The Tim Ferriss podcast with Marc Andreessen is very good. Andreessen compares himself to Warren Buffett as a value investor, except that Andreessen bets on legacy industries getting disrupted, and Buffett bets that they don’t.
I generated a transcript for those who hate podcasts. Also, for those who complain that Marc Andreessen has a squeaky voice that only a dog can understand.
Source: Marc Andreessen — Lessons, Predictions, and Recommendations from an Icon –The Tim Ferriss Show
This is Tim Ferriss and welcome to another episode of THE TIM FERRISS show. I am very excited about this one folks have wanted to do it for a long time it took about a year year and a half to set up and of course every episode is my job to try to deconstruct world class performers to tease out the perspectives habits routines favorite books etc that make them as good at what they do as they are.
This episode we have Marc Andreessen, @PMARCA on Twitter. He is a legendary figure here in Silicon Valley and indeed worldwide. Even in the epicenter of tech it’s hard to find a more fascinating icon. Marc co-created the highly influential mosaic Internet browser, the first widely used graphical web browser. He also co-founded Netscape, which later sold A.O.L. for 4.2 billion with a B. and then co-founded LoudCloud which sold as Opsware to Hewlett Packard for 1.6 billion.
He’s considered one of the founding fathers of the modern internet. This all makes him one of the few humans ever to create software categories used by more than a billion people, also one of the few who’s established multiple billion dollar companies. He’s now a co-founder and general partner of the venture capital firm Andreessen Horowitz where he’s quickly become one of the most influential and dominant tech investors in the world.
Now I want to try to keep this short but it’s hard and I think you’ll enjoy at least one of about to read so we refer to an email. In this conversation. And our conversation took place at the Sand Hill Road offices of Andreessen Horowitz. We refer to an email from Marc to Ben Horowitz and exchange and this is how it reads because we don’t dig into it in the interview. Page thirteen in “The Hard thing about hard things” by Ben Horowitz which is a great book.
To Marc Andreessen. This is after a media interview where Ben felt that Marc disclosed the company’s strategy prematurely.
To Marc Andreessen, from Ben Horowitz, Subject: launch. “I guess we’re not going to wait until the fifth to launch the strategy.” Signed, Ben.
Within fifteen minutes Ben received the following reply.
To Ben Horowitz, cc: a bunch of folks, from Marc Andreessen, subject: launch. Apparently you do not understand how serious the situation is. we are getting killed killed killed out there. Our current product is radically worse than the competition. We’ve had nothing to say for months. As a result, we’ve lost over three billion dollars in Market capitalization. We are now in danger of losing the entire company and its all server products management’s fault. Next time do the fucking interview yourself. Fuck you, Marc.
So. We get into some really fun stuff in this interview that I don’t think Marc has discussed in many places. We talk about his epic debate versus Peter Thiel, we talk about all of the usual questions, favorite books that he’s gifted other people, favorite documentaries, movies, morning rituals, what he would put on a billboard, etc.
We talk about rules for investing, what he does at partner meetings to make people defend ideas or propose ideas. We talk about AI, we talk about the future of Bitcoin, drones, who to watch. We talk about what he would teach in an one through tenth grade class advice to his younger self what he misses about the mid ninety’s Internet and how he might recreate it, how he thinks about or handles FOMO. It goes on and on, we really had an extremely detailed rich conversation and I hope you enjoy it and please do say Hi to Marc. He’s very active on Twitter at P M A R C A
Without further ado please enjoy. Marc, welcome to the show.
Thanks Tim I am so thrilled to be here. I’ve been hoping to make this happen for quite some time and I figured we’ll just jump into it.
The first question is, strong opinions loosely held. You’re associated with that expression. Can you explain what that means.
Yes. So it’s kind of a mentality. It’s a mentality around how to start a company for sure and it’s a mentality of how to invest for sure and I think it’s a mentality that’s probably helpful in a lot of or the other as a life and so it’s kind of this. I’m drawn to paradox. So I’m drawn to a kind of philosophical term, it’s like a thesis-antithesis-synthesis kind of thing . So because a lot of people in the Vallley have very strong theories, and then the problem is they carry them too far because there’s always there’s countervailing theories. You know you kind of think.
Strong views is very important, right, so most people go through life and basically never develop strong views on things or or or specifically go along and basically buy into the consensus and so one of the things I think you want to look for as both a founder and as an investor is you want to look for things that are out of consensus right now. So you know something very much opposed to the conventional wisdom, which sounds easy, hard to do. But if you want to try to do it and that if you’re going to start a company around that, if we’re going to invest in that you know you better have strong conviction because you’re making a very big bet of time or money or both.
The problem is OK it’s a strong view, great OK, what happens when the world changes? Right, what happens when like something else happens, right. Basically the way the world works, kind of in business and investing and other places, is just when you think you know everything figured out, that everything changes right.
So this sort of system evolves and things happen, and so what do you do when the world changes and there what you just see everywhere, I think, in the world and everywhere in business, investing, are people just hate changing their minds. People get, you know, you see in politics all the time as well. People just get locked into a point of view on things and then you get this all this you know these biases like confirmation bias, or people feel like they have to, you know, what’s the thing in politics for flip flopping, try to see it as bad.
Right right right. So take it as an example, a politician that flip flops is viewed as bad and sort of probably evil.
Actually it’s interesting, if you talk to the world’s best hedge fund managers, that’s exact opposite. They love changing their mind. Like I’m one of the few people who openly admits I love spending time with hedge fund managers. I think they’re awesome. I think they are, I feel similar, they’re fantastic people and they are the most open-minded people I know. Because they love when you tell them if they’re wrong. They get all excited, their eyes light up, and they’re like, “Oh why why do you think that?” And they’re genuinely interested because if you’re right and they’re wrong, they will change their minds. And they will literally reverse their trade. If they were long a company they’ll flip around to go short on it, they’re totally fine with that and that’s how it works.
So what I carry from that is it’s the weakly-held part which is: convicted-convicted-convicted-new facts->change.
Right but it’s a paradox, right, or it’s attention because those are those are at the thought you know determination coupled to flexibility like they’re antithetical. What you see in the startup world is sort of these two kinds of advice that express this, and there are people who with a straight face will get both of these forms of advice without ever acknowledging that they’re in conflict, right, one of which is fail fast.
Right, you know if you want to go fast, like if it’s going to fail, it’s great to fail. You discover what’s wrong going to fail. And then the other is you have to be determined, you can’t give up.
OK Like how do you possibly reconcile those? And my view of that is that’s where you get a strong view as weakly held.
So how do you advise in that particular example? For instance, or assess which tact founders or companies should take potentially? Because you look at some examples, let’s just say, or something like that where the model as it began is very much similar to where it is now and then you have other companies. Let’s say like Twitter or others, where they pivot into a goldmine effectively, and then I mean then obviously other things have to be laid on top of that to make it successful long term, but having been in the valley now myself for fifteen, sixteen years, you see a lot of people who change their mind almost too frequently.
…with inconsequential facts perhaps. How do you think about advising a company that’s struggling as to whether they should stay the course?
So we have it, we see both cases we see both cases for both failure because we see companies that are just there almost as Fail fast thing is frankly completely out of hand and I’m old-fashioned, right, come from people like to succeed like it’s great.
I like to say like we did before, this word “pivot”, like we didn’t have it when I was a founder. When I was first out we didn’t have the word “pivot”, we didn’t have a fancy word for it, we just called it a fuck-up you know like.
I’m old fashioned on this like I like to succeed I think succeeding should be the goal not failing and certainly not failing fast or slow or any other form of failing, so I get really kind of cranked up about this but we do see companies that literally every time I meet them they pivoted, like, and so every time I meet them they’re off to something new and there it is today. It’s I thought as I don’t like watching a rabbit go through a maze or something that has never been they’re never going to converge on anything. They’re never going to put the time in, if you know actually figuring it out and getting it right.
