenge of building decentralized products that have a great UX is really hard. I think that's really important to understand. There's a reason Open Sea is the biggest NFT marketplace, and there's a reason Coinbase is the biggest gateway. They're very centralized. You know what I mean? They're not decentralized. They're holding the complexity in the middle and they're operating more like a bank or more like an eBay. But that will continue to get better. I think wallet UX will continue to get better. And I think it all just blends together. I really believe that there's this hybrid that's going to happen where centralized products built on top of- Open Sea is a perfect example, centralized product built on top of decentralized backend. What is important is an open and decentralized backend that is the public record of the commitment that was made. And Chris Dickson said once, all blockchain is as a commitment between two things, and it's a commitment that is tracked and validated and proved. And then one of our investors is Starkware, which is an L2 product called Starknet, and he always says, “It's a capital F fact, not a fact.” And I think it's very important to think of like what is really important in the space. And that's really important. What will be built on top of that? I think it'll look a lot like web2. I think web2 is going to get into web3. I think Twitter is going to launch NFT proof profile photos, and then they're going to think about it further where that becomes your identity, now it's verified, then you can show your NFTs. Well, if you can have a profile photo that's an ape, why can't I just buy it on Twitter? Why can't I hit buy? You probably can. Okay, now I can do that. Well then maybe my ticketing actually moves there, and then maybe my profile holds my tickets and I can add it to Apple pay. Well, is Twitter a mechanism for interacting that? So, I think it all comes together. What's different though is the fundamental backend of who owns what is public, everyone can see it, and there's a record of it, which changes the ability to own things in a digital world that you couldn't do before. And that's all, that's the fundamental difference here. And I think everyone gets caught up in all this shit that is like web2, web3 UI, not. Is there a fundamental difference that you can own something that only you can own that you couldn't before that is a file or a token or something else? And the answer is yes. And I think something that can be infinitely copied is such a breakthrough that's hard to comprehend that drives this whole space that every web2 company is going to morph into web3, but the interaction and the new identity layers, much like when Facebook came along and said I want to own the identity when it used to be made up screen names on AIM and made up screen names on Yahoo messenger and email addresses that were only work, and there were always these different identities. I think that is the opportunity that is happening when you have identity and you have a new means that was never possible before of online ownership, those two things. And by the way, this happened for the last 10 years. So social status moved from big homes and cool cars to online followers and your interactions of who you know. The first thing people do when you meet them is they Google them. That already happened over the last 10 years. And now you bring ownership into that and everything that's happening, the same behaviors. That's why people hate web3. It's because people that are douchebags with fancy cars are acting like douchebags with fancy NFTs. I mean, that's literally what happened. But now it's like very- the loudest and then the internet's really loud and the loudest actually become the most annoying. And so, it's a compounding effect. And like that's why the NFT space is fucking annoying. It literally is like a bunch of- Imagine if your house was built in the middle of the parking lot where all the douchebag cars went and hung out.
Eric Jorgenson: Every time you walked by, they tried to sell you a Lamborghini.
Shane Mac: Exactly. When the Lambo kids used to go to a park that you never went to and you're like I don’t fucking care, I see a Lambo on the road sometimes. But now we're sitting in the middle of this motherfucker being like fucking everyone's got a Lambo. And I'm like fuck these Lambo people. And that's why there's such a fucking reaction to web3. I get it. I'm there too – fuck these Lambo apes. You know what I mean? I know tons of people that own them, but it feels like that, and I think that's the visceral reaction we're getting to the thing. I think you can't tell the difference between them just like you just can't tell the difference between what is web1 and web2. Google was web2 but like web1 links and forums and stuff. Like there's still much of that stuff around. eBay's still here. I never think about things die. I think about the new things grow and become something completely different. And I think the companies morph and adopt that will kind of grow with this market as well. But I never look at like email's not dead, Craigslist isn't even dead. Craigslist is actually still fucking really functional and it really works until today. And so, I'm also, I know you really well, like I'm a very optimistic type human, and so I don't look at tearing things down. I really look at what is possible that wasn't possible before and what are the best ways to go about achieving things with those new possibilities?
Eric Jorgenson: I love it. I think it's such a paradox of like only a few tiny things have changed, as you said, but the second and third and fourth order effects of that change a lot of stuff. But it's really hard to embrace that and understand what will change and what won't and all of the things that are newly possible, which is like that's where all the exciting kind of conversations come to me. You mentioned Ethereum a few times in this. Is XMTP built on ETH? Is it its own separate chain? Like how does this work?
Shane Mac: Totally. So, you have L1s and L2s, and L1 would be Ethereum and L1 would be Bitcoin and L2 would be Polygon. Polygons, it's an L2 because it is built to support an L1. That's the definition of an L2. So, Polygon helps scale Ethereum. It's faster and cheaper, but it's not as secure, therefore it's an L2 in support of Ethereum. So, what's interesting about us is we're not an Ethereum only chain. We're doing it on our own chain. We're using an L2, but we're using it more like an L1. It's not based on Ethereum. And I'm not going to talk about what we're using yet because there's a lot of debate here and discussion, and it'll all be public. But I've mentioned a few, Polygon, Starknet, there's a lot of different L2s out there. And I think what's interesting to know is using a service like that to do the accounting and roll-ups and all of the stuff that comes along with the token and kind of the financials allows us to not be dependent on no one and pay the gas fees and all the crazy absorbent fees that come along with it, but still have economics and accounting built into the system and a public blockchain to see all of the deliverables of what wallet address to another wallet address. And so, it looks more like an L1, but it's not a core L1 like Ethereum, if that makes sense, because it's not an L2 because it's not dependent on an L1.
Eric Jorgenson: It doesn't live within any one of those ecosystems. Like this does seem like a cross-chain problem.
Shane Mac: Totally. It's a wallet problem. It's a wallet address to wallet address problem, which it doesn't really matter the chain. You might use your Ethereum wallet Rainbow, you might use MetaMask, you might use Coinbase wallet. And the address is specific to Ethereum or it's specific to Solana, etc. And so, it's definitely a cross chain future that we believe, and we want to support that. So, we don't want to be dependent on, oh, it just works for Ethereum. We're starting with a focus on Ethereum and Ethereum addresses out the gate just because a lot of the use cases and problems we see today are happening there. But definitely I would love it to be on Solana.
