On climate tech, crypto regulation, and writing in public.
Albert Wenger is a managing partner at Union Square Ventures and the author of World After Capital. Before joining USV, Albert was the president of del.icio.us, through the company’s sale to Yahoo and an angel investor (Etsy, Tumblr). He previously founded or co-founded several companies, including a management consulting firm and an early hosted data analytics company. Albert graduated from Harvard College in economics and computer science and holds a Ph.D. in Information Technology from MIT.
Albert Wenger
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[00:00:00] Alex: Albert Wenger is a managing partner at union square ventures and the author of world after capital. Before joining USV, Albert was the president of delicious through the company sale to Yahoo and an angel investor in companies like Etsy and Tumblr. He previously founded, or co-founded several companies, including a management consulting firm and an early hosted data analytics company.
Albert graduated from Harvard college in economics and computer science and holds a PhD in information technology from MIT. Today, we talked about climate tech, crypto regulation, and writing in public. Hope you enjoy.
[00:00:37] Alex:
Before we get into the climate fund, which is obviously something that's been happening recently for you all I'd like to start by just talking about your thoughts on climate as it's something you've talked about, written about extensively I think it, it, it seems like there's a fundamental disconnect with people when there isn't in like immediately perceptible effect in their lives.
You know, if their house isn't on fire there isn't a ton of motivation to do anything about it for a lot of people. With that said, what do you tend to say when someone says, okay, it's a problem, but we're blowing it way out of proportion.
[00:01:08] Albert: Yeah. I mean, it depends a little bit obviously on who the audience is, but I do try to get people's mind focused on the extraordinary amount of energy that we are now adding to the Earth's atmospheric and oceanic system.
And I try to help people understand that in like, you know, quantifying it at Hiroshima says nuclear bombs, because I think people have an idea that a Hiroshima nuclear bomb level than an entire city. Tens of thousands of people, instantly, many of them later level, you know, lots of buildings to the ground.
And so I asked people to estimate how many Hiroshima says nuclear bombs with energy. We're adding to the earth system above the industrial baseline today. You know, it gives them options like long a year or one a month, one a week. And on the day when an hour and, you know, People will even people who leaned into it aggressively unless they actually know the answer will say something like, well, maybe it's like one an hour, like really aggressive one a minute and then tell people it's four per second.
And you know, that it has the effect. It does stop people dead in their tracks because they just find that like impossible to believe. What I found is it doesn't have a lasting effect for most. It's very effective in getting a small percentage. It's probably in the low single digit percentage of people to really, for the first time ever grok the severity of the problem.
Most people you can sort of see that they're shocked and they're so shocked that a few minutes later they have already packed. This has information weigh in. Do not consider further because life-threatening information department, you know? And and there, I don't really know what we can do about that.
I mean, it's very similar to people, you know, learning about the fact that, you know, a few have bad nutrition, you will, you know, have, you know eventually heart disease problems. And they're like, yeah, that's terrible. And you tell them how many people die of heart disease and they're terrible.
Literally see how that information like receipts in their mind as you look at their face, you know? And so, I don't know, I don't have a good answer for how we get from this to mass mobilization, keeping in mind that like in world war two, we only got to mass mobilization. You know, through you know basically a definitive, like a defining highly visible event.
And before that, you know, it was very few people who saw the war for what it was and who were willing to, to prepare. And so you know, What I fear is that with climate, there will be ever escalating events, but none of them will arise to that level until it's too late. Got it
[00:03:56] Alex: with that in mind, sort of a two-part question here, more on the side of what you've been doing with union square ventures what were the individual and sort of collective motivations for starting the climate fund?
You know, you're obviously putting your money where your mouth is with this, and I guess as a follow onto that, is there anything in particular you're excited by in climate technology? Sure.
[00:04:16] Albert: Well, the first thing is. This isn't just a existential threat. It is also an extraordinary opportunity to create new technologies who start new companies and to be Frank, to make money for investors.