But then you do see the other case and this is what the where the Fail fast thing came from as you do see the case you see people who just absolutely are determined that it will just palm their head against the same wall for years and years and years and years. And you admire them for the determination, and at a certain point it just becomes an absence, right’ and then you’re just at some point it becomes self destructive. It becomes Don Quixote, you’re just tilting against windmills.
You know kind of arbitrarily and so those are polls we do see behavior at the polls.
You know the question you’re asking is of course the key question, which is like, OK what’s in the middle? How do you know, and frankly I don’t think there’s an answer. That I think that’s where the answer is judgment and I think that’s the test.
There’s a there’s a couple key tests for founders or for that matter for investors in these kinds of decisions. I think that’s one of the really core tests is, Do you have to fundamentally have the judgment to be able to make that call? Knowing, by the way, that either way could be a big mistake. Like you know nobody’s going to tell you, you’re not going to get any confirmation of anybody that oh you made the right call. You’re not going to realize like if you change in that succeed it’s all.
Right, but by the way you might have succeeded if the whole thing even better if you change and fail. You know, you’ll never know whether the old thing would have worked, like you know the counterfactual. In science I call it the counterfactual. You never know the counterfactual.
The way my brain is. what I’m always thinking in terms of the counterfactual. I was thinking in terms of the way things could have been, right, that the world evolved in a certain way, kind of as a consequence of people making all these decisions on the fly. People could have very easily made a different set of decisions, the world could have ended up in a very different place, and so the idea that you’re ever going to know the consequence of your decision I think is probably a fallacy. What the alternative would have been, right, like the relative relative result of your decision. And so I just think you basically have to fall back on judgement, and you have to fall back on some sense of the intangibles.
Tim: And when you’re looking to, say, stress test ideas and if we look at it in the case of a partner meeting, here so you mention hedge fund managers. And I’ve read a profile of Ray Dalio at one point. This is Bridgewater capital and they talked about his meetings and how they stress test ideas and and how people need to defend ideas.
How does a good partner meeting go if someone proposes I was going to say a trade and investment an investment that is a substantial investment. What then happens from that point to a yes or a no decision?
So we don’t get to — A hedge fund manager can reverse himself out of bad trades, convinced you can turn around and take the opposite trade. We don’t get to do that, right, so when we invest it’s with it’s knowing that we’re in for ten plus years, basically, is our assumption. So it’s that and by the way we make an investment decision it’s a commitment of dollars. It’s also a commitment of somebody’s time, and by the way, organizations time and bandwidth, and there’s only so much of that. And then the other thing we have in venture is when we make a decision, we then become committed to that company in that category. And so we can’t invest in their competitors, including by the way their competitors who don’t even exist yet.
Right so that you know for example the investors in Friendster were more more likely than not completely and not only maybe unwilling but also unable to invest in Facebook when it came along because they were conflicted. Because the founder fester would have said you know you can’t you can bet in a competitive company and so. So our decisions are big decisions and they have serious consequences for the future of the firm so on the one hand it’s very important to us to have a full discussion and get all the facts on the table, and really kind of at these things.
On the other hand we’re trying to preserve the contrarianism, kind of at the core of what we do the strong, not-consensus view, as we’re trying to be able to invest in the things that really are unusual and odd that other people are taking seriously. And one of our theories about venture capital is that there are so many things like investing, it’s likely to make a good investment or a bad investment.
I actually think that’s not the big issue. I think the issue at least in venture capital, is where you make a good investment or a great investment and I think good is the enemy of great. We see many companies that are just fine, and that are you know, yeah you know founders are good, and the Market seems good, the product seems good, the customers kind of like it, and they get a little revenue and it’s kind of all fine but those companies never go anywhere. And then every once in a while we’ll see these companies that just have some extremely strong strengths some extremely kind of you know special wonderful thing going on that by the way may have all kinds of problems and issues but there’s something at the core of what it is that’s really special, magical, and those are the ones that we want to do. And what we’re trying to do is basically stock our portfolio with just investments like that and so to capture that you can’t. It’d be very easy to have a conversation about the weaknesses of something, to beat the idea to death, and you never invest.
And so the the rule that we have and then you would only invest in the consensus once you don’t invest in the very good ones as opposed to the great ones and then you would fail as a firm. So so we have to kind of probably have to do you get both things at the same time. We have to try really hard to encourage the strong, not-consensus thinking, but also have the full discussion to make sure that we really stress test that thinking. So the way we do it is basically each of our GPs has the ability to pull the trigger on a deal without a vote, without consensus, and as we say as if the person closest to the deal has a very strong degree of positive commitment and enthusiasm about it, then we should do that investment, even if everybody else in the room thinks this is the stupidest thing they’ve ever heard of.
However, you don’t get to just go do that yourself completely on your own without stress testing your own thinking. And so it’s the responsibility of everybody else in the room to stress test the thinking and if necessary we actually create, or we create a red team, right, we’ll actually formally create sort of the countervailing force and we’ll designate some set of people to counter argue the other side as like a debate team. It’s basically right and then the way that we try to you know this is fraught with like there’s all kinds of ways this can go wrong because like what if I bring in a deal I would have been bringing in a deal or what you know versus the new person bringing a deal or whatever and so we better not try to do is we do this to each other. Right and so whenever he brings in a deal like I just be the show is right just like you and I think it’s the best idea I’ve ever heard of and I’ll just like trash the crap out of it and I don’t try to get everybody else to pile on. And then at the end of it if he’s still pounding the table saying “no no this is the thing” then we all say, “OK we’re all in a row behind you.” And then it’s a disagree-and-commit kind of culture.
By the way, he does the same thing to me. And so we’ve actually it’s a torture test.
Tim: What are some of the keys to fighting well? In seems key to many different types of relationships, personal, business or otherwise, the ability to see conflict resolve. Or just fight well and then make up, so it seems like you and then if not my words but like fought like cats and dogs. But you always kind of get over it.
We prefer old married couple.
There is a story I don’t know if it’s accurate about Netscape early days, something related to an interview with the journalist. You know the story talking about it’s in Ben’s book.
The email you’re about to reference.
So could you could you could you describe this for people who are unfamiliar?
I really think you know that for that you got to read it. You got to read Ben’s book. But let’s just say we started out our relationship with vigorous disagreement and we’ve continued that to this day. And but how do you…?
This is a family podcast, I don’t want to use…
Oh, it’s not a family podcast. But if you want to do it all the better way, that’s “The hard thing about hard things,” it’s in the book and I’ll put it in the show.
How do you mean you guys got off to a very aggressive start? How did you identify that Ben was someone worth having those types of disputes with? That there was a value in what he brought to the table as opposed to just another person that you were butting heads with, who is not worth keeping at the table?
So honestly there were there were three things I want to see. What he would talk back to me so he would like argue right back at me. He wouldn’t just go roll over. Like he would argue right back in a lot of a lot of what you see this. I did you just observe a lot of companies over time or investment firms or whatever you know everything you know there’s a temptation everything must become a hierarchy and then people always don’t with the preparations what’s speaking truth to power and a lot of what I’ve always found, the really sort of wise and smart leaders are trying to do is they’re trying to actually provide the people in the organisation who will actually talk back. It’s actually that’s one of the ways to really get ahead. You know there are certain organisations where the way to get ahead is to talk about leadership that’s how you get noticed, but there are other organizations where that doesn’t work at all, and I would recommend getting out of those as fast as possible.
We try to be at least but I want this organization be one where people will actually speak truth to power and then argue back to us just like anybody else and so on which is why I argue so much is because we want to set the model and set the precedent.
