Transcription
So, I felt like a boot off the throat. Like every morning, I wake up happier than the day before because all of these forms of repression that I had just gotten used to; when you're under this level of repression for this long, when it's relieved, it takes you a little bit of time to realize, you know, my God, I can actually — I, and the founders we work with, can actually do all the things that are completely legitimate to do that we were nevertheless being blocked. Hallelujah! [Music]
Hi everybody! Welcome back to the Mark and Ben show for a very special episode, which is our post-election recap and landscape. Longtime viewers will know that we did some episodes earlier on the political landscape, including our own activities earlier this year. Of course, the election results are in, and they are very dramatic. We think a large number of very important things are about to change, or are actually already changing. We want to give everybody kind of our sense of what the landscape looks like and the changes ahead for tech and for little tech.
I want to start with two disclaimers right up front. One is per our normal custom; we are not going to get into non-tech political topics. People care very passionately about many aspects of politics, and we're not going to talk about most of those. We'll talk specifically about tech and business and America's role in the world relative to tech and business.
Second, it’s important to say, in no way are we speaking for the new administration or anybody in it. Everything we talk about policy-wise will either discuss things that people in the new administration have already said they plan to do, or we’ll talk about options that they have — things that they can do, or things that they might do.
So, with that in mind, we wanted to start with a recap of basically what happened in the last four years that led up to this point. It was, I think, unarguably the worst four years in our career in terms of White House policy as it related to technology, and probably to business more broadly. I want to separate the Biden White House from Congress and so forth; there are a lot of Democrats who did good work in Congress, who voted for the right things, who have a good kind of set of policy ideas, but the White House wasn't that way.
In particular, they did things that no White House has done; they went far outside the law. They did things like de-banking companies, issuing Wells notices to companies for no reason, threatening companies, and so forth. All of it was with the goal — it was mainly focused on the areas of fintech and crypto — and they did it to try to destroy those industries. It's still unclear exactly why, but it was a very hard-fought battle; they were very good at it. To give you just a rough idea of how much they damaged the U.S. industry, Korea, which is a very small country by comparison, has double the crypto usage as us.
This is at a critically important time when they were doing this; the kind of foundation for safe AI is crucial. Not getting being vulnerable as a consumer to AI cyberattacks, dealing with deepfakes, dealing with bots — enabling new services with machine payments. All of those things we were not able to do as a country, so we were very likely to fall behind in AI and the technological race.
In addition, the administration was looking like they were on a very dangerous path with AI as well. They took an incredible insular view and didn’t look at it globally; they only looked at what it meant for the U.S. and all those things depressed everything from the crypto markets to the stock market to entrepreneurial activity. We saw entrepreneurial activity just die in those areas, and we were in a very tough situation, which is why we got involved in politics to begin with.
What you and I found over the last couple of years is that people have opinions on lots of various aspects of politics, and not everybody follows tech, business policy, and economic policy. When we describe to our friends or people who aren't in the tech industry the kinds of things they were doing, people are, I think, shocked — just blown to bits, completely shocked.
We had a company that gives free loans to poor people who work at minimum wage jobs and need to borrow a little money to pay for a birthday party before their paycheck comes, and the CFPB terrorized them. They basically threatened them, told them that if they didn't come under their consent, if they didn’t give up attorney-client privilege, they would harass them out of business. We had never heard anything like this; it's just absolutely crazy.
That was the Biden administration; it was quite shocking. One of the misapprehensions that I think people have about government is that government behaves according to its own laws. That was a misapprehension I had. So specifically, if a government chooses to — especially if an administration chooses to — they don’t have to do that; they are free to threaten, and write letters, make angry phone calls, and basically threaten all kinds of things to pressure you into agreeing to things that are not covered under any law.
