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Web3 is a mindset change

· 5 min read
Calvin Cheng

a16z wrote a well thought out piece expressing the why and the promise of web3 as a design challenge requiring strong foundations in 3 aspects

  • technical decentralization
  • economic decentralization
  • legal decentralization

It's a great read and I can definitely identify with it in relation to my own experiences working with a range of crypto-native, web3 companies.

I have been lucky enough to have opportunities to work for a diverse range of companies - from the traditional, hierarchical company in my very first job and transiting through a range of software-centric, web 1.0 and web 2.0 startup companies. And I have had the chance to see first hand how different the leadership's mindsets are, across the entire spectrum of operating culture.

The Traditional, Industrial Corporation

The traditional corporation in the 2000s is all about management command-and-control, operational efficiency and cost control. This model has a long history from nineteenth-century industrialists. Peter Drucker (1909-2005) taught that management is a liberal art and infused his management advice with interdisciplinary lessons from history, sociology, psychology, philosophy, culture and religion. Drucker's approach worked well in the increasingly mature business world of the second half of the twentieth century where large corporations have developed basic manufacturing efficiencies and managerial hierachies of mass production.

But Drucker was ahead of his time. He is also intrigued by employees who knew more about certain subjects than their bosses or colleagues, and yet had to collaborate with others in a large organization. Drucker challenged the common thinking about how organizations should be run and took it upon himself to poke holes in their beliefs, hoping to challenge organizations to evolve beyond their assumptions.

Drucker's writings have predicted many of the major developments in the past 30 years, including privatization and decentralization; the rise of Japan, the decisive importance of marketing and the emergence of knowledge work that necessitates lifelong learning.

Dot Com Boom-and-Crash and Web 2.0

However, Drucker did not fully understand the economic significance of the internet. In an interview with Erick Shonfeld, Drucker expresses his belief that the cultural impact of the Internet is unbelievably great and has tremendous importance, it is only marginal [economic] size. In his given context and mental framework, he sees the internet as "another distribution channel" for corporations.

Almost 20 years later, with the benefit of hindsight, we now know that the companies with the biggest market capitalization in the world are mostly internet companies - from Apple, to Microsoft, Alphabet, Amazon and Meta.

An entirely different way of thinking and operating has emerged over the past two decades where how-fast-you-learn and how-fast-companies-can-execute-on-knowledge-work are the critical paths that these modern corporations have, over their industrial-age hierachical corporations.

Working for the traditional corporation is distinctly different from working for a modern software-first corporation. In the traditional corporation, the management takes on a top-down approach to planning and execution. Plans are carefully charted out ahead-of-time and then timelines and resources are allocated to subordinate departments and teams.

Modern internet-age companies have management ethos that are in stark contrast against their industrial age counterparts. The emphasis is on rapid experimentation and innovation, by empowering autonomous teams and knowledge workers, on the basis of these teams' deep expertise and knowledge.

It is important to note that this mindset evolution is not a binary choice though. Rather, it is an entire spectrum of nuanced management approaches across a huge range of companies.

As a personal anecdote and in my own work experiences, these management mindset differences are significant and result in huge differences in economic outcome - both for the workers involved as well as the companies themselves.

The Web 3 Mindset

But the Web 2 / Internet-era corporate management mindset and the traditional corporate management mindset are similar in one fundamental aspect - maximize profits for insiders, management and shareholders, even if it's at the expense of the wider social good.

And this is exactly why Jack Dorsey is famously critical of a16z.

To Dorsey, Andreessen Horowitz and its $2.2 billion crypto fund epitomize much of what’s wrong in the crypto movement. By funding companies that enable a new internet built on the blockchain — aka Web3 — Andreessen Horowitz is positioning itself to profit mightily from a system that (if it works) is meant to distribute gains to the users. Funding these companies can also entitle VC firms to tokens they can use to steer governance and take outsized returns, which doesn’t help matters. “You don’t own ‘web3,’“ Dorsey tweeted. “The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label.”

Will VCs have an outsized influence on the nature of web3?

Or is there yet hope that the crypto purists (like Jack Dorsey) and VC-funded web3 startups have a path on a middle road?

Web 3 takes the concept of capitalism to a much wider audience - but that requires a shift in management mindset and style. It will take a whole new mindset and leadership model to understand the zen of growing the pie to empower communities and customers, beyond management and shareholders (investors).

There is nothing harder than changing people's behaviour and mindset. This is a non-trivial mindset change for people who are already well-schooled with operating models of Traditional Corporations, the Web 2 corporations or the VC-funded corporations.

Are we at the beginning of a better, more enlightened form of capitalism? Or is it more of the same?