And we pitched this fund straight up as a venture capital fund. Our goal is to produce the same kind of returns for our investors that we've produced from our funds to date. So. So I think, you know, if we had thought that this is that there's no rules for investing, we wouldn't have raised a fund.
If we, if we didn't think it was an opportunity, we might've just, you know, spend money on activism and politics. But it's our belief that this isn't an either or question does it, isn't they, oh, government get out of the way and let the entrepreneurs do it. But this also isn't a, well, this is only a government and there's no rule for our entrepreneurs.
So it's going to take both. It's going to be. New technologies, new companies, lots of commercial endeavors. And it's going to take the government for condition more. What am I most excited about was the second part of the question? I think that's what I'm excited about. It. There is a global awakening. You know, we're seeing really interesting companies, not just in the U S but we've made an investment in India with committed investment Egypt, investment in Switzerland. And we have the technological means and we're adding additional technological means.
So, you know, I'm excited because it means we can still. Safe this you know, I'm not suggesting that we won't go through a difficult time, no matter what we do, we will, but I think we could still stave off the worst. And so, so that's exciting. With regard to specific technologies, I do think there's a Renaissance around working on nuclear.
I think that there is you know, a massive investment going into electrifying everything. And the electric future is amazing. You know, anybody who hasn't driven electric car, I think once you've driven a good electric car, you're not going to want to go back. It's such a pleasant and incredible experience.
And so, you know, plus imagine quiet city streets, imagine no Smaug, you know, it's just, it's a great future. So there's a lot to be.
[00:06:20] Alex: So more broadly for a second. Let's say you had the utmost say in determining how this was done. What do you think the ideal approach would be for tackling climate change?
You know, cause I think the unfortunate reality is really, really two things. I mean, I'd be curious to hear your thoughts. I mean, firstly, I think there's this problem of. Non definition or, or lack of actionable goals to work with in the first place. Like, you know, getting rid of plastic straws or any similarly like empty gestures, isn't going to cut it.
And secondly, I think driving change is more a matter of like aligning economic incentives than mandating it through top-down governance.
[00:06:53] Albert: About, I think it's both, I think it's not just aligning incentives. I mean, you know, if we think about world war II for a moment, you know which I think is an apt analogy The level of threat here is very similar to that.
You know, the government align economic incentives, big Vista did say, look for it. We're going to buy a lot of airplanes from you, but it also sets for it. You're going to make those airplanes. You know, I mean, it was sort of like it was aligned at one level. They didn't, you know, they didn't nationalize Ford motor company and turn into airplane manufacturer.
They left Ford motor company and they placed it in large order. But you know, a lot of it was non it wasn't optional, you know? And so like, I believe government needs to say, look, I'm starting in 20, 25 or 2027, like some really aggressive date. You're not going to get a registration for an internal combustion engine car, sorry, it's just not going to happen.
Which is essentially an infinite carbon tax. Then I think we need a carbon tax on many activities where we don't really know how to quickly decarbonize. And that carbon tax needs to be redistributed so that it points to being neutral or maybe even progressive, not regressive. Right. So otherwise you wind up with the kind of yellow vest movement in France.
Like if you just stupidly slap a fuel tax on there and you don't think about what the redistribute effect of this is, you're going to get protests and the protests, this will actually be right. So so I think those are, you know the things that need to happen. And like, if we wanted to, we could decarbonize the grid in the U S in five to 10 years, if we just said, okay, we're going to just build a whole bunch of nuclear reactors with no one to acknowledge it.
Maybe with slightly improved known technology we could get there. And and I think we, we should get there now. I don't think we'll have the political will for some time. So what that means is during this time period now, Sort of pre Pearl Harbor dates, if you want. We need to be, we meaning people who see this clearly need to be laying the groundwork so that when the eventual moment comes where everybody says, oh my God, we have to do it.
That we actually have the capability. So to me, one of the more fascinating things is the peripheral horrible. It was a big effort behind the scenes, for example, to in the, all through the U S train machinists, like literally train people, how to operate a lace and drill drilling. And that was a crucial, crucial effort because that's what allowed the war production effort to ramp into high gear very quickly.