Eric Jorgenson: So, something that- a question that has popped into my head like four different times now is like who is doing all this work? Like on the one hand, this is like a crazy, brave new world where this just came into existence a few years ago, and so there aren't people who've been doing this for 20 years, and there're so many things that you're having to invent for the first time, these token incentives and alignments and protocols. Who are the people who are joining XMTP now and working on this, and is this people who have been studying web3 blockchains for years? Are they having to kind of like learn it all on the job? Like what is the vibe and who are the people who are kind of in the trenches today?
Shane Mac: Yeah, that's a good question. What's really interesting is that almost all of this technology has actually been happening for decades. Blockchains are also- You take Zcash before blockchain, that was what it was actually modeled after. A lot of these primitives did exist before, they just never got adopted.
Eric Jorgenson: Bitcash, is that the one?
Shane Mac: And Zcash was another one.
Eric Jorgenson: Was Zcash before? That's crazy.
Shane Mac: And so, a lot of these things- it's in the Bitcoin paper. If you read the Bitcoin paper, he references it like, “Like the Zcash-” What's interesting is there's two paths here. First off, I'll start with if this is a hiring pitch, I always believe whenever you are at the forefront of technology, the reason why our first value of our company is curiosity is because we celebrate what we don't know more than what we do. That is something that I've honestly had as a motto of mine since Assist in the last decade or even my whole life is just curiosity first. And the more you know, the more you realize you know almost nothing. And so, the more I get older, the more that becomes true to me and the more it compounds as something I just believe more and more every day. So, with that said, I think in a space like this, the best part is to find people who are the fast learners, who are rapid learners, who actually can dig in and do things. And most of them are tinkerers on their own outside of their company before. Like most people, they're already messing around and they're sitting at Facebook messenger or they're already messing around and they're sitting at Apple or they're already messing around and they're sitting at Box. And Aaron Levie's like everyone at work is playing with the wallet, fuck, I need to hate on it online. I think that's the types of people that are- they're curious, they're crypto curious. That said, the technology stuff from a messaging protocol, from delivering and storing messages, from how that works, from a protocol level, from XMTP, like a lot of the stuff that is messaging specific takes a lot of experience that isn't new. And to do all that stuff that was required to build WhatsApp and SMS and HTTP and SMTP and email and server side and client, all that shit is not like spam. And all this stuff is not like, hey, let's come up with it new. That's actually the opposite. So, people who have built all that and are like, oh, and I can apply it to a new world, how exciting is that? And what if we could own it together? And what if people did own SMTP because everyone uses it – Outlook, Microsoft, Google. I don't know. It's the biggest thing in the world. Like who the fuck- who the fuck? Why does Microsoft get all this money as a server? You know what I mean? It's an interesting thing to think about. So that's on that side. On the protocol side, you have people that have been building distributed systems, cryptography, all these things for decades. They're actually the OGs. So, we just hired a guy who's from Shopify, 10 years, all distributed systems and backend, and has a cryptography like historically on how cryptography and how do you do this and how do you verify it. That stuff's been worked on for a long time. So, for people in the space that are like it's all new, it's all new, it's all radical. I don't think that at all. I always think about the dots that connect that create new things. And so, for this space, we are looking for people who have a good history in these core primitives and people who want to build a protocol level that understand distributed systems and can build that level of technology isn't everybody. There's a lot of react in front engineers that can do an SDK. That's also an art, doing the product side and building things that developers can use, etc. But a lot of the stuff we're doing isn’t we're doing for the first time. I think we're doing for the first time is how do you connect all these dots in a way that's never been done? And that's what's cool. That's exciting. And that's really on us to be curious, change our mind, understand what's working, understand who is right in the argument online, who is wrong, what are we missing here, what are we not, and ask the hard questions and ask the good questions and the right questions that allow us to put these things together and not think that we have all the answers now. I don't want to sit here and be like, yeah, this is exactly how the future is going to live. I'm more like I gave a talk to the team yesterday in our weekly kickoff. I said, “Listen, our job is to have a core fundamental belief for the future. We believe there should be a way for wallets to communicate, and they should use a universal backend that's decentralized. So, you can take your inbox with you.” When you log in to Open Sea or you log in to an ENS page, you have all the same messages that you carry around the web with you. And that's a fundamental different way than the web works today. You go log into your Gmail, those are different then when you log into iMessage. And to think about that is a pretty radical shift, that's a big core fundamental belief. Everything else, how it gets applied, what are the right use cases, what is going to go wrong, what is the economics, we need to figure that out. And I think that's what's really cool is you need people that are able to be decisive, want to build, and not think they have all the answers, but have a really good understanding of the core technologies we're building. That is all coming together to create something new.
Eric Jorgenson: Yeah, that's awesome. I was just reading something about an academic who was like deeply frustrated about- like academics tend to dismiss innovations that aren't like fundamental scientific breakthroughs. And this guy was like almost everything that's an actual tangible improvement in people's lives is new connections between existing dots. Like that is what innovation is in practicality day-to-day. So, I think that's an amazing reminder that everything feels new, but this is really like there are decades behind almost all of these technologies that are just getting kind of put together in new ways.
Shane Mac: I learned that from Robert Stephens. I learned that really from sitting next to Robert for years. One of the greatest parts about building Assist was getting to sit next to Robert Stephens for five years and just hear him think every day and hear him help me question the way I thought and challenge my thinking and also hopefully like be a better person, listener, decision maker. And that was something that he really optimizes for. He creates the environment where seemingly unconnected dots connect and ways to see it that you couldn't see it. And he designs all these different interactions and experiences on how you put sticky notes on the wall and how you go and frame your mind around a certain idea over here and then do something completely different and then mix them all together and see the output. Like he used to talk about that guy- I forgot the guy's name, a really famous artist and he would create songs like that. And he would take different themes of his life, and then when he mashed them up, that's how he would output songs. And so, he's just a really incredible, dynamic thinker that thinks like no one else.
Eric Jorgenson: Robert Stephens, founder of Geek Squad for anybody who wants to me to save them a Google. And I got to spend only a few hours with him, probably like entirely thanks to you. But that is like palpable. You can feel him as an energetic, unique connections like as soon as you sit down with the guy. He is thinker making new awesome and hilarious. One of the other- I mean that story is a good example. I think like of all of the people who I've known long enough to see a meaningful career trajectory for, I think you are one of the fastest learners and have grown and changed the most. Probably one of the things that I would ask, I think you are the best at and that like you are the first person in the world I would ask about is like building a company culture. I've seen you very deliberately craft cultures and packages and stories for teams at pretty much every company that you have done. And I thought you had such a good approach to that and do interesting stuff with your equity and do interesting stuff with your recruiting and your internal communications. And I don't know if you'd want to share any of those publicly or how much you treat those like kind of hard-earned secrets, but if there's any you want to talk through, I'd love to because I think that's so indicative of the kind of person you are and the kind of companies that you build.