So that was want to see would talk back to me too as he was often if not always right and I wouldn’t say always just because nobody knows but like he was very smart and very clear thinking. And then the third thing is I saw something early on him, that he was just amazing working with people which is not something I think has ever been necessarily true of me. But he was just like watching him in front of a group of people was just routinely magical in terms of how he could get people out how he could communicate with people in a very clear way how he could be very fact-based but he could really make people feel you know kind of in a really fundamental way. And so that combination.
You made it clear that he was somebody very special. So we mentioned Ben’s book which is one of a handful of books that many many of the best operators, founders I know in Silicon Valley routinely reference. There are a handful that come to mind. Aside from that, Four steps to the Epiphany I guess would be one. This one here that was right in the lobby of your office, “High Output Management” with the new forward by Ben Horowitz is another which went out of print and then came back into print because it became a bit of a cult classic here in Silicon Valley. Are there any books you would prescribe to say, a would-be entrepreneur coming out of college, just to give them and to increase the likelihood of them succeeding? Are there any other books that come to mind?
Yeah so “High Output Management”. It’s one of Andy Grove’s books. It’s the best book on management ever written. He wrote another book called “Only the Paranoid Survive” which is one of my favorite topics, and so that is also a very good book. We recommend Ben’s book is good. I think Peter Thiel’s book is Self-recommending, Zero to one. And then there’s a bunch you know there’s a bunch of others there’s a bunch of others that are good. Really though I think or I got a lot of my education from was history reading history and so I would go back like I would go back and read a lot more about the contemporaries. I would go back and read about us and go back to read about Ford, Rockefeller, J.P. Morgan. Maybe it’s just me, but like I find the period of 1870 to 1920, 1930 really interesting. Sort of the arrival of many of the technologies are going to build the world that we live in today. Disruptive period.
Yeah and histories, I didn’t really study history in college or anything, but history is this weird thing where the way that you’re taught history like in school like in high school, you know ,it’s like it’s all these legendary people and they’re kind of all the Olympians the founding fathers and these great generals or whatever. And it’s like you got the names, you got the dates, and they did these amazing things and they’re kind of these great like, and they feel like unrelatable. Like you couldn’t possibly like to even think at least where I come from to even think that you could have ever had anything in common with these people. It was not something I ever heard anybody like they’re like that you know the pantheon of kind of the legendary. People who have lived and I just found, like with the really well-written biographies, they get you inside the heads of what it was like to be Walt Disney at age twenty, right, or what it was like to be you know out of a car in Carnegie Mellon or Ford or what it was like to be you know for that matter William Randolph Hearst or people have all heard of like.
The really good biographers are really good at getting inside the head of what it was like to be them before they became the people who ultimately made it into the history books. And honestly a lot of stuff like a lot of things have changed, a lot of things haven’t changed that people have changed. And so I was trying to get those histories you can always kind of see, OK that personality type like yeah I know you know thirteen people like that you know. And so I find out there’s actually a lot more it’s a template against a lot more to kind of think about, than people give history credit for.
Tim: I had Cyrus the Great recommended to me. And people don’t change and you see the same archetypes like oh that’s Bob, my coworker, he does the same thing! And the biography mentioned made me think of Walter Isaacson’s book on Ben Franklin who was always sort of untouchable in my mind and but even clued into all of his foibles and challenges and self-doubt and it really humanized it in a way that actually made me aspire to bigger things.
If you wanted to get someone hooked on biographies Is there any particular book you would recommend?
There’s a bunch. The Walt Disney biography just mentioned because it’s a great one. One of our founders, Brian Chesky, the founder of AirBNB, Walt Disney is his hero and so he’s got me even more deeply into that. A new author Neal Gabler has written the best biography on Walt Disney and it’s a phenomenal book. I actually like another one I really like coming out a kind of left field but there’s Charles Schultz, who is the creator of peanuts. The show’s biography is amazing and basically the case that he makes is that he basically makes, the biographer makes the case that Peanuts was the longest continuous work of American Art ever made, it was a sixty year art project. With deep foundations in American history and psychology and philosophy and through and it was sort of a reflection of the life you know of the person who made it and and of course it was also a great entrepreneurial accomplishment because you know as this very personal thing but at the same time it became this gigantic business success. So I think that was great.
The Wizard of Menlo Park is a great biography of Edison and Edison as very much Edison was kind of pro Silicon Valley in a lot of ways and I think he’s really interesting to his record of sustained innovation in many many different areas and he then went out to try to commercialize things. Good is that we’re much better at the commercialization part now the people in those days we know how to build the companies much better now but the pace. You know he would just routinely invent things like the phonograph like just it’s just obvious right to him and so and he did that you know for decades he was a fountain of innovation and it’s a very inspiring story.
Tim: The Netscape story we touched on a very briefly in the many places people can read about that so I don’t want to take up too much time but on a related note I wanted to ask is there anything you miss about mid 90’s Internet.
And what would it be?
Yeah. So when I got to the valley in 1993, 1994, I thought I had missed the whole thing because I thought the P.C. I had studied and studied history and I used all the stuff and I thought you know the P.C. I knew Apple and Microsoft up in Seattle, Intel down here, and all the other big software companies at the time. You know Novell a Lotus all these companies get the game. You know E.A. the gaming companies. I think they’re the great P.C. companies who got built in the Seventies and Eighties right and by the ninety’s by the time ninety’s arrived like it was the P.C. it was done like it was it was finished and like you could go by I want to write it like it was done. And in fact the overwhelming mood in the valley when I arrived was that it was done. Like the P.C. was done and by the way the valley was probably done because there was nothing else to do.
And then there was this moment where I am you know various people and more people than more people for whatever reason it was kind of like we really wrap their heads around the implication of the Internet which today seems obvious but at the time was very contrarian.
When I got to Silicon Valley, if you had said the Internet will become a mainstream consumer medium of three billion people are going to use worldwide for all forms of human activity, you would have been laughed at. Like, you would have been institutionalized. Like people would’ve laughed at you and so as we figured that out then what happened was it was like OK new frontier right is part of that goes back to the kind of history thing like you know for a long time the development of like you know the United States the New Frontier was whatever was for the west right and then eventually they got all the way to California and they have the gold rush and like and then there was famous thing you know so it was kind of theme in American history as the closing of the frontier like there’s so theme of like every Western right that every revisionist western that gets made is like there’s no more frontier. You know the radicals can’t go any further west, they just build around in the ocean.
So instead of we have our we have kind of virtual franchise with intellectual frontiers, right or we have greater frontiers or we have entrepreneurial frontiers the technological frontiers and and so the Internet kind of represented the opening of a new frontier and once we recognized that it was like brand new and then at that point that was where all the enthusiasm came from, because it was that point, like OK if that’s going to happen then you know what we have to do, and at that point the list becomes very exciting like we have to do e-commerce. We have to do all my publishing we have to do transactions we have to do you know social networking, we have to do auctions, we have to do All of the big franchise companies that came out of, you know, the next you know ten fifteen, we have to do search, all the ideas kind of immediately materialized. And then people, it was off to the races.
Tim: Is there anything comparable right now for you?
I think in my view there always is the thing is these things look like cults and fringe activities until they break mainstream and so for me it’s not. I mean so like for example the mobile Rush in the last ten years, basically since the release of the iPhone.
The mobile rush, or this social networking rush kind of post facebook. Those are kind of known and well understood. And it’s just straight entrepreneurial opportunities probably you know generally kind of reaching some level of saturation, right, a slight digression. We don’t foreclose the possibility that there will be another mobile killer app or another social killer app but it’s getting harder and harder and harder because more and more people have figured out that you can do these things and then the winners have now got their established right.
One of the ways I think about it is to to first have Facebook and then you have Twitter and then Instagram and now you have snapchat and those all became big winners.
OK now what would it take to make the fifth one?