If you had to basically put like on the day of Pearl Harbor say, okay, now we start training people. It would have taken you under the two years. Right? So I think it is incumbent upon everybody who understands the dips, severity image, elements of the climate. To work on this mobilization now, so that we can put a future president of the United States or even a current president of the United States in a position.
To flick a big switch. We've got to build that switch basically. And we're going to build the circuitry that hangs off that switch so that once that switch gets flipped, something actually happens.
[00:09:57] Alex: You know, many people point to other countries, you know, China, India, even Saudi Arabia. If they're looking at like per capita carbon emissions and sort of surrender to the tragedy of the commons in a way.
So I I'd ask, even if we fix things domestically, we'd probably still be in trouble at a global scale. What do you think the key to ensuring multinational corporation is here?
[00:10:16] Albert: Well, th the first key is to take care of your own problem. You know, it's like, I mean, this I'm not religious, but it's a great biblical verse, you know, about like, what do you care about the splinter in your, you know, brothers when you haven't removed the log jam the new years?
Right? I mean the U S. It was responsible for 50% of this is a cumulative problem. This is not an aunt. Like we're responsible for 50% of the emissions that are up there. So like, unless we dig deep, like really deep, we have no moral authority of any kind. And I think step one is just that little moral authority because that's the only true authority there is.
So so, you know, for us to be critical of, of India and China, Of the two, I was more worried about India until fairly recently because China already had climate religion. I mean, yes, they were still doing some coal fire power plants, but just to put things in perspective, China is building 17 new nuclear reactors as we speak, at least that we know of possibly more.
Right. India was really the big laggard and given the scale of their economy and given the growth of their economy, I was more concerned about India, but India recently too, has gotten real. Moving on this and there's many issues with the Modi government, but but they really seem to have gotten the message that India is one of the most exposed nations to the climate crisis in terms of its geography.
And so there's been a huge moment for instance, on EVs in India, even just in the last six.
[00:11:45] Alex: You know, climate gives us an interesting segue into crypto, which you've written about the relationship between, and I'd like to touch on briefly as someone who certainly an advocate for crypto and innovation going on in blockchain technology, I'm sure there's a lot of, or a fair amount of dissent and even some claims of hypocrisy there.
I think proof of work seems to be the main culprit when it comes to any sort of claims on climate. And I'm curious to hear how you think the evolution of protocols in the space will like interact with climate going forward. Yeah.
[00:12:13] Albert: I mean, you already pointed on the question. Proof of stake is not even worth discussing because it's just a bunch of, yes, this may be some slight computational overhead relative to a centralized solution, but it is so low that it's not worth talking about.
So it leaves us talking about proof of work. I sort of believe that the world has significant benefit from the existence of at least one proof of work system. And obviously the dominant group of work system today. Assuming that the theorem successfully transitions to proof of stake will be Bitcoin.
And so, you know, My view is we need so crazy, much more electricity than we have today. Anyhow, because when I move all the cars to electric, remove all the home heating to electric when I need more air conditioning. So. Roughly call it. We're going to need two X, the amount of electricity wrapped putting today.
And by the way, if we had three or four X, we would know what to do with it. Electricity is beautiful. It's like this finely tuneable energy. Right. You can apply it to the, like, you can dial it in. So precisely. Right. So I think the idea that somehow we're like, okay, we're not going to know what to do with electricity is totally absurd.
Right. So I think when you put it against that backdrop, then suddenly the sort of electricity consumption proof of work, I think doesn't. Really register all that much. That's number one, number two. I very much think that proof of work will gravitate towards the lowest cost of electricity because it is the number one cost of proof of work.
And so yes, if we allow coal to be the lowest cost of electricity, we have a real problem. But if we do what we, I said earlier, have a massive carbon. Then proof of work will never run on coal-based electricity. It just will not be competitive. So that will help migrate this towards green resources. And then I think once the further I do infect belief, this can be used to bootstrap green path.
