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a16za16z Podcast | Ben and Marc Explain (Practically) Everything – Part 1
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CHAPTERS
- 0:00 – 3:07
The Software Eats the World Thesis
Marc Andreessen explains that the computer is only about seventy-five years old and that the smartphone finally puts computers in everyone's hands. He expects nearly everyone on the planet to have a smartphone by the end of the decade, which opens the way to reinventing every industry.
- •The computer began as a code-cracking tool, then spread to governments, businesses and PC owners
- •The iPhone in 2007 started the smartphone era
- •Marc expects effectively everyone to have a smartphone by the end of the decade
- •A thirty-five dollar smartphone is rising in India and Pakistan
- •The next five years are prime time to rethink every industry around software
- 3:07 – 5:48
Healthcare, Education, Government and Baumol's Cost Disease
Marc says media, financial services and retail have been eaten first, while healthcare, education and government come next. He explains why now is the time, citing Baumol's cost disease and the need to give everyone access without bankrupting the country.
- •Media, financial services and e-commerce have already been transformed
- •Healthcare, education and government are the big next domains
- •Technology has driven down costs in media and finance but not yet in healthcare and education
- •Applying technology is described as the only way to give everyone Ivy League-level education and modern healthcare without bankrupting the planet
- 5:48 – 10:14
Job Transitions and the Social Safety Net
Ben Horowitz addresses people whose jobs are being eaten, arguing the challenge is the transition between sets of jobs rather than the total number. He says technology that lowers the cost of education and healthcare makes a robust safety net affordable, funded by taxes.
- •Jobs 50 years from now won't be the ones we do today, as with farming, ice delivery and vinyl records
- •The challenge is the transition from one set of jobs to another
- •Lower costs from technology free up money for a safety net
- •Oculus could put kids in top virtual classrooms
- •Ben says the safety net would ideally be government-run and tax-funded, but only works with real technology behind it
- 10:14 – 12:26
Then and Now: Market Expansion Since Netscape
Marc argues today is not a repeat of the 1990s bubble. At Netscape there were only about 50 million people online, many on dial-up, while today more than two billion are online, which has produced companies with a billion users.
- •People have been calling a new bubble since 2005
- •Netscape had over 90% share but only about 50 million internet users existed, 25 million of them on AOL
- •Market expansion has been 40-60 fold over 15 years
- •Google, Facebook and others now have more than a billion users
- 12:26 – 14:00
How the Firm Keeps Up with Many Technologies
Asked how they keep up with drones, Bitcoin, 3D and virtual reality, Ben says the firm invests only in what it understands, namely things where software is the core intellectual property. He sees all these areas as manifestations of one underlying phenomenon.
- •The firm's founding tenet was to invest only in what it understands
- •Software as core intellectual property unifies the different areas
- •Improvements in platforms, languages and connectivity drive the trend
- •Ben calls it their favorite thing to do
- 14:00 – 16:32
Software Moves into the Physical World
Marc predicts that every physical thing will become smart, with chips and internet connections, over the next ten to twenty years. He defends early products like smart refrigerators as experiments, noting that major technologies took years of trial before going broad.
- •Everything from toys to buildings to pills will carry chips and data
- •A smart fridge could detect spoiled food and track what to reorder
- •Criticism assumes products could be designed perfectly the first time
- •PCs, smartphones and the web all followed years of experimentation
- •The internet of things will take a long time but will happen
- 16:32 – 20:00
The Changing Venture Capital Landscape
Ben describes how the shrinking number of VC firms has been healthy, since the firm brought light to a shadowy industry and a seed tier emerged. The landscape split into seed investing and large-scale venture investing, making it a better time for entrepreneurs to raise money.
- •The firm started in 2009, which Marc says was told to them to be the worst crisis for venture capital in forty years
- •The industry was previously opaque and hard for entrepreneurs to evaluate
- •The firm put light on the industry
- •Seed investing emerged for small amounts of money and help
- •The middle tier of firms lost relevance
- 20:00 – 21:20
Cheaper to Start, More Expensive to Grow
Asked why founders need big venture money if they can start on a credit card, Marc says companies are cheap to start but expensive to grow. Larger global markets require sales, marketing, development, support and expansion capital.
- •Companies can start with laptops and lattes
- •Markets are larger and global, so the prize is bigger
- •Scaling requires sales, marketing, recruiting, partnerships and expansion capital
- •Marc says tech companies doing something big almost never stay small and raise venture capital
- 21:20 – 25:23
Global Innovation and Many Silicon Valleys
Ben says venture capital will become more global, though not by copying Silicon Valley, since it is a network effect. He and Marc point to large Chinese companies, regulatory-free special economic zones, and entrepreneurial energy around the world, including the Middle East and Iran.
- •Alibaba shows large companies are coming out of China
- •Ben says policy and tax breaks alone can't replicate Silicon Valley's network effect
- •There should be 50 Silicon Valleys focused on different areas of innovation
- •Special economic zones and South Korea's stem cell rules are examples
- •Chris Schroeder's book Startups Rising and the Tehran startup scene show global energy
- 25:23 – 27:37
The Firm's Focus and Funding Platforms for Global Entrepreneurship
Ben explains that the firm doesn't need to be in every deal and sticks to software and Silicon Valley, where it knows the culture. Marc adds that portfolio companies like Facebook, Twitter, Airbnb, Lyft and Teleport help build a world with more entrepreneurship.
- •Investing differs from enterprise sales in that you needn't win every opportunity
- •The firm focuses on software and Silicon Valley because it understands the culture
- •Cultural differences matter for global investing
- •Portfolio platforms enable global communication, travel and talent relocation
- •Further expansion is to be determined