Shane Mac: I mean, it's all open to me. I think the point of doing it is to attract people who think it's interesting to want to work with us. That was always the goal of how do we create a place that I would want to work at personally every day and then others would also think that those are valuable and that valued things that I think over my career, I've learned the hard way of what really matters to myself and I think matters to others. And Robert Stephens said to me once, he said, “If you want to make people happy, including yourself, make them more productive.” And he said, “Remove blockers is one way to do that.” And I actually have a Ganesha sitting on my desk every day because this guy named Tucker once said to me, “You remind me of a Ganesha.” He's the Hindu God for unblocking others. And he's like, “just like either mental blockers or hurdles or ways in which people doubt themselves or physical blockers or connections or ideas or creating a new third space for new ideas to grow or whatever it is.” He's like, “You're just like a Ganesha to me.” So, I always took that to heart, and I was like, huh, interesting. So just a reminder to myself to unblock others and even unblock myself. But then on the productive side, it's interesting because it really came out of Zaarly to be honest. We had all the money in the world. I think I was radically not self-aware at the time. I was really young. I'd never led product. I realized later in my career that I'm not actually great at running product. I think I'm interested in such cool new dots and ideas that I can see things others can't in products, and I can communicate them clearly, but I'm horrible at running a product roadmap, running a product process, keeping it- It’s just not my jam. And so, I think I was really terrible at that job. And also, the company ended up, I don't know if you call it failing or not, you were there a lot longer than me, but for me it was a huge failure. And mostly on me, I think by the time I left and it pivoted a few times, I was like I was responsible for this. I was leading product is the most important thing in software companies. And at that point, we'd raised $35 million. We had a suite office in SF. We had nap pods. We had a fucking Skee-Ball machine. We had free lunch every day. We had all the things. And I remember being really, really unhappy in mid-2013 to the point of probably like fully depressed, just lost my relationship. And I was like this can't be it. Like this can't be- Even if I fail, I want to be feeling like I'm with people who we gave it our best shot with that are sticking around, and we value productivity, direct feedback, and time in a way that I didn't feel like I did. And I looked around and I was like because we didn't have that culture. We had a lot of the like not Zaarly stuff, but the SF perk I call it – the nap rooms, the ping pong tables, the free lunch, giving people a reason to spend more time at the office, have more fun. And when things get hard, no one cares that you had fun when things weren't hard, they care that we're doing meaningful work and we're trying to fix things and you have enough space and autonomy to be productive, make decisions, and have control of your life and your work. So, the more I got into that is really where it all came from. I was like I can't create another company like that. And it was really hard at the time. Different than today, people still believe to raise a lot of money, to build a successful company, you need to be in San Francisco. And so, you're juggling two things, which was how do you compete? Every VC would ask the same question. They would be like how are you going to hire people out of Twitter and Facebook, and how are you going to compete in talent when you don't have as much money and blah, blah, blah, blah, blah. So, at first it was a tactic to try to compete with them, but then it became just a personal belief of I'm going to create a better place to work that hopefully other people want to work as well. And I realized something very fundamental in that. It's that if I compete on what we're building, I'll lose, but if I compete on how we work, I can win. When in San Francisco you can walk down the street and work at the number one payments company in the world, the coolest social network in the world, you can go send a fucking rocket to Mars if you want. Like you can literally- if you're the best employee, if you're the best talent, you can work wherever the fuck you want. If that is true, I'm not going to beat you on a better idea. Like I'm not going to tell you XMTP is a cooler idea than sending rockets to Mars. It’s just not, I'm not that fucking not self-aware. Like that's fucking cool. But you’ve got to go work for Elon Musk. I can beat you on being different than Elon Musk on how he works. Different mission, different reason, that's fine. At the time, maybe you want to leave San Francisco. We'll enable remote first culture. That's why I started learning about remote first 10 years ago. And then now it's funny because that's like how the world works. But it's hard to communicate from remote first culture. It's hard to run a company when you can't see each other every day. It's just different to do and to create that bond. And then I just went crazy. I was like, well, how do I get people time back? Maybe I'll give them a personal assistant. What if I give everyone a personal assistant? What if an assistant can use your personal or professional life? Your personal life doesn't stop at work, so why can't you actually give a personal assistant to your entire team so that you can plan Airbnbs and babysitters and all this shit for your family on the weekend so you're not doing it while you're working. I was like, well, that makes people have more focus at work. Why the fuck don't we do that? I was like don't use a personal assistant for their work, use a personal assistant for life so you can work. And people are like that's crazy. I feel bad using an assistant for- the hardest thing is getting people to fucking use it. I'm not kidding. People still today, every day, all I do is spend time teaching people to like hey, ask your assistant to do that. They're like, oh shit, I forgot. And then it's like practice giving away your job and giving away your Legos, and that's a part of a startup culture. And so, everything came down to like getting over your ego of you think you're really smart so then you need to do the job, and you're the only one that can do it. So, teaching a leadership mindset. And then it got into like, well maybe if I do that, everyone should have a coach. Why do only the executives have assistants, why do only executives get coaches? Maybe everyone should be able to have a coach. That would make more people more self-aware, give them more confidence, give them more direct feedback, help them give more direct feedback to others, feedback culture's a gift. Shit, let's do that too. Why don't we give- I have a financial planner. Why doesn’t everyone else have a financial planner? When I had stock options, fucking shit show. Tokens, I don't know how fucking tokens taxes work. You know what I mean? So, it's like we just start going down the list of like how do you help people take the things that give them anxiety out of their life and help add things that make them more productive into their life and reduce the separation from executives to everyone else. And those philosophies, for me, fundamentally changed everything. And people were like how did you hire this person out of Apple? I'm like I got them to just tell- I told them one thing, you don't have to go to Cupertino anymore. And they were like, hmm, great. But now remote is everywhere. So now remote's not the thing. Now you’ve got to be able to lead well, you've got to be able to communicate remotely. You’ve got to be able to create a culture that also- the reason we write about stock options, removing the cliff for people, creating the onboarding package, like I just went through this whole thing with a person in Nashville that does custom stationary and this whole calligraphy letter that Matt and I write to them and their family and they have a passport thing and all this stuff, it's meaningful to us, but it's also meaningful to the culture. The reason is different than people think though. The reason is your job when hiring is when the dinner conversation with their spouse happens, the spouse feels really confident about the company you're going to join. And that is something that is the secret metric of all. If you do a metric test in a survey, Bryan Johnson used to do this, he's a friend of mine that started Braintree, he used to ask spouses on a scale of one to ten, how excited are you that your spouse works for this company?
