Marc Andreessen on Big Breakthrough Ideas and Courageous Entrepreneurs

1. 0:00 – 0:05

   Intro

   1. SPSpeaker0:00

      [upbeat music]

2. 0:05 – 2:24

   Tech valuations: why Andreessen says this isn’t a new bubble

   1. SPSpeaker0:05

      Thank you very much for taking the time to come in and speak to us. Many of us, um, are aspiring entrepreneurs, so we'd really quite like to be like you, and, um, many others, um, would also like to pitch to you. Um-

   2. MAMarc Andreessen0:17

      [laughs]

   3. SPSpeaker0:18

      ... actually sitting here makes me, gives me a sense of how intimidating that must be, so, uh, I won't, I won't wish it for much longer.

   4. MAMarc Andreessen0:24

      [laughs]

   5. SPSpeaker0:25

      Um, perhaps, perhaps we could, um, just start by outlining the, the three main topics I'd love to cover today. Um, the first is your views on tech and venture capital trends. Um, the second is, um, how you assess entrepreneurial DNA, and the third is your views on leadership and your leadership experiences, um, that, that you've had throughout your, your esteemed career. Um, so if we could perhaps start with the, that first, tech trends, and go with something topical. You mentioned last month at the Goldman Sachs conference, um, that tech was not in a bubble. Rather, it was in a mature deployment phase. Um, then the WhatsApp deal happened, and Mark is on the board of Facebook, um, so I just wanted to ask you, what do you think about that deal and how are you thinking about valuations?

   6. MAMarc Andreessen1:13

      So I, unfortunately, I can't, uh, 10 years, 10 years from now I can come back and tell you all about the WhatsApp deal, but right now I'm on the, I'm on the, uh, I'm on the Facebook board, and I know that you all would not come visit me in jail, so I will, um- [laughs]

   7. SPSpeaker1:24

      [laughs]

   8. MAMarc Andreessen1:24

      ... I will keep that one to myself. Um, so, uh, y- there's a couple of big things. So the, just in terms of thinking about what we've been through in the last 20 years in Silicon Valley, um, some people in the room are old enough, you may remember there was a bubble. Um, and, uh, it was a fairly big deal. Um, in sort of, uh, 1998 to 2000, and there was a very profound crash, uh, which was deeply traumatizing, uh, for those of us who, who went through it. Um, and then we've been through this extremely long period of basically, you know, actually years of pain followed by then sort of what I, what I think of as, as, as very slow recovery. Um, I think it's actually been an object lesson in the psychology of markets and bubbles. I think that, um, people are much more highly sensitized to bubbles after a bubble. If you could be sensitized to them before a bubble, um, you could make a lot more money. Um, uh, but, uh, people get highly sensitized, and so there's this phenomenon of, of trying to close the, the barn door after the horses have escaped, and that, that is a lot of what all the bubble talk in the last, uh, 10 years has been about. Um, and so we, we, we could talk at length about kinda why I think, in fact, tech is not now in a bubble and has not been in a bubble since

3. 2:24 – 4:48

   Installation vs. deployment: a framework for tech cycles

   1. MAMarc Andreessen2:24

      2000. Um, the, the deeper thing, the more interesting thing is this follows a historical pattern, um, which is what I talked about at the Goldman conference, which is based on the, the, the best thinker on this topic is, uh, a, is a economist named Carlota Perez, who wrote a book called Technological Revolutions. That's probably the single best book. Like, that book and The Innovator's Dilemma are probably the two key books that are really critical to understanding how this industry works. Um, and so she describes in her book, uh, she describes a general model for the deployment of new technologies, and then how technologies intersect with financial markets. And so she's got this whole thing and, and it's basically this multi-generational process, um, and there's what, there's basically these two big, uh, uh, sort of, uh, phases of it. There's what's called the installation phase, and there's what's called the deployment phase. Um, and it turns out, in every single case, and this includes railroads and, like, lots, electricity and steam engines and lots of prior new fundamental technologies, there's always this just gigantic bubble and then crash kinda halfway through. Um, and historically that marks the transition from the installation phase to the deployment stage. The deployment stage, you could argue, is where all the actual interesting thing hap- things happen. It's where all the tech- all the new technologies actually start to work. Um, they actually make it into everybody's hands. They actually become cost-effective, and we actually find out how to actually use all these things. Um, and so that's the phase I think we're in, in now. You know, without talking about the WhatsApp deal in particular, it is interesting to note that the companies that people think are overvalued today, um, generally either have billions of dollars of revenue, um, which was not the case, uh, in, um, in, uh, in, in the '90s. For example, Face- Facebook, uh, people argue f- Facebook as an example. Facebook went from zero to $10 billion of revenue in less than 10 years. Um, and so that is definitely not what happened in the '90s. Um, the other thing is the companies that people debate today, for the most part, have extraordinarily high customer, uh, count, uh, uh, user, uh, user count. Market sizes have expanded gigantically. Um, and so you've got these things now that people are arguing about that have, in some cases, a half billion users on their way to a billion users. And if people wanna take a position that you can have a large scaled internet service that's worth a billion users that's not gonna be worth anything-

   2. SPSpeaker4:21

      Mm-hmm

   3. MAMarc Andreessen4:22

      ... you, you could take that position. I, I'm not sure I would recommend it.

   4. SPSpeaker4:25

      Yeah, no, that, that makes sense. When you, as you say, when you look at the, the cost per user, it's actually only $36, which is much, much less than in many others for the WhatsApp deal. But another thing you, you previously mentioned was that, um, MBAs flocking into the tech sector is a sign of the bubble. So to play devil's advocate-

   5. MAMarc Andreessen4:42

      Yeah

   6. SPSpeaker4:43

      ... many of the people here are flocking to the tech sector.

   7. MAMarc Andreessen4:46

      Yeah.

   8. SPSpeaker4:46

      So could that perhaps be a sign of a bubble?

4. 4:48 – 9:27

   Are MBAs a bubble signal? Why business skills are newly central

   1. MAMarc Andreessen4:48

      So things are heating up. Um, and so, uh- [laughs] Historically, there's actually been, and, and I suspect everybody in the room knows this, there has been a direct correlation between, uh, PE multiples and, uh, MBAs-

   2. SPSpeaker4:58

      [laughs]

   3. MAMarc Andreessen4:59

      ... uh, tilting, tilting, uh, tilting into the, uh, tilting into the, uh, the, the tech industry for sure. So I think something different is actually happening. Um, I think something different is happening with how companies are getting built, um, and maybe I could do the long version, kind of the, the slightly long version of this, which I, I think there's actually a whole new, whole new way companies are being built in the last 10 years and, and I think that, uh, businesspeople and MBAs turn out to be very central to it in a way that's different than the past. Um, so I kinda divide the story of how tech- the great technology companies got built kind of into three phases, and I think we're in the third phase now. The first phase was in the '40s, '50s, '60s, '70s, and it was so crazily hard. If you talk to people who were in business then or you read the stories, it was so hard to build a new tech company. It was such an unbelievably sort of exceptional thing to do, that you, you, you only really had these really extreme characters who, who would do it, and there were a pretty small number of them. And they were extreme, extreme characters. Like, they were, they, they make all the current, like, high-octane entrepreneurs look like wusses. Um- [laughs]

   4. SPSpeaker5:50

      [laughs]

   5. MAMarc Andreessen5:50

      ... and the ones I'm thinking of, Thomas Watson Sr. If you wanna read, like, what it's like to work for somebody who's harsh, read the book on Thomas Watson Sr. Um, you know, he makes, he makes, uh, all, all of today's entrepreneurs look like cream puffs. Um- [laughs]

   6. SPSpeaker6:02

      [laughs]

   7. MAMarc Andreessen6:02

      ... he would just literally sit in his staff meetings for, like, five hours and just scream at his g- uh, scream at his guys. It was just this ast- and he built this aston- astonishing company, IBM, off the other side of that. Um, uh, uh, David Packard, um, David Packard actually was quite a character. He, David Packard people now remember for the HP way and for kind of the whole warm and fuzzy- You know, kind of approach to running companies. When, when David Packard was actually running HP, he had two nicknames. Uh, one was Pappy, um, which is kind of what people remember, the kind of paternalistic, uh, type. His other nickname was The Mean One.

