← Cheeky Pint
Cheeky Pint
Marc Andreessen and Charlie Songhurst on the past, present, and future of Silicon Valley
02:07:56
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- [00:00]
Marc Andreessen
Do you mind if I start with a couple of questions?
- [00:03]
John Collison
I mean, sure.
- [00:05]
Marc Andreessen
Cheeky means what exactly?
- [00:07]
John Collison
Okay, in the context of a cheeky pint, it is a pint you're not really meant to be having.
- [00:12]
Marc Andreessen
And when it becomes established, it starts to attract establishment people. The social network problem, right, Exactly. And in that sense, the downturns, as much of a pain in the butt as they are, are probably helpful.
- [00:21]
Charlie Songhurst
You go back to banking, you go back to consulting.
- [00:23]
Marc Andreessen
Yes.
- [00:23]
John Collison
Why is there more risk taking on the west coast versus the East Coast?
- [00:26]
Charlie Songhurst
Because like, ah, the frontier FOMO leads to high trust. That sort of has a cynical truth to it.
- [00:32]
Marc Andreessen
Category 2 errors are much, much worse, by the way. They torture you for fucking decades because you read about the success cases that you've screwed up all the way up. And so you just learn the hard way. Like you have to be extremely open minded. I have found people willing to tolerate any level of chronic pain in order to avoid acute pain. In order to avoid acute pain, people would much rather lose slowly over five years than have the conversation that involves a dramatic change to stop losing. All right, there you go. All right, very good. Anyone need anything else? Finally, a legitimately Irish bartender.
- [01:03]
John Collison
I have a scheduling issue with these because 5pm clearly after work. Pints acceptable. 4pm I don't know after work if you're a banker or whatever. 3:30pm like now you're just drinking at the office. Marc Andreessen has been around the Internet since the very beginning.
- [01:17]
Marc Andreessen
Really?
- [01:17]
John Collison
He co founded Netscape. He invented the image tag. He was there at the beginning. And later he co founded the venture capital giant Andreessen Horowitz. So I'll be speaking to him along with our mutual friend, Charlie Songhurst.
- [01:27]
Marc Andreessen
Cheers. Cheers.
- [01:28]
John Collison
Good to see you guys.
- [01:31]
Marc Andreessen
Do you mind if I start with a couple of questions?
- [01:34]
John Collison
I mean, sure.
- [01:37]
Marc Andreessen
Well, there's just a couple of things. As a midwestern American boy, there's just a couple of things that. This is not my natural habitat.
- [01:42]
John Collison
Okay.
- [01:42]
Marc Andreessen
Cheeky means what exactly?
- [01:44]
John Collison
Okay, in the context of a cheeky pint, it is a pint you're not really meant to be having. And so if you were meant to be going home right after work and instead you stole away with a few co workers just off the books, aren't meant to be at the pub right now. That would be a cheeky pint.
- [02:03]
Marc Andreessen
And then pint. The thing about pint that's just really puzzling is that everything else in Europe is like it should be the cheeky deciliter.
- [02:11]
John Collison
I see.
- [02:12]
Marc Andreessen
Right and so why is pint used with reference to alcohol but not with actual measurement?
- [02:17]
John Collison
Because, I mean, Guinness and alcohol generally is part of a rich tradition. Guinness dates from the 1700s. It's part of why we have the. It's the reason we have the canal system in Ireland. It was you. The largest company in Ireland at one point. Often the longest tenured institutions are universities and breweries. And, you know, you look at the Belgians and things like that. And so I think tradition survives better in alcohol than it does in road signs.
- [02:44]
Marc Andreessen
Okay, I have several more questions, but I will suspend them for the purpose of this conversation.
- [02:48]
John Collison
Okay. I like this new format that we're inventing. So where I want to start is we have here various bits of markandries and memorabilia and a still from one of my favorite pieces of Marc Andreessen content.
- [03:00]
Marc Andreessen
Your Miller liked commercial.
- [03:01]
John Collison
Oh, that was awesome. It was only in a rewatch that I realized it was with Norm MacDonald.
- [03:04]
Marc Andreessen
Norm MacDonald.
- [03:05]
John Collison
What was it like meeting him?
- [03:06]
Marc Andreessen
The one and only. My experience, comedians are always a little bit interesting to meet because they're professionally funny. And so their interest in being interpersonally funny is not that high because it's a lot of stress and pressure, I think. I see. I mean, he was very naturally funny. Yeah, yeah, yeah.
- [03:23]
John Collison
But he wasn't always on.
- [03:24]
Marc Andreessen
He was not always on. And I mean, I will tell you in context. We'll see the commercial. I just say in context, it looks like we were in the coolest nightclub in the world. I will tell you. It was in the middle of the day, what they call the Inland Empire in LA in some warehouse. And it was.
