11 - Network State Conference 2026 - Fireside with Mike Maples of Floodgate and Balaji

Thanks for flying all the way out. >> Yeah, it's a nice flight. >> So, why don't you just tell everybody about your background? Early investor in Twitter, Twitch, you know, Floodgates being a major a major angel for many years. >> Yeah. So, I guess I'm one of the OG seed investors. So, I invest uh either too early or way too early in startups. So, uh you know, when I invested in uh Twitter, they were trying to decide whether to call it TWWTR or uh voicemail 2.0 You know, Lyft started out as Zimride. Octa was Sasher. Uh, and so, uh, yeah, too early, way too early, or legally ambiguously too early. >> Well, you you were one of the seeds of seed investing itself. Like seed investing wasn't it wasn't even a thing that people did. It wasn't a category and people, right? >> Yeah. Yeah. So, um, you it's hard to believe now, but in 2005, you couldn't raise a million dollars in Silicon Valley. you raised either quarter of a million dollars from angels and friends or you went straight to a $5 million series A, >> right? >> And so, um, a bunch of things happened. You know, you had the LAMP stack and you had Amazon with web services emerging. And so, you know, my saying was that 500,000 is the new 5 million. And so, that was kind of how we got started. >> So, we've we've kind of, you know, it's funny to put this way. We both uh, you know, have about 30 years in tech in some ways. me since college and >> where did the time go? >> Yeah. Yeah. Exactly. So, uh you know now today though that era of Silicon Valley may be coming to an end and uh with you know Larry Page, Sergey Brin, Zuckerberg, Larry Ellison, Elon Teal all leaving California, many of our mutual friends, colleagues and so on not in the news. You know what are your thoughts on that? Because you you saw the talk I gave 13 years ago and that arc you were saying is playing out. >> Yeah. So um and I don't know how many folks have seen Bology's talk at Y Combinator in 2013. Okay. So there were you gave that talk but um there were two or three things that you said at that time that really stuck with me. So I I was working on a set of ideas that I calledorked capitalism. And so I thought that networks were beginning to uh subvert the the modern corporation and become the most valuable companies. And what you made me realize, you talked about a few things. One is uh Albert Hirschman's book, Exit Voice and Loyalty, which I think you're going to have a panel on later on. Um uh and then I think that the the other thing you mentioned was the paper belt. And I started to realize that the paper belt was a metaphor for more than just companies. It was a metaphor for all the institutions in the western world. And uh and then you wrote a an essay. I think it was called like software is reorganizing the world. And so that was to me that was kind of like your first foray into sort of declaring the network state. >> That's it's funny because there was you know I was a very private person. Um that was the first talk I ever gave and uh both Salsberger's New York Times and the Wall Street Journal denounced me for doing that 13 years ago. Uh which is fun. Very first talk. And so I that right after I heard your talk at YC, I reached out to Andre and I said, "Can you introduce me to this guy?" >> Oh, yeah. That's great. >> And he said that that you generate more ideas in a given time frame than anybody he knows. >> Well, I I love Mark and I love, you know, everything. We've been sort of on the sidelines of this whole tech thing for the last several years exchanging observations and I think we have a lot of values in common. you know, we saw how the valley built out and um you know, one of the things that also you you mentioned three things from the talk which were um the concept of exit voice and loyalty, the reorganizing the world like the mass migrations and the paper belt and of course they're all kind of tied together where the disruption of technology causes a backlash from the institutions and leads to a physical exit. Um but you know one of the things that I didn't fully anticipate over the last 13 years is you know tech has become really really popular and and the thing is in becoming that popular you know obviously you're a capitalist I'm a capitalist but the capitalism part of technoc capitalism has made a lot of people in the valley chase money per se more like like sooner shorter term you know right >> um and I I you know, I think the values that underpin the valuations are very important and you've always been a very win-win person. I'd love to hear your thoughts on that. Is that changing? Do you think you know? >> Yeah. So, um, if if I zoom out, one of the ways I think about a startup or at least what I'm interested in is um, it's a break from the present. So, a startup that matters has to refuse something. >> If so, I'm not interested in investing in a better version of something. I want to invest in a brand new version of what's never been. >> And uh to me that's the way entrepreneurs win is not by being better but by changing the subject, >> you know. Go ahead, T. >> And so therefore, it stands to reason that those people need a certain type of help because everybody's moving forward this way, assuming the future is going to look like that. The founders I want to work with are out here and they're saying, "No, that's not going to be the future. There's a different future." And what they need to do if as