Well there’s only so many icons on the home screen of the phone, right, the fifth one has to knock something off and knock one of the other ones off, and so it’s become these markets actually becomes more of a zero sum game or even smartphones. You know smartphones, a giant industry but like you know volumes globally are now expanding at like single digit percentages. And so the smartphone industry is becoming one that’s mostly because people competing directly with each other, not creating new things. And so we would say like those opportunities those businesses are gigantic in those companies will get much bigger but there’s not as much entrepreneurial opportunity. The opportunity is more likely to be in areas that people think are called in fringe.
Tim: What will be some examples?
What we are testing is what are the nerds doing on nights and weekends? Their day job, like the day job is I work at Oracle, or work at, say, I work at SalesForce.com or Adobe or Apple or Intel or one of these companies or i’m or not or I’m just I work in a trust company where we’re going to bank or whatever student whatever. That’s fine, they go they go do whatever they need to do to make a living. It’s the question is like, what’s the hobby? What’s the thing at night or on the weekends? So then things get really interesting, right, so then you look at like things like cryptocurrency, bitcoin, you look at things like a lot of the new advances.
There’s a whole area of kind of health hacking, you know, quantified self is a very interesting area. There’s food. You know there’s kind of that, you’ve actually been been part of the catalyst for this, but there’s this whole kind of area of like scientific food and food hacking that’s emerging. There is a revolution actually happening in robotics. Because robotics has finally become something tractable where people can do it at home.
There are deep learning is right on the tipping point, you can add on as a hobby. You can download this thing called tensorflow from Google, Tensorflow which is a deep learning framework. It’s a framework for doing in the field of AI, It’s for how computers can kind of deal with the real world and do things like driving cars or you know all these things.
This is technology that was, five years ago it didn’t really work. Two years ago you would have had to been an employee at one of three or four big companies have access this technology and then Google just open sourced it and so now anybody can download it, running on their own computer. So all of a sudden like AI’s like a tractable thing that you can just have on your own laptop, and you can build you can build things on top. You can build a bot. You can build a bot you want to build itself.
We backed a founder who literally built himself his own self driving car.
I read about it. George.
Like literally like one guy can now build a self driving car right. Ten years ago this is like a DARPA funded like Grand Challenge like research project five years ago this is a you know team of a thousand Google and now it’s George Wright and so That’s an example of the kind of thing where it just looks like it’s going to tip. And then you know there’s one George today, there’ll be a thousand Georges tomorrow.
Tim: Do you think the dangers of AI that some people talk about are overblown?
Completely one hundred percent.
Tim: Can you elaborate?
All the many things I worry about the machines rising up and killing us.
It’s not, actually. It’s very it’s related to the Luddite fallacy. There’s something deep seated in human psychology where we are always going to invent the thing that’s going to kill us and at one point or we’re going to unlock the power of the gods. It goes back to the Promethean myth. It’s like the concept of original sin. It’s like fire the big the big moral of the Promethean myth. Like fire is the thing that enabled him and civilization, is also the thing is going to burn everything down and kill us.
Very deeply embedded in our in our psychology. Frankenstein. The subtitle of Frankenstein of the novel the subtitle was the “modern Prometheus” it was direct reinterpretation of the Promethean myth except in this case it was literally the monster that was stitched together and then brought back to life through an unholy, literally unholy science. And then there was there’s even religious versions of it in in Jewish literature. There’s a concept of the Gollum which is the creature made out of mud that rise and rise up out of the three ghettos of Warsaw or something, to kill all the enemies and then come back and then they kill all the people who read it. Right so this is very kind of core John Henry still driving man right John Henry’s the famous it’s a there’s a song or the sort of story about the railroad worker and there’s the machine that can like. And can hammer the railroad spikes faster than a human can and John Henry it’s a famous showdown between him in the machine. And of course he wins and then drops dead of heart attack. Right it is critical of the method he drops out of a heart attack right because technology has to get its revenge, and so it’s just that projected forward and the reason I’m so confident on this is because it’s just every single era of technological advance. This has always been the response, there’s always been this line of thinking and then it turns out it’s a tool.
It’s a technology, it’s a tool, it’s something that helps us do things in a better way. It’s overwhelmingly to the benefit of mankind, and then we wonder why everybody got so worked up over it.
Tim: So if we put aside the existential threat piece, you know summoning of the demon conversations, we put that aside entirely. How would you answer someone who’s who worries about job displacement?
And because there are some really I think reasonably smart people who are very fearful of what will happen to society when people are are massively displaced. How would you encourage them to think about that?
Yes So let’s crystallize the concern. So the World Economic Forum came out with this this thing last year the kind of made a pretty lot of people out there said to be five million jobs destroyed by 2020. So let’s run the numbers on that. So that sounds a lot of jobs like us a lot of people it sounds like a lot of jobs. So when you look at the American economy just this year, 2016, and we don’t quite have this AI thing working yet, so we can’t blame what I’m about to say on AI.
This year the American economy will destroy twenty one million jobs and create about twenty four and a half million jobs, for a net add of about three and a half million jobs. It’s about the pace run and that’s this year right, and so we will destroy, in the next three months we will destroy more jobs in the World Economic Forum project will be destroyed by over the next five years.
Why don’t people know this? Why is this not obvious?
Because whenever you read news stories about job growth, it’s always the numbers quoted are always net numbers. So last month 200,000 jobs, 230,000, 250,000 jobs created so those are net jobs. Nobody reports the gross numbers. The gross numbers are back numbers. We destroyed more than five million jobs a quarter and we create more than six million jobs a quarter. Basically quarter in quarter out and so one is people just dramatically underestimate the size and complexity and churn in the American economy as it currently exists.
Another example be there is about it turns out there’s about five million people who drive professionally in the U.S. And so one of the questions with self driving cars right is where this was going to happen the truck drivers the taxi drivers everything and everything else. Again, five million jobs we can redeploy we redeploy every every quarter we redeploy five million people like this is not in the scope and scheme of the American economy. It’s a totally doable thing.
The other thing that people don’t appreciate or understand that I find mind blowing, is, would you would you guess based on everything that people say would you guess that the rate of job creation, destruction American economy is rising over time or falling over time?
Tim: This seems like a test I’m bound to fail. I don’t have an informed opinion.
I think most people would guess that it’s rising. The view would be technologies having ever greater impact, and change feels like it’s accelerating, right it’s a big theme in the political season is a feels like the world’s kind of getting away from us. Technology is getting away from us, trade getting away from us.
You know basically dramatic changes are happening that are historically unprecedented. It’s kind of a feeling it’s almost everybody believes, as almost everybody but it’s certainly the perception being created right almost everybody believes that change is increasing change and change accelerate.
Actually turns out in the American economy the reverse is happening. The rate of both job destruction and creation are falling and have been falling for decades have been fought over the last fifty years and they’re not dramatic lines down but they’re basically very slow lines down. So basically what’s been happening is in fact every year the American economy gets less dynamic.
And you might say oh that’s good because that means that you’ll have stability that means people won’t have to change jobs all that stuff. I would argue that’s bad because what that means is we’re not creating enough opportunity. Thinking about the future I think we want to think about opportunity we want to think about what we’re going to be able to in the future and want to think about what our kids are going to be able to do in the future. What will be the new fields, the new sciences, the new forms of art, the new industries, the new businesses, the new companies, the new jobs that will get created?
Every job that we all have and everybody listening this podcast has got created as a consequence of the process of change. Which is very and has been very positive to literally everybody on planet earth like this this is these have been very very positive changes in terms of increasing human welfare and opportunity, and so the idea of living in a world where change is becoming less rapid, which is what’s actually happening, is to me that would be the problem.
We should want more change, we should want more change, because we should want more advances because we want more opportunity to get created. We should want more products and services in our lives, we should want more industries created, we should want you know more medical advances, we should want more advances in art and science, in every other field of human activity and we base it wherever it is.
