Dwarkesh PodcastMarc Andreessen — AI, crypto, 1000 Elon Musks, regrets, vulnerabilities, & managerial revolution
EVERY SPOKEN WORD
150 min read · 30,124 words- 0:00 – 1:04
Intro
- MAMarc Andreessen
... AI might just upend all that. Future apps might just be much more of a dialogue between computer and machine. The very fundamental assumptions about how software gets built might just completely change. We work with a lot of great founders. We also work with Elon and, like, he's still special. (laughs)
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
I think the incumbent education system is trying to destroy itself. I don't think there's any prospect of nuclear fusion being legal in the US.
- DPDwarkesh Patel
Things that are basically the equivalent of, I don't know, baseball cards, where there's no real good or service that's being created.
- MAMarc Andreessen
I would e- entirely disagree with the premise of that question. Different religions and cultures, they all tend to have, like, some underlying unease with the concept of money, the concept of trade, the concept of interest. It's like superstition, it's like resentment. But those things are the things that make economies work. If venture capital ever gets snuffed, if there was no more, you know, tech startups or whatever, like, then at that point, the economy is gonna be 100% managerial, and at that point, there will be no innovation forever.
- DPDwarkesh Patel
Okay. Today, I have the great pleasure of speaking with Marc Andreessen, which means for the first time on the podcast, the guest and the host playback speed will actually match. So Marc, welcome to the Lunar Society.
- MAMarc Andreessen
(laughs) Good morning, and thank you for having me.
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
It's, uh, great to be here.
- 1:04 – 5:08
Chewing glass
- MAMarc Andreessen
- DPDwarkesh Patel
My pleasure. So, um, have you been tempted anytime in the last 14 years to start a company? Not A16Z, but another company.
- MAMarc Andreessen
No. It's... Uh, I mean, e- I mean, we, we have. I mean, so, you know, the short answer is we did. So we, you know, we started our venture firm, uh, in 2009. And so it's, uh, it's sort of given my, you know, my partner Ben and I a chance to kind of fully exercise our, our entrepreneurial ambitions and energies, uh, to build this firm. We're o- we're over 500 people now at the firm, which is, um, you know, small for a com- you know, for a tech company, but it's big for a venture capital firm. Um, and so it's, it's let us, uh, kinda fully get the, get, get, get all those urges out.
- DPDwarkesh Patel
But there's no product where you think, "Oh God, this needs to exist, and I'm, I, I should be the one to make it happen"?
- MAMarc Andreessen
You know, I, I think a lot... I mean, we, we look at this kind of through the lens of like, "What would I, what would I do if I were 23 again?" Um, and so I, you know, I always have those ideas. But, um, you know, starting a company is really... You know, look, starting a company is like a real commitment.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Like, it, it really changes your life. Um, you know, my, my favorite all-time quote on, on being a startup founder is from Sean Parker, who says, uh, "Starting a company is like chewing glass. Um, eventually, you start to like the taste of your own blood." (laughs)
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
And that (laughs) that quote, that quote always gives people like this... I always get this queasy look, you know, on the, on the face of people I'm talking to when I roll that quote out. But like, it really is. I mean, it's really intense. Um, and so I always tell people... You know, whenever anybody asks me if they should start a company, you know, the answer is always no, um, because it's just, it's such a j- just like, gigantic, like, emotional or rational, you know, kind of thing to do. Like, the implications of that decision is so profound in terms of how you live your life, um, that I, um... Yeah. I mean, look, there, there are plenty of great ideas and plenty of, plenty of interesting things to do, but the actual process is so difficult. Um, it, it gets romanticized a lot. Um, and it's, it's not romantic. It's, it's a very difficult thing to do. Um, and so... And I, you know, I did it, I, I did it multiple times before, so I-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
At least for now, I, I don't, uh, I don't revisit that.
- DPDwarkesh Patel
But, eh, being a venture capitalist is not like that? When you're in the 30th pitch of the day, you're not wondering if chewing glass might not be more comfortable?
- MAMarc Andreessen
No, it's different. Well also, it's different. Eh, well, I just, I'll tell you how I experience it. You know, p- uh, you know, people are wired to respond to stress in different ways. And I think there are people who are wired to be, you know, extremely productive and extreme... You know, actually get, you know, who get, like, very happy under extreme levels of stress. Um, I, I, I, I have a different re- like, I, I'm fine with stress. I'm, I'm, I... In fact, I, I, I incline towards it at night. You know, I, I, you know, if I don't have any, I seek it out. But like, I don't... Past a certain level, I don't really enjoy it. Like, it doesn't... It, it degrades the quality of my life, not, not improves it. (laughs)
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
Maybe I have an affinity for self-torture. But, um... And so it's, it's, eh, there's... I mean, look, there's, there's stress in everything, you know. Um, and there's, there's stress in every profession, and there's, there's certainly stress in being an investor. But it's a completely different kind of stress. Um, because when you're a startup founder, like, it's all on you, right? It's, it's like everything that happens is on you. Everything that goes wrong is on you. Like, y- y- when there's an issue in the company, a crisis in the company, like, it's on you to fix it. Like, you're, you know, you're, you're up at 4:00 in the morning, like, all the time, like, worrying about things. Um, and just, e- investors, there's just a layer of buffer. Um, you know, we, w- I mean, we have, you know, we have, we have no end of problems and, you know, we have, we help our portfolio companies as best we can with, with all kinds of issues. But like, you know, some crisis inside a company, like, it's not my compa... You know, like, it's not-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Not everyth- (laughs) Not everything is my fault.
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
(laughs) And so it's a, uh, it's a, it's a more diffuse kind of stress, uh, and, uh, and, and honestly, easier to deal with.
- DPDwarkesh Patel
Got it. Yeah, makes sense. Why did you stop your blog? Would you ever start it again?
- MAMarc Andreessen
Hmm. So I write intermittently. Um, you know, I just, um, I, I, I mean, I stopped... The, the original blog was like a, what? 2007 to 2009, you know, kind of thing. Um, and then we started the firm and then that got, that kind of, uh... You know, it's like having a new baby. That kind of soaked up all my time.
- DPDwarkesh Patel
Yeah.
- MAMarc Andreessen
Um, and then I, you know, I write intermittently, and then I do, you know, am doing, I do social media intermittently. And, y- you know, basically, it's just... Uh, you know, part of it is I, you know, I (laughs) have a lot to say and a lot that I'm interested in. But also, I, you know, I like to experiment with the new formats. Um-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
... and I like to, um, you know, kind of, uh... You know. Like, you know, we do live in a fundamentally different world as a result of, of social media, and the internet, blogging, and, and Twitter, and all the rest of it. So I, I, I try to keep my hand in it and experiment. But, um, you know, I kind of rotate... I rotate both how I spend my time and rotate what I think, you know, makes sense.
- DPDwarkesh Patel
Mm-hmm.
- 5:08 – 7:29
AI
- DPDwarkesh Patel
Uh, now before AWS, deploying applications was probably the bottleneck on your software. What is the biggest bottleneck today? At what layer of abstraction do we need new tools?
- MAMarc Andreessen
Yeah. So I think, literally sitting here today, I think overwhelmingly, it's, it's the, the impact AI is having on, on, on coding, right?