A quote-unquote "consent decree" is a classic example; you voluntarily agree to it, but in an atmosphere of coercion. For a small company that can't fight the U.S. government in court — they just don’t have the resources to do it — it’s extremely effective. There’s been a lot of publicity around some of the things that Elon Musk went through. The kind of funniest, although maybe not "haha" funny, was the dog J suing him for discriminating against refugees when he had a contract with the U.S. government that required he only hire citizens. He was basically doomed either way, but that's Elon — he's the richest man in the world or whatever and can fight those things.
Let’s focus on one aspect of this — just explain to people what "debanking" means and how that played out. Debanking was one of the more nefarious things; it was actually created during the Obama administration through a program called Chokepoint 1.0. What Chokepoint 1.0 was designed to do was to stop people from selling weed or selling guns through banking restrictions. The administration came up with the answer that they wouldn’t allow businesses who do that to have bank accounts; they’d kick them out of the U.S. financial system by putting pressure through the FDIC on the banks.
They re-ran that play for Chokepoint 2.0, but rather than kind of weed or guns, they did it on emerging industries like crypto and fintech. We had dozens of companies kicked out of the banking system simply for trying to build a compliant company that would employ people and make the country strong. These are important technologies, so it’s great if that technology comes from America, because if it doesn’t come from America, it’s coming from somewhere else.
The impact on a startup or a startup founder being kicked out of the banking system is pretty tough. For a tech company, it’s much harder than a weed company. It’s hard on a weed company because they have to store their money in cash, and they create a lot of criminal activity, creating a big target. But it’s worse for a tech company because tech companies require investment from outside investors, and it’s really hard to have somebody wire you $20 million if you don’t have a bank account — to function, collect revenue, pay expenses, execute payroll. Right, you can't ask everybody to pay you in cash.
Essentially, the way I think about the banking issue is it's an extra-legal, unconstitutional act completely outside the bounds of any law or constitutional provision. It's the government effectively applying pressure on banks to sanction American citizens and American businesses; it's sort of the equivalent of sanctioning Iranians or the Russians. But you're sanctioning American citizens. There’s no law saying you can do that, there's no authority, there's no due process, there’s no appeal, there’s nothing — it’s just straight-up authoritarian violence.
When it comes to the election results this week, it was like night and day, and obviously not everybody voting was focused on these issues, but for those who knew about them, they were front and center. Let’s describe what just happened on Tuesday.
I was talking to Chris Dixon, who runs our crypto fund, and I said, “Chris, this is surreal.” He agreed. What’s surreal is that the election happens, and Trump is not in office. He hasn't clearly defined what he’s going to do, but within 24 hours of being elected, the stock market had its fifth biggest day in history, with no economic news — no sign that the economy was going well, no expectations of GDP increase, or any reduction in interest rates.
The fifth biggest day ever in the stock market. The crypto markets went way beyond that; they just went absolutely berserk. The fintech world went straight through the roof, and the big thing that struck me was, well, the Biden administration was maybe even worse than I thought. The fact that it's not going to be them caused that to happen — it was unbelievable. But as I said, I think that we know from the things said and so forth that we're not going to stay in that direction. So, Hallelujah! I think it's very good — that part is really good for tech and good for startups.
It felt to me like I was feeling a boot off my throat. What’s interesting is that it has felt like the boot psychically has been lifting every day; every morning I wake up happier than the day before. I realize it’s just like all of those forms of repression that I just had gotten used to. There’s a psychological term for it called "learned helplessness.” When you’re under this level of repression for this long, when it’s relieved, it takes a little bit of time to realize you know, my God, I can actually — I and the founders we work with can actually do all these things.
I’ve talked to so many crypto founders who are just like, "We can build these products now." And it got me thinking, "What was stopping you from building the products?" Because it wasn’t a law, it wasn't guidance from the SEC; it was literally this crazy totalitarian repressive environment wanting to kill the industry in the United States for reasons that were not being stated.