We have to fight to get that as opposed to what everybody thinks which is we have to fight to prevent that.
Tim: What’s the smartest way to fight to get that?
If you were willing to go into politics, but you’re willing to, this is when you run for office.
When you run for office I will help you put your platform together.
Short of that I think the thing to do I mean I think that the value and I guess my view as you know do it do what you can to directly contribute to it, and so do it. You can do it. You can do either, try to create new things, try to create new products, create the new the new art, science, technology products. What consumer goods, create new things, create businesses around those things, create companies or for that matter, by the way, nonprofits like great organizations are models that can let things scale so that they can touch more people.
And then you know a big part of our role is fund them, fund them and support them and help and help enable them and train them get them up and running.
Tim: You mention for instance when you first got to the valley there was a feeling on the part of many people that it’s done, the season finished, and missed the boat. And now in the venture capital world there is a term used fairly often: FOMO, fear of missing out. How do you think about or handle FOMO yourself?
You know mostly we just fall right for. Probably just little suckers for it. So the way we describe fear of missing out, missing out comes from it’s like it’s clear visible signs that something is happening you’re not a part of. And so it’s not FOMO if something that hasn’t happened yet. It’s almost something that’s clearly obviously happening.
So which is for those people not in the tech investment world comes in in a concrete form just as it as it may be.
An example of an e-mail from a founder: Hey I would love to squeeze you in, I’m overcommitted, so and so and so and so is in, can you get us docs by tomorrow if you’re interested?
blah right in there’s a lot of sort of cult cortisol. Driven emergencies. Some of which may be REAL many of which are illusions. You know and so the thing is so I guess there’s kind of there’s kind of you know there’s kind of a couple ways to handle it, and one is just like one is you view that as a sign of success. Like you view that as like what it appears to be, which is like OK, the train is leaving the station and I want to be on the train or not.
Tim: That strikes everybody as like so clearly wrong. Like that must be wrong, like that must be just foolish behavior which is why it’s been encapsulated in this term called FOMO. It’s kind of design of you know design it’s not scary. Like that Must be a stupid thing.
You know a lot of people will at least say that what they try to do, that is kind of take a cynical kind of counter theory, which is like, OK then by definition those are probably bad ideas because you’re probably getting played, or you’re probably a sucker, kind of along for the latest scam.
And so are the opportunities passed? Or if it was a good opportunity, why would you be asked to participate in it? And then you go to the other side, the other cynical side of the poll, which is like OK now I’m not.
And there are certain VCs who do this, by the way. I’m not ever going to invest in anything hot, because it’s going to have that characteristic, so I’m going to I’m going invest in things that aren’t hot.
Tim: The uncrowded trade.
Yeah, the thing that nobody else is interested in. And you know sort of on the on for old companies they call it value investing. You know for new companies we just call that, you know, whole sectors, just an area in which nobody is interested in.
And you know by the way like I don’t think that that’s I don’t think in any way that’s a dumb conclusion on their investors to do that and it works very well for them. My personal preference, what I try to get us to do around here is to just eliminate this as a variable altogether and literally just like not think about it. And so like if it’s urgent we have to address tomorrow and then if it’s you know they may or may not ever be able to raise money in five years, but I try to get us to just ignore that part entirely. Basically just take that out for on both sides, both the hot and the cold.
Just take it all out and then try to get to try to get to the actual thing right try to get to that yet. So what what is it really this specific company. Right doing this specific thing with this specific technology the specific people at this specific time, what is that thing. And let’s make our own evaluation of that thing independent of whether it’s hot or cold, and then if it makes sense we’ll invest, and if it doesn’t we don’t, but we won’t factor in whether it’s hot or cold.
Now the challenge we have actually, over time roughly on average the things that are hot are priced somewhere between two to four X higher than the things that are cold. At the extreme from cold to the hot it’s about four X. Right, in investing terms, if it’s super hot it’s forty pre, if it’s super cold it’s ten pre, and for the same quality, right for the same fundamental quality level and a big part of our answer is, I think it’s fine if we’re going to invest, we’re going to invest in Market terms because it’s called all of us there if Mark terms are forty because we’ll invest there but we’ve made our own decision about whether invest. So we just try to strip it away.
Tim: Got it. Very kind of way easy to say easy to say, hard to decide to do. Are There any particular investors outside of venture capital who impress you?
Yes so I spend most of what I study other investors or study the people we consider the people we compete with and collaborate with very closely. I also study the value investors on the completely other side of the spectrum and it’s a fascinating.
And I’ve gotten to know some of them directly, it’s a fascinating kind of thing, you know. So Warren Buffett is the archetype but also there’s now a lot of famous Valley investors have karma and a bunch of others that have written books and kind of built up loans.
Yeah there’s this whole kind of theory of value investing that goes back to Ben Graham in 1920s 1930s. And so there’s this whole world of value investing and on the one hand there’s no overlap between the worlds, because I like to say like basically anything Warren Buffett’s willing to invest in, we run screaming in the other direction, and vice versa.
Right and that’s as it should be but basically everything he invested like Heinz ketchup right and the reason he invested in Heinz Ketchup is because people have been eating Heinz ketchup on hamburgers for a hundred years and therefore the best guess would be that they’re going to continue to eat Heinz ketchup for the next hundred years. We weren’t screaming from that.
Tim: You’re not gonna invest in sees Candy?
No absolutely not! Furthermore I mean I would you know every time I hear a story like See’s Candy I want to go find the new light side of it, you know super food candy company is going to blow them out of the water. So like we’re wired completely opposite in the in that sense.
Basically he’s betting against change, we’re betting for change, and that’s a very very big like when he makes a mistake it’s because something changes he didn’t expect. When we make a mistake, it’s because something doesn’t change that we thought would. And so they could not be more different in that way, but what both schools have in common is an orientation towards I would say original thinking of really being able to kind of — going back to the previous conversation. Really view things as they are, as opposed to what everybody says about them or the way they’re believed to be like that valley busters I was talking about getting the core of the truth of what’s actually happening in the business.
And then the other is long term.
It’s the only other place, value investing is the only other place in the market anymore where you can find long term investors. Like Buffett, who will actually invest in a company and he will hold it for forty years. That does not happen elsewhere in the market, it’s only the deep value guys who will do that.
It’s funny that at the extremes they have that in common.
Tim: Talking about creating opportunity. If you decided to close a chapter on your career as a venture capitalist, a funder of ideas and a catalyst, and you had to teach a class…So let’s just say ninth grade or freshman year in college. Fifty students. What would you teach?
I would be highly inclined towards teaching people how to build things. There’s a book I’ve actually never read but I love the title. It’s called “smart people should build things”
Tim: I like the title.
I almost don’t want to read the book because I’m after that title almost everything else everything it says is going to be let down. But the titles absolutely brilliant. So my two favorite titles.
Tim: What’s the second?
Steve Martin. I have read this one. Steve Martin’s autobiography is a fantastic book, “My life standing up”. It actually starts not the title the book it’s called “My Life standing up” to the title but the main lesson of the book he says the key to success is, quote, “Be so good they can’t ignore you.”
Right inside and I think it’s just basically if you just have those two principles, like if people should make things and be so good they can’t ignore you, like that’s a pretty good way to like that’s a pretty good way to orient.
Tim: The autobiography is amazing. I listened to the audiobook, the Steve Martin audiobook.
I mean he’s a comedy genius, but more than that the level it’s like the whole thing it’s like the level of thoughtfulness that he put in. How we constructed his career. Nothing about his career was an accident, which I thought was fascinating.
Anyway, so I think about how to make things and by the way I don’t necessarily even just mean software or computer programs, but how to make things more broadly. It goes back to how to make new art, how to make new science, how to make new technology, how to make a new company.
Tim: How would you teach that?
Projects, hands on projects.