   8. SPSpeaker6:31

      [laughs]

   9. MAMarc Andreessen6:32

      Um, and he similarly would just, you know, tear people apart. Um, and then Ross Perot is my favorite example. Ross Perot built the first great outsourcing company, one of the big tech successes in the '60s. Um, and of course when... You know, he was fantastic as a business builder. When he came into contact with the American public, people went, "What?" Um, and you know, again, this sort of extreme personality. So you had some of this, this kind of, this sort of will to power thing that was happening. A- and by the way, the VCs in those days I think were very similar. Tom Perkins, who's become re-famous again lately, um, you know, is, is the same kind of character. He's, he's an ex- he's a very, very extreme character and, and, and, and he always was, but that's what it took f- you know, for him to do what he did in the '70s, uh, and '80s in venture capital. So those are kind of the extreme days, and then I think both VC and entrepreneurship, tech entrepreneurship sort of professionalized. Um, and so you had a lot of VCs then, and this includes great VCs, John Doerr, Mike Morris, Jim Breyer, um, you know, who are business people or investors first, um, and, and never, never ran companies. Um, and then you had this kind of move through the '90s where you had this kind of default model where the one thing everybody knew was that founders couldn't possibly run their companies, and so you would have a founder and then you would basically promote or fire them to chairman or CTO, and then you'd put in a professional CEO as fast as possible. And I think what happened is that model just got extreme. Um, and I think by the late '90s in the Valley, we were mostly building companies that were kind of shells, um, or, you know, kind of like puff pastries o- o- of companies where, you know, they really didn't have... At, at the height of the bubble in '98, '99, the products that were getting built for the most part weren't very good, and these companies were kind of on this bomb run to get public as fast as possible, and you had all these catchphrases, uh, like, "Go big or go home," uh, or my other favorite one at the time, which was, "Forget details, just do deals." Um, and so you had this really kind of mercenary hit-and-run approach to building companies, and then all those companies vaporized after the crash 'cause it turned out they didn't have valuable products, they didn't have deep engineering capability. And then all the engineers who worked for those companies hated working for those companies because they were completely sales driven, sales led, these kind of mercenary kind of exercises at, at the, at the height of, of, of how bad it got. Now I think you've got the exact opposite thing. I think the pendulum has swung all the way in the other direction, which is now we all understand and take for granted founder CEO, technical founder CEO is a good thing. You know, Mark Zuckerberg is kind of the apotheosis of kind of the, the idea that we have now. Um, and so now what's been lost for a lot of the entrepreneurs, a lot of the entrepreneurs are engineers, but not business people, now what's been lost is a lot of the actual art of building a business. Um, and in particular, what's been lost is the art of sales and marketing. Um, and a lot of today's founders, one of the big issues we deal with is they're very technical, they're very product centric, they're building great technology, and they just don't have a clue about sales and marketing, and what's more is they almost have an aversion to learning about it. It's almost like a post-traumatic stress kind of thing, like, you know, 15 years after the crash. Um, and so now the challenge for a lot of these companies is how to take what are actually fantastic products and fantastic technology and then integrate in top-end business thinking, top-end sales and marketing thinking, and top-end operational thinking. And so I think we actually collectively have a huge opportunity to kind of put the pieces back together, and I think that's what the next five years are gonna be about.

5. 9:27 – 12:47

   Two partnership models: “I need a Sheryl” and founder-respecting CEOs

   1. SPSpeaker9:27

      So do you see the role of MBAs in terms of helping scale through that sales and marketing function?

   2. MAMarc Andreessen9:32

      Yeah. So, um, yes, definitely. And, and, and in fact, in the abstract, there's kind of two models, um, that are both actually working quite well. Um, the kind of reference model now is the Mark Zuckerberg, Sheryl Sandberg model. Um, and I work with Sheryl at Facebook, and I tease her all the time she's lost control over her own name. It's now become a proper noun.

   3. SPSpeaker9:48

      [laughs]

   4. MAMarc Andreessen9:48

      Um, you know, every 24-year-old technical founder, you know, is like, "I need a Sheryl." Um, and I'm like, "You know, so do 400 other people, unfortunately." Human cloning is not quite at the stage yet where we can fulfill everybody's need. Um, but basically the model of a very, you know, high-powered business person with deep, uh, capabilities in sales, marketing, and operations who's able to partner as a number two, as a president or COO with a technical founder CEO when you have somebody like a Mark Zuckerberg. So that's one model that works very well. Um, and one of the interesting things about the last five or 10 years is more and more of the top-end business leaders in Silicon Valley have figured this out, and like Sheryl, have chosen to partner not as the CEO, but as the president or COO with a great technical founder and build great, uh, companies. Uh, a recent example, Dennis Woodside is a top-end Google product exe- or business executive, just left and became number two at Dropbox to Drew Houston, who's another one of these guys. Um, and so that's one model, and I think that's a very exciting model, and I think it's working well. Um, the other model is what you might call sort of the Bill Campbell, Scott Cook model, um, or maybe the Dick Costolo, uh, model is sort of the other example, which is in the case where these companies don't have a founder who's capable of being CEO or who wants to be CEO, um, to have a business person, um, become the CEO, but with a, the sort of, with a much more advanced understanding of the role of founders and the role of product strategy and technology strategy than I think the professional CEOs got into in the '90s. So s- and, and this is the... I, I describe this as the Bill Campbell, Scott Cook model 'cause that's maybe the best example in the history of the Valley, um, which is, um, you know, Bill Campbell, probably well known to the folks in the audience, you know, is not himself a technologist or a product person, but is an outstanding operator of businesses, has profoundly deep respect for founders, um, and has profoundly deep respect for products and, and, uh, and, and for technology, um, and always makes it a point in, in his career, he's always made it a point to partner with the engineers as opposed to be threatened by them or feel like, you know, they have to be f- you know, they're, in the case of, of a technical founder, they have to be forced out. A- and of course, Apple, you know, Apple over the years has been a case study of this, and of course, Bill came up through Apple, and so he saw this. And so you kind of contrast the now legendary kind of John Sculley, Steve Jobs model to the Bill Campbell, Scott Cook model, and you kind of see how, you know, kind of where that came from. Um, and so that's a model that can also work very well. Um, and so as, as the folks here think about as you build your careers, um, and think about these things, um, I think if you're gonna be in the tech industry, the really key question... You know, it, it might turn out either way, but the really key question is what's the partnership that you're gonna have with a technical visionary, uh, in the company who will often be a technical founder? And I think if you can crack that code, I think there is y- just an enormous opportunity to, you know, to have one plus one equal three.

   5. SPSpeaker12:18

      So at, at Andreessen Horowitz, the, the VC fund you founded, you invest in many of these founder CEOs. Um, they all want a Sheryl.

   6. MAMarc Andreessen12:25

      Yeah.

   7. SPSpeaker12:25

      Um, finding a Sheryl isn't, isn't necessarily that easy. Um, you've built up a, a very disruptive model within the venture capital industry where you provide a lot of value-added services, including hiring and marketing, um, to portfolio companies. Could you talk a little bit about, um, how you came up with that disruptive model and what opportunities you see going forward to continue shaping the VC industry?