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
So like, I think there's a real possibility that basically... I think there's a possibility that basically every application category gets umb- upended in the next, you know, in the next five years. Like, I, I think the, the, the whole model of how applications get built across every domain, I, I think it might just completely change. 'Cause I, I think, you know, the, the, the old model without AI, you know, you, you typically have like some sort of database, you have s- some sort of front end of the database. You have forms, um, right? You had, you know, these, these sort of known user interaction models, you know, mo- mobile apps and so forth. Um, y- you, you... You know, we kind of got to a pretty good kinda shared understanding of how humans and, and machines communicate kind of in the, in the windowing era and then in, in the mobile era-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
... and the web era.Um, you know, I- I think AI might just upend all that. And I think the future apps might just be much more of a dialogue between computer and machine. (jingle plays) Um, you know, there's either a text, a text-written dialogue, or a spoken dialogue, or some other form of dialogue, and, you know, the, the human is guiding the machine on what to do, um, and, and receiving real-time feedback, and, and there's a, there's a loop. And the, and then the machine just does what it does, and it gives you the results. I, you know, I think we're potentially on the front end of that. I, I think that all might change. Um, so, so the, the, the assu- the, the very fundamental assumptions about how software gets built, I think, might, might just change.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, and so the, the, the, yeah, the tools on that are at th- are at the, are at the very front end. Like, there's an entirely new stack that needs to get built, um, to do that. So that, that's, that's, yeah, that's, that's, that's probably the big thing.
- DPDwarkesh Patel
Is, is, is there a reason, though, AI is not one of your focus areas? Or as, as far as I know, you guys don't have an AI fund dedicated to that technology specifically.
- MAMarc Andreessen
Yeah, so basically we look at it as it's all software, right? And so the, the, we, we look at it as like it is the core business. So software is the core of the firm.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, you know, we've, we've, you know, we've been public on that for, for a long time. Um, you know, the, the core fund, the core venture fund is the kind of core software fund. Um, and then AI basically is the next rou- is the next turn on software. And so it's, I, I, I view it kind of as the opposite of what you said. It's, it's sort of, it is, it is like the most integral thing that we're doing.
- DPDwarkesh Patel
Hmm, interesting.
- MAMarc Andreessen
Um, the, the separate funds get created for the new areas, like the, for the new areas that are, like, structurally different, um, in terms of, like, how industries work, um, right? Um, and so, uh, you know, but, but, like, AI, AI is basically the future of software. And so it's, it's, it's the future of the core of the firm.
- DPDwarkesh Patel
Got it, got it. Um, now let's talk
- 7:29 – 9:38
Regrets
- DPDwarkesh Patel
a little bit about your past. So you sold Netscape for $10 billion. Um, but today Chrome has what, like, 2.7 billion users or something. Um, and then Opsware was sold for, like, $1.7 billion. Um, AWS is gonna probably make close to 100 billion in revenue yearly. Um, in, in retrospect, do you think if these companies had remained startups, they would have ended up dominating these large markets?
- MAMarc Andreessen
Yeah, so I spend, like, virtually no time on the past. (laughs)
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
'Cause the, the one thing I know about the past is I can't change it.
- DPDwarkesh Patel
Yeah.
- MAMarc Andreessen
Um, so, uh, I, I spend, uh, virtually no time kind of revisiting, revisiting old decisions. I, I, you know ... The people I know who spent a lot of time revisiting old decisions, like, are, are less effective because they m- they mired themselves in, in what-ifs and counterfactuals.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, I ... So I, yeah, I, I really don't spend any time on it. I really don't even really have theories on it. Um, I guess the big thing I, I would- I would just say is, um, reality is, reality plays out in really complicated ways.
- DPDwarkesh Patel
Yeah.
- MAMarc Andreessen
Like, you know, everything on paper is straightforward. Reality is very complicated and messy. The, the, the technical way that I think about it is basically every startup is charting a path to find a course, uh, through a complex adaptive system.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, and, and, and, and just because of that, like, it, you know, it's sort of this, it's if you remember the, I don't know if you remember or if you ever read about this in the old days. People had this obsession a while back with what's called, you know, chaos theory.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
It's sort of this thing of like, okay, they, we're used to thinking about, like, systems as if they're like deterministic, you know. So you start at point A, you end up at point B, and you can do that over and over again, right? Like, you know, what happens when you drop an apple out of a tree or whatever. Um, you know, in the real world, like in the world of humans and, you know, eight billion people interacting and then trying to start companies that intersect in these markets and do all these complicated things and have all these employees. It's just there's, there's, there's like random elements all over the place. There is path dependence as a consequence. You, you run the same scenario, start with point A, one time you end up point B, one time you end up point Z. You know, there's a million reasons why the, the, the sort of, you know, forks branch or the, the, the branches fork. Um, and so- (laughs)
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
... you just can't, like ... Yeah, I mean this, and this is always my advice. This is my advice to every founder who wants to revisit old decisions, um, is just like it's, it's not a useful and productive thing to do. The wor- the world is too complicated and messy, um-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
... and so you just, you know, you take whatever you, whate- you know, you take whatever skills you think you have and you just, you do something new.
- DPDwarkesh Patel
Mm-hmm. Makes sense. Um,
- 9:38 – 19:30
Managerial capitalism
- DPDwarkesh Patel
aren't venture capitalists part of the managerial elite? So Burnham says that the rise of the finance capitalist is a decisive phase in the managerial revolution. What would he think about men, uh, venture capitalists?
- MAMarc Andreessen
Yeah, so this, this, this I actually, this, this I actually think about a lot. So, um, and I know you said everybody can Google it, but I'll just, I'll, I just wanna, I will provide this, just so this, this, this makes sense. So, so James Burnham basically famously said there's basically two kinds of capitalism and we, we call them both capitalism, but they're actually very different in how they operate. There's the old model of capitalism which is bourgeois capitalism, and, and bourgeois capitalism was the classic model where the owner of the business, right, there, there was a person who, by the way, often put their name on the door, right?
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
Ford Motor Company, right? Um-
- DPDwarkesh Patel
Anderson Horowitz.
- MAMarc Andreessen
... Disney Company, right? (laughs) Anderson Horowitz, right? Um, and then, and then that person owned the business, right? Often 100% of the business. Um, and then that person ran the business, right? And so this is, this is sort of the classic, you know, this is, these are the people the communists hated, right? This is like, this is like the bourgeois capitalist company owner/builder/CEO, right?
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
As, as sort of one person with - it's very key - with like a direct link, right, between ownership and control. Right? The person who owns it controls it. The person who controls it runs it. Like, it's just, it's just a, it's just a thing. There, there's a proprietor of the business. So, so that's, that's, that's, that's the old model. And then what he said basically is as of the middle of the 20th century, most of the economy was transitioning and I think that transition has happened and has, you know, is basically now complete. Um, most of the economy transitions to a different mode of operating, a different kind of capitalism called managerial capitalism. In managerial capitalism you, you, you basically you have a separation of ownership and, and, and management. So you have, you have one set of own- you know, think pub- public company. You have one set of owners, you know, who are like dispersed shareholders and there's like a million of them for a big company and who knows where they are and they're not paying any attention to the company and they have no ability to run the company and like, whatever. Um, and then you've got a professional manager class and they, they step in and they, and they run the company. And then, what he said basically is as a consequence of that, that the managers end up in control even though the managers don't own the company, right? Even though their ownership stake in ... you know, a lot of public companies, the managers might own like 1% of the company. But they end up in total control and then they can do whatever they want. Um, and he, and he actually said, "Look, it doesn't even matter if you think this is good or bad or whatever. It's just inevitable, and it's inevitable because of scale and complexity, right?" And so the, the modern industrial and post-industrial organizations are gonna end up being so big and so complex and so technical that you're gonna need this professional managerial class to run them and it's just an inevitability that this is how it's gonna go. And so, so I really think this is exactly what's played out. Um, a, a consequence of that, that I think is pretty, (laughs) pretty obvious, um, is that managerial capitalism has a big advantage that Burnham identified which is the managers are often very good at running things at scale. And we have these, you know, giant, you know, industries and sectors of the economy and healthcare and education, all these things that are running at like, you know-... giant levels of scale, um, you know, which was new in the 20th century. Um, but e- there's a corre- a cor- there's, there's sort of a consequence to that which is m- managers don't build new things, (laughs) right? They, they just, they're, they're not trained to do it, they don't have the background to do it, they don't have the personality to do it, they don't have the temperament to do it, and they don't have the incentives to do it because they basically, the, the number one job if you're a manager is not to upset the apple cart, right? You want to, like, stay in that job for as long as possible, you want to get paid your annual comp for as long as possible, and you don't want to do anything that would introduce risk. And so managers can't and won't build new things. Um, and so specifically to, to your question, the, the role of s- startups, like, the role of entrepreneurial (laughs) capitalism, right, is to basically bring back the old bourgeois capitalist model enough, right? It, it... now, it's, it's a rump effort 'cause it's not most of the economy today but, but bring back the older model of bourgeois capitalism, or what we call entrepreneurial capitalism. Like, bring it back enough to at least be able to build the new things, right? Um, and so basically what we do is we, what we do basically is, like, we fund the new bourgeois capitalists who, who we call tech founders. And then there's basically two layers of, of finance that basically enable basically bourgeois capitalism to at least resurface a little bit within this managerial system. Venture capital does that at the point of inception and then private equity does that at a point when a company needs to actually transform. Um, and, and so I, I view it as like we're, we're an enabling agent for at least enough of a resumption of bourgeois capitalism to be able to get new things built even if most of the companies that we built ultimately themselves end up being run, you know, in the, in the, in the, in the managerial model. And that, that's, you know... a- and as Burnham would say, like, that's just the way of the modern world. Like that- that's just how it's gonna work.