So you’d have say in your assignment. You would have a science slash engineering assignment of some type.
Yeah yeah or you know an objective you’d have a you know you’d be trying to construct something here it actually turns out one of the reasons why computer science has advanced so fast in the last you know thirty years is because people can make new things on computers without anybody’s permission. and so you know it was a software world for awhile but you know people can also write books without anybody’s permission. They can also write music without anybody’s permission, and they can also start companies mostly without anybody’s permission in most industries.
And so it’s basically just anywhere where you can actually do or you can actually yourself create something new, make something new.
I find I’m actually very a little bit from folks like Elon Musk. Like I want to make something new, for sure there’s part of it I don’t really want to say as it’s called creativity and so therefore it’s like you want to do something new, have an original idea about it but again that makes people feel like it’s a it’s a it’s an unattainable thing. It’s like, How am I possibly going to come up with a new idea in a field where people have been working on it for a hundred or two hundred years?
Like it just seems implausible so I also find and I think the great artists and the great scientists and the great business people often have this in common. It just goes back to history which is OK for whatever you can make. Learn about how things got in the past, and get inside the heads of the people who made things in the past and what they were actually like and then realize that actually they’re not that different than you. Like at the time they got started they were kind of just like you.
Steve Jobs had a great, one of his in his famous commencement speech he said everything everything in the world around you is made by somebody who’s no smarter than you were, than you are, right and so there’s nothing stopping any of the rest of us from doing the same thing. And so I think that would probably be what I would try to do.
Tim: Maybe a boring left turn but I’m interested to ask, and that is what are the companies or who are the people you’re watching most closely in AI, Drones, and cryptocurrency?
Yeah. So I’m very proud of we have a bunch of we have a bunch of companies that we like to say, we’re conflict of interest or put your money where mouth is. We have both. we have lived up to the principle so. We have to draw on companies that I think are spectacular. So where was our first run investment, commercial drones which turns out is going to be just a giant market in industries, oil and gas and insurance and all kinds of all kinds of implications. But the one that people are going to see I think in their day-to-day lives is going to be more the other one, which is called Skydio which is a company we backed and doing autonomous consumer drones.
And the there’s going to be a very big advance in what you can do with the kind of hobbyist level.
Tim: What does an autonomous consumer drone do?
Well whatever you tell it to.
So they haven’t really they haven’t rolled out the product yet so I don’t want to spoil too much of the surprise but it’s basically it’s a drone that can fully fly itself. It doesn’t require remote control and so they can be given assignments and it will carry out those assignments and it can fly through you can fly through tree branches it can fly through power lines. It can fly through underground parking garages without any collisions. You can just compile itself which is if you tried flying any of the current drones, that’s very hard to do.
I think it’s an exercise in how quickly you crash it. And so they like that that technology is about to tap and become very widely usable. And so that’s very exciting. So there’s that.
Tim: I’m sorry to interrupt. Commercial drones for insurance. Give me an example.
Residential insurance. You get insurance suspect or you’re in new construction you’re modeling or building a new house. To get the insurance companies going to insure that they do an inspection. Inspection involves, you know, a person climbing up on the roof, and hopefully not falling off. And taking a bunch of notes on a clipboard and writing up a bunch of stuff, and like it’s actually turns out to be a pretty fairly dangerous job.
Or another example, cell tower inspection. There’s all these cell towers are sent out thirty thousand or something cell towers in the US. They only do inspected. Inspection literally is a dude on cables right and these some of these are big towers. And then you get to like oil and gas like you get a drilling rig, he got inspect that thing.
You know, try climbing up to the top of an oil and gas rig, right, like these are very these are these are these are dangerous things. And so what if you could just fly the drone like what if you could literally do the entire thing by air, right, what if the inspector just rolled up to the house and just took the drone out of the backseat and just launched up in the air, and the drone flies a pattern about the house takes comprehensive 2D photographs of everything, and then creates a 3D representation from the 2D photographs, which you can now do, and then does all the recognition elevations everything materials, figures everything out. And then the guys literally, you know, the inspectors like that in the driveway in the car.
You know what they are conditioning on. no danger.
Safe and sound.
Yeah yeah and so that kind of thing. There’s another, I’ll give another.
Nobody’s doing this yet but somebody is going to. So if you’re if you’re a cop if you’re top of the beat, two in the morning, you get a call that there’s a convenience store and somebody broke in the convenience store you have to go to the check. The check involves going and seeing whether the lights and all the stuff and broken glass, but you also have to check the roof. And checking the roof is actually a very important thing because if there is a bad guy, they saw the cops coming, might have climbed up on the roof. They might have a gun, and they might shoot at you and so you’ve got to go through the roof. And so what do you do, you get your flashlight and your gun and you climb the ladder and you poke your head up and you hope that nobody’s on the roof.
Hope no one plays whack a mole with your head with a revolver.
Yes exactly right. And so what would be that what would be what could we do to help that what about every police car have a drone in the backseat, and you just you get to the thing and from a safe distance you launch the drone and the drone does an infrared camera sweep of the roof. Right before you even walk up to the thing. And by the way. Like if there’s a bad guy on the roof like what if the drone recognizes, like, OK there’s a person in the roof. And what if the drone locks on to that person and then just basically follows that person over they go. And they rabbit. You know they run they run for it and the drone is like right there ten feet above, following them the entire time.
Right so all of a sudden like just the job of being cop becomes a lot safer.
It’s in this by the way even goes back to the question you asked which is like, is an AI a threat?
It’s like no, like this is the case, the way those drones are going to work as with those are all powered by AI.
I guess this is all based on deep learning, this new technology.
It’s the same technology by the way that was just used in that Go, in there in the in the in the famous Go thing where the Google AI beat the human player.
It’s the same technology, and is just going to use for it’s going to use for drones, and it’s going to be things in our lives that we are just going to able to rely on to be able to make our lives safer and better and we’re just going to take them completely for granted, and we’re going to work in combination with them, and we’re going to be really glad we had them, and we’re going to be completely unwilling to go back to a world where we didn’t have them.
And it’s just going to be obvious. It’s just we have to get it but if you get the stuff in people’s hands, they can they can really I think really fully see it.
Tim: What do most people not understand about cryptocurrency?
I think it’s just such a, well, a couple things. So this will not come as a surprise to you: I thought I understood it and I really didn’t. Money gets people really cranked up.
The entire concept of money is probably the single I don’t know maybe after God it’s like the single most emotionally loaded concept that we have in humanity. Like money just before because money makes people mad under any circumstances on any topic related to money, right, and it’s just because I think it’s just because it’s such something that we all rely on and it’s something that we always think is going to.
There’s always this sense of unfairness and so money gets people really cranked up and so I think that there’s sort of the idea of cryptocurrency and block chain and this kind of new idea of distributed trust in the Internet and then there is this application of that technology, which is a very fundamental application, which isn’t, you know, a new kind of money. I think most people are unable to just simply objectively dispassionately look at the mechanics of how it works without almost getting preemptively upset. Like just angry. Like how dare the nerds come up with some new form of money, like this has got to be like there’s got to be something wrong with this, right, and I will now attempt to find, you know, the thirty possible things that could be wrong with this until I find one that basically proves that this can’t possibly work. Because obviously it violates the Laws of Nature and governments, and you know whatever whatever.
And like somehow I’m gonna come out of the right side of this. And by the way I’m not even just talking about like regular people, I’m also, bank C.E.O.’s just are furious if you bring up that point, and they’re just like, just get really upset. And I’m like, you know, Did you get upset about your toaster?
Like it’s just a technology. like it’s just a thing. And you can you can study it and you can learn about it and you can think about it, and you’ll either conclude it’s good or not, but like it’s not going to bite you. Like it’s just a thing, right, and so I like the way I look at it.