6. 12:47 – 15:50

   Andreessen Horowitz’s model: building a VC firm for founder CEOs

   1. MAMarc Andreessen12:47

      Yeah. So w- my partner and I came up as entrepreneurs kind of in the phase where the assumption was that you fire or demote the technical founder and you bring in the professional CEO, and you become a sales, sort of a sales-driven company. And so... And we, you know, we, we kind of, we have a lot of experience with that model. Like I said, sometimes it works, sometimes it doesn't. But we thought, this is, we started our firm, we planned our firm in 2007, 2008, and then started it in '09, and our, our, our basic take was there was an opportunity. Uh, many of the other venture capital firms had tilted hard in the direction of sort of professional sales-driven, uh, CEO. We decided to tilt hard in the direction of technical founder CEO. Um, and so we basically said, "How would you build the venture capital firm optimized for a technical founder who wants to become a CEO?" Um, that led us... Uh, and by the way, not religious, like that's not the only thing we do, but like how would you kind of center the culture of the firm around that idea? And then I'll, I'll come back to the, the other part. So we, we kind of decided on two things that would come out of that, which is, one is if you have somebody running a company who has not run a company before or has not maybe necessarily been a manager in some cases before or, in some cases, maybe has not held a job [laughs] before, um, they become CEO of their own company, um, it really shines a very bright light on the, the background, um, and caliber of the general partner that you're gonna propose to put on their board. And we just made the decision that... And, and there are many different kinds of successful VCs, but we just made the decision at our firm, the general partners will be people who have built technology startups before. Um, and so I think at this point, seven of our eight GPs, I think I'm the only one who hasn't actually been the CEO. Um, I think seven of the eight of our GPs have been the, a CEO, and I think s- five or six of the eight now have been founders. Um, and so sort of by definition with our firm, you get somebody on the board who really knows, um, h- has been through the war, really understands w- r- you know, what, what, what things are like. And so when something goes wrong and, you know, things are just like horribly like crashing, um, you know, the key engineer quits, or the founders can't get along, or the biggest customer dumps you, or a competitor comes out with a much better product, and all these really horrible things that happen, uh, you can't raise money, um, that we have somebody in the board seat who is a really good advisor and can say, "I was in that situation before, and I can tell you what doesn't work 'cause I probably made all those mistakes, and then I can tell you, you know, give you some advice on, on what does work." So that's one. Um, and then the other thing we said was we said, "Okay, well what's, what's the, what..." You know, we sort of thought about, well, what are the reasons why, you know, if, if a VC brings in a professional CEO and fires the founder, why do they do it? And part of it is lack of experience. The other thing a professional CEO brings in, um, is a very, very deep network. Um, if you've been a, you know, VP or general manager, uh, or CEO in Silicon Valley for 20 years, you have this enormous network of executives who you can hire, and engineers and recruiters, and you know all the reporters and all the editors, um, and, um, you know all of the, um, customers, you know CIOs and CTOs, and you know how to go sell the things, and you know all the VCs, you know how to raise money. So you just have the, the business people in the valley who've been in the valley have this just giant network of people, and these technical founders often don't because they've often been heads down, you know, writing code most of their, most of their lives. Um, and so basically what we decided was let's pre-construct the network that will basically, where we can take a technical founder and inject them straight into the network and sort of give them the superpowers of a network that's comparable to what, you know, a John Chambers might have. Um,

7. 15:50 – 16:54

   Operational platform and “finding a Sheryl”: the services layer

   1. MAMarc Andreessen15:50

      and so, and, and that's been a very big effort on our part. We have about 60 full-time professionals now across five operating teams in the firm that are not GPs, but are full-time professionals, uh, organized around the different areas of the network. So sales, business development, corporate development, marketing and PR, executive talent, engineering talent. Um, and so as an example, when it comes time to find a Sheryl, as a consequence, we, we fo- we're, we're trying to build very deep relationships with all the Sheryls, um, of both genders, um, throughout the valley, um, just as sort of a normal part of sort of our network building exercise. Um, and then when we have companies that are kind of maturing to the point where they need somebody like that, you know, as one example, we will know who those people are, and we'll have kind of, you know, very easy access to them to kind of help them-

   2. SPSpeaker16:30

      Yeah

   3. MAMarc Andreessen16:30

      ... to sort of bridge the gap.

   4. SPSpeaker16:31

      No, that's, that's very understand- helpful understanding how you lean in once you've identified the founders. How do you actually-

   5. MAMarc Andreessen16:38

      That was good. That was good.

   6. SPSpeaker16:38

      [laughs]

   7. SPSpeaker16:39

      Stop it.

   8. MAMarc Andreessen16:39

      That was good.

   9. SPSpeaker16:40

      [laughs]

   10. MAMarc Andreessen16:41

       That was good.

   11. SPSpeaker16:41

       The, uh-

   12. MAMarc Andreessen16:42

       That was good

   13. SPSpeaker16:42

       ... how do you actually identify them initially? Um, so what do you think are the, are the traits, um, that founders have? And I'd also love to hear about some of the best and worst pitches you've ever heard.

   14. SPSpeaker16:52

       [laughs]

8. 16:54 – 18:55

   How VCs choose: funnel math, fundability, and the pain of saying no

   1. MAMarc Andreessen16:54

      So, um, the, the basic math is... The, so there's a basic math component and then there's the, all the intangibles. So the basic math component is there's about 4,000 startups a year that are founded in the technology industry that would like to raise venture capital. Um, we can invest in about 20, um, so the falloff is significant. Um, we, I like to say our day job is crushing entrepreneurs' hopes and dreams. Um, we actually have focused very, very hard on being very good at saying no 'cause it's most of what we do. Um, uh, we see, actually, we see 3,000 inbound referred, uh- ... opportunities a year. We narrow that down to a couple hundred, um, that are taken parti- particularly seriously. Um, and I would say there's kind of this very interesting kind of process where there's, you know, the, the say the, the, the hard thing is deciding which ones we're gonna invest in 'cause we can just invest in so few. Um, the somewhat easier thing actually it turns out, this has been a surprise, it's actually after you've been in it for a while, the thing that's actually fairly easy to tell is will this team and company be fundable by a top VC? Will it get funded by a top VC? It may be, it, it may be Sequoia or Accel or Greylock or who, who knows who it is, but, you know, w- is, does this company kind of clear the bar? And I think the way the math works basically is, you know, there's about 200 a year that are fundable by top VCs that, that, that get funded. Um, by the way, within the 200 about 15 of those will generate, you know, 95% plus of all the economic return. Um, so just 'cause it gets funded by a top VC doesn't me- uh, even the top VCs, right, tank, you know, generally about half their deals. Um, so even if you get funded by a top tier VC it's not complete validation. So about 200 a year that are kind of fundable by top VCs, we can fund 20, and then 15 of them actually generate all the returns. And so it's kind of a white-knuckle thing when it gets right down to it to try to make, you know, the picks. And if there's one thing that's frustrating in this job that every VC deals with it's, you know, you miss most of the big winners, right? It's like mo- the, the thing all the top venture firms have in common is they did not invest in most of the great successful technology companies, um, which is an incredibly frustrating thing. Um, th- so that's the basic dynamic, and that's the framework within which, you know, people come in, uh, and, uh, a- and pitch to us. Um, at the heart of it there's two things that we look really,

9. 18:55 – 21:57

   Founder “DNA”: courage, genius, and rejecting the “failure fetish”

   1. MAMarc Andreessen18:55

      really hard for. I mean, there's, there's kind of the surface level stuff you look for. So you look for huge market, um, you look for, you know, differentiating technology, and you look for, you know, incredible people. Um, I think in practice, I think that we collectively and cer- we specifically and then we collectively VCs, I think we probably ... We, we spend a lot of time talking about markets and technology, and we have lots of opinions, and I'm, uh, not sure that those opinions are actually all that relevant all that often. Um, I think probably the decision ultimately is and should be around people, um, as like 90% of the decision. Um, the two things we really zero in on on people are, um, you know, two things. They sound simple. They end up being very difficult. Um, courage and genius. Um, courage is the one we talk about a lot 'cause it's the one that people can learn. Um, uh, you know, courage, courage which is to say not giving up in the face of adversity, um, you know, just being absolutely determined to succeed, you know, is something that you can, you can like force yourself to do. It can be very painful. You can force yourself to do it. The genius part is a little bit hard to force yourself to do. Um, you know, courage without genius might not get you where you need to go, but genius without courage almost certainly won't. Um, and so we're looking for some kind of magic combination of genius and courage. You know, there's, there's a, there's a ... One of our, one of my partners quotes, [laughs] quotes Nietzsche a lot on these top- He says it's, it's, it's a will to p- it's will to power. It's, it's, um, uh, you know, it's people who simply will not stop. Um, and, and by the way, right, there's always been this kind of thing in Silicon Valley of like, you know, sort of this, I call it the failure fetish, right? It's failure is good, right? Failure you t- ta- you guys are probably all f- have been taught this, heard about this from a lot of people, like failure is a wonderful thing, failure teaches you all this stuff, and it's great to fail a lot. Like, and we don't like buy any of that. Um, we think that's all complete, [laughs] complete nonsense. We think failure sucks.

   2. SPSpeaker20:33

      [laughs]

   3. MAMarc Andreessen20:34

      Um, we think failure is a terribly, terribly depressing thing to go through. Uh, we think success on the other hand is wonderful.

   4. SPSpeaker20:40

      [laughs]

   5. MAMarc Andreessen20:41

      Um, I ... You know, you wouldn't think that this is something you have to actually say out loud.