One of the remarkable things about the whole crypto crackdown was the claim that we have to protect consumers. As they were terrorizing every compliant legal company, they let all the crazy fly-by-night meme coins run without doing anything about them. They wanted to destroy the industry, to destroy trust in the markets and these kinds of things.
I feel like that song from The Wiz, you know, "Can you feel the brand new day?" There’s a concept in political theory called "narco tyranny." Narco tyranny is the principle that basically says for the lawless, they can do whatever they want, and for the compliant, the government is going to torture them to death. That was crypto. That was also the experience for the city of San Francisco and other major cities in the U.S. If you're a violent drug addict, you have free rein on the streets, but if you're going to open up an ice cream parlor, God help you! They're going to regulate you hard.
One of the things that struck me the most was the Amish vote. The Amish decided to come out and vote for Trump because the Biden administration raided their farms for selling unpasteurized milk. That's the big crime here, while grand theft auto just isn’t a crime in any major city anymore unless you're in some huge auto ring. If I steal a car and ride it around, smash into a wall for kicks, that’s considered a misdemeanor. Whereas selling unpasteurized milk brings in the FBI, raiding operations.
The implications of that were more pervasive than I had realized, and in tech, we’ve experienced that massively.
So let's talk about our role in this, our contribution to it. We were involved directly in a number of situations, a number of races, and we were a major backer of a super PAC called Fairshake, which was working on behalf of the American crypto industry and for good crypto policy. How would we score ourselves for what we were able to do?
It's really shocking. You and I have been around other tech companies getting into politics, and it’s never gone well for the tech industry. This time, Fairshake was 52 and 6, which means 52 wins and 6 losses in Congress. Importantly, this wasn't just party-line support — we supported many Democrats who were pro-crypto.
Some of the races were incredibly difficult; for instance, Sherrod Brown was over 10 points ahead against Bernie Moreno in Ohio. The people affected by the bad policies were willing to come out, vote on it, and stand behind these issues. On the other side, nobody was advocating against those policies. We could never get any of them to meet with us — not the SEC, not the CFPB, the Biden administration, or anybody else.
We never knew what they were trying to solve for. There was literally no Americans on their side on these issues. It was like all the people wanted one thing, and they still went against it — with the fury of a thousand suns. It still seems like a weird fever dream; how did that really happen?
As we got more involved over the last two years and had lots of conversations with senators and Congress people, many of them weren’t following the issues; crypto is like the number 18 issue for your average Congressperson. I often found myself lost in conversations where I was explaining what was happening, and they’d be completely perplexed.
I’m really good friends with Wes Moore, who’s the governor of Maryland, and he’s a Democrat. I explained to him what was going on, and he just couldn’t believe it. He said, "Are you telling me the truth?” I told him I couldn’t possibly make it up; I’m not that creative.
Reflecting on what we accomplished this year, it's been phenomenal. I’m just so happy for all the founders, all the people trying to build companies, all the people trying to do something larger than themselves to make the world a better place. They’re now, essentially, let out of jail.
Now, regarding our level of determination in terms of continuing to engage, the big lesson for us was that we’ve got to stay engaged. Once someone gets rolling with an agenda— it doesn’t matter how crazy the agenda is, if nobody shows up to represent startups, the right thing isn't going to happen.
Look, we are 15 years old now, but like it or not, we’re leaders in little tech — maybe the leader in little tech. In that position, you and I concluded we have a responsibility: if we don't stand up for this, nobody will, and it could get completely wiped out. Innovation is super important to the country and to everybody who lives here.
We spent from 2009 when we started the firm to about 2021 basically not engaging in politics or policy, assuming startups are a non-political topic. I always quote the old Soviet quote: "You may not be interested in politics, but politics is interested in you."
So my conclusion is this has to be a permanent role that we play. We have to stay present. There will be phases where the tides are on our side, and there will be phases where we really have to fight, but we must stay involved every step of the way. We have to advocate for the things and the people we believe in.