long as they don't want to stay there all by themselves, they have to persuade people to join a movement. And so movements literally move early believers to that different future. And they co-create the future. You early customers and employees co-create the future with founders. And so um that's what I'm really interested in. So then back to your question, you want to have all of the the the team, the early investors, the early customers, the right kind of crazy together, right? Everybody uh tends to believe in a hidden truth that the rest of the world doesn't believe yet. In fact, most great startup ideas, most people don't like at first. And so you want to have people that are animated by belief, by the same set of beliefs. And one of the challenges right now is there's so much money and so many sources of money and the valuations have gotten so high that founders can become tempted to try to play term sheets against each other, get the best price they can, but you know, you got to live with that investor for the rest of the time, right? It's not just one round. >> Yeah. I mean this is the thing is basically um you know I go back and forth on this because obviously you know the capitalism part of techno capitalism has resulted in this huge engine pulling all this stuff forward that would otherwise just be theory but it also is resulting in more and more short-term behavior and more envy as a consequence right because you know people are seeing these gigantic fortunes so many of our mutual friends have either exited California exited Silicon Valley made backup plans and so on. What are you seeing with that given, you know, what's happening? >> Yeah, the the thing that that I'm seeing is that um unfortunately California's uh governance has become the logical conclusion of um the unchecked lack of accountability and um a government monoculture. And so, you know, like um there's that train that we've spent over10 billion on less than a mile of track. And the weird thing about it is a lot of the folks in California politics don't think there's anything wrong with that because [clears throat] that money went to a bunch of unionized workers. And so you get to this thing where I'm going to take taxes from a large group of people and I'm going to curry curry favor with a small set of people whether it's the teachers unions or other types of unions. And you know to some degree it's massive scale legalized organized crime. Yes. Right. It's it's it's not it's extractive governance rather than governance that uh responds to the needs of the people. And so at some point um you either try to fix that or you realize that they're just coming for you. They're going to seize everything. So exactly and the way I think about this is you know the the blue business model or the party not the people which is the same thing that happened in Soviet Russia but here it's a little more subtle where essentially in California elections are held but the party always wins and it doesn't actually have competitive multi-party elections. And now the thing is that uh when that started in the early 2010s um that's when the like you there was a Schwarzenegger era there was an era within our memory where there was still some multi-party competition but when that competition went to zero when they actually had a total monopoly on political power you could have the NOS's receiving money to hand out syringes and that employed party people you could have the hundred billion dollar California train to nowhere you could have various boondoggles of solar subsidies and so on and all of that as you point out employs party faithful who their job is a function of this and they're just you know how many hundred,000 people worked on this train mission accomplished in that sense are going to show up to vote um so I think when something like that is happening you have a subset of the tissue that's sort of devouring the host and you have to exit because they've got the political power and you it's very hard to to surgically just dislodge that, you know. >> Yeah. So, you either have to exit or you have to have a quick escape hatch. >> Sure. >> And so, a lot of the people I know in California, and this is the part that's more sobering, is uh a lot of people I know have a backup plan. They have a they have a plan B that they can activate very quickly. Y and and this is the thing that these people don't understand, you know, when they try to pass these wacky laws and well taxes and, you know, goofy nonsense like the trains or they can't build a sun shade in LA, that kind of or houses. People readjust their expectations based how people act and uh people have options and it's an option. This is the thing is so many of these laws or movements are based on a 20th century world of stationerity and immobility and lack of options as if the entire world wasn't one click away you know and and they was like oh where would you live other than California but there's so many places that you one could go on the third hand I've been surprised by how long it took some of our colleagues to move on the fourth hand I'm not surprised that They eventually did. >> Yeah. And you know, the funny thing is I I don't want to move. Like I I I think that the land in coastal California is wonderful. I love the weather. I love the people I get to work with. If if I if I if it ever comes to pass that I have to move, it'll be just because they ran me off, right? I have no desire to move. >> Well, you know, so on this, I