   6. SPSpeaker20:45

      [laughs]

   7. MAMarc Andreessen20:45

      But, um, we, we do find it to be clarifying, uh, when we point it out.

   8. SPSpeaker20:48

      [laughs]

   9. MAMarc Andreessen20:49

      Um, and so we are strongly biased towards people who are so determined to succeed that they just, they never give up, they never quit. Um, and I think that is a huge part of it, and that's something we really look de- we look, try to look deeply for. We ... And, you know, you ... That's the kind of thing that's not listed on a resume, right? That's something that has to be deep in somebody's, fundamentally deep in somebody's character, and you have to see it in their backgrounds.

   10. SPSpeaker21:08

       Um, what has been your, talking of courage, what has been your most courageous moment, and perhaps the moment of which you're most proud?

   11. MAMarc Andreessen21:14

       Oh, the moment ... Actually, this is actually a good day to ask that question 'cause my partner Ben's book actually came out today. Um, so if you haven't bought it yet, um, number one on Kindle in management, $14.44. $14, 44 cents. Makes a-

   12. SPSpeaker21:26

       [laughs]

   13. MAMarc Andreessen21:27

       Makes a great, uh, birthday present for, uh, all of your friends. Um, uh, uh, he actually tells the story in his book, it's actually in his book, and it's, it's when our ... It's actually, it's, it's when our st- it's, it our second company Loudcloud, um, when, when, when we got just taken apart. We started our second company Loudcloud in September 1999, and it was classic, you know, we were ... I mean, it was fantastic. It went incredibly high rapid growth rate off of a standing start, straight into the, you know, the e- the last six months of the bubble. Um, you know, unprecedented growth, cover of Wired magazine, on and on and on. We took it public in 18 months,

10. 21:57 – 23:24

    Courage in practice: Loudcloud’s crash and surviving the darkest days

    1. MAMarc Andreessen21:57

       and then just the world caved in, our entire business caved in, um, uh, burning, you know, an enormous amount of cash, uh, 'cause we were, we had, uh, created the company for much, much higher growth. Um, and, uh, and our stock, uh, ultimately bottomed out at half of cash. Um, so our shareholders, uh, made the judgment that not only were we so incompetent, um, that we were not capable of justifying the amount of cash we had in the bank, but that we were certain to burn at least half of it before we would call it quits and just give them the cash back. Um, those were probably the dark days. Um, and then, you know, NASDAQ, you know, started sending the delisting letters, and they sent about one a day, um, saying, "If you don't give your s- your, your stock back up above a dollar we're gonna delist you and you'll be on the pink sheets," and we came within days from that. Um, and so gutting through that ... And, and by the way, gutting through that kind of thing at the same time that it looks like the entire world is ending, that it looks like, you know, the tech industry will never, ever recover, um, I think we ... Uh, the, the, the thing that we're most proud of is, is, is, is actually working our way through that.

    2. SPSpeaker22:50

       Fair enough. That's tougher than getting in.

    3. MAMarc Andreessen22:52

       [laughs]

    4. SPSpeaker22:53

       The, uh ... You spoke about Ben's, Ben's book, um, and Ben talks a lot about these, these challenges. The, the whole notion in the book is dealing with the hard things. Um, have there been hard moments in your relationship? And, and-

    5. MAMarc Andreessen23:07

       Oh-

    6. SPSpeaker23:07

       ... could you talk a little bit about that relationship? I remember once reading that, um, he described you as the Beyoncé of the relationship and, uh- [laughs]

    7. MAMarc Andreessen23:15

       ... him as Kelly Rowland. So how do you feel-

    8. SPSpeaker23:16

       Yes

    9. MAMarc Andreessen23:16

       ... about being Beyoncé?

    10. SPSpeaker23:17

        [laughs]

    11. MAMarc Andreessen23:17

        Yes. Yes. I'm hoping, I'm hoping that wasn't a commentary on my figure. That's my, that's my main, that's my-

    12. SPSpeaker23:22

        [laughs]

    13. MAMarc Andreessen23:23

        ... my main concern.

    14. SPSpeaker23:23

        Or on your dance moves.

11. 23:24 – 27:22

    Long-term partnership with Ben Horowitz: trust, conflict, and “lead bullets”

    1. MAMarc Andreessen23:24

       Or on my dance moves. Um, so- Uh, I would, let me maybe broaden it out. So it goes to the nature of business partnerships. So Ben and I have been partners for 18 years, so I first met Ben in 1995. He actually tells the story in the book of how we met, which is a whole story in and of itself and involves a lot of curse words. Um, you know, we kind of describe ourselves... I mean, we, we, we love each other and we, we, we do everything together, uh, everything in business together. We, um, you know, we describe ourselves a little bit as the, as the old married couple, um, you know, that you see like out on the park bench on the park in the middle of the afternoon sitting at opposite ends of the bench kind of staring at each other. And they're always there, but they're not talking. Um, and, you know, maybe they argue every now and then. Um, but they're there this year, and they'll be there in five years, they'll be there in 10 years. Um, so, um, y- you know, I would say at this point, at this point, it's probably hard to untangle how the partnership works other than just that we've been working together for so long. Um, and so we have the, a lot- we have a deep level of trust that comes from understanding each other very deeply, and so I know exactly what he's good at and I, I know what to defer to him on, and I... He knows exactly what I'm good at and he knows what to defer to me on. Um, and then both of us trust the other. Um, uh, you know, so we, we both know that we'll make decisions in, in both of our best interests. Um, and there's never anything that's, you know, advantages one of us over the other. And so w- as a consequence, each of us are very comfortable, um, you know, essentially caving to the other on any topic, which I think is, is, is actually very helpful. Um, that said, we argue about everything, um, and we constantly argue. Um, and, you know, we often come at things from very different points of view. Um, and, you know, he, i- in, uh, you know, I don't even know how to describe. We, we just, we have different back... You know, we have different backgrounds from before. Um, we have kind of different reference points for how we think about things. Um, he is a far better, uh, operator than I am, so he's much better at running a business. So, for example, a, a lot of things, when we, when we used to run, uh, companies together, um, a big thing we'd argue about is, you know, I would, I, I sort of... I, I think what he would say about me is, is I'm sort of abstract, so I think about things like products and strategy and business in an abstract way. And so for me, it's like, okay, what's the right answer? Like, what, what's the, you know, what should we do? Um, and then the way he thinks about it is from an organizational standpoint, from a management standpoint, is what i- what are we capable of doing? Um, and so I will often propose things that, where he's like, "You're out of your mind." Like the entire... You know, yes, in theory, that might be a good idea. In practice, you'll destroy the entire company if we try that, and I'm like, "Well, that's a pretty good point." Um-

    2. SPSpeaker25:38

       [laughs]

    3. MAMarc Andreessen25:39

       Uh, and then, you know, the argument in the other way is, you know, look, I know that the organization is gonna get challenged by this, and I know it's gonna be hard and we might lose people, but it's so important that we have to do this thing, um, that we have to really push it. Um, and so I think a lot of the theories that he and I have developed over the years about how to run companies are kind of at that intersection point of what's kind of intellectually the correct thing to do or the optimal thing to do, and then the actual practical reality, um, of, uh, what can be done. He talks a lot about one of his theories that we use a lot at the firm is, um, he uses the, his book is kind of all about this, is we, we call it there are no silver bullets, there are only lead bullets. Um, there's this, there's this temptation when you, especially when you get into crisis, when you get into a real, real, real problem, there's this temptation to think there must be a magic answer. Like, there must be some stroke of genius. You know, there... It's almost, it's like what you, uh, I don't know, what you- if people watch the new Sherlock Holmes, you know, TV series, which I just love, it's like, you know, Sherlock is gonna ha- you know, no matter how dire it gets and no matter how, like, evil Moriarty is, Sherlock's gonna have that stroke of genius that's gonna save the day, and there's this really strong tendency to kind of think, um, that that, that that's out there. And we see a lot of entrepreneurs that kind of cycle through different silver bullets, and then they don't work, and they don't work, and they don't work. Ben's point is always, it's probably, the answer is probably in firing a whole bunch of lead bullets. Um, and so the answer probably is, you know, the engineers working, you know, later at night for, you know, six months, um, and, you know, getting the next version of the product out. And the answer is probably for, you know, the sales reps to go call on twice as many customers and try to close more deals. And the answer is probably to, you know, your stock price is low, you know, go find the investors who are willing to invest when you, when you're trading at half the cash 'cause it turns out they actually do exist, and then your stock goes up a little bit and people start to regain confidence. Um, and so, um, I would say I've, you know, I've certainly come around to that point of view a lot. Um, and so when we work with entrepreneurs, we often have very similar advice 'cause it's kind of, it'll be tempered through the very practical realities of what you have to do to get through a situation like that.