Eric Jorgenson: That is the real truth of it.
Shane Mac: That's the real truth. And so, when you're hiring, you think the same thing and startups are skeptical. You're like this is a fucking bullshit startup, who are these people? If you reframe all that of how thoughtful you are, the decisions don't have to be big. People every day read our blog, and they're like I can't believe you rethought the stand-up. I've been doing a stand up every day, 25 minutes a day to a wrap up, but the reasons why are intentional. And we don't even do it anymore, we threw it out. We tried it for two months. Everyone was like fuck the wrap up. And so, it's like iterating. But putting this stuff out public is the stuff that allows you to know that we're intentional about culture, we're thinking long-term, and we care about people first. And every time we get a new person, and the person I hired in my life that's the one I didn't believe I could hire was Robert. And I focused on Jackie, and Jackie is his wife. And I wrote his final welcome calligraphy letter actually, and I signed it to Jackie because I said now we need to split him. And I think it's just fascinating to think about. And a lot of founders don't think about it, and then they're wondering why the person who is excited about their idea, not how they work, isn't saying yes. It's because the spouse is like, “Hmm, I don't know about that.” And I think that's the skeptical one to focus on. And that's not the reason why we do it. The reason why we do is authentic and pure, but the benefit of it is clear. And it's to show that you're thoughtful, intentional, and really taking care of people. And it's not always easy. It's not an easy thing to do, but we're kind of on an obsessive level of it now. And I just think people make decisions, decisions become the company, and so I spend all my time on the people.
Eric Jorgenson: I think that's an amazing sundae that I want to put a cherry on top for you. Because I think all of the thoughtfulness shows and one more of the like anxieties I have felt, especially at my first job, was like how do you leave? There was such a weird thing around people leaving companies. And during a startup, it feels like a betrayal, like for the team who is still there, that was like kind of how it was viewed. And you kind of want to be happy for the person, but you're also like cast relief on the work that you're doing and everybody starts second guessing themselves. And so, one of the very first blog posts on the XMTP blog, and I think you did this at Assist too, was like part of the onboarding is here's how to quit. And let me just remove this anxiety around feeling stuck and feeling- Like we know that you will not die at this company. So, let's talk about- let's begin with the end in mind and like talk you through that, and here are the expectations and everybody's playing from the same thing. It was just one more sort of anxiety off the list. And it gives you the sense that everybody's there because they want to be, not because they feel scared to quit or scared to leave or don't know how.
Shane Mac: Totally. And to go deeper on that point, because I've actually learned a lot since I wrote that; I wrote that in 2015, I think. That post, one of my most impactful ones that still today I keep learning on and I keep getting reminded of new reasons of things to make it better and why it's so important and the let's get real about perks post, I mean, that's how Squared Away started. Like I wrote a post that said, what if we gave everyone a personal assistant to the team, not to the execs? And all of a sudden, I called Michelle and was like, hey, can you find more military spouses and we can provide everyone with an assistant? And she's like, yeah, the military spouses email me all the time and they always want jobs because they can't get hired. And it was like the light bulb in that moment, kind of was the genesis. And now that company has 230 employees. It's crazy. And Michelle's the CEO of it. It’s incredible.
Eric Jorgenson: I’ve got to have her on the podcast. I really want to talk to her. Like her whole story is awesome. And I feel like I got a lot of questions about personal assistants and using them and who and how and all that stuff.
Shane Mac: So, the How To Quit is interesting because there's a ton of things that actually came out of this. So, I wrote the article How To Quit. It breaks down the right way to quit. Because I was tired of getting the cold email sent to me and it's unexpected. And what was really changing in the world is something that I fundamentally believe about the world is that trust can be built online as well as it can be built offline. And it's my thesis for everything. I started Squared Away; I'd never met Michelle in person. I started my venture fund; I'd never met Chris in person. And people are like that's really crazy, I can't believe you do that. Now it happens more because the internet relationships moving online, but I've believed that for 15 years. And I think it's built my whole career. And it's to the point now where that's my fundamental thesis of web3. Now you don't need anyone else to actually tell you to trust someone. The algorithm adds the trust. And so, the implications of trust now being completely always capital F fact removes the need for two humans to come to the consensus because the algorithm can. That changes trust for everything. So, the upside to all of those crazy- I'll go back to that or we can do it another podcast. The How To Quit thing. So, I wrote this, I go deep on it. Every day people come in, I teach them how to quit because I don't want them to quit bad because now that trust is built online, the day you leave the company is the day I see you every fucking day. You never stop seeing people you used to work with online. You actually sometimes see them a lot fucking more because they're loud mouths after they quit and they want to talk all the time. And so, what's interesting about that is you want supporters. You want people when you leave a company to be your champions. And if you do that and you do that well, your career will be incredible. And I always watch this anxiety around the conversation. And Robert said to me, once he said, “Listen, at Geek Squad, the first day I ask them, do you want to leave here someday? I don't have a hold on you forever. What do you want to do? So I know how to give you the skills that you might not have to go do that someday.” And I've always had that philosophy. So I had it with a conversation with a guy that works for us last week. And I was like, “What do you want to do after you leave here?” And he's like, “I never had a boss ask me what I want to do after I leave.” And we had this amazing conversation. At the end, he said, “Thank you so much for just caring about what I want to do in the future. He’s like my wife, actually, her boss talks 95% of the one-on-ones and she fucking hates the job.” And so, from a leadership standpoint, it's actually an incredible environment to get people to actually share things, so you know how to help them for when they leave. But the bigger things happen later, which is what we think about as it's actually strategic as well because you don't want people to stay who are afraid to tell you they want to leave or are staying for an economic reason. So how do you create economic incentives for people to leave? Zappos did this where they pay you $10,000 not to take the job. But then we were thinking about it. We're like we have this vesting in cliff, and everyone says to me startups need vesting cliff so the people that join don't leave in six months and get some of that equity, and now they have some equity and they didn't stay for a year. And so, I was like what if I ask a different question? What if I ask what if they stayed for a year after six months because they didn't really want to be there, but they wanted the vesting cliff? What's less value to the company? What's more helpful to the company and what's less valuable to the company? Well, I don't know about you, but managing people who don't want to be there, especially early on, is the worst thing for your company. Your equity probably has a chance of being worth nothing just by letting them stay. Two, they're getting another six months because if they’re six to nine months, like yeah, every day I talk to people, they're like, “I got a vesting in cliff in four months,” everyone. So, I was like fuck the cliff. Because if you in two months are like I hate it, I'm like I would rather you have two months then take ten more. And I would rather you not be here if you don't want to be here, then stay for ten more months because you're like- We don't want that anxiety. Then we're going to fucking hate each other because you don't want to be here. So, I'm like, holy shit, what if the cliff is actually doing the reverse incentive everyone thinks? Because everyone says like hire fast, fire fast, all these bullshit phrases you hear in startups, it takes a long time, all these things. And I'm like what if you remove- it's all incentives. Everything's incentive of mechanisms of what people do and what behaviors exist. So, I was like what if you remove that? And I'm like, holy shit, it removes that entire conversation. If someone doesn't want to be here, I'm like how amazing, we'll give you some equity. If we make it work, you'll get a dime. It's great. But I don't have to fuck with it for eight more months. So that you're like I'm going to try to get that cliff because I think the company is going to be something, but I fucking hate the fucking chain. And I never saw that one. And when we caught that light, I was like what are we doing here? And I went to Cooley and they're like no one does that. And then you ask a lawyer can you do it? And they're like, well yeah, you can do it. And I'm like, well, why don't people do it? And they're like no one ever has done it. And I'm like, well, what do they do it for? They're like, well, you try to retain your employees. And I'm like I don't want to retain someone who doesn't fucking want to stay. And they're like- And all of a sudden, you just ask enough questions to unravel these things. And then I think you had to have the philosophy of the How To Quit thing. But once I started dotting these things together, I was like, oh, this exists for a thing that actually is in competition with the goal that we really want. I don't want you to have 12 months equity if you wanted to leave in two. I'll give you two months equity for you not to stay for ten. And those are the things, I love those. Now that sounds like a- it's not like in a vain way. It's like in a benefit for everyone way. If you want to leave in four months and you join our company tomorrow, that's my fault for making the hiring and you should get equity. Fine, then we don't have a cliff anymore, cheers.