- DPDwarkesh Patel
But, but you guys get, like, preferred shares and board seats, and rightfully so. But wouldn't Burnham look at this and say you guys are all, like, you know, you're, you're, you're not the owners and you do have some amount of control over your companies?
- MAMarc Andreessen
Yeah, so he would say, I think he would say that we're like a hybrid. We're like a managerial entity that is in the business of s- catalyzing and supporting bourgeois companies, bourgeois capitalist companies. Like I, I, I think he would clearly identify the startups that we f- we fund. I think he would view as like, "Oh yeah, that's the old model." Like that's the old model of, like, Thomas Edison or Henry Ford or one of these guys. You know, you know, y- you could just draw like a straight line from Thomas Edison or Henry Ford to like, you know, Steve Jobs and Larry Page and, and Mark Zuckerberg. Like it, you know, that's, that's that model that's, you know, it's a, it's a founder, it's a CEO, it's a, it's at least a, you know... Well, they start out owning 100%. (laughs) You know, they do have to raise money most of the time but like, you know, th- they're throwbacks. Like the, the modern tech founders are throwbacks to this, this older model of, uh, of bourgeois capitalism. And I think he, so he... So I think you're right in that he would view us as a managerial entity but he would view us as a managerial entity that is in the business of causing new bourgeois capitalist institutions to at least be created.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, and I, and I think he would credit us with that. And then, and then I think he would say what I also said. I think he would say is, "However, our fate is that most of the companies that we fund and most of the founders that we back end up over time handing off control of their companies to a managerial class." Um, and so our, our, our, our companies, eh, the companies we fund, when they get to scale, they tend to get pulled into the managerial orbit, right? They, they tend to get pulled into the managerial matrix, which by the way is when they stop being able to build new things, right? Which is what causes the smart and aggressive people at those companies to leave and then come back to us and raise money and start a new, right, bourgeois capitalist company, right?
- DPDwarkesh Patel
Y-
- MAMarc Andreessen
And so, so, so basically, like, I view it as like, I don't know, the economy is like 99% managerial and if we can just keep the 1% of the old model alive, we'll keep getting new things. If the 1%... By the way, if we get snuffed, like if venture capital ever gets snuffed, it's outlawed, or whatever, you know, whatever, it just fails, right, um, you know, and there, there is no more venture capital, there's no more, you know, tech startups or whatever, like then the, th- then at that point the economy is gonna be 100% managerial and at that point there will be no innovation forever. (laughs)
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
I think people might think they want that. I don't think they (laughs) actually want that. I don't think we, we, I don't think we wanna live in that world.
- DPDwarkesh Patel
Then uh, will this trend towards managerialism also happen to a16z as it scales or are, will it be immune? Like what happens to a16z in five decades?
- MAMarc Andreessen
Yeah, so the, so this, this becomes, you know, at a, at a certain point this becomes this succession problem, right? So, so as long as Ben and I are running it, like our, our determination is to kinda keep it as much in the bourgeois model as possible. And as, as you pointed out, like it literally, it's like our name's on the door. You know, like Ben-
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
... Ben and I control, Ben and I control the firm. Like you know, there's no, there's no, you know, th- there's no board. Like the firm doesn't have a board of directors. Like it's just, it's just Ben and me running it. You know, it's a private entity. It's, it's, there are no outside shareholders. Um, and so as long as Ben and I are running it and we're running it in the way that we're running it, it will be as bourgeois (laughs) it-
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
... will be in the bourgeois model as much as, as much as any f-, as, as any, as any, as any, uh, investment firm could be.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, you know, someday, you know, there, there's the succession ch- challenge. The succe-... And I bring that up because like the, the succession challenge is basically, you know, for, for, for te- for b- for tech companies, the succession point is usually sort of when that transformation happens, right? When it goes from being a bourgeois, in the bourgeois model to being in the managerial model. Um, and then this gets to sort of the philosophy o- of, of succession and tech companies and the, the, the general thing that happens there is that, you know, the, the great... And you see this over and over again with like the great founder CEOs. When it comes time to hand it off there's basically two kinds of people that they could hand it off to. You know, they could hand it off to somebody like them, right, who's like a mercurial, you know, idiosyncratic, you know, high disagreeableness, you know, ornery, you know, you know, it's a sort of, you know, entrepreneurial kind of personality, right? Um, you know, somebody in their mold. Or they could hand it off to somebody who knows how to run things at scale. Almost always what they do is they hand it off to somebody who can run it at scale.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
The reason they do that is actually two reasons. There's the theoretical reason they do that which is it, it is at scale at that point and somebody does need to run it at scale. And then the other is (laughs) they often have what I call the longsuffering number two.
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
Um, so they've got like, you know... if you've, you've had like, you know, whatever, um, you know, you've had like this like high octane, you know, kind of founder CEO who like breaks a lot of glass and then there's often like the number two. There's like the chief operating officer or something who is like the person who like fundamentally keeps the trains running on time and keeps everybody from quitting. Um, and that longsuffering number two has often been in that job for 10 or 15 years at that point and is literally the long suf- you know, is long suffering. Like they've always been the, the underling and then it's like okay, he, you know, they "they now deserve the chance to run the company themselves." And that's the handover. Now,... those founders often end up regretting that decision. And in later years, they will tell you, "Boy, I wish I had handed it off to this other person who was, you know, for, maybe deeper in the organization, who was maybe younger, who was more like I am, and maybe would have built new products, and maybe that was a mistake." But the fact that they do this over and over again, to me, illustrates why the Burnham Theory is correct.
- DPDwarkesh Patel
Mm.
- MAMarc Andreessen
Which is large, complex organizations ultimately do end up getting run by managers in almost all cases.
- 19:30 – 23:02
100 year fund
- DPDwarkesh Patel
Um, now if you had a fund with a 100-year lock in, what would you literally invest in that you can't invest in right now?