12. 27:22 – 29:32

    Activists and conflicts: responding to allegations and linking activism to market conditions

    1. SPSpeaker27:22

       That, yeah, that, that seems a, a, a very healthy argument. Uh, perhaps I could bring you onto a, um, an argument that, that's probably much harder to deal with. I mean, in general, you enjoy an incredibly strong public image. Um, j- last week, Carl Icahn, um, rather than using either a silver or lead bullet, used a kind of badly trained Gatling gun-

    2. MAMarc Andreessen27:43

       Yeah

    3. SPSpeaker27:43

       ... um, when he, uh, he brought up as an investor of, of eBay, um, that eBay should divest PayPal and, uh, alleged that, um, you had a conflict of interest. Um, could you speak a little bit about how it feels dealing with, um, those sorts of allegations in the press?

    4. MAMarc Andreessen28:00

       I think that the, um... And, and by the way, it's not just, it's... You know, Carl has become very active in a bunch of tech companies lately. It's actually not just Carl. There's a firm called Elliott Associates. Uh, it's a top hedge fund that's become very active buying, uh, beaten down tech companies. There's a bunch of others. Um, uh, actually, this, this is part of my theory of we're not in a bubble, um, which is, uh, when activists become interested in a sector, it's because the sector, the, because the PEs are low and because the cash balance is high and the debt levels are low. Um, and so it, it, you know, although I'm not, not, not, I'm not getting that much of a thrill out of the, my current level of personal engagement, um, this stuff is, I view this, the, all this activist activ- uh, activity as validation of, of my thesis, which is we're not only not in a bubble, we're actually still in a bust, especially the big tech companies are still in a bust. Uh, multiples are very low, uh, cash balances are very high. Um, it's the kind of thing where I think time will cure that, um, because in time, PEs will expand. In time, companies will invest more of their cash in their own business, um, or find other things to do with it. Um, and the activists will go back to harassing steel mills-

    5. SPSpeaker28:59

       Yeah. Fair enough

    6. MAMarc Andreessen29:00

       ... and oil companies and airlines.

    7. SPSpeaker29:01

       Yeah. It wa- it was interesting to see that in, as you, as you blogged, in 2011, he was advocating exactly the, the sorts of board management that he's now seems to be criticizing.

    8. MAMarc Andreessen29:11

       Yeah. Carl Icahn in 2011 was extremely enthusiastic about, um, uh, board nominees, um, with conflicts of interest, uh, that came from his organization. Um, uh-

    9. SPSpeaker29:20

       [laughs]

    10. MAMarc Andreessen29:21

        And so I, I, I posted, uh, this morning, um, extensive, uh, excerpts from his communications at that time. And so a- as far as I'm concerned, he can now argue with himself.

    11. SPSpeaker29:29

        Yeah.

    12. SPSpeaker29:29

        [laughs]

13. 29:32 – 32:12

    Inside a VC firm’s Monday: partner meetings, pitch days, and pipeline review

    1. SPSpeaker29:32

       It's very helpful, um, for us as, as students to understand how you actually spend your day. Um, and, um, I'm sure it's a, an incredibly busy one, so thank you for taking the, the time out today. Um, but could you perhaps describe what yesterday looked like?

    2. MAMarc Andreessen29:47

       Oh, [laughs] yesterday. Good Lord, what did yesterday... What day was yesterday?

    3. SPSpeaker29:50

       Monday.

    4. MAMarc Andreessen29:50

       Monday. Okay, good. Um, so Monday is butts in seats day for us. So Mo- Monday is pa- all-day partner meeting. Um, and all the VC firms kind of have this in common. And so, like one of the really critic-- When you're starting a company, there's all these really critical issues like what product you're gonna build, what market you're gonna go into. When you start a VC firm, it's really important what is your conference table gonna look like and how comfortable are your chairs gonna be? Um, 'cause you are gonna be in those chairs for a long time. Um, so it's basically, it's, you know, sometimes yesterday was like eight hours. It can be as long as twelve hours straight of just straight meetings. And so it's basically two things happen on a Monday. Well, three things happen on a Monday. So we have a, uh, breakfast every Monday. Um, and we alternate breakfast. We have a general partner breakfast, and then we have a general partner plus senior operating staff breakfast, and we alternate back and forth. Um, and we kind of do all the firm related things. Um, and then we have back to back what we call the all GP pitch meetings. Um, and so these are the companies that we are most likely to invest in. Um, and so the, the signal if you're raising venture money is you get, you get invited on Monday, that's a good sign. If you don't get invited on Monday, it's not a good sign. Um, and so, um, and we have, I think yesterday we had three of those back to back. Sometimes we have four or even five. Um, also by the way, pitch early in the day, not late in the day. Just helpful advice. Um, uh, so we do those. Um, and then, um, uh, and then we have deal re- at the end of the day, we have what we call deal review. Um, so and we actually do that twice a week. Most firms do that once a week, but we wanna move a little faster, so we do it twice a week, Mondays and Thursdays. And so that's basically a complete, you know, sort of the, um, you know, com- com- basically the complete pipeline report. Well, maybe possibly interesting. So we, we actually run our deal process like a sa- like, uh, we actually use salesforce.com, and we actually run our entire process in the firm like a Salesforce runs a sales pipeline. Um, and so we have comprehensive tracking of kind of the stage of every, b- all the way from all the initial inbound deals all the way through to the ones that are being closed. Um, and so we kind of review that entire pipeline, and we actually have a team that, you know, a team that manages that, um, and a great, uh, a great, uh, um, operating, uh, person who, uh, who manages all that. Um, and so we, we go through all that, and that's where we ha-- that's basically a long argument. Um, and we go through and we argue about every company, um, and we argue about everything else we can think of to argue. Um, and then we go home and collapse.

    5. SPSpeaker31:56

       In those, uh, in those deal flow meetings, are there any technologies, and I know for example you've blogged recently about Bitcoin and how excited you are about Bitcoin and the future of the news industry. Are there any particular, um, technologies or industries that you're, you're most excited about?