Eric Jorgenson: Okay. So, you got really excited about basically the trust that can exist between remote people, which totally agree, like met a lot of my closest friends on Twitter and digitally and have become close to them even before we met in person. But you said something about that changing and that trust becoming capital F fact on like when there is a blockchain base to some of those interactions and some of that, and I don't know that I totally followed that.
Shane Mac: So, take it like this. The question is how do you scale trust? The question also should be are humans good at understanding if something's trustworthy? And I think the answer to that is no. We're emotional, we think we're good at things, we believe we know what we're doing when mostly we don't. And so, I've always believed that trust can be built online as well as offline. The reason I believe that is because I can read everything that you're thinking, I can know everyone that you're talking to, I can ask people that I already know that you're connected to about you, I can look at your past, I look at your history, and I can know a lot more than I could if I met you at a bar and I just asked you a bunch of questions and you could make up shit or not, and you could bullshit me or not. And it's harder to check, and now you can just instantly go to the internet, like it's all kind of in our back pocket. But most people in the world, I don't believe, operate that way. They operate more like the bar way, which I actually think is a worse way to build trust. And so, trust is like this meter that grows over time based on our interactions of whether or not you and I say we're going to do something, it becomes true, and then I say I trust him more. Or trust is the opposite. It's almost like thinking about it as a battery. This is what Toby from Shopify talks about, like trust is a battery. It goes up and down. The more things you do that you say you do, trust goes up; the more things you don't, it can go down a lot faster than it goes up. And what's really interesting about that is this – most people are really bad at making decisions not emotionally because we're emotional creatures. So, scaling trust is really, really hard and getting it right and wrong is very subjective. And so, what a blockchain does is it's a commitment, and in the commitment, all the factors that determine trust are removed because all things have to be true on both sides for the commitment to be made. So, it removes the dependency for trust which actually adds trust to the entire thing. So, it allows you to scale trust because you don't have to trust another person. And that's the biggest thing. It's the opposite. It's counterintuitive. It's I don't have to spend a year to fill up my battery, and you can never have a hundred percent trust, to 98% I trust Eric to then say, fuck it, let's start a company. I can say if all these things are true and this DAO says it will do this, and in the future to control it, you have to vote with this, I can do that with someone I've never met because the mechanism of the blockchain and the tools is what you trust, not the other person. And by removing the human element from trust, we're actually able to scale trust. And the outcomes of what's possible when you can scale trust infinitely because you remove the faulty decision making and behaviors and emotions of humans is insane. Like I've been doing it on an emotional I feel like I do my due diligence but I'm still quite wrong about trust many times, you can never be a hundred percent right, looking at this world being like what if everyone in the world does not have to trust each other to build trust to do things together. That's fucking insane. The implications of that, of what we can do together to have a mechanism of building commitments and trust without requiring humans to learn or judge or understand or make decisions about whether they trust someone changes everything.
Eric Jorgenson: Or pay for some like proxy for trust as an intermediary. People keep using trustless as a term for the blockchain, but I think trustful is actually a better one. Like it's automatic, scalable, basically free trust. And I tried to write this out because I totally agree with you; this is a massively underestimated thing, and we are totally blind to how much we pay to create trust to enable transactions between two parties.
Shane Mac: Take a house. I just bought a house. The idea of all the things in the middle that we do to create trust that still always have tons of variances and nuance and emotion built into it to try to get two people to trust each other, a house transaction at this point is kind of like the blockchain. You put the public deed, you have a different party, like they've done all this stuff. To the point where they don't let the two people meet each other. If you both have an agent, you don't meet each other. And so, it's very much they've gotten to that place because it's such big transactions. To be able to do that for everything and micro stuff and little things and build in a trust list which adds trust mechanism to the middle, that's what people don't understand about what's happening is you don't have to trust someone else to do things that in the past you would think took so much trust. I guess that's my example that maybe is why it got tricky in the beginning. It's like for me, to build the trust in Chris to start Logos Labs, to invest in companies, that's a high, high bar of trust. It took me three years. For me to build trust in Michelle to say I will start a company with you, do you want to start a company with me, she was my assistant for three years. That's a lot of trust. To think that took three years, and I'm in the 1% of the world of people who even believe that you should do that on the internet to you can do that in minutes to anyone in the world that you don't need to know the other party to do things that you before thought took insane amounts of trust changes everything about what's possible on the internet. That's so big and so underrepresented and so under talked about and so not really how people see it, that is like so exciting for me that I'm like, oh, everyone's about to feel how the internet adds trust to the interactions in their lives versus being scared of it.