So, if you think about community solar today, you have the chicken and egg problem where you go around the community and you say, Hey, wouldn't it be great if we had a community solar array? And if we did it, would you buy some electricity? And people say, well, yeah, that's interesting how long it's going to take the year.
Like, yeah. Well talk to me when you have it. Right. But of course now we don't have customers. So now you don't have the financing to put the community solar. Like Bitcoin lets you reverse that. You can put up the committee solar, right? You started mining Bitcoin. Now you go to people's door and say, Hey, the community solar rate is there.
It's right over there. You can see it. You sign up today. I will switch you over today. That's a totally different value proposition. And if you think about it, for instance, why did Uber succeed? I mean, yes, we can talk about some of the shady tactics, but by and large, because they'd raised a lot of money so they can bootstrap the supply first, they can prepay for supplies so they could pay drivers to be on the standby so that when they turn on the demand, like you pulled up the app and there were lots of.
That is a totally different proposition from sign up for this app and some, they will have drivers on it. Right. And so I just think that so much of this criticism I think, is not embedded in the larger context of the dramatic need for more electricity, not embedded in an understanding. It's the relative prices of different types of electricity that matter.
And they don't just matter for Bitcoin. They matter for all electricity consumption, whether we're using green electricity or dirty electricity, and we need to change this relative prices. And the second we do, we will also change what Bitcoin runs. And third, they don't even consider this idea that this is like a totally novel financing mechanism that I think is a perfect fit for these assets.
My view here is there's a lot of this feels like an easy target because when people sort of hear the amount, they're kind of shocked by how much electricity proof of work consumes. But again, in the broader context, I think this is a red herring
[00:15:54] Alex: as Someone who's, who's been following this for quite some time.
Now I'm interested on hearing your thoughts on the progression or where you think the most traction will arise in the space. And very much of the opinion that, you know, non-funded doubles and tokenization will probably proceed DFI tools chronologically. But I'm interested in hearing what you think.
[00:16:11] Albert: I don't think anybody knows anything. I mean, look, the way I think about crypto is. There's a deeply important, fundamental innovation here, which is being able to maintain consistent data without having to centralize the database. So, and centralization always means giving control to somebody. I mean, this could be a, you know, a group like banks, like in a federated system, but still you, you basically say here's the powers that be the powers that determined.
So having the ability to have consistency without anointing, somebody is, is an incredibly important innovation where, and how this will all play itself out. I don't think I'm I don't think anybody's to understand. So as an investor, that means you have to do lots of different things and then some will work and some won't.
I also think. Unlike the web. And I've said this many times, this is not a technology welcomed by regulators. The web was very welcoming to regulators. We've got all sorts of safe havens exclusion from sales tax, you know, telecommunications decency act, section two 30. This is not welcome wise. It's not welcome because this very much goes against incredibly politically powerful incumbents, such as.
Such as now the large internet companies and such as the biggest power itself, which is government and you know, as part of a government, the federal reserve banks of the world. So this is not a welcome innovation. This will be fought all the way. And so that's yet another reason why I think making predictions about if, when and how it will be adopted, I think are extremely difficult.
Because it's very hard to see which way this regulatory risk is going to flow. And I can think of many, many different scenarios of how this will play up. And I'm not smart enough to know which one of them
[00:18:01] Alex: will you anticipated. My next question there. I'd like to take a little bit of time to chat about your book, a world after capital.
It's phenomenal by the way. I think I first heard about it from Jude Gemilla. We spoke a lot about how you chose. Publicly anyone can literally go to the site and see edits being made and suggest new ones. I mean, it's almost done now, so maybe don't do that anymore, but
[00:18:23] Albert: I will consider thanks for the next book.
[00:18:27] Alex: Yeah. I I'd like to get into some of the core ideas with the time we have left, but firstly, what compelled you to write the book and what compelled you to write it publicly?