14. 32:12 – 35:44

    Big breakthrough ideas: why the firm tilts toward “crazy” pitches

    1. MAMarc Andreessen32:12

       So there's a two-part, two-part answer to that. Um, and so the first answer, uh, uh, I will answer the question in the second part, but the, the, the first answer is, um, we-- this is another kind of theory we have at the firm. So there are venture capital firms that are very top-down in thinking about markets and technologies. And so if you go inside a particular Sequoia and Accel, um, and Bessemer, and I think Kleiner Perkins used to and, and may still, um, the way that they f- the way they, they actually have, th- those firms are actually very explicit, um, about how they think about products and markets. And so they actually will have, uh, I think in each case they'll run an annual planning process, um, where they will actually get together, you know, at the, at the beginning of each year and they'll literally draw a map, um, of what they think markets are gonna look like. And so, you know, and, and it's basically a value chain map. And so it's, uh, it's an interesting exercise to think about. It's like, okay, like for example, for networking you'd have like, you know, fiber optics and communication ships that then lead into things like routers, um, that then lead into things like, you know, ISPs, and then ultimately lead into things like, um, you know, other, you know, wireless businesses or whatever, and you kind of draw that entire thing out as a, as a map. And then you basically have boxes for each of the product, product categories and then, you know, a VC firm can invest in one company per category. Um, and then basically the goal for the year is put a name in each box. And so they sort of consider it a success at the end of the year if they've invested in the best possible company they can in each box that they've identified. That's kind of one extreme. Um, we decided to be more on the other extreme, which I think is a little bit more what I would call the benchmark, uh, approach or in the old, in the, uh, uh, the, in the prior generation would've been called maybe the Arthur Rock approach. Um, uh, which is basically, um, and, and by the way, we have all the same theories, like we can't help ourselves. We just sit around and talk about this stuff all day. But, um, we incline more towards the other side, which is basically, um, the big breakthrough ideas. The, the entire art of venture capital in our view is the big breakthrough ideas. The nature of the big breakthrough ideas is they're not that predictable. Um, and in fact often upon first contact they seem nuts. Um, and it actually turns out to be the, now all the crazy ones also seem nuts, so it's a little bit of a, you know. [laughs] They called Einstein crazy, but they also called Charles Manson crazy. You have to be, you have to be cautious, uh, uh, on this stuff. But, um, the really, really breakthrough ideas often seem nuts the first time, the first time you see them and, and it's the fact that they seem nuts can be a very positive signal because number one, it, that, that can explain why that thing already isn't being done by an existing big company 'cause it's just considered too strange. And then number two, um, you know, i- if it, if it works, like if, if the bit flips at some point and it goes from being nuts to being like, "Oh, that's a good idea," like then, you know, those are the companies that could just explode. Um, could become just gigantically huge. And most of the big ideas, the PC seemed nuts at one point, the internet seemed nuts, Bitcoin today seems nuts. Um, and s- Airbnb seemed nuts, uh, Uber seemed nuts in the beginning. Um, and so, um, y- you kind of wanna, i- in our view we have this sort of approach. You wanna kind of tilt into the really radical ideas. Um, but by their nature you can't predict what they're gonna be. Um, and so what you basically wanna do is have as pr- prepared mind as you possibly can, and learn as much as you can about as many things as you can, and then basically e- enter as close to a Zen-like s- you know, blank slate kind of state at the begin, you know, kind of the Zen, you know, Zen ideal of kind of perfect humility kind of, which is hard for a venture capitalist. Um, [laughs] you know, sort of perfect humility at the beginning of the meeting basically saying, "Teach me." Um, and then they either, you know, they either do or they don't, but then, you know, the, the hope is, you know, if Larry and Sergey walk in and they're like, "I know this is the thirty-fifth search engine, but this will be the one that works," um, you know, you're open-minded enough to say, "You know, yeah, that might work," as opposed to, "You idiots, don't you know that that's been tried and failed so many times before?" Um, and so we're way more on the side of we've got sort of opportunistic, um, trying really hard to let ourselves be educated by the really

15. 35:44 – 39:31

    Great vs. terrible pitches: clones, the “idea maze,” and testing conviction

    1. MAMarc Andreessen35:44

       smart entrepreneurs. Um, you asked about, uh, the best and worst pitch meetings. Um, the worst pitch meetings by far are the, the rip- I mean, and we try very hard to not have these get to us, but, you know, Snapchat for dogs. Like, y- y- y- you know, it's this... I, I, I'll just give you, this is not a startup thing, I'll just give you an example. You see it in Hollywood, right? It's like one volcano movie works, then there's like 400 volcano movies. It's like, how many freaking volcanoes? Um-

    2. SPSpeaker36:07

       [laughs]

    3. MAMarc Andreessen36:07

       ... it's like 35 of the top 100 games in the iOS App Store now are like Flappy Bird clones. Like, and so, and, and, and Paul Graham in, in, in the venture community, Paul Graham calls this the Hollywood approach to, to, to startups, which is, it literally is, you know, uh, you know, Airbnb for parrots. It's just, it's these infinite variations of all the successful ones, um, that you get. Um, and by the way, the ones that sound silly, also just ones, vertical search engines. When Google worked, so search engines went very deeply out of style, and then Google worked, and then there were vertical search engines in every single category, and except for travel, they all failed, right? 'Cause it turns out there was just gonna be a search engine, and there wasn't gonna be a search engine for, you know, health. There was just going to be a search engine. Um, and so it's all the variations and clones and kind of the mercenary kinda, kinda hit-and-run, you know, kinda stuff. So we, we try really hard to not sit in those 'cause those are very painful. Um, the ones that are the most exciting are the ones where it's a, it's a really, really bright founder who's done a tremendous amount of work, and completely understands the domain, um, and walks in with a really crazy idea, and then in the course of an hour, um, can basically walk you through, w- we have this sort of concept we use called the idea maze, which is the really bright founders with these really radical ideas tend to go through what they call, call the idea maze. So they, they tend to have worked for years working their way through the idea to try to figure out how to get from kind of the initial crazy starting point to at the end something that will actually work in the real world. Um, and the really great entrepreneurs can walk you through the idea maze and make you understand the flow of thinking that got, got them to the point where they actually came out the other end with what is a great idea. Um, and what's inter- what's interesting about that is those are generally not... There's this kind of, um, you know, theory in venture capital, you wanna back coachable entrepreneurs. The entrepreneurs who really have the radical ideas are generally not only not coachable, um, they generally react with hostility to being coached. Um, and so one of the things we test for, um, is, um, you know, basically say, "Well, you know, have you thought about doing it this other way?" And what we're not looking for is the, "Oh, that's a great idea." Uh, what we are looking for is the stare that's just like, "You idiot."

    4. SPSpeaker38:00

       [laughs]

    5. MAMarc Andreessen38:01

       Right? "You moron. You've been sitting here listening to..." You know, this is them talking to me. "You've been sitting here listening to me for 20 minutes, and I've been working on this for five years, and you think you understand this so well that you can make me a suggestion. And not only are you an idiot for thinking you can do that, but I will now explain to you in detail why you're that big of an idiot." We love those.

    6. SPSpeaker38:17

       [laughs]

    7. MAMarc Andreessen38:19

       Like, those are fantastic. Those are outstanding. Um, and so, uh, and it goes right back to the combination of genius and courage I was talking about. Um, and, and so in particular, I mean, it's part of it's in the words, but also part of it's just the look on the face. Oh, we love that look.

    8. SPSpeaker38:31

       [laughs]

    9. MAMarc Andreessen38:32

       It's like caviar. [microphone static]

    10. SPSpeaker38:35

        [laughs]

    11. SPSpeaker38:35

        So I wanna turn it over to Q&A. So perhaps we can just finish with, um, with one question, which is, you had built two very, very successful companies, um, and then in 2009 you decided to not run a technology business and instead found, um, what's become the fastest growing venture capital business. Um, people were probably telling you, "You're nuts," like you just said.

    12. MAMarc Andreessen38:58

        Oh, yeah.

    13. SPSpeaker38:58

        Um-

    14. MAMarc Andreessen38:58

        Yeah. Well, we went, we went, we went around to see, we went around to see, 'cause we'd worked with, we worked with all, all the, all, most of the big, most of the big VCs, so we went around to see all of our friends in venture capital and tell them what we were thinking, and they all told us we were nuts.

    15. SPSpeaker39:10

        So-

    16. MAMarc Andreessen39:10

        Actually, with, with two exceptions. Actually, two of them were incredibly helpful. Jim Breyer and Anil Boothari were both just tremendously, tremendously helpful, and we're very grateful to them for all their help. But the rest of them pretty much told us we were nuts.

    17. SPSpeaker39:19

        So what, what drove you? And, and perhaps you could answer it in this context. When we apply to the GSB, we all get asked to write an essay on the following question: What matters most to you and why? So what today matters most to you and why?

16. 39:31 – 41:47

    What matters most: technology’s power and shifting from climbing to helping climbers

    1. MAMarc Andreessen39:31

       So we're really deep believers in the power of technology. Like, we, we, we, we think that the technology industry has made the world a radically better place in the last 70 years, and we think it will make the world a radically better place yet in the next 30 years, and we think it's just starting. Um, you know, the fact that we've just now, after 70 years in the computer industry, gotten to the smartphone, which is the first computer that can get to everybody on the planet, that everyone on the planet is gonna have one of those, um, you know, that is a... Y- you know, we're just reaching the point now where we're able to apply technology to a lot of really fundamental problems, uh, in the world, a lot of f- fundamental problems and opportunities. And so it, it, we, we just all feel, or I, I feel like we have spent, we've, I've spent my career and then even previous generations of entrepreneurs in the valley have spent their career getting to the point where we can now do the things that we can do. Um, and so it's an amazing, it's an amazing, amazing time, uh, in terms of what we can do. Um, in terms of starting a venture capital firm, um, there is, uh, an aspect to starting, uh, s- there are some serial entrepreneurs who like starting seven or eight companies in a row. Dave Duffield is probably the best example of this. I think Workday is company number eight for Dave, which is amazing. Um, I've done it three times. Ben did it twice. Well, it depends how you count, but twice, two and a half times. Um, uh, it, w- uh, it, for some of us, at a certain point, it starts to be like, you know, it's like you climbed all the way up the hill, and then you end up back in the bottom of the hill and you have to start the climb again. Um, and so at some point you start to think maybe there's a way to contribute, um, that has to do with helping people climb the hill, um, as opposed to being the person out in front. Um, and so I think we reached that point, um, and we're very, you know, we're very happy, uh, doing that.