It goes back to like it’s just a thing. it’s just it we now have this idea of cryptocurrency it’s a fundamentally new and very important idea. We now have this ability to have this new kind of currency based on top, you know everybody’s had eighteen thousand theories why it’s not possibly going to work.
As a point it’s still working today exactly the same as it worked last year, and the year before that, year before that. By all the noise and all the stuff and all that crashes and this and that other thing like it just continues to work it just is like it is becoming you know it’s becoming like air or water, it just is. Like it or hate it it just IS.
And so anyway. We’re still very excited. We’re very excited and we’re actually we were going to continue to make new investments.
Tim: Of your current investments, or non investments, are there particular companies that you you think are breaking new ground or doing interesting things in crypto?
Yes so well so I mean Coinbase are sort of our big bet. Most people have heard of it as a company, most people heard of this kind of the easiest way to buy and sell bitcoin, and they have a whole bunch of stuff they’re doing.
And then we have this company 21 which is a really brilliant founder of awesome. He was a partner here, very very very smart guy and he has he has the he has the highest output per minute of new ideas of anybody I’ve ever met in my life. And I know what I mean output per minute.
But if you did it with him and it’s hilarious to just watch the outpouring after especially after you know when it’s a glass of wine it’s astonishing. I mean he’s like an adversary. He’s like an Edison kind of character is just it’s just literally thousands of ideas, and then it’s whatever percentage of the ideas that he can get two, and then you’ll give the other ideas to everybody else, and then wonder why they’re not pursuing them, which is which is often a good question, and then the next time meet him he’ll have a thousand new ideas and so his his company’s people can read about it if they want but it’s done a bunch of interesting things.
He has a whole additional set of ideas he’s pursuing now. I had a long drive to this thing up north and I drove back and I was on the phone with him for two hours. You know, the middle the night driving you know the freeway. Balaji in my ear. You know idea Number thirty.
Could be worse use of time you know.
It’s good food for thought the food for thought.
What advice would you give to Marc, the twenty something at Netscape? And you can pick the time.
You know I’ve never even thought I’ve never for a moment even thought about that. I don’t do so the thing I don’t I don’t do replays.
The question I’ll never answer is, What Would You Do What would you what would you have done differently had you known X? and I never ever play that game because you never you didn’t know X.
Have you ever read the Elvis Cole novels? the great crime novelist Michael craze. Elvis Coles this kind of post-modern L.A. private detective the great novels and he’s got this partner Joe Pike. My favorite fictional character. Maybe of all time. Low paying job, Pike is a former Marine Force Recon. Guy. So it’s not like you’re your French taco and in the novels. Joe Pike has a he’s he always wears the same outfit every day wears jeans he wears a sweatshirt with the sleeves cut off and if he had her. Mirrored aviator sunglasses ready and and he’s got bright red arrows tattooed on his deltoids pointing forward and basically his entire thing is forward.
To that’s that sort of like you know we don’t stop we don’t slow down we don’t revisit about you know past decisions. We don’t we don’t second guess and so honestly, that question I have no idea how to answer.
Tim: I think you just Did.
Tim: When you think of the word successful. Who’s the first person who comes to mind and why?
It’s a great it’s a great question and I will say my father in law. For one who’s a whole could be the subject of a whole podcast.
Can you give us a taste of why that is?
He’s an amazing guy. John Arrillaga he is one of the small handful of people who basically built Silicon Valley, and so he has an amazing life story, but just to do the short version. He went to Stanford, you know just effort on a basketball scholarship in the 1950s. Grew up very very very poor a part of the country when he got a basketball scholarship, studied got a bachelor’s in geography from Stanford.
You may have not ever in your life met a lot of people who have a bachelor’s degree in geography.
They abolished the major the year he got his degree.
Abolished is a pretty strong word.
And he became a real estate broker commercial real estate broker in like 1958 when the valley was all orchards. Within two years he was making ten times more money buying in developing properties as he was as a broker, and his boss fired him because he was making all the other brokers feel bad. So he started, I mean it’s basically continuously from 1960 to today. He’s been one of the biggest developers in Silicon Valley, uniquely by the way as far as I can tell uniquely, I’ve never met anybody else after the first few years.
He basically he has not used debt on a project I think in almost fifty years. So he’s a real estate developer who doesn’t entirely extra remotely and comment entirely on equity and basically it was he and there’s a small handful of him and his contemporaries who basically built literally literally built the valley and so yeah you know when I want to yeah.
He’s fantastic I really love he’s fantastic.
He once sat me down, he’s like OK, he’s like you know is like this tech stuff I understand like you guys think it’s a big deal. It’s fine that you should go do it for now, I just want you to know the real money’s in real estate. It does have a lot of street cred and I said yes sir.
Tim: Do you any particular mourning rituals?
Sleep in as long as possible.
When you usually wake up?
Try not to blow through any red lights on the work.
When do you usually wake up?
Oh it’s about forty five minutes before I have my first meeting. It’s you know it’s I do the I want to call, the hot docking.
Like a controlled crash into the office. It’s not, you know, as if you read these that you know so all the fourteen things successful people do in the morning. Like I can’t even imagine.
Tim: Do you drink coffee?
a lot. Yes.
If It has caffeine in it I drink it. Yeah I really think, the perfect day is caffeine for ten hours, alcohol for four.
Tim: Sounds a lot like my day.
I’m not shy for a second about that.
Tim: The Silicon valley speedball.
Yeah that’s right.
Tim: Any favorite documentaries or movies?
Lots of favorite movies. I don’t know where to start.
What have you seen.
Actually you know in the last twenty years and last ten years really you know it’s T.V. even more the movies.
OK but any favorites?
Well the whole trend of so Mr Robot which I just think is absolute genius. If you can ever get him, you should get him sometime.
I have never met him you’re probably right. He’s directing. He’s he’s written and he’s personally directing all ten episodes of the new season so it’s going to be. I think he’s that he’s he would be and he went he has actually made a movie but like you said he’s often you know when Oscars or whatever it is people.
Halt and catch fire.
Tim: I’m not familiar with that.
Halt and catch fire is extraordinary. it’s a very it’s the best fictional portrayal of what a tech startup is actually like. halt and catch halt and catch fire. So there was a title, is there’s a mythical I.B.M. mainframe days there is a mythical instruction, that is sort of a sort of an urban legend that there was a specific piece of code that you could write that would cause the computer to stop and then catch on fire.
Tim: Like The Mission Impossible command.
Yeah I don’t think it was ever really verified for sure whether or not it existed, but it kind of became this movement, mythical thing, and so it’s it’s the story. Actually it’s loosely the story of the birth of the P.C. at a particular
It’s sort of based on how the company Compaq got built in Houston. It’s not in Texas, but it’s basically the birth of a new computer company. but it’s a very and it’s it’s funny because the reviews the reviews are funny so it’s a historical piece. It’s very serious very serious drama. So you know it gets compared to Mad Men and shows like that, set you know set the office in the personal lives of everybody, and so, and it’s funny because the critics reviewed, and they said I don’t know, it all seems like it all seems super heated, like it’s all too like the melodramatic.
Everybody I know in the Valley that’s seen it is like, no no that’s actually what it’s like. it’s actually one hundred percent what it’s like. and like I knew that guy and I saw that thing happen and I saw that person blow up that way.
Like Ben’s book.
Yeah exactly yeah yeah that’s what it’s actually it’s what it’s what they really caught. It’s fictionalized but they really for anybody really wants to know what it’s actually like to go through one of these things that show is tremendous and then of course Silicon Valley.
Tim: Do you have a favorite scene or episode?
So I actually still only seen the first season. I’m not current. I’m starting actually become culturally irrelevant, because I can’t I don’t get any of the new references at all.
Tim: You seem to be doing just fine.