Eric Jorgenson: Yeah, I think understanding that, and I think you articulated it incredibly well, to me is part of or one of the pillars of getting to the point where you're kind of like, oh, the blockchain is a generationally transformative technology that will change- we will feel the reverberations of these changes and see the deployment of this for decades. And it may define a lot of the careers and companies or DAOs or investments, like this may drive the next decades. Is that how you see what's happening? Like where do you think this-
Shane Mac: It's already happening, it's just not globally understood. So, the future today is I'm a TikTok star. Let's say I'm a TikTok star. And I'm like you know what? I want to sell something. I want to create something. I want to sell it. I want to start a business. I'm going to be a TikTok star who sells cologne.
Eric Jorgenson: You could sell an amazing cologne. I want to smell just like Shane Mac.
Shane Mac: Yeah, exactly. I never wear cologne. My girlfriend actually bought me cologne recently. I was like, all right, I'll wear whatever makes you happy. I was wearing Clinique Happy my whole life from like my seventh grade, I just bought the little orange bottle. But the point is today, the way you do that is so much work. You find people to do it with. You have a lot of meetings. You try to go reach out to them. You try to get intros. You try to meet other TikTok influencers that might have the same audience. What if you did this together? You don't need to do it together because then you’ve got like ten co-founders. So you just have a couple of co-founders and then you want incentivize the influencers to market your shit, all that stuff. Tomorrow what it looks like is what people are already doing, which is you launch a Republic page, say I'm going to start a cologne company. I'm going to sell shares in it that are tokens, everyone can be an investor. If you want to be a co-founder, buy more of the tokens. We can all put money in that's shown how much money we put in. We can split the equity based on the amount of contributions you've done or money. And now the top 30 people own a company together and they're running it, and the cap table is all online it's all digital. They found it through the Republic page, just because the person built a link out, put it all out there, showed the sales they already had, what they were already doing. And everyone joins on board all digitally, all the trust is built in there, and they also have a liquid market. People are like, you know what, I'm out of this, I’m going to sell my tokens to somebody else. And are there a lot of things that could go wrong with that? For sure. But are there a lot of things that could happen that could never happen before in a velocity of time that is unlike anything that's possible today? Yes. And if you look at velocity and speed at which things happen, that's already happening. Republic already offers token investments, Republic already offers start a landing page, they market it. And that type of stuff where launching a business feels more like creating a group chat is crazy to think about how big that could be if it's reduced down to that simplicity. And I think right now, my personal mission I wrote down three years ago is to create more owners in the world. Like I want to help create more founders and more people with more agency that realize that they can own something, build something, have stock in something, and create more owners in the world, especially when it comes to how you believe in yourself.
Eric Jorgenson: It totally changes how you think about the world.
Shane Mac: Everything. And it's so hard to step off that cliff and it's good to go back and remember before we had that, and before we had that mindset, and talking to people about how many frictions or how many insecurities or how many people that judge them or don't give them support and the reasons why people don't think they can do that. And so, if I go back to my personal mission of that, it's also really, really hard. It's really hard to start something and know the lawyer and the stock or sell something, or what do I do first? I buy a landing page, that's not a business. How do I see myself? It all comes down to how we see ourselves, what's the network around us, and what's the community of other people doing like-minded things? And so, when you feel like you don't have that, it's really tough. And I look at things that remove friction to ourselves, our own insecurities, as well as the process of it. And I look at stuff like this, where all of a sudden, you could just buy a token, be part of that community, and you're an owner. Like you're an owner of something. Granted, there's going to be so many dumb- Like this is where like token arbitrage and coin tokens and shit coins. And that's why I don't care about coins, I don't care about tokens, I don't care about any of that shit. I care about let's go build something together, and the fairness and trust is built into the blockchain of what together means.
Eric Jorgenson: Yeah, the tokens are just a tool for reducing the friction around so many of these interactions that we all have.
Shane Mac: It’s just a digital version of stock. Like people are like what's a token? I'm like it’s stock. It's just a digital version of stock that is also transferrable and doesn't have to like call a broker.
Eric Jorgenson: And it's accessible to everybody globally, it's fractionable, it's liquid, and people can earn with tiny amounts of their time. It's not like I'm an Apple employee or I'm an Apple shareholder or I'm not. Like you can be a representative of hundreds of different projects and earn tokens from hundreds of different projects in this like sort of new, weird liquid employment. But it's thanks to tokens. Who cares about any individual one, but that is an enabling technology that changes a lot of things, will create whole new careers, I think.
Shane Mac: Totally. And it's even funny because like token equals stock, and then people are like NFTs, they're so cheesy and it's not real and whatever. I'm like what is an NFT? It's just a token. It's a non-fungible token. It's actually just Bitcoin. It's the same technology. What do you mean? Oh, it's just one of them. All an NFT means is it's just one. It's not even a certificate. It's a token, but it's just one token. So, if there was one Bitcoin in the world, it would be an NFT because there's only one of them, but because there's not- and I don't care if your Bitcoin or your dollar or your Apple stock is now my Apple stock because they're all transferable. That's a token. A non-fungible version is if there's only one, like the Mona Lisa, then I want the fucking one because I don't want a thousand replicas. And I think people just don't get it. And they're so looking at the client level of like NFTs and hype and money and art and all this shit. But like it's still just a token. It's just there’s only one.
Eric Jorgenson: I think it'll slowly just become water around us. Like everybody had to slowly figure out what a dial up connection was and get internet connected to their houses. And it's going to be the same sort of viral growth of people helping each other install wallets, wrap their head around what a token is and what a currency token versus a NFT is and all that stuff. But I mean, that's part of the work we're doing here.
Shane Mac: For sure. A lot of work to do on that front. I think it's so complicated. Wallet UX is so hard. A lot of stuff needs to happen on top of it to really obfuscate the complexity below it. A lot of work to be done there for sure. And protect people. I think it's really- when all anyone says is never, ever, ever, ever, ever, ever, ever lose your seed phrase, there's a problem with that statement that needs to be figured out. Like okay, it's great that you own it yourself. It's also, how many times have you hit forgot password? Like that's the reality – a lot. And if I think about my mother or my father and them and how many times they use the really well optimized or shittily optimized forgot password flow. Well, maybe that company does add a lot of value my life that allows me to actually get my shit back then I forgot the password for, and I think that's a big piece of the things that are like on the to be figured out list for sure.
Eric Jorgenson: Okay. So, let's put a bow on this with like a final bucket that I think will be kind of an interesting summary of everything, which is like how are you sort of personally like across everything investing in or capitalizing on it? Like you're founding a company in this space for sure. I know you have your fund, Logos Fund. Like are you investing in it out of the Logos Fund? Are you invested in it personally, tokens, companies? Like what's the skin in the game look like for you and the kind of maybe theories that are driving that?