- MAMarc Andreessen
Yeah, so the thing with the longer... You know, so our, our, our lockup now, you know, our, the b- the base lockup for venture is, like, 10 years and then we have the ability to kind of push that out. You know, we can kind of push that to 15 and then, you know, I think if we, you know, for really high-quality companies, we can push that to 20. Um, you know, we haven't, you know, we haven't been in business long enough to try to push it beyond that, um, so, you know, we'll, you know, we'll see. Um, y- you know, the, the, the question if you could push it to 100 years, the, you know, the question is like, is it really time that's the bottleneck, right? Like, are there, you know, like, the implication of the question would be like, are there more ambitious projects that would take longer that you would fund that you're not funding 'cause the timeframe's too short? And the problem with 100... The problem with a 100-year timeframe or even a 50-year timeframe or even a 20-year timeframe is that new things don't tend to, they, they don't tend to, like, go through a 20-year incubation phase in business and then come out the other end and, and, and be good. Like they, they basically, what seems to happen is they, they need milestones. Like, they, you know, they, they need points of contact with reality. Every, every once in a while there will be a company, a very special company will get funded with a founder who's like, "Look, I'm gonna do the long-term thing." And then they kinda go into a tunnel, you know, for 10 or 15 years where they're building something and the theory is they're gonna come out the other side. Like th- these have existed and these, these do get funded.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
You know, generally they never come out with anything. Like, they, they just, they, they, they end up going, they, they end up in their own private, we call it they end up in their own Private Idaho. Like, they end up in their own internal world. They, they don't have contact re- with reality. They're not ever in the market, they're not working with customers. You know, they, they just, they start to become like basically bubbles of, of their, of their, of, of their own reality. Um, and then, you know, they don't... Like, look, contact with the real world, like, contact with the real world is difficult, like, every single time. Like, the real world is a pain in the butt. Um, and you know, to, to, to, to, like, mark to market your views of like what you're doing with the reality of what like anybody's actually gonna wanna pay for, like, requires you to go expose yourself to that. Like it, it's really hard to do that in the abstract. Uh, or, or to build a product that anybody's gonna wanna use. Um, and so this thing where people go in a tunnel for 10 or 15 or 20 years, like, it doesn't go well. I think 100 years would be an even more degenerate version of that. Like, I, I just think they'd, they'd end up, i- it would just, it would end up, you know, kind of best case as kind of this unbounded research lab that maybe would write papers and I don't know, you know, something maybe comes out the other end in the far future in the form of some open source thing or something. But like they're, they're not gonna build an enterprise that way.
- DPDwarkesh Patel
Mm.
- MAMarc Andreessen
Um, and so I, I think having some level of contact with reality over the course of for sure the first like five to seven years is pretty important. Um, the other question that I would, that I would ask, you know, the other, the other way to, to, uh, to, to get at kind of your underlying, underlying question, the other, the other thing would just be like what if you just had more zeros on the amount of money, right? And so what if instead of funding companies for $20 million, you could fund them for $2 billion or $20 billion? Right?
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
I mean, in other words, you know, maybe they would operate on the timeframe of today's companies. They'd operate on a, like, whatever, five or 10-year timeframe, but-
- DPDwarkesh Patel
Yeah.
- MAMarc Andreessen
... you know, you could, you could fund them with $20 billion in venture financing instead of $20 million. Um, you know, I think that's a more interesting question. Um, I think it's possible that there are, you know, pretty big, you know, fundamental things that could be get built with larger amounts of money, um, in this kind of entrepreneurial model. Um, you know, everyone, I mean, look, you get, you know, every once in a while you, you do see, you know, you do see these like giant... You know, Tesla and SpaceX is two obvious examples, like, you know, just of these, like, world-changing things that just, you know, took a lot of money and, and then had, had really big impact. And so, so maybe there's something there and maybe that's something that the venture, you know, ecosystem should experiment with in the years ahead. Um, so th- I, I would be more focused on that as opposed to elongating the time.
- DPDwarkesh Patel
Mm. But
- 23:02 – 27:54
Basic research
- DPDwarkesh Patel
like, what about basic research, right? So I, I think you've spoken (laughs) about the, uh, dysfunctions of the academic/government research complex. Uh, but like within the next internet, the next thing that the Andreessen Fund 10 years from now is building on top of, maybe there needs to be some sort of, uh... Uh, if ev- if the government effort is broken, maybe you just need to bootstrap something yourself or have you considered that?
- MAMarc Andreessen
Yeah, so the strong version of this argument, um, uh, is from a guy named Bill Janeway, um, and he's a, was a legendary VC. (laughs) Actually Janeway's a great, a great, a great, a wonderful guy if, if people haven't heard of him. He's a, he's a, he was actually a, it was a, a... He was a, he was, he's a PhD in economics. I think he's a student of a student of, of, uh, John Maynard Keynes. Um, so he kind of comes from a, like a highly pedigreed, like, ec- economic theory background and then he was a, himself a legendary venture capitalist in his career. He became a hands-on investor at the firm Warburg Pincus, um, and funded some really interesting companies. Um, and so he's, he's, he's one of these rare people who's both theoretical and practical, um, on this kind of question. Um, and he wrote this book, um, uh, which is, I really recommend, um, uh, it's called Doing Capitalism and, and where he kind of goes through this question and, and so the argument that he makes, you know, along the lines of what you're saying, the argument that he makes is basically... And, and it's a little bit of a p- I don't know, it's a little bit of a pessimistic argument. The argument he makes basically is if you look at the entire, if you look at basically the history of professional venture capital which is now like a 60-year journey basically, you know, it's, it's, or maybe even 50 years, it's basically from the late '60s, early '70s in, in kind of modern form. Um, he said basically the, he said basically the, the big category that's worked is, is comp- you know, computer science. Um, and then he said there's the, the second category that's worked is biotech.... um, and then he- he said, at least at the time of writing, he said everything else didn't work. Um, and so, you know, all the money that people poured into Cleantech and, you know, da-da-da-da-dat, like all these other, you know, areas, um, you know, that- that venture capitalists tried to fund, you know, they basically, they- they just... Eh, from a return standpoint, they just didn't work. They just, you just washed the cap- you just- you just burned the capital. Um, and then, and then what he says is, an- and then he says is, it's like, uh, the number, when he wrote- when he wrote the book, he ran the numbers, and it's like basic computer science has worked twice as well as biotech or something like that. Right? Um, and then what he said is, what he said is, this is a direct result of basically federal research funding over the, over the previous 50 years. And so he said basically, venture, what venture, what- what computer science-based venture capital is able to do was it was able to productize 50 prior years of basic research in computer science, right? Information science, information theory, communications theory, right? Um, you know, algorithms, right? All- all the stuff that was done in- in engineering schools, you know, basically from, you know, 1940 through, like, 1990. Right? Um, a- and so he said, basically, we- we are, you know, we- we are productizing that. That- that's been the big thing, right? And then, and then he said, you know, biotech, we're, you know, that- that sector were productizing basically the- the work that NIH, right, and others, you know, put into basic research in the biological sciences. And he said, you know, that- that was, you know, about half as much money, um, and maybe ab- like- like half as much time. Like, you know, that- like that work really started kicking in i- in the '60s and '70s, a little bit later. Um, and then he said, look, he said, "The problem is, there aren't other sectors that have had these huge investments in basic research." Like they ju- you know, there- there has been no basic, you know, there- there's just not this huge backlog of like basic research into like climate science or into, you know, take your pick of, I don't know, online content (laughs) or like, you know, wha- whatever the other sectors are where people burn a lot of money. Um, and so he says, look, he says, "If you wanna predict the future of venture capital, you basically just look at where, you know, the previous 50 years of where research, R&D, you know, basic research has happened, federal research funding has happened." Um, and he said, and he- and he- and again, his strong form of it is, you know, i- i- it's like there's no shortcuts on this, right? And so if you- if you're trying to do venture capital in a sector that doesn't have this big basically, uh, you know, kind of install base of- of basic research that's already happened, like you're- you're basically just tilting at windmills. I think there's a lot to his argument. I'm a little more optimistic about a broader spread of categories. Um, a- a big reason I'm more optimistic about a broader set of categories is because I think computer science, right, in particular up now applies across more categories. Right? So, and this is- this- this was sort of the- the underlying point of the Software Eats the World thesis, which is computer science used to be, you know, computers used to be just like an industry, where just like people made and sold computers. But now you can apply computer science into many other markets, you know, financial services and- and healthcare and many, many others where it can, where it could be a disruptive force. And so I- I think there's a payoff to computer science and software for sure that can apply in the sectors. I think maybe some of the biological science- sciences can be stretched, uh, uh, in- into other sectors. You know, and then look, there's a lot of smart people in the world. You know, there's niche research efforts all over the place in many fields that are, you know, doing- doing interesting work. Maybe there's, you know, maybe you don't get a giant industry out the other end in some new- new sector, but maybe you get some very special companies, you know, doing special... I mean, you know, look SpaceX, like, you know, SpaceX is- is like a massive advance in aeronautics. It- it, you know, took advantage of a lot of aeronautics R&D. You know. There's not like there's some huge aeronautics venture industry, but yet, you know, there is a- a big winner, um, you know, at least- at least one, and I think- and I think more to come.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
And so I- I'm a little bit more optimistic and open-minded. Um, you know, I think Bill would probably say that I'm naive.