[00:18:37] Albert: Well, I would say, I think there's. A happy confluence of things. One is I early on discovered computers in my life and I've spent a lot of time studying working with I then also happened to have studied economics long before this particular combination became popular.
In fact, at the time both departments were like, we've never heard of anybody doing this and why should we even talk to each other? So so it feels like I've been thinking about this problem for most of my life. And also I've been actively participating in it's we're investing in backing companies that.
You know, moving this, you know, the sort of capabilities of information technology and how they're deployed in the world forward. And so as a result, I spend a lot of my time thinking about what, well, what does it all mean? Like where where's this journey headed? And, you know, I started to feel like I had some useful insights that were worth sharing.
And so I first started giving some talks and. I realized that the talks were hard to give because people were missing so much context. And so I felt like putting it all into a book would be a good idea. Now writing it in public, I think, look, I
I continuously find that on almost anyone topic. There are people smarter and more thoughtful and better read than I am. And so why would I say. You know, put things out there so that I may find some of those people and they may be like, well, have you read this or have you considered that? And you know, I think the final product is mine in the sense that all errors, submissions terrible ideas, I take full responsibility for it, but I think it's improved significantly as a result of.
[00:20:05] Alex: You know, one of the biggest themes that I think is interesting here and something have chatted about with, I think it was Tyler Cowen who who seems to fall into this camp is the idea that the industrial age is basically expired. And that we're hanging on to it in a refusal to actually enact radical change.
When you're describing that to someone practically, what are any real world examples you tend to give?
[00:20:26] Albert: Well, To me that the heart of the industrial age was that what I called the book, the job look, which is this idea that, you know, by letting entrepreneurial companies go and make stuff and letting people have good, you know, jobs that pay the money so they can buy this stuff.
We had a very virtuous circle for a long time. Right. It gave us a lot of the things we have today. For instance, being able to buy cheap clothing, being able to buy amazing computers, you know, all these things. But I think it's become a vicious cycle now where, you know we are spending trillions of dollars on advertising to convince people that they need a 17th pair of sneakers you know, and that they should be paying, you know, $300 for a pair of sneakers.
And And then people are working incredible hours to then be able to afford that pair of sneakers. You know, and we've in the process taken some of the world's brightest minds and have them you know, figuring out what ad algorithms or engagement algorithms instead of having them figure out how to fight climate crisis.
So, yeah, I think this, you know there's many different places where you can see that we're, we're we're part past the industrial age. Easiest way to think of it. As the industrial age was great at solving students as a problem. And it has basically solved those problems, leaving over problems, that it is not good at solving, right.
It's almost definitionally. So like if a system is good, it's not good. No system is good, everything. It just doesn't never works that way. So if a system runs for some time, it'll have solved the problems that is good at solving it, leave over and also create along the way problems that it's bad. And so we talked, we spent a lot of our time talking about the climate crisis.
Why is the climate crisis, which is not like a novel problem? It's not like people weren't bringing the alarm bells back to the seventies and then increasingly louder over the intervening five decades. It's because the system isn't geared to solving it. Does that mean we need to do away with capitalism?
No. I mean, the book is called the world after capital, not the world after capital. And the reason it's called that as, because it's saying, look, the binding constraint on humanity, isn't physical capital. We have enough machines, it's really attention. It's like, what are we pointing those machines at? Like, what are we building?
And the attention to distribution problem or allocation problem cannot be solved by markets because prices don't exist for some of the most important things to pay attention to it. So that's the essence of the book. And I guess one more thing here, which is.
People know that this expiration has occurred. Right. It's why we have phenomena such as Brexit and Trump and you know, political gridlock in Europe. The system isn't a functional system, I think. But people are so afraid of letting go. And so unimaginative about what could come next, that they would rather cling to a expired, broken system than try and create.
[00:23:16] Alex: Albert, this has been phenomenal. Thank you.
I appreciate the time very much. Yeah. Great talking to you. Cheers. Have a good one. Bye.