Shane Mac: Just on crypto front or just investments as a whole?
Eric Jorgenson: I mean, specifically in crypto, but put it in context maybe of everything else. Like if it's a hundred percent of what you're investing, that is an interesting thing to know, if it's 5%, that's also interesting.
Shane Mac: Yeah, so I'm happy to share this. I have what's called the say half of the liquid money and net worth, half of that is into investments and things I want to invest in. I don't invest in things I don't understand. So, I'm not investing in like local restaurants, or I get asked to invest in a lot of things that aren't software. Like I really just feel like I understand software, I understand products, and I can be helpful to founders building those kinds of companies. And I understand crypto to a point which is not even the best in the industry, but I'm working with the best VCs and founders that have access to a lot of the great deals. And I understand how to build remote companies and culture from doing that and doing a lot of it wrong. And so, from an investment kind of spectrum, I can literally just pull up my coda doc here, I have it all like really broken out. And you can look at very much 20% my own stocks, 20% the fund, 10% crypto. And so, think about it, stock. So, I sold all public stocks on November 15th. They're all now down 60%, which is not a bragging point. It's a thank you to Chamath because he literally said on a podcast that I listened to on November 14th, he said all time high stocks, all time high crypto, all time high art, and Elon and Jeff Bezos are both selling stock they said they'd never sell. And he said if you're not rethinking your positions in how you think about public equities and stock market, then you're crazy. And I thought about it. I invest in very few companies, all in on them, and honestly, I had a really great- I invested in seven companies in two years, and I have over 200% returns and it was like Zoom, Slack, Affirm, Opendoor was my big, like I ended up making out a dollar above what I sold for, but I rode it all the way down to 14, rode it back up to 20. I got out and now it's at like 10. So, no money made, but like I held long enough, and I only invest in things I really believe in. And so, in that front, I was like, will I feel better at 50% more gains? And I also am not a sophisticated investor. I just invest in products I love. Or will I feel worse if half of it goes away? And I was like I’m good, I’m fucking good. And I just sold. And now, I can't believe- Now I look like, oh, I made a smart decision, but I listened to- To give you investing thoughts, I know you love investing advice, I sat there and I listened to [Shamoth] on that podcast on repeat over 15 times say that. And I sat there for two days, and I went through the downside emotional feeling and the upside feeling of what will I feel if I made 50% more? And I was like nothing. I feel like I'm lucky on what I returned now. What would I feel like if I lost 50%? And I was like it's a fucking meaningful amount. And I was like I'm out. And on a crypto front, I think of that as the startup like investing. So, the way I think about crypto is this: ETH and BTC is 50% of it, much because I used a lot of it to buy a house and the last 10 years I sat on a lot. And so that's from the new money in perspective, not on like I got lucky because I held with 40,000% fucking increase because I bought in 2012 when we were hanging out. So, take that out of it. Look at it, new money in where I'm thinking about investing, BTC and ETH because my company is built on it. I think of it as a 10-year move, and if it's right, it's really right, and I still believe in that, and if I'm wrong, that's fine. And then the other half of that is 10 to 15 investments that I think are the support layers for them that for me I think of as startup investments, which is don't try to play the market, think of it as a five to seven year thing, and all of your money is lost in startup investing on not realizing the upside. Every moment of it feels like the tallest moment in every moment in real time. You always feel like it's a premium. You always feel like it's buy whatever. So, Solana, I think there's other Ethereum going to be built. Bought Solana, Cardona, Polka Dot, etc. I'm like, okay, there's going to be other chains here. And then I thought what supports ETH? We're building on ETH. ETH doesn't scale worth shit. There's a lot of things to be improved about it. So, I went down the list, and I think the guy from a16z, who's one of the partners there, he's awesome, he's a developer, he said like next summer will be the L2 summer. And I was like that's an interesting point. And so, I went and bought all the L2s. So go down the list, you’ve got the Polygons open, so you can buy that, etc. And so, went into an L2 kind of world. And then I just went into what are the companies in which Paradigm and Andreessen are investing in that I have access to the token? Axie Infinity, one of the best returns. Like the Graph, one of the best returns. So, like all of those. And that's how I looked at it. And I'd still look at it as startup investing. So, I'm following the best VCs. I look at it as if it's right, it has an exponential upside. If I play the market, I lose. And so, I really think of token investing as investing in startups, very few win. The ones that win, you can't imagine how big they'll be. Every time you invest in, it feels like the highest moment. And the ones that have the highest price have the most market adoption actually feel expensive, but the ones that have no adoption lose, and that's where you think it's cheap and you get a deal and you lose.
Eric Jorgenson: And you’ve got to hold of them through all of the time. And now that they're liquid, it's so much harder to hold it through all the time when it feels like-
Shane Mac: And that's why you have to have philosophy. You have to play long-term philosophy. If you don't, unless you're some quant trader and day trading and shit that I don't have the brains to do or even the computing power, I'm playing a startup game with the tokens, which are the equity for startups. So, I feel like it's the right game to play. And then the other half of the money of personally, that's public and token stuff, how I think about it, is so all the public market stuff is just cash now. Like it's just- that's above a strategy of like I do think there's going to be big opportunities here in new things. And I got lucky timing, I guess, to get out at that moment. Now it's all down 60%; I could buy in, I haven’t yet. I'm just kind of like just curious. I'm like I'm good. I don't really want to right now, it's not my full-time job. And then the fund is also investing in web3 companies, hopefully before the token launch, and remote infrastructures, like remote.com, etc. and just playing the startup game but from a fund perspective of writing 50 to a 100K checks into companies, very different dynamics. That's more of like a typical fund, etc. But it's the same philosophy – companies, long-term, and we're investing in seed and A stage, mostly trying to do seed. That's more really got to be helpful to the founders, have those meetings, spend time talking about culture, hiring, using the product, giving feedback, and really trying to help them get to their next round, very different than just buying tokens. But the same philosophy – is Andreessen Horowitz leading? Is Paradigm leading, who is the lead? I'm not lead. So, I don't want to be half your round with a 100K check. It's just not the game we're playing. And I think it's done pretty well. I think our fund first year was looking at multiple Xs, and it allows me to spend more time making more owners in the world and learning from founders that I want to learn from. I always say it's like an MBA that I hope pays back.
Eric Jorgenson: There's a very helpful mindset, like there's so many people investing in crypto with such different strategies, and you're can really fuck yourself by playing somebody else's game or not thinking through the long-term or just being super over-reactive to what's going on. But I love that mindset.