    2. SPSpeaker40:58

       Thank you. Thank you so much. Now we can have some smart questions.

    3. SPSpeaker41:02

       We're actually hosting the Future of Media conference here tomorrow.

    4. MAMarc Andreessen41:05

       Oh, great.

    5. SPSpeaker41:06

       Um, so I was interested to ask you about the news business. Of course, you've been tweeting and writing and thinking a lot about that lately. Um, and I guess if I could sum up your views, you're optimistic about the prospects for journalism, um, to thrive using a variety of, of business models. Um, so I'm a former journalist, and a lot of the issues that you are thinking about now have been being discussed within the industry for maybe eight or 10 years, a lot of, you know, um, soul searching and, and reflection and experimentation. So what I'm curious about is why did you get interested in it now? Like, what prompted you to get excited about that space and to start thinking and talking about it?

17. 41:47 – 47:09

    The news business as a competitive market: from monopoly-era “objectivity” to new models

    1. MAMarc Andreessen41:47

       Well, so less from an investment standpoint 'cause we don't really-- content's not content generally, so we don't really inv- we're not gonna be making a lot of investments in, in media production, um, just 'cause it's a, it's a different field. We, we can talk more about that. Uh, my interest in news and media is sort of twofold. One is as a giga- [chuckles] as a gigantic consumer of it. Um, uh, um, and somebody who thinks it's very important. And then two, because everything I've worked on my whole life gets constantly blamed, um, for the decline and fall of journalism. Um, so the internet... Everybody knows, right, the internet has completely destroyed the news business. Internet has destroyed journalism. The democracy is in peril, and it's all my fault. Um-

    2. SPSpeaker42:20

       [laughing]

    3. MAMarc Andreessen42:22

       So, um, at a certain point I s- you know, s- I start to, I get, get, uh... And, and on behalf of all the people I, I worked with to, to, to build, to build things like the web, it's like, okay, maybe it's, maybe, maybe it's not the new technology's fault at a certain point. Um, so my observation is-- And then I think it's a very interesting topic. So I think the news b- the... And I focused on the news business 'cause that's kind of the, the, the, the pointy end of the spear in terms of, you know, the thing that people are most worried about. Um, I look at it as this, I, I look at it... I do what very few people have been willing to do, I think, which is look at it purely as a business. Um, and basically say, and, and... So here's my, my basic position, is our view of what the news business is and of what journalism is, is an artifact of a specific period of time from 1945, basically into, basically 1945 to 2005. Um, and basically post-war, uh, post-war US. Um, if you go back to the news business before World War II, if you start in colonial days, um, and if you extend all the way up through the 1930s, the news business worked very differently. Um, it was a very successful business, and it was... A lot of people were in it, a lot of people made a lot of money. But, like, as an example, this whole idea of objectivity that journalists now take as kind of this, kind of, you know, kind of pure concept that has to be maintained. Like, there was really no such thing. Like, I always say, like, in, in... So I would say, like, objectivity is an artifact of an era in which news businesses were monopolies or oligopolies. Um, in the days when news businesses were fully competitive, uh, sub-subjectivity was how it went. And they always say, you know, "You're a scumbag. How can you say that?" And I'm like, "Well, Ben Franklin was a subjective journalist, and so stop calling Ben Franklin a scumbag." Um, you know, he actually knew what he was doing. He was actually a very successful journalist, a very successful publisher. Um, there's a great book on the news business in the colonial era in the US called Infamous Scribblers, which is what was a pejorative at the time for reporters, which could come back into fashion. Um, and, uh, it's a great articulation of how the news business actually grew up in the US. And then in the '20s and '30s, it got really interesting with figures like Hearst and Pulitzer. And so you can kind of, you can actually study kind of the historical news business kind of through, I think, through those two time periods. Um, and then you kind of look at post-World War II, and you say, "Well, what happened?" Well, monopolies and oligopolies got established, and so for, um... And it, it was sort of this era of centralization in, in a lot of parts of the economy, but it was very clear in the news business. You had, you know, you'd have one major newspaper per metro area because of the cost of distribution. Um, you'd have, you know, three TV networks nationally because of the limited bandwidth for VHF TV. Um, you'd have, you know, a handful of local radio stations. You'd have a handful, um, you'd only have a handful of magazines. You could only really have three general news magazines on newsstands 'cause you just couldn't afford to distribute more than that. You scale, scale economics kind of ruled the day. And so, so the news business went into this mode where they kind of said, "Okay, we're a monopoly. We're a monopoly or an oligopoly, and if you're a monopoly or an oligopoly, it's incredibly important to stay out of antitrust trouble. And the best way to stay out of antitrust trouble is to not s- to not make anybody angry, and the best way not to make anybody angry is not have any opinions. And so therefore, let's be objective about everything." And then we can, we can just basically say, "First Amendment, objectivity, don't break us up." Um, and that worked really well as long as the distribution was controlled, which it was. Um, the dis-distribution was locked down. Um, and then the internet showed up, um, and then the internet introduced, basically took the legs out from under all the distribution monopolies, and then all of a sudden there are, you know, millions of voices. So my point as a business person is, okay, that, that's the past. Like, that's, that's, that's, that's the old days. That's over. We need to look back to what happened when these things weren't monopolies and oligopolies. We need to look back to the '30s and '20s and back to the colonial era, and we need to basically think about how to build news businesses and media businesses that thrive in a competitive market. Um, and that has to do with being, you know, incredibly aggressive. That has to do, in many cases, with having a very strong point of view. Um, it has to do not with the idea that you're gonna be the only point of view, but you'll be one of many, and you have to argue things out. Um, you have to have the right cost structure. Um, you have to think about market segmentation. And if you have to, you have to do all the things that people do when they actually build businesses. Um, the issue in the news business is that a lot of the executives in the business did not grow up in a competitive market, and so they just don't know how to do that. So now what's happening is the new entrepreneurs, like Jonah Peretti at BuzzFeed or Sarah Lacy at Pando or, you know, the people, the folks who built... You know, you see a lot of this in the tech industry, TechCrunch and all these things. Um, you know, a, a lot of these new things there... Or, you know, what Pierre Omidyar is doing with First Look, um, is you're getting now very smart people who are coming in from outside with very fresh points of view, building very exciting things. And all the traditional journalists are like, "Oh yeah, that doesn't count." But healthy business, healthy journalism. You, you have to get to healthy business before you get to healthy journalism. And so, so then you look at market size, and you basically say, "Well, how big is the market for all this stuff?" And it turns out the market for news is gigantic, and it's growing very fast because so many people are becoming part of the modern world, and so many people are getting access to information for the first time. And so the global market for news is gonna be five billion people within 10 years. Um, and everybody needs to know what's going on. Um, and so the market's gonna be large. And so I think there's huge opportunities for market growth, but it's gonna be from companies that are, that are, that are able, or that are able and that are willing to compete.

18. 47:09 – 50:07

    What gets “eaten” next: healthcare, education, financial services—and eventually law and government

    1. SPSpeaker47:09

       I'm looking for internship in high tech, and there's a great quote, uh, that software is eating the world. And, um, what do you think is going to be eaten next? And if you were an MBA, where, which industry you would go to work to for the summer?