- DPDwarkesh Patel
Mm-hmm.
- 27:54 – 31:19
$100b fund?
- DPDwarkesh Patel
Um, now, but you mentioned earlier being able to write potentially nine or 10 figure checks to these companies like SpaceX or Tesla, uh, who- who might require the capital to do something grand. Uh, last I checked, you guys have 35 billion or something under management. Do- do we need to add a few more zeros to that as well? W- is that, will A16Z's, uh, assets under management just keep growing or will you cap it at some point?
- MAMarc Andreessen
So we- we cap, so we cap it, uh, you know, as best we can, right? Uh, we- we basically cap it to the opportunity set, right? And so basically our- our- our- our entire model, right? And- and it's not a single, you know, it's- it's maybe obvious, but it's not a single check of money. Like, it's broken into various strategies, um, and we apply different strategies in different sectors at different stages, you know, so it's decomposed. You know, we have like six, you know, primary investment groups internally, so the- in the different stages, and so that money's broken out in different ways, but, um... Yeah, I mean, look, um, you know, I- we- we- we cap it as best we can to the opportunity set. We always tell LPs the same thing, which is we're not tr- we're not trying to grow assets under management. Like that's not a goal. Like we're- we're- we're to- to the best of our ability, we're trying to maintain whatever return level we're maintaining. You know, we- we are trying to eat market share. Like we- we'd like to eat as much market share as possible, and then we would like to go fully exploit the available opportunities. We'd like to fund all, you know, we'd like to fund all the really good founders. We'd like to back, you know, all the interesting new spaces. Um, you know, but we're not... What- what we wouldn't want to do is double assets under management in return for, you know, 5% lower returns or something like that, like that- that would be a bad trade for us. Um, so to- to put another zero on that, I think what we would need would be a theory... But as I said, I think we would need a theory on a different kind of venture capital model, which would be basically trying to back much larger scale projects. Um, and- and again, I- I think there's a really big argument you could make that that's precisely what firms like ours should be doing. Like there are these really big problems in the world, and maybe we just need to be like much more aggressive, uh, about how we go at it, and we just need, you know... And we need founders who are more aggressive, and then we need to back them with more money. Um, look, I think you can also argue like either that wouldn't work or we don't need it. You know, the- the counterargument on the Tesla and SpaceX examples that I gave is that they didn't need it, right? They- they- they- they raised money the old-fashioned way, right? They- they raised money round by round in the existing venture ecosystem, um, and so, you know, for whatever limitations you think the existing ecosystem has, and maybe it's not ambitious enough or whatever, like it did fund Tesla (laughs) and SpaceX. Um, and so, you know, maybe it works. And- and then this goes to this underlying question, right? So the underlying question underneath all this basically is not the money part. The underlying question is like, how many great entrepreneurs are there?
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Right? And then how many really big ideas are there for those entrepreneurs to go after? Right? And then, and then that goes, you know, one level deeper, which is okay, well like what makes a great entrepreneur? Are they born? Like, are they trained? (laughs) Right? Like what, you know, what made Elon Elon? What would you need to do to get 10 more Elons? What would you need to do to get 100 more Elons? What would you n- need to do to make 1,000 more Elons, right? Are they already out there and we just haven't found them yet? Could we grow them some, you know? (laughs) Could we grow them in tanks? You know? Um...
- DPDwarkesh Patel
Dissent testosterone to the water supply.
- MAMarc Andreessen
Yeah. Like, yeah.
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
I mean, like, yeah. Th- yeah. Or- or- or do we need a d- yeah, by the way, do we need a different kind of training program, right? Do we need... I don't know. Does there need to be a new kind of entrepreneurial university that trains entrepreneurs, right? Like, that's just, like, a totally different thing.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Like, those are the underlying questions, right? I, like, I think if you show me 10 more Elons, I'll figure out how to fund their companies. I- I- I can- I can tell you, like, I- I- we work with a lot of great founders, um, and we- we also work with Elon and, like, he's still special. (laughs)
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
Like, he's still highly, he's still highly, he's still highly unusual, even rel- even relative to the other great entrepreneurs we've worked with.
- DPDwarkesh Patel
Yeah, yeah, yeah. (laughs) Uh,
- 31:19 – 44:16
Crypto debate
- DPDwarkesh Patel
let's talk about crypto for a second. Uh, when you're investing in crypto projects, how do you distinguish cases where there's some real new good or service that a new technology is enabling, and cases where it's just, uh, speculation of some kind?
- MAMarc Andreessen
Yeah. So what we definitely don't do is the speculation side. Like, we- we just, we just don't do that and I- I- I certainly mean that very specifically, which is, like, we- we're not, like, we're not running a hedge fund. So what- what we do is we apply the classic venture capital 101 playbook to crypto and we- we do that the exact same way that we do that with- with every other venture sector that- that- that we invest in, which is to say we're trying to back basically, you know, new ventures. By the way, in- in crypto, that venture might be a new company or it might be a new network, right, or it might be actually a, you know, a hybrid of the two, and we're- we're completely agnostic as to- as to which way that goes. We actually- we actually write our crypto term sheets where even when we're backing, like, a crypto C corp, we- we always write in the term sheet that they can flip it into being a, you know, a token- a tokenized network anytime they want to.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Right? And so we're- so we- we don't distinguish between, you know, kind of companies and networks.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, but- but we approach it with the venture- the venture capital 101 playbook, which is like, look, we're looking for basically really sharp founders, um, who have a, you know, a vision and a- and the determination to go after it, um, that basically where there's some reason to believe that there's some sort- deep level of technological economic change happening, which is what you need basically for a new startup to- to wedge into a market. Um, and then that there- yeah, that there's a- there's a reason for it to exist. Like, there- there's a market for what they're building and, you know, they're- they're gonna build a product and there's gonna be an intersection between product and market, and there's gonna be a way to make money and, you know, kind of, you know, the- the- the core playbook. We go into every venture, every crypto investment with the same timeframe we go into venture investing. So we go in with, you know, at least a five to 10 year timeframe, if not a 15 to 20 year timeframe. And- and so that's what we do. The reason that's not necessarily the norm in crypto, I think is basically an artifact of the fact that, you know, crypt- cry- es- especially anything with crypto tokens, like, it- there- there is this thing where they do tend to publicly float like a lot sooner than startup equity floats.