Shane Mac: Totally. And I say like on that front, I'm the worst. I'm not really being like crypto savvy with data and shit like that. I'm literally playing the game I've always played, which is use products I really love, write about them, all the founders want to talk to the person who writes about their product, understand how venture capital works, and understand that it's a power law upside where the winners take all, very few people win, and the like dynamics at play are market trends, your ability to hold, and understanding that illiquidity of startup investing in the last 20 years is the greatest thing that ever made people smart. The smart people now that have to hold when that liquid token’s dropping 50%, but really there's 6000% waiting if you hold for three years, is a real fucking hard game to play. And I think you’ve just got to completely be like that's the game I'm playing. I like products. I understand the game of startups. I'm playing a long-term upside-
Eric Jorgenson: Sometimes I need to distract myself and remind myself that I don't want to do any more complicated taxes. That's my like, to keep myself illiquid.
Shane Mac: And a lot of people are doing really well with NFTs and arbitrage and turning ETH into magic money. Honestly, I don't have any of it. I hold a few just to learn about wallets and stuff like that. I have some chain runners because like some people told me to buy it. I wanted to kind of like I kept watching the community. I was like that's cool. I understand like the idea that every single pixel is on chain versus it is like an image in a file somewhere. Like that's pretty cool. It's a new kind of innovative piece that I thought was interesting. But from a make money perspective, I'm not in the like, oh yeah, I fucking hold 12 apes and I've turned them into ETH or whatever. I'm in the like I hold ETH, I hold BTC, and then I invest in tokens that are what I see as startups.
Eric Jorgenson: You mentioned back when we were talking about XMTP, looking for like and potentially investing in the SendGrid built on XMTP. Does that exist within XMTP? Is that kind of like you and people around it? Okay. That’s at the fund level because that's a crazy opportunity. Like when you're building a platform that becomes a new enabling platform for potentially a whole suite of technologies. Like you invest in the Discord and the Twilio and the WhatsApp and the SendGrid that all get built on top of this protocol that you helped get started, that is an amazing opportunity.
Shane Mac: That's where you 10X down on the fund and you're writing much bigger checks and much bigger things. I mean, that's what really drives me. If you look at XMTP as a vehicle for creating more owners in the world, that goes back to what I'm personally doing, there's a reason I'm not CEO either. Like Matt wanted me to be his coach before I even joined, but it was so aligned to my personal mission of communication, building messaging for 10 years. And I was like I can't not take this shot. And I really know Matt. I've known Matt for 10 years. Our trust level battery is at the top, mostly because we both know where we bullshit each other. We both know where we are insecure. We both know what we're great at with each other. And having that level of trust allowed me to go do it. What's interesting about it is going back to the people side, it aligns to what I've done. So, I have a lot of history in building messaging, communication, social products, but it's not why I'm doing it. Why I'm doing it, and what I actually think is super interesting, is imagine that $50 billion companies that are built in the next 10 years were built on top of our protocol and all those CEOs and all those founders and all those communities we enabled are the network that we get to create, fund, and benefit from, and literally just kind of be involved with. That's the big idea. And that's the enablement of people layer that is much more exciting to me than arguing over like protocol dynamics and shit on the like is web2 or web3 going to be a thing. I think what's more interesting is if we can enable a new communication layer to exist that's just different. I'm not going to say it's better or worse. Is iMessage great? Fucking great. I love it. Hope it always works. It's really good. Is there a different way to talk to people that you would have never met before in a way that brings more identity pieces or signals that allow people to connect that was not possible before? I believe so. And that's what's cool is being able to create that community on top of us and dream about a future where we get to invest in all of them.
Eric Jorgenson: That is super awesome. I look forward to that, too. I really appreciate you taking all the time. I admire the shit out of you and have since we first met, I don't know, more than 10 years ago probably now working together. But as always, I appreciate you taking the time and bringing all the energy that you do to all the people and being such a helpful sort of, I don't know, coach and teacher and open book and everything. Like I know very few people who feel like primary sources of endless energy, and you are one of them and there's less than five that I know.
Shane Mac: Well, I don't know if that's good or bad. It can be bad energy. I also lost my voice. I'm two and a half- it tells you I've been talking too much for sure because I literally feel like my voice is broke.
Eric Jorgenson: We wrung you like a sponge. That's good. You're out of words and out of time.
Shane Mac: No, it's amazing. Keep doing this. Everyone at every stage of my career, how I felt internally was, oh, everyone's already doing it. And I think you can sit here and be like everyone has a podcast, everyone's doing an interview show. But you have a unique take on the world. You have a unique story to tell. Creating content will only lead to more opportunities. And it's never about millions of audience. Like if you have that, great. But from every conversation we have, you'll probably meet one other person, and those things compound forever. And I just like can't emphasize enough how like cool this is, what you're doing, you should keep doing it. I've always liked your take on content, media, etc. I hope you don't get another job. I actually feel like your unique take on the world is your ability to curate all types of information into more trusted and long form meaningful things – the book, the Evergreen Library, and your amount of research is at like a university type level of how much research you do and that's what's missing in today's ecosystem. So, I don't know. I just want to push you to keep doing this. Don't be afraid to charge for it. Get excited about business models and try to make money from this and keep pushing that forward. Because I really think that this is a sweet spot area that I would love for you to keep pursuing and not have to go be like, all right, I need to get a job now because I want to pay for shit, more like learn how to make this a thing that can last forever and just keep growing even if you did get a job.
Eric Jorgenson: Yeah. I love doing it. I think part of what makes it good and why people like it, whether it's the podcast or the book or whatever, is I just love spending time in whatever I'm studying and learning, and that if you are just kind of like earnestly chasing ideas and trying to figure shit out, that ends up benefiting people. And I'm surprised and delighted to find that hopefully you can build a career out of doing that, especially if you can start placing bets and meeting more founders and building conviction and putting skin in the game. Like it's a beautiful thing.
Shane Mac: Totally. Have you thought about finding someone who's a- or we can talk about that afterwards.
Eric Jorgenson: Private session begins now.
I appreciate you hanging out with us today. Thank you so much for listening. If you liked this episode, next go and queue up Jason Hitchcock on DeFi, NFTs, and the metaverse, or maybe check out last week's episode on Squid Dow, the economic flywheel denominated in ETH run by pseudonymous shadow coders. It's amazing. Don't forget to leave a quick review, please, before you pick your next episode. I love all of you beautiful geniuses. Thank you very much.
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