The other big lesson for me was how crucial it is to be nonpartisan and to be pro-tech. There are candidates from both parties who are great on that, and it just so happened that in this presidential race, the good candidate was a Republican. It’s proving out instantaneously, which I did not expect. I figured you’d have to go in and actually change the policies, but the policies are changing in anticipation.
Let's talk about that directly. A lot of people are going to ask us: We spent time with President Trump this summer, supported him for his tech and business agenda throughout this fall and through the election, and obviously he now has won — not just by winning the Electoral College but also the popular vote.
This is probably the most sweeping mandate we’ve seen in American politics probably in the last 30 or 40 years — probably back to like Reagan in 1980 or 1984. How should people in the tech industry think about President Trump as president, not just for America, but specifically for tech and business?
The thing he said at dinner that I remember most vividly is that he said, "Look, we have to win.” I think he’s going through that lens. Be it fintech, crypto, AI, bio, defense tech, we have to win as a country. We have to build the best technology; we have to solve the most pressing problems. We need to be exporters of this. Our military needs the best tech, our public safety needs the best tech, and we just need the best technology.
I think all policy-wise discussions start there with him. That might seem obvious, but that's not broadly the case in Washington. There are people who look at it through very different lenses, and that’s what I expect. I think that kind of ripples down to energy policy as it relates to AI, blockchain technology, and these kinds of things as well.
Why does tech matter? The critical question we get since we got involved in this presidential race is, "Is tech really a top-tier policy?" We believe very strongly that tech is a top-tier issue. The thing I got the most criticism for personally was when people asked why I think tech is so important. There are other things out there. Yes, those things are valid, but I’m not an expert on them.
Specifically, tech comes right to the heart of whether America is a strong country or not. If you think about what happened in the 20th century, it was an amazing century for America and the world. America won — technologically, economically, and militarily — across many fronts.
These fronts are interconnected. If you’re the top tech economy, you’re likely to be the top economy. If you’re the top tech country, and you’re the top economy, you’re likely to have the best military, especially in modern national security, where your military is based on technology.
If you have the best defense systems, the best planes, tanks, subs, everything — if you have the best tech and the most money — not otherwise. This is critically important because the world is a very dangerous place. There was a gigantic geopolitical battle in the 20th century between the U.S. and the USSR. That battle ran from 1917 to 1989, with two systems globally vying for dominance — liberal democracy and totalitarian communism.
Had the Soviets been superior technologically, they would have been superior economically and militarily, and we could be living today in a much harsher, darker world. As it turned out, we won technologically, economically, and militarily. The end result was that the Soviet Union surrendered in ’89 — they just quit. They couldn’t keep up with us technologically and economically, and that’s arguably the greatest victory of a war with no shots fired in history.
What that victory meant was that a large number of people spent the 20th century expecting World War III between the U.S. and the USSR, with hundreds of millions dead. It never happened because we were able to win as we did.
I believe the 21st century is going to be another version of that. We are now in a bipolar world again between the U.S. and the Communist Party of China — essentially USSR 2.0. They have a much darker, more totalitarian, authoritarian view of how world affairs should work. We’re essentially replaying this, and either we and our vision of the world will win or their vision will win.
This is critically important for it to be us, and tech matters not just because these are fun gadgets or because Silicon Valley is exciting or because it’s important for the stock market. It matters to the future of the country and the world. From our perspective, we understand this perhaps better than anyone.
The last thing we want to do is get into public politics — no good has come from it, at least for me. But we do have a responsibility because we see more new technology companies than anybody else in the world. Being in that position, we have a responsibility to report out what’s going on, what we’re building, and what we can build, and that’s a very good explanation of why we’re doing it and why it matters.
We will still not comment on the myriad of other issues.
Let’s talk about six sectors in tech and guidance to founders in terms of what to expect from here. Let’s start with crypto. What do we think will happen from here?
Look at what’s already happened. I mean, every crypto project out there has gone up in value. More importantly, when talking to founders, the number of things that people wanted to build, particularly in creative businesses in Hollywood, art, and music, has been stifled.