- DPDwarkesh Patel
Right.
- MAMarc Andreessen
Um, and- and so, you know, these- these- if these- let's say we're backing a new crypto network, it goes ahead and, like, floats a token, you know, as sort of one of the first steps of what it does. You know, it has a- it has a liquid, you know, thing, you know, years in advance of when a- a corresponding, you know, normal C corp would. This weird thing in behavioral economics where when something has a daily price signal and where you can trade it, people tend to obsess on the daily price signal and they tend to trade it too much. Um, right? And- and there's- there's all this literature on this that kind- kind of shows how this happens. Like, it's- it's part of the human experience. Like, we can't help our- like, it's like moths to a flame. We can't... If, like, if I can trade the stock every day, I trade the stock every day.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Right? Like- like almost all- almost every investor in almost every asset class trade- trades too often, uh, in a- in a way that damages their returns.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, and so, and then as a consequence of that, what's happened is a lot of the fir- a lot of the f- investment firms that invest in crypto startups are actually hedge funds. Right? They're- they're- they're structured as hedge funds, right? They- they- they trade, they have trading desks, they trade frequently. You know, they have these, you know, they have the equivalent of what's called a public book in hedge fund land. They've got, like, you know, these- these- these crypto assets-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
... they're trading frequently and then they'll back a startup and then they'll trade that startup's token just like they trade Bitcoin or Ethereum or whatever. But- but in our view, like, that's the wrong way. And then, by the way, there's a- there's a- there's a- there's an incentive issue which is then they- they pay, you know, they pay themselves on a hedge fund model, they pay themselves annually, right? Um, and so they're paying themselves annually based on the markup of projects that might still be years away from, you know, realization of- of- of- of ultimate underlying value. And then you- you... And then there's this big issue, you know, of- of misalignment between them and their LPs. Um, and so- so that... So anyway, so that's all led to this thing where basically just these new crypto projects that- that- that the tokens are traded too aggressively. They're- they- they- they just, in our- in our model, they just shouldn't be. They're not ready for that yet. Um, and so- so we- we anchor hard on the venture capital model. We- we treat these investments the exact same way as if we're- we're investing in venture capital equity. We- we basically buy and hold, you know, for as long as we can. Um, and, uh, and- and, you know, and try to get to the, you know, have a real focus on the underlying intrinsic value of the product and technology that's being developed. So in other words, like, yeah, basically no specula- like, no... If- if by- if by speculation you mean like daily trading or whatever, trying to look at prices and charts and all that stuff, like, we don't... That- that, we don't do.
- DPDwarkesh Patel
Or separately, another category would be things that are basically the equivalent of, I don't know, baseball cards where it- there's no- there's no real good or service that's being created. It is something that, you know, might- you might think maybe about might be valuable in the future, but not because, like, the GDP has gone up.
- MAMarc Andreessen
Oh, baseball cards are a totally valid good and service. That's a misnomer. Like, that- that- that's not... Yeah, I- that- that- that- that- I think is a... That- that- I would entirely disagree with the premise of that question.
- DPDwarkesh Patel
But- but are they gonna raise median incomes or e- e- even slightly or...
- MAMarc Andreessen
Sure. Yeah, yeah. There are people who make... Yeah, there are people who make their living on baseball cards.
- DPDwarkesh Patel
Right, right, right. Um-
- MAMarc Andreessen
Like, look, art- art is a- art is- art has been a part of the economy for thousands of... I mean, art- art's one of the original things that people bought and sold, right? Like, it's- it's a- it's- art is- art is fundamental to any... I mean, any- any kind of... I mean, would you really want to be part of an economy where they- they didn't value art? Like, like that would be depressing.
- DPDwarkesh Patel
Yeah, yeah. Or- or, like, but there's a question of, like, do they value art versus are they speculating on art and then how much of the effort is being spent on speculating on the art, uh, versus creating the art?
- MAMarc Andreessen
Well, so this gets into this old kind of taboo, right? Cultural taboo. You know, this- again, this depends what you mean by speculation. Like, if- if what you mean by speculation is, like, obsessing on, like, daily price signals and like buying and selling and churning a portfolio, right? Be- being like a day trader, right? Like that kind of speculation, that- that- that- that's what I- I think of speculation is. Like, that's- there... Let's say that's the bad form of speculation. Like, that's the- the non-productive form. If by speculation, on the other hand, you know, you mean, look, there- there are different kinds of things in the world that have different possible future values, um, and, you know, people are trying to estimate those future values and people are trying to figure out, you know, utility and they're trying to figure out aesthetic value. I mean, look, you just look at how the- look at how the traditional art market works, right? Like, is somebody supporting a new contemporary artist speculating or not?It's, like, you know, yes, maybe, you know, from, from one lens they are and maybe they're buying and selling paintings and maybe they're, you know, maybe they, they buy in and if it doesn't start going up in price, they flip it and buy something else, maybe there's speculation. But also, maybe they're supporting a new young artist, right? Um, and maybe they build a portfolio of, of new, uh, you know, a speculative portfolio of new young artists. Uh, and as a consequence, those artists can then afford, you know, they can get, and get paid and they can afford to be full-time artists and then it turns out, you know, they're the next, you know, next Picasso.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, and so that, that kind of speculation, I think, is, is good and healthy. Um, I, I think it, I think it's, I, and I think it's, it's core to everything. Like, I'd also say this, like, I don't know that there's, I don't know that there's actually a dividing line between that form of speculation, speculation on what people call investments. 'Cause even when people make investments... I mean, you just look at the, the bond, even just the institutional bond market. I mean, look, U.S. government debt, right? Like, people are today in the bond market trying to figure out what that's worth, right? 'Cause like as, you know, as the debt ceiling gonna get raised? Like, you know, they're, like even that's up for grabs, right? And so, and, and that's, and that's the pr- that's not, to me, that's not speculation in a bad sense. That's a market working properly. Like, people are trying to estimate, you know, people, you know... Ben Graham said, right, "Financial markets are both a voting machine and a weighing machine," right?
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
And in the short term, they tend to be a voting machine. In the long run, they tend to be a weighing machine. What's the difference between a voting machine and weighing machine? I mean, I don't know. Some people would say they're very different. Maybe it's actually the same thing. Why do prices go up, right? 'Cause there are more buyers than sellers. Why do prices go down? There are more sellers (laughs) than buyers. Like, the way markets work is you get individuals, you know, basically trying to make these estimations and then you get the collective effect, and I, I just, there, there's this, there's this dirty interpretation of any-
- DPDwarkesh Patel
Sure.
- MAMarc Andreessen
... kind of trading or any kind of basically people trying to, you know, do it, do the voting and weighing process that I, I just, you know-
- DPDwarkesh Patel
Yeah.
- MAMarc Andreessen
... I, I just think it's this, it's this historical ancient taboo against, like, money, you know. It's like in the Bible, like, it's like, you know, Jesus kicking the money changers out of the temple, right? It's this, you know, this, this old taboo against, like, charging interest on debt, right?
- 44:16 – 51:07
Future of VC
- DPDwarkesh Patel
we reached the end of history when it comes to how venture capital works? So, you know, for decades, the- there's like the, you basically get equity in these early stage companies, you invest in more of our rounds, there's a 2:20 structure. Is that basically what venture is gonna look like in 50 years? Or w- what's gonna change?