I've been thinking about this and I think the frontier is the filter. That is to say, like the more desirable the land, the less desirable the land. and vice versa. I if you've got what I mean by that is if the land itself has some amazing climate or something like that, so many people will be fighting over it that it's red ocean. And so instead, what you want is relatively undesirable land, which is blue ocean, you know, like the thing you're just saying where it's a it's a piece of land that someone can see a potential in, a future in that nobody else does. And then it's more desirable because it's not desirable. nobody else cares about it. So you have the freedom to you want which is actually the cre the key thing not so much the climate per se. I don't know your thoughts on that. >> Yeah. Well I mean part of what I like about what you're doing is you know to some degree the network state ethos is don't get mad get organized. >> Yes. Right. >> And and and you know you you know you can you can do things within the state of California just like you can do things by exiting California. Uh you know exit is what gives voice its power. Right. and and the the the opportunity and the optionality to exit. Uh so I I still like that land a lot. I still like living there a lot. Uh and so I'm trying my hardest to, you know, make it work. Um the the the thing that's scary about it though is that they've taken on so many liabilities in the future that you just you get to a point where it's like how are they not just going to seize everything? And and when that happens, the exit becomes inevitable, which would be really sad. That's the thing is I I think in general it's always better to jump than be pushed you know if you know that's coming then much better to do it on your own terms you know and where are you seeing people go obviously some of our friends gone to Texas some to Florida where where some now to Argentina and so on. >> Yeah Texas Florida uh um where else um uh you know I'd say those are the main places. >> Yeah. So Dubai also is up. Yep. >> Um anything that is an interesting place that that you know you've been looking at that others don't know about yet? Like I don't know Uruguay something like that. >> I I wish I I'm too busy. Uh but but um you know this Kha'Zix done I mean just legendary you just >> come and visit. You're come visit. >> Yeah. Yeah. Yeah. I I mean it's just uh what they've done and just their just the the ambition and the hutbah is just extraordinary. I mean it's just so impressive to see that that's happening in the world. >> This is a good I mean they had such a tough 20th century. Um you know like that was where like goologs were. It was like the Soviet Union was there and so on. So they really deserve the you know the the amazing stuff they're building there now. It's crazy to go there and see how modern it is and realize that within living memory that was communist. And then conversely, right, like if you think about California 40 years ago and then what it is now, it's like two curves that are, you know, that's why I say it's not third world and first world anymore. It's a ascending world and descending world, you know. >> Yeah. And, you know, it's it kind of illustrates your idea that history is going in reverse, right, ways. Yeah. Because and the thing about this is you know in tech people like you and me we know that things get disrupted right you know that Kodak had its day and then it wasn't there anymore right or Hollywood had its day and it's really getting disrupted but you know many people for whatever reason they can only think about that the level of a company but not one level beyond at the level of a community or an institution or a country. Would you have any thoughts on that? I've I've got thesis. >> Yeah. Um well, another thing that influenced me a lot, it was even before your speech was his book, The Sovereign Individual. >> Yes. >> And um one of the one of my takeaways from that book was that um technology was going to make the economics of coercion less attractive. >> Yeah. >> So, it's not that states don't have the power of a monopoly on violence. They do. That just is what it is. But if if states use coercive uh powers in an extractive way rather than to to enforce property rights or individual rights or their own nation state rights um it's going to become increasingly more costly to them because people have the are sovereign enough to flee exit. So, you know, on this, by the way, I do think the sovereign the sovereign individual is a good book, but there's a few things that it did miss that I think are a useful counter force to it. So, it really didn't think about China or AI as much. You know, other books like Kerszsw stuff. So, if you superimpose, you know, some of these different things, um, there's at least three sort of counterarguments to sovereign individual that are or compliments. One is let's call it the individual sovereign. If individuals are gaining superpowered then someone like Xi can become so powerful that actually they can restrict the freedoms of other sovereign individuals right >> two is the sovereign collective where a group of people work together right and then third is uh the drone army right and this is actually something where you know the logic of the sovereign individual is you're going to need lots of uh you know you need money to pay an army and in the absence of state tax collection and coercion and seizure and all all that kind of stuff in the 