They had been waiting for a technological platform that gets them past the distribution monopolies and the difficult take rates. Now, here we have technology that lets creatives get 98% of the money instead of 2% or 10%. We saw this early on; before the crackdown, my friend Nas put out an NFT of a song that had won a Grammy, and the NFT made more money than the album, even though it came out later.
That was so exciting for many people, and all those projects shut down. Now, they’re starting to come back in just the last two days. I think that’s tremendously exciting. Even more importantly, we have a company called Worldcoin providing two critical technologies for AI: proof of human and providing provenance.
Proof of human addresses issues like election interference and scams. Most people arguing online are bots — these aren’t actual people. This technology solves that problem. Worldcoin has had great success worldwide; half the people in Buenos Aires use them. But they’ve been outlawed in the U.S. That will likely change, and they will be back.
So, if I was a founder, I would build now because with the guidance we’ve gotten on policy statements and the things the new administration has said, it’s unlikely you’ll be dealing with the kind of harassment we've encountered before.
The next related question is often framed as, "You guys just want lawlessness. You don’t want any regulation." What's our view on what we actually still need?
We worked hard to help get a bill through Congress with bipartisan support. We supported the bill called FIT 21, which was about new crypto regulation. Market structure is essential; it’s a new technology, and the SEC's argument that no new regulation was necessary is ridiculous.
How do you know whether a token is a commodity or a security? Finding some guidance for entrepreneurs, consumers, and traders on these definitions is crucial. The reason the SEC fought against this bill so passionately is exactly because regulation is important in these fields.
If you look at the political dynamic in Washington, FIT 21 passed through the House with almost all Republicans and 71 Democrats voting for it, going against the White House, which even threatened to veto it. Once it was bipartisan, they couldn’t.
This is a great illustration of courage in Washington — to stand up to your own party and say that the right thing has to be done for America.
We are 100% supportive of sensible regulation that protects people. We need it because we want trust in the markets. The blockchain and crypto markets are the most egalitarian that exists, and they provide access to people who don’t have it.
The last quarter’s inflation crushed poorer citizens, while wealthier people were mostly unaffected. Crypto portfolios do exist among disadvantaged populations. The crackdown on this technology was a crackdown on equality, access to the financial system, and fairness.
Now, let’s talk about AI policy. AI is a brand new technology with a scary name. It allows for so many possibilities and requires keeping an eye on it carefully.
We need to win. We have to be careful. We have to make sure it doesn’t break existing laws, but hamstringing it to prevent potential risks is worse than anything we might prevent.
As for how we see the political scene for AI, there are factions. Some are trying for regulatory capture; some are driven by a precautionary principle, saying we must outlaw things beforehand. However, you can already see that AI and energy are intertwined topics.
One challenge with AI is the bottleneck; data is a bottleneck now, which will soon be followed by an energy bottleneck. The energy grid is already taxed. This is the time we should be solving both challenges if we want the U.S. to be the preeminent technological power.
Ultimately, while we’re not directly involved in the chip industry, all the geopolitics around the chip supply chain needs addressing. The Biden administration successfully realized this need, passing something called the CHIPS Act, allocating billions for chip fabs in the U.S.
However, to date, only a tiny fraction of that funding has been dispersed because of political requirements being added to it. This means that companies like Intel have had their financial plans disrupted because the money hasn’t shown up.
Lastly, let’s touch on defense tech. We are in a changing technological environment, and the adaptation of defense capabilities is rapidly evolving — observe the drone technology revolution seen in Ukraine. Drones, both offensive and defensive, represent a significant advancement in military technology.
If we can’t keep the technological edge in defense, we risk losing not just economically, but also militarily. So there’s a pressing need to enable companies to build and leverage innovative technologies in defense.
Thank you for listening. It’s been great to discuss all of this, and we are very excited about the near future.