- MAMarc Andreessen
So I think the, the details will change, and the details have changed a lot, um, and the details will change a lot. And if, you know, if you go back to the late '60s, early '70s, like, they- the details were different then, um, and then, you know, the deals were different 20 years ago. By the way, they're changing again right now, um, in a, in a bunch of ways. Um, and so th- so the details will change. Um, having said that, I think there's a core kind of, I don't know, prince- there's, there's a core activity that is... There's a core activity that seems very fundamental, um, and the, the term that, um, the term I use that I borrowed from Tyler, Tyler Cowen who's talked about this, he, he calls it project picking. When you're doing new things, right? And by the way, new things, new tech startups, by the way, making new movies, um, publishing new books, um, you know, creating new art, right? When you're doing something new, there's this pattern that just repeats over and over again. And if you look back in history, it's basically been the pattern for, you know, hundreds or thousands of years, and it- it seems like it's still the pattern, which is, you're gonna do something new, it's gonna be very risky, it's gonna be a very complex undertaking, right? It's go- like I said earlier, it's gonna be, uh, some very complicated effort that's gonna involve a path-dependent kind of journey through a complex adaptive system. Reality is gonna be very fuzzy and messy. Um, and you're gonna have a very idiosyncratic set of people who, you know, start and run that project. They're gonna be highly disagreeable (laughs) you know, ornery people, uh, 'cause that's the kind of people who do new things. Um, they're going to need to build something bigger than themselves, right? They're gonna need to, like, assemble a team and, like, a whole effort. They're gonna run into all kinds of problems and issues along the way. Um, and then there's just this role, e- every time you see that pattern, there's just this role where there's somebody in the background who's like, "Okay, this one, not that one. Um, this founder, not that founder. This expedition, not that expedition."
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
"This movie, not that movie." Right? Um, and those people kinda play a judgment and taste role, they play an endorsement branding marketing role, um, and then they often play a, a financing role, right? And then by the way, they often are very hands-on, and they, they, you know, they try to then contribute to the s- success of the project. And the historical example of this I always use is that the current model of venture capital is actually very similar to how whaling expeditions got funded 400 years ago.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, right? To, to the point of, like, the, the term that we actually have, which is carried interest, or carry, which is sort of the pro- the profit-sharing that the VCs get on a- on a successful startup. That term actually goes back to the whaling industry 400 years ago where the financiers of whaling, uh, journeys, like, literally like out of, like, Moby Dick, they go, like, hunt a whale and bring its cr- you know, it's basically its carcass back, you know, to land. Um, uh, the, the carry was literally the percentage of the carried amount of whale that the investors got. It was called a carry 'cause it was literally the amount of whale that the k- that the ship could carry back. Um, and so if you go back to how the whaling journeys off, like, the coast of Maine in, like, the 1600s are funded, there were a group of what we, you know, they didn't call themselves venture capitalists at that time, but there were a group of basically, you know, capitalists. Um, and they would sit, you know, in a tavern or something and they would, you know, get pitches by whaling captains, you know, about, you know... And you can imagine the whaling captains, right? Like, I mean, like (laughs) whaling, right? Whaling. Like, a third of the whaling journeys never came back, right? Like, a third of the time, the boats d- got destroyed and everybody drowned, right? And so it's like, "Okay, I'm the captain who's gonna be able to, like, not only go get the whale, but, like, I'm gonna be able to keep my crew alive. And by the way, I have a strategy and a theory for where the whale is," right? And maybe one guy's like, "Look, I'm gonna go where everybody knows there are whales." And other guy's gonna be like, "No, that place is overfished. I'm gonna go to some other place where nobody thinks there's a whale but I think there is." Um, and then one guy's gonna say, "I'm better at assembling a crew than the other." And the other one's like, "Well, no, I don't even need the crew. I just need, like, a bunch of, like, whatever grunts to, like... And I'm, I'm gonna do all the, all the work." Um, and then another guy might say, you know, "I want a small, fast boat," and other guy might say, "I wanna, you know, a, a, a big, slow boat." Right? And so there's a se- there's a set of people, like, imagine in the tavern at candlelight, like, at night, like, debating all this back and forth saying, "Okay, this captain on this journey, not that captain on that journey." And then, and then putting the money behind it, right? To finance the thing. And, and, like, that's what they did then, that's still what we do. Right? Um, and so, so what I'm pretty confident about is there will be, there will be, there will be somebody like us who's doing that in 50 years, 100 years, 200 years. It- i- it w- it will be something like that. Will it be called venture capital? That I don't know. You know, will it be... You know, I don't know. You know, wh- wh- where will it be happening? I don't know. But, um-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
... that- that seems like a very fundamental role.
- DPDwarkesh Patel
Yup, yup. But w- will the public private distinction that exists now, will that exist in 50 years?
- MAMarc Andreessen
That's really starting... Public and p- private market, like, companies, right? Um, you mean like-
- DPDwarkesh Patel
Yeah, yeah.
- MAMarc Andreessen
... c- like, companies going public?
- DPDwarkesh Patel
Yeah, yeah. And just, like, the, the fact, like, there's different rules for investing in both and, you know, just kind of a separate category. I- d- is that gonna exist?
- MAMarc Andreessen
Yeah. So th- that's already sh- there's already shades of gray. Um, so th- I would say that's already dis- dissolving. Um, you know, it's very formal, you know, there's ve- formal kind of rules here. But, um, you know, there- there's already sh- shading that's- that's taking place, right? And so in the last 20 years, it's become much more common for especially later stage private companies to have their stocks actually trade, right? Actually be, you know, let's say semi-liquid, right? And, and trading either through secondary exchanges or, or, you know, tender offers or whatever. And so like, th- and th- that didn't used to happen, right? That, that didn't happen really in the 1990s and then it started happening in the, in the late 2000s. And then you've got, you know, lots of people with different kinds of approaches to have different kinds of private markets and new kinds of private liquidity. And so and the- and then, look, you've got these new mechanisms. You've got crypto tokens, right? You've got entirely new mechanisms as well, uh, you know, kind of popping up representing, you know, kind of underlying value. Um, and then, you know, you've got- you can- you- you have big, you know, arguments and debates all the time in public and with regulators and in the newspapers about what counts as, you know, this, you know, who can invest and, you know, w- uh, you know, this whole accredited investor thing, right? A lot of this is around, quote-unquote, "protecting investors." And then there's this concept of, like, high net worth investors should be allowed to take more risk 'cause they can kind of bear, you know, th- the losses whereas kind of normal investors should not be allowed to invest in private companies. But then there's a counterargument that says then you're cutting off growth investing as an opportunity for normal investors and you're making, you know, wealth inequality worse. And so, you know, that- that- that- that debate will keep playing out. Um, I- you know, it'll- it'll kind of fuzz a bit. Like, I- I'd expect probably both sides will- will- will- will moderate a little bit. Um, you know, so in other words, public companies will get to be a little bit more, um, you know, they'll- they'll probably get a little more liquid over time. The definition of what it means to be public will probably broaden out. You know, the- the- the regulators will probably expect... Well, I'll give you an example. Here's an interesting, uh, thing. So, um, you can have this interesting case where you can take a company private, but yet it's still effectively public 'cause it has, uh, publicly, uh, traded bonds. Um, and then it- it ends up with, like, publicly filed financials on the bond side even though its stock is private, right? And so it's- it's effectively r- it's r- effectively still public for the- because of information disclosure. And then the argument's like, well, if it- if it- if you already have full information disclosure as a result of the bonds trading, you might as well take the stock public again 'cause you're not losing... you know. So anyway, I- I, you know, it'll- it'll fuzz out somewhere in there.
- DPDwarkesh Patel
Okay. So there's a clear
- 51:07 – 57:29
Founders
- DPDwarkesh Patel
pipeline of successful founders who then become venture capitalists like yourself obviously. Um, but I'm curious why the opposite is not more true, right? So if you're a venture capitalist, you've seen dozens of companies go through hundreds of different problems and you would think that this puts you in a perfect position to kind of, uh, be a n- great entrepreneur. So why don't more venture capitalists become entrepreneurs?