20th century. Um you wouldn't have the total wars that you do, right? But what it didn't anticipate is robots and drones creating tons more robots and drones and compounding such that electricity led to labor led to more robots and drones which can basically completely vitate what a military and army even looks like. right now. I've got I've got some thesis on this, but I'd like to hear if you've thought about that at all. >> Well, um, you know, the the way I've kind of internalized it is that, um, you know, when you gave your talk in 2013, it was networks that were really the the activation mechanism for kind of applying the ideas of exit, voice, and loyalty. And now AI lets individuals and groups be much higher agency. You know, you can have fleets of virtual people, I suppose. Uh and so I think that it empowers individuals and groups uh to do more. Hopefully it empowers governments to do their jobs better too, right? It's funny. It can make good governments I mean AI is amplified intelligence even more than artificial intelligence. So the better you are, the better AI is. If you're interested in solving math, it'll solve math. But if you're interested in doing malware, it'll help you do malware, right? So it'll make bad governments worse. they'll become crazy surveillance states. It'll make good governments better because they'll have automated processing of all of your paperwork and so on and so forth. So I think we see huge divergence in variance in governments. I know your thoughts. >> Yeah. Um I haven't thought about it as much as I should. My my hope is that um some of these ideas can be applied in free societies to make the governments more accountable. So like the way the way I look at it is most institutions they start out fulfilling their mission if they succeed and then they create lots of abundance create lots of abundance and then there's sort of this logical conclusion where they exist to perpetuate themselves and this happens by the way in our industry too right like Microsoft got to a point where they've got to convince you to buy a new version of Word every year right >> uh rather than make Word legitimately better every year. Um, and you know, Facebook got to a point where they got to convince you to get angry looking at your feed all the time. And so, you know, the logical conclusion of something that achieves dominance is usually to perpetuate its dominance. And usually exit ends up becoming the mechanism to break that dominance. >> You know, on that um Mike Merittz has this concept of uh every business is supposed to serve one of the seven deadly sins. And what he he means it tongue and cheek. What he means is if you're not serving a visceral human need, eg getting somebody food, gluttony or um you know helping them achieve something quicker, sloth, right? Then you're not going to have traction. The problem is as you say that while that's meant to be a joke, it's not meant to be, you know, taken too seriously at a certain level scale like Netflix becomes so successful that they say and I and I know the guy meant it as a joke, but he said like, oh um Netflix is meant to compete with wine with your spouse, you know, it's meant to Right. And so then you this is the thing you're talking about where you optimize it to win so much that it's actually doing negative some things for humanity. >> Yeah. you get to a point where you just can't make the pie that much bigger >> and so you have to become extractive and so you know that's what ends up happening and so the the the the tech industry has this miracle of renewal though you know as soon as Microsoft becomes a monopoly out comes the internet and and they become less relevant to be a monopolist and then you know Facebook becomes a monopoly and then you've got AI and so so but but um we need more corrective mechanisms for our institutions like I I I want to try to help fix the western institutions, right? It's worth trying to save. >> So, so we're going to talk more of this. One thing I want to say is there's at least one private sector version where, you know, the seven cardinal virtues offset the seven deadly sins. >> And one way of thinking about it, if you're standing in line at the supermarket, you know, all these candy bars are set up there. Why? with all of their packaging because it's meant to kind of overwhelm you when you're standing there and looking at it for 3 minutes like, "Okay, I'll have some chips." It's all set up. I mean, it's not like they have fresh fruit there, right? It's not like they have nothing there. All the placement there is very highly optimized. So, you've got these many billion-dollar corporations that are trying to break down the willpower of one person, right? And the opposite might be join a community where the community is focused on um the opposite of gluttony, right? Temperance, you know, uh the opposite of sloth, you know, like you being sedulous, you know, hardworking. And then you kind of make a purchase decision and now you get the social pressure in a positive direction. I think that's going to be an important offsetting term. >> Yeah. And that's what I like, you know, I've heard you use this term of like a moral innovation, right? Exactly. So it's kind of like a startup is like a product or a technology breakthrough innovation and what you basically do is bend the arc of the present to a different future and you move people to that different future and a moral innovation I think you say hey this isn't good and rather than