I have to binge. The sesame seed scene in the first episode first season was probably the highlight. Let’s just say loosely based on Peter Thiel scene, loosely are not going to write the second part out or maybe very precisely very accurately. You know who knows.
Tim: If you could have one billboard anywhere with anything on it what would you put on it, that could not be an advertisement for your portfolio companies?
Outside Trump tower.
OK. What would you put on it if you want to convey a short message to As many people as possible?
Oh I’ve got one. All right this is a little maybe small scale for what you’re looking for but I’ve got one I’ve actually thought about hiring a skywriter to do this one. Let’s do it again, right in the heart of San Francisco Bay.
Billboard, just two words on it: raise prices.
Tim: raise prices.
Tim: Can you explain?
The number one thing just the theme and we just see it everywhere, the number one failing companies have when they are really struggling is they they are not charging enough for their product. It has become absolutely conventional wisdom of Silicon Valley that the way to succeed is to price your product as low as possible and then under the theory that if it’s low priced everybody can buy it and that’s how you get to volume, and we just see over and over and over again. People failing with that because they because they get into probably called, “too hungry to eat.”
They don’t charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it right and so they can’t hire the sales rep they can afford to hire the sales rep to go sell the product they can’t afford to buy the whatever T.V. commercial whatever it is they can afford they cannot afford to go acquire the customers.
Too Hungry To Eat.
Too hungry to eat. And then they sit there and they don’t sell anything and then they get nervous and then they cut their prices.
And then it’s a race to the bottom.
It just makes the problem worse. And so, probably the single number one thing we try to get our companies to do is raise prices. By the way, it’s like, “Is your product any good if people won’t pay more for it?”
You know it’s like you get litmus test good litmus test right.
Tim: Last two questions. What did you change your mind about in the last few years?
It’s a good question so one is we started I will give you a very practical one. We started when we started out we did we didn’t do any health care related stuff, your investments here and we’ve now done a complete almost complete one eighty on that, and we’re now very deep in health because we think a bunch of really interesting things are happening. And that was a response just like that had something I was doing like that was respond which is that we just basically had a very smart phone is coming through here basically telling us we were dumb. By the way they were right.
Like which we just haven’t figured it out yet and so we got serious about it a couple years ago and kept we have this guy VJ Pandey, former Stanford Professor running this program for us, and it’s extraordinary what’s happening at the kind of intersection of health care and computer science. So there’s a lot is happening there.
The thing that I’m probably think about the most is that I am still trying to work out of my own head is that a combination of Peter Thiel, Larry Page, and Elon Musk in different ways have provoked fundamental crisis, a fundamental conversation in the valley around, you know, kind of the sort of moon shots. The big the big the big big the big challenges and so you know you know, why can’t we build self driving cars? Why can’t we have new kinds of rocket ships? Why can’t we go to like literally go to Mars? Why can’t we cure cancer? why can’t we you know do nuclear fusion? Why can’t you know long list of things that are like you know big big things we talked about earlier a little bit like.
Silicon Valley has always viewed it self a little bit as the tools business, right, or a lot of the tools business Silicon Valley has been getting more and more assertive entering more and more industries directly, right, so like we were left entering directly in transportation. AirBnB entering directly to real estate, and tech companies entering directly into banking.
So our companies are getting more assertive it going into markets that previously they made not you know other founders may not have been want to go into in the past. And then Larry Elon and Peter basically all say in different ways like we’re still not doing enough. There are these much bigger things to be to be done, and why are we waiting for either governments to do more for large industrial companies like G.E. to do that, or for you know I don’t know research universities to figure them out?
Like why can’t we do these things. And you know there’s one school of thought that says they’re simply too hard, they’re simply too daunting, they’re too expensive, they’re too different , you know they’re they don’t have Moore’s law on their side. Like there’s a reason we haven’t been doing them, is because they’re too difficult.
And then there’s another school of thought that says, you know that’s just being a wimp and you should go try to do all these things because if we’re not going to do it really who is? I’m trying to find is there something in the middle, like is there like, what are the shades of gray, right, what’s what’s the line? What’s the line where you know we’re it’s line which hasn’t made sense.
A Tesla that Flies didn’t make sense.
And there’s a line in there somewhere. I think. Right or maybe Peter’s right or maybe there isn’t a line. I maybe I maybe maybe the next Tesla should be one that flies.
And so it’s to me that’s the provocative thing is it. It’s a question about stretching the limits how far. And how far can we stretch the limits of what we’re witnessing will before our wings melt?
Strikes me also that I mean did you mention Peter, we wanted flying cars and we got one hundred forty characters. There were a lot of questions from from fans asking how to how would he suggest people entrepreneurs or be encouraged to say to solve the big problems versus making social media networks etc?
And I think you made a point actually in a debate with Peter at one point maybe as the Milken conference, coulda been elsewhere, that Twitter, and I would agree with you, is one example. A hundred forty characters has been world changing in a lot of ways. I mean you look at political activism you look at many different examples when you have adoption, that that that is that wide that global free with the emergent properties are just unpredictable. I mean you get some incredible use cases including political revolutions exactly right
The last question–
So that was there was a debate at the Milken conference which is one of the one of my shining moments as I prepared for weeks for that debate. Knowing Peter was going to prepare at all to bring it up because I think I was actually able to go toe to toe with him but I had to sandbag him to do it. He was actually shocked that I had felt for I enjoyed that I really enjoyed going to my one of my great debating moments as I could I want to almost keep up with Peter.
So it’s actually funny his whole thing his whole slogan that you know the slogan of his firm which is this he said we were promised flying cars instead we got a hundred forty characters, so generously he will immediately concede that both of those are actually not the point.
So him first well he immediately concedes the flying cars probably don’t make sense. And then he immediately concedes that Twitter probably is more important than like just being dismissed like that, and so he will he basically just basically says the slogan it was just to provoke provoke the conversation. But to your point it does provoke the conversation and I actually think you’re I think or I think it provokes a conversation.
Tim: OK why don’t we have the other big things? Maybe flying cars or not, why don’t we have nuclear fusion? why don’t we have like all these other things when we have supersonic flight like we have the Concorde?
Now we don’t even have a Concorde. Like seriously it takes nine hours to get to London. Like really? Great I mean I think that’s it’s a very relevant question and then but I also think it provokes the thing on the other side which is I think the computer stuff the communication stuff like Twitter and all these other things, that I mean, Peter flatly says the iPhone doesn’t count as innovation. And I just think that’s I think that’s too far. I think the IPhone Actually causes innovation. I think it’s one the most important products ever developed. I think the impact on the world is absolute enormous and growing, and so I think there’s there’s there’s a tendency to write off the stuff that built the valley. I don’t think I don’t agree with that, I think there’s a lot more to do in the core of what we do.
Tim: The last question is, do you have any ask or request of my audience, people listening anything you’d like them to consider ponder?
So for first of all they should all for sure work for companies. Please come to our website, a16Z.com. We have jobs. We have job listings. We’d like to get everybody in our orbit. Anybody smart enough to listen to your podcast we definitely want to work for our companies. and certainly And then you know I would say you know I would say build new things and then if it’s something that needs of it’s a you know if it’s a business that’s promising needs money and you know we’re open for we’re open for business.
Tim: Marc any last place you’d like people to check you out online? Where can they say hello?
Twitter Twitter’s good. Twitter.
@pmarca. Is that from your unix handle way back in the day?
It’s an old old joke. It’s a boss one time who was so important that he had both his real email address, a public email address, and he has P. with his name behind it which is his private email address. So I thought that was a little bit too much and so we all gave ourselves P. Nobody knew who we were.
Tim: Check out the andreessen horowitz website, I’ll put that in the show notes as well you should also check out their podcast which I guess greatly enjoyed the you could start with I mean one that I really enjoyed was the sort of deconstructing Amazon episode and thanks so much for the time.
It’s been a blast really appreciate it.