- MAMarc Andreessen
Yeah. So I think the answer, I think one is it's just harder. Like, it- it's just- it's- it's- it is harder to build a company. Like, it just- it flat out is. Like, it's not easy to be a VC, but it's harder to build a company. Um, and it- and it requires a level of personal commitment. Like, people get to a point, like, successful venture capitalists do get to a point in life where they start to become pretty comfortable. Um, you know, they make money and like, you know, they have like, you know- they- you know, they start to kind of settle into a ni- sort of fairly nice way of living at some point in a lot of cases. And so going back to the, you know, 2:00 AM chewing glass, um, you know, kind of thing, um, you know, is- is maybe a little bit of a stretch for how they want to spend their time. Um, y- so that's part of it. I think the other part of it is, look, the- the activities are pretty different. Um, you know, the- the way I describe it is actually starting and running a company is- it's a full-on contact sport, you know. It's 100 decisions a day. Um, it's like a- a- I'll give you an example, bias to action. Like, anybo- anybody who's running a- running a company, like, you have to have a bias to action. Like, you have- you're- you're- you're faced with 100 decisions a day. You don't have definitive answers on any of them and you have to make the- you have to actually act anyway 'cause if you sit and analyze, you know, the world will pass you by, right? And s- it's like, what is it? A good plan executed violently is much better than a great plan executed later. Right? And so- so- so it's just- it's a mode of operating that basically i- like, rewards, like, aggression, contact with reality, constantly testing hypotheses, screwing up a lot, changing your mind a lot, you know, revisiting things. Um, you know, uh, just like it's, you know, it's- it's- it's, you know, thousands and thousands of, like, crazy real world variables all intersecting. Um, being an investor is different. It's- it's much more analytical, clinical, um, outside in, like, m- the decision cycles are much longer. Um, you get a much longer period of time to think about what you should invest in. You get a much longer period of time to figure out when you should sell. Um, you know, you gen- like I said, you generally don't want to trade frequently, like, if- I think if you're doing your job right. So you actually want to take a long time to, like, really make the investment decisions and then make the ultimately sale decisions. Um, uh, you know, you- you- you- you know, VCs, we- we help along the way, you know, when- when companies have, uh, you know, kind of issues that they're in the middle of. But like, you know, fundamentally, it's like a much bigger level of watching, observing, learning, thinking, arguing, um, in the abstract, um, as opposed to day-to-day just, like, bloody combat. Um, and so it's a different... I don't know. It's like, uh, you know, honestly, it's a little bit like why don't the great football broadcasters, right, uh, you know, go get on the field, right?
- DPDwarkesh Patel
(laughs)
- MAMarc Andreessen
And try being, you know, running back for a season?
- DPDwarkesh Patel
Yeah. (laughs)
- MAMarc Andreessen
It's a little bit like that to be totally honest.
- DPDwarkesh Patel
Yeah, yeah, yeah. Got it. Um, how soon can you tell, uh, whether somebody will make for a good CEO of a large company specifically? So can you tell as soon as, you know, that they've got, like, a new startup that they're pitching you or does it ta- does it become more clear over time as they get more and more employees?
- MAMarc Andreessen
Yeah. Well, look, sometimes they've done it before, right? And so s- well, okay, so I- I guess I'd say this. The- the- the big thing with, like, being able to run things at scale, there- there's actually a very big breakthrough that people either make or they don't make. And the- and the- and the very big breakthrough is whether they know how to manage managers.
- DPDwarkesh Patel
Mm.
- MAMarc Andreessen
Right? And so it- it- because the reason for that is, like, running a big company, you don't have, you know... say you're running a company with 100,000 employees, you don't have 100,000 direct reports, right? You still only have, like, eight or 10 direct reports.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
And then each of them have eight or 10 direct reports and then each of them have eight or 10 direct reports. And so even the CEOs of really big companies, they're only really dealing with, like, eight or 10 or 12 people on a daily basis. Like, and so- and so- and- and- and- and- and so the key breakthrough... Right, and then- and then how do you become trained as a manager? The way you become trained as a manager initially is you manage a team of individual contributors, right? So I'm an engineering manager. I- I have eight, you know, or 10 coders working for me. And then the breakthrough is can I- c- am I trained in how to become a manager of managers, right? And- and- and so if I'm- if I'm- if I'm early in my career, the way I think about that is I start out as an individual contributor, let's say an engineer,... I get trained on how to be a manager of individual contributors. That makes me a, an engineering manager. And then if I get promoted to what they call Engineering Director, which is one level up, now I'm a director and now I'm managing a team of managers. Anybody who can make that jump now has-
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
... a generalizable skill of being able to manage managers and then the, the, what makes that skill so great is that skill can scale, right?
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Because then you get promoted to be V- VP of engineering, now you have a team of directors who have teams of managers, who have teams of ICs, right? And so forth. And then at some point, if you keep climbing that ladder, at some point you get promoted to CEO (laughs) , and then you have a team of managers who are the executives of the company and then everything expands out from there. And so, if you can manage managers, like at least in theory, you have the basic skill and temperament required to be able to scale all the way up. Um ...
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
... you know, then it becomes a question of, like, how much complexity can you deal with, like, uh, can you learn enough about all the different domains of what it means to run a business, you know? Are you gonna enjoy being in the job and being on the hot seat, like all, you know, all, all kinds of those, those questions?
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, I think most of the people we back ... Well, let's put it this way. I think 100% of the people we back have the intelligence to do it. Um, I think maybe half of them have the temperament to do it, and then maybe half of those have the intelligence and the temperament and they really want to do it. A- and by that, by, by want to do it, I mean 20 years from now, they, they still want to be running their company.
- DPDwarkesh Patel
Right.
- MAMarc Andreessen
Um, and so, um, you know, e- enough of them where we get some success cases, but you, you, you ... But having said that, like, look, as an entrepreneur, you have to really want that. Like, you, you have to be smart enough and you have to have the temperament and you have to actually want to learn the skills.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Um, and not everybody is able to line those up.
- DPDwarkesh Patel
Got it, got it. Managing the manager of evolution. (laughs)
- MAMarc Andreessen
Yes. (laughs) Exactly. Well, that's the thing, right?
- DPDwarkesh Patel
Uh ...
- MAMarc Andreessen
Well, actually, that- that's exactly right. So right, the, the best case scenario is a bourgeois capitalist entrepreneurial CEO managing a team of managers who are doing all the managerial stuff required of scale.
- DPDwarkesh Patel
Mm-hmm.
- MAMarc Andreessen
Right? Like, that's the best case scenario for a large modern organization, right? Which is, they're able to har- the best of both worlds. They're able to harness the benefits of scale and they're able to still build new things. You know, the degenerate version of that, right, is a manager running a company, right, of basically, like, you know, basically bo- you know, basically, you know, in theory, people who can build new products, but if the manager, i- i- in the, in the Burnham sense, if, if the CEO is manager in the Burnham sense, is running a team of people who want to build new products, that company probably will not actually build new products. Those people will probably all leave and start their own companies.
- 57:29 – 1:02:15
a16z vulnerabilities
- DPDwarkesh Patel
Yep, yep. Now a- as unlikely as this may be, j- just humor the hypothetical. Let's say a16z, for the next, uh, 10 to 20 years has mediocre returns. If you had to guess, looking back, what would be the most likely reason this might happen? Would it have to be some sort of macro headwind? Would it have to be, uh, betting on the wrong tech sectors? What would it have to be?
Episode duration: 1:20:17
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