just feel like a pathetic helpless victim I'm going to say hey there's a better way to do this I wonder if there's people who agree with me let's join together make it happen you know make that different future happen and so it's it's it's taking matters into your own hands with a set of common believers right In that way it's very similar to how I invest. >> That's right. Now you said something else which is this will be a recurring theme but you know it would be nice if western institutions could be fixed. My view is um you know like there's a progression from Christendom to the west to the internet just like you went from Britain to America to the internet. It's like the version 3.0 You know, and I'm not sure western institutions as western institutions can be fixed, but I think internet institutions, internet first institutions built by the internet can replace them. What are your thoughts on that? What, you know, go ahead. >> Um, you know, I think that that they certainly have to be reinvented. Yeah. >> And I don't know what form that takes. Um, I guess I'm a little bit of a David Deutsch fanboy. Uh, wrote this book called The Beginning of Infinity. >> Novel loves David. >> Yeah. and his basic idea is that if it's possible in physics, it can be done. >> Mhm. >> And so I look at it like we ought to always try u to upgrade our institutions whether that means we start over or fix them but but like we should try uh because there's a lot you know California's got a lot of great things that are worth saving right and um I'm not making any predictions about what'll happen but it's worth trying. you know, you want you want everybody to play a role in making each part of it better if they can. >> It's funny because, you know, the term institution conotes a degree of establishment, right? Legacy like institutional. So, you know, what we do is innovation, disruption, right? Which is almost the opposite of the connotation at least of institution. So, one might instead say um here's an organization, right? Which is a more neutral term perhaps, right? institution conotes old, innovation conotes. Here's an organization that does a certain function in society. How can we develop a new organization that accomplishes that function even if structured differently? >> Yeah, I agree with that. And and I also think that it's um this may be a crash thing to say, but you know, people have talked about that book uh built to last. >> Uh somebody probably ought to write a book called Built to Die. >> Yeah. >> And like we unfortunately we all die and uh you know >> how many companies how many of the companies in built to last lasted? It it's well, but death is kind of an important invention of life, right? It it makes way for the new and and I think that um some of these institutions that have kind of got gotten to I like to say that um growth is a combination of ambition and acceptance and it's like you know you want to some of these institutions get to a point where that propagating themselves and their own power becomes more important than their ostensible mission. Yes. And I think for the most part they have to be replaced. >> Yeah. What does it say? It's like everything starts as a starts as faith and it becomes a um it becomes in business it becomes extractive and so and so at some point and these institutions I mean if we say like Netflix has gotten like somewhat bad or what have you these institutions you know I don't know academia uh many of the bureaucratic parts of the California bureaucracy zone have gotten far beyond that they don't they arguably don't do any good um but so well okay what is what are you what are you looking forward to what's going well, right? You're talking about the problems with the states and so on and so forth. We're seeing our friends, you know, make all these backup lens. What are you seeing that's going well? >> Oh, I mean the the the AI uh advancements are just incredible. And I mean this stuff's going well. The stuff you're doing is going well. Uh and so uh I mean it was just a speech 13 years ago and and I mean how many people moved to that school in Kazakhstan? How many? >> Hundreds. Yeah. >> Yeah. That's I mean that's wild. Yeah. I mean, I just thought you were writing some blogs about it and stuff, but I mean, it's been incredible. So, I I'm um >> you know, I'm uh sort of surprised at the degree to which a lot of people are doing stuff. >> Yeah. >> You know, Elon is blasting rockets into outer space when we said we're not doing that anymore. And, you know, Tesla actually works. Full self-driving. It actually works. And like um you know, yeah, we got a lot of insanity and craziness and you know, stupid people acting stupidly, but we've got a lot of people that are showing that it's possible. >> Yeah. I mean, it it's interesting because um you know, the tale of two cities opening, it was the best of times. It's the worst. So, it's the best of times technologically and the worst of times politically in the west in some ways. And you know, it's funny because uh you know, a few a few years ago, I was talking to one of my friends. He was talking I mean of course look AI is amazing does lots of great stuff. He's talking about AI and I said, you know, imagine someone solving the Reman hypothesis, but they're on the Titanic, right? And what's funny is just like yesterday or two days ago, the math singularity hit and the quasi reman hypothesis was literally solved, right, by open AAI. And so like that metaphor that I