    2. MAMarc Andreessen47:23

       Oh, that's a good question. Um, so, um, I think that... I mean, the, so the big one, the big ones, the big ones clearly, the big ones clearly on deck are healthcare, education, and financial services, I think are the, the, the next three kind of giant sectors, um, where I think software can have a revolutionary impact. Um, we're actually been putting-- We actually started out saying we're not gonna do any healthcare. It was one of our things we s- We had a bunch of no-fly zones when we started our firm. No rocket ships, uh, no, uh, no flying cars, um, no space elevators, um, no, no drugs, either in the drug development sense or in the other sense. Um-

    3. SPSpeaker47:56

       [laughing]

    4. MAMarc Andreessen47:57

       Uh, and then, um, a- and then, uh, and then we said, uh, no, no bi- no biotech, no healthcare, um, because it's, you know, it's a, it's a different category, and if you're gonna make, uh, you know, pharmas- you know, invest in biotech companies or medical device companies, FDA approval, it's a different thing. We've actually gotten much more involved lately in, um, the cross-section of healthcare and IT, and there's all kinds of interesting things happening, uh, at the intersection of healthcare and, and IT and software. Um, and actually there's things happening actually on the medical side, and a lot of that, it's very interesting things now happening around genomics, um, and big data applied to genomics. Um, and then, um, there's another whole set of things happening around healthcare information, um, and, you know, making, like, health marketplaces work better and, you know, direct access for consumers to doctors online and all these incredible, uh, kind of new services. So I think healthcare is gonna be really interesting, and we're, we're diving in much more aggressively there. Um, education, you know, is a big one that I've talked about a lot in public, but I think education is ripe for, for transformation. Actually, Clay Christensen has been doing really amazing work on that, uh, that's, it's worth reading. Um, he's very passionate about that. Um, and then financial services, um, I mean, we think it's, it's go time for financial services. Um, we needed a breakthrough software technology to be able to go after financial services. Financial services, right, the big problem for startups in financial services is it's regulated to death. Um, and so, um... And it's gotten worse, right? Through s- We, like, we call Dodd-Frank the Big Bank Protection Act of 2012. Like, it's, it's the largest wall in the world for a startup to have to climb over, um, to really compete from scratch. But Bitcoin and cryptocurrencies give us the technology change that we needed to go after financial services. Um, and so we are now looking at a very broad cross-section of new kinds of, whether it's new kinds of lending, new kinds of insurance, um, new kinds of derivatives, um, new kinds of, um, you know, small business financing, new kinds of fundraising, crowdfunding, crowdsourcing. Um, w- we think now there's enough technology change happening, um, and, and both consumers and businesses are kind of desperate for alternatives, um, that there are some very interesting new financial services companies to get built. Um, and then the long run, the two that we would like to work on, we haven't gotten to yet, but in the long run, law and government are the other two really big ones. Um, but those are probably more in the out years. We'll talk about that at a future date.

19. 50:07 – 55:24

    Developing-world access: smartphones, everyday utility, and investing constraints

    1. SPSpeaker50:07

       How do you see about, um... How do you see sort of the path for affordable internet for the rest of the world, and when will Andreessen Horowitz start investing in frontier market technologies?

    2. MAMarc Andreessen50:15

       In what? I'm sorry, what's the last question?

    3. SPSpeaker50:17

       Uh, when will Andreessen Horowitz start investing in frontier market technologies?

    4. MAMarc Andreessen50:20

       I just didn't catch the-

    5. SPSpeaker50:21

       Frontier, frontier markets.

    6. SPSpeaker50:22

       Frontier.

    7. MAMarc Andreessen50:23

       Oh, oh, develop- like developing world.

    8. SPSpeaker50:24

       Yeah.

    9. MAMarc Andreessen50:25

       Or whatever the, yes-

    10. SPSpeaker50:25

        Yeah

    11. MAMarc Andreessen50:26

        ... the, the terms. Um, [laughs] it's, it's hard, it's hard to keep up with all the terms. Um, so we don't, um... So we consider, I would say, the following. We consider that the, um, basically the, the, the amazing opening of the developing world or whatever terms you wanna use, the, the, the billions of people around the world who have not had access to what we would consider to be modern education, modern, um, information, modern communication, modern politics, um, access to markets, um, you know, most of the world has not ac- ha- has not had access to those things historically. Most of the world is in the process of getting access to those things. Um, and so we think the biggest thing happening in our time is the just tremendous flowering of, of basically the en- the entire developing world. Um, and it's, it's all over the planet. Uh, and it's happening at different paces, but it's, it's really all over the planet. There's extraordinary stories now in almost every country, uh, on the planet of just amazing things happening. Um, and we think it's a twin story. It's, you know, it's a political and economic development story, um, a- and a, and a markets development story, but then it's also a technology story. And we think it sort of is the rise of the developing world with first the PC and now the smartphone. It's not an accident that it's happening now. Um, and, you know, it's, uh, it's on the heels of satellite TV and fax machines and so forth and, and, and the internet, but now it's smartphones. Um, and so we think a world in which everybody on the planet has a smartphone with internet access is a completely different world. Um, uh, not just, like, 'cause they can play Flappy Birds, um, but because they can, you know, very fundamental things. They can get up-to-date market information on pricing, um, which is very important if you're a farmer and you, you never had that information before. Um, or they can get up-to-date, uh, health information, or they can get educated, kids can get educated, uh, in ways, you know. A lot of countries around the world, like, they don't have textbooks, much less, like, modern education systems. Um, and so there's just an enormous abil- opportunity to upgrade education across the entire world. Um, and then of course huge political change, um, and a lot of that is a consequence of people, number one, being able to see what they're missing, um, and then number two, being able to organize. Um, and we think the potential for these technologies, um, as a way, um, for, uh, for political org- organization, political protests to happen. Uh, everybody I ever talk to who's been through one of these kind of political protests in the last five years talks about the cen- centrality of this technology. It's only Western media commentators who say it doesn't matter. It's the people on the ground are all over, um, all the new stuff. So it's really, really fundamental. Um, we as an investment firm are not s- we're a single office firm. We're a boutique firm, so we're just investing, uh, out of Silicon Valley, and we're, um, mostly investing in US companies and maybe a f- a few companies, um, in markets like Europe. We're not really set up to invest on the ground in the developing world, but a lot of the companies that we're investing in are building products that we think are gonna be transformative on the ground. And so I'll just give you one example. Uh, Lyft, uh, is a company that we're involved in. Um, Lyft actually is a, it's a ridesharing company. Um, that's, uh, it's a-- Lyft and Uber are kind of roughly in the same market. The difference with Lyft is anybody can become a driver. Um, so it's not professional drivers. It's ord- ordinary people being drivers. Um, Lyft is actually based on the founder's experience on the ground in Zimbabwe when he was working, uh, on a development project, um, where he saw in, like, poor villages in rural areas all over the world, um, you know, you have, uh, you know, there might be a couple of cars. Um, and if somebody's going to take a drive into town, you know, anybody who wants to get in, in, you know, is gonna, like, chip in for gas, and everybody's gonna, gonna go on that ride. And so ridesharing is kind of a thing that happens when not everybody has a car. So Lyft is basically gonna take the concept of ridesharing global and gonna make it an information system, so you can have a much more optimal, right, spread of drivers and cars and rides. Um, and so you can have transportation work much better all throughout the world, including in the poorest parts of the world, right, all through the smartphone, um, which could be a huge boost to quality of life. Um, Airbnb, same thing. Um, Airbnb, you know, it's, you know, it comes across as a way for kids to travel around and stay in other people's houses. Um, the founder of Airbnb-- And by the way, this is a classic s- case. The founder of Airbnb, Brian Chesky, went around, tries to raise venture capital. Everybody said, "You're crazy. That's, you know, nobody will ever stay in somebody else's house. That's nuts." Um, he was getting really depressed. He went home for Christmas, uh, and talked to his grandfather, and his grandfather said, "Oh, yeah, yeah, back in the '30s and '40s, that's what we used to do." Like, if you were gonna go to another city, you would find out a friend of a friend, and you would say, "Hey, can I, you know, use your spare bedroom?" 'Cause, like, we couldn't afford hotels. Um, and so the opportunity to take real estate globally and make it much more accessible, um, and make it much more cost-effective for people to be able to stay, you know, be able to stay whenever they're on the road, whenever they're traveling, uh, to make it possible for everybody who owns a house, um, or owns any kind of property to be able to open it up for, um, be able to make extra money. Um, you know, we think many of these ideas can scale basically all the way up and all the way down. Um, we think that these can be, be very broad-based ideas. And so we can kind of come at things, ridesharing, real estate sharing, education, financial services, all these things, and we can make them very, very broad. Um, and so that's what we're trying to do.

    12. SPSpeaker55:05

        Marc, we're sadly out of time, so thank you so, so much. Um-

    13. MAMarc Andreessen55:08

        Good. Thank you, everybody.

    14. SPSpeaker55:09

        Thank you. [audience applauding] [upbeat music]

Episode duration: 55:24