had became literal, right, and yet at the same time, unfortunately, they're like shooting at and malttoving Alman's house, you know? Yeah. >> So, the the physical API and fixing that seems to me if there's some way we can use this to help with this. >> Yeah. And it's um and I'm just curious like how many people here are doing startups or involved in some type of a network state initiative and so I mean the the main thing is like it can be done and you're going to encounter a lot of resistance. you know, startups and these types of things are provocative act, right? It's a disagreement with the present and you know, the status quo is going to fight back because the status quo literally has the word status in it, right? People who have their status, you know, associated with things staying the same are going to fight back and they're not going to fight back fair and they're not interested in negotiating in a fair way. But like it can be done and people have proven that it can be done. Elon's proven it can be done. A lot of these founders that I've had the chance to work with have proven it can be done and it's like the belief that it can happen makes it a lot more likely that it can happen. >> That's right. And you know Anderson has also talked about this that at least today the world is a surprisingly plastic place where if you move really fast in a direction with a lot of you know you have to get all your numbers right and and so on but it can shift if you put pressure on. >> Yeah. And and of course it's going to be, you know, it's like uh people not liking Sam Alman is part of the process, right? >> Nothing against Sam, by the way. Nothing against Sam. I'm just talking with the crazy people, >> whoever. Right. But it's just like the president is always going to fight back. >> Yeah. >> And it's not going to it's not going to be nice to you. In fact, a lot of the times the founders I work with in the early days, the world thinks their idea is stupid. And so that's tough. But the tougher part is after they succeed. Yeah. after they succeed, everybody says, "Well, you cheated somehow or you're a bad guy or you got too much power or whatever." And you know, here it was your life's work and you fought and bled for this thing and you got all these people saying bad things and throwing rocks at you. >> It it's, you know, it's like with the Instagram acquisition, you know, today people are like, "Oh, obviously Zuck bought it that was antirust and so on." But then if you actually go and look at the contemporary coverage of it, John Stewart said, "Oh my god, a billion dollars for something that makes dumb." He's like, "The only thing that should be called Instagram is something that instantly gets him a gram of Coke." That's what he said, right? He thought it was so fun. And the thing is, at the time, that was like a fourth of Facebook's cash on hand. It was for a product that made no money. It was months before the IPO. Zuck did it like only informing without, you know, getting a board vote. He didn't need a board vote. Every And yet he had the gumption. Oh, and Instagram had like it was worth 500 million like 3 days before and then they paid a billion and because they had just launched the Android app. For all these reasons, that was a very nonobvious thing. And it also seemed to signal to Wall Street, oh, there's going to be so many competitors to social media. Facebook doesn't have a moat. It has to pay a billion dollars to do this, right? And uh and so the only consistency is the negativity. People were really negative on Zuck when he was doing the thing and then they were really negative on him when he succeeded. Yeah. >> And it's just like, you know, it's funny like I tell many of my portfolio companies, you know, as a CEO, you can be hated as the CEO that had to fire everybody and go bankrupt or you can be hated as the CEO that made so much money. You should be the second kind of hated, you know, like win. Yeah. Right. >> And and it's interesting and and and I saw a lot of your founders um most people should not like your idea at first, right? Like that's the counterintuitive thing, right? Like human beings are conditioned to like things. And so if everybody likes your idea, it's too similar to what already exists. The the best ideas have kind of this polarity to them where most people don't like it. But this some set of people say, "Where have you been all my life?" And and that that's the sign of a startup that's got a chance uh to change the future. >> Yes. Okay. Any last any last comments? Any last thoughts? uh just uh you know thanks to everybody in this audience who's uh trying to make the future different rather than just going with the flow. You know it's like you have a choice in life of what you want your life to be about. And a lot of people just try to succeed by riding the wave and just doing whatever whatever comes next. But there's a term I like to use called prime mover. And prime movers uh create futures that wouldn't have happened but for them and uh those are the people who change the future. And so it's it's risky and it's harder and it's you know you have some bad days just like good days. But I just uh salute you for trying. If if people are building star societies in state, should they come to Floodgate? >> Oh yeah, because we're, you know, we're uh spiritual brothers in arms of those people whe whether there's a deal to be done or not. So yeah. Great. Awesome. All right. Thank you. Thank you everyone. Thanks.