- [03:39]
John Collison
It was not as cool as it looked.
- [03:40]
Marc Andreessen
It was like 110 degrees outside. It was like 130 degrees inside. There was no air conditioning because it would screw up the sound. And then to create the smoky nightclub effect, they spray vegetable oil.
- [03:53]
John Collison
Not water. Vegetable oil.
- [03:54]
Marc Andreessen
Not vegetable oil. Because it has to.
- [03:56]
John Collison
Oh, it has to, like, actually create a paper.
- [03:58]
Marc Andreessen
It has to linger. The director was great, and he was tremendously tolerant of me with no actual experience doing anything like that. But I think he did think he was Stanley Kubrick because we did, like, 150. 50 takes.
- [04:09]
John Collison
He was really into his Miller Light.
- [04:10]
Marc Andreessen
Yeah. And so, like, hour six of nearly passing out from the heat and choking on vegetable oil was not the most. Oh, and then the other great. The other kind of great claim to fame is it was a week later, Miller fired their ad agency, which I would like to think that I was cool. I bear some responsibility for Being. That's really funny. Yes. Okay.
- [04:32]
John Collison
So the thing I want to get into you guys about or spend a lot of time on is the history of the Valley. One interesting place to start might be can you tell when you're in a bubble?
- [04:43]
Marc Andreessen
So my experience is no. And the nuance that I would put on that, I'll describe two. The nuance number one is there's an old line with respect to economists that also applies, I think investors, entrepreneurs, which is economists have predicted nine of the last two bubbles or nine of the last two crashes. And so it is extremely common. It's a difficult question because it's extremely common for people to call a bubble. When they're correct, they will then go around for years claiming that they're the one who called it. What you find with those people generally is they were calling it continuously for the 20 years earlier. Peter Singer, for example, or earlier than that. There's a famous Barron's. Barron's. It's still around, but it used to be like extremely important investor publication. There was a columnist for Barron's, something Abelson, Ellen Abelson. And literally he wrote the same column for 40 years. The end is here. It's all going to crash. It's all a giant bubble. And he wrote that, I think continuously. I forget the exact years, but from 1975 to 2015. And so you have this Cassandra thing where they kind of dine out on it. And so I find generally that those kinds of people don't have predictive ability. And then I will tell you, look, the most sophisticated hedge fund managers in the world, generally, if you look in their backgrounds, you know, at some point, if they thought they were in the macro business, they will have tried to make the trade based on what they view as obviously a bubble. And there were extremely sophisticated hedge fund investors who went short tech stocks in the fall of 99 and then realized they were wrong and then went long tech stocks in Q1 of 2000.
- [06:09]
John Collison
He's talked about it, Publications, he's talked about it.
- [06:11]
Marc Andreessen
But there are many other. Well, there's another guy who I won't name, who's very active today, who's very smart. And I was talking on the phone about stuff, and he's just started laughing. And he said, he's like, all I know is whenever I think the stock market's going to go up, it goes down and vice versa. And this is like a guy who's like an investing legend.
- [06:25]
Charlie Songhurst
Was it obvious when the bubble started to burst? When was it obvious in retrospect? That, that was.
- [06:30]
Marc Andreessen
No, no, no, no.
- [06:32]
Charlie Songhurst
Is it 2000, 2001? Is it only like 2004 when you look back when does no sort of.
- [06:38]
Marc Andreessen
The sort of cliche which is correct is the market climbs a wall of worry. So what happens is when the market is rising every step of the way, there's like some panic attack going on about like it's immediately going to collapse. And then what happens is there. And I'm sure you guys have seen the drawdown charts are really fascinating to see because you.
- [06:56]
Charlie Songhurst
There's a big one in 1998 with the Asian crisis.
- [06:58]
Marc Andreessen
So we all thought that was it. This is exactly where it's headed. So, yes, there was a blow up in 98, there was an international crisis, and then there was a collapse of a big hedge fund at the time called LTCA Long Term Capital Management.
- [07:09]
John Collison
I read that book recently. It was really good.
- [07:10]
Marc Andreessen
It's a fantastic book. It is a great moral, it's a great lesson. And do not name your hedge fund long term.
- [07:17]
John Collison
I thought the lesson was don't run 30 times leverage on the one trade.
- [07:20]
Marc Andreessen
Oh, there is that. And also assume that academ, you know, superstars necessarily have a feel. So, yes. But yeah, like a lot of us in like that was it, like, that's it for IPOs, it's over. You know, that's it. The whole thing is going to cave in. So every step of the way. And then conversely, like, we all got so used to it rising that like, there was a lot of speculation. You know, I think I would say the median view among smart people. And you know, when the NASDAQ first cracked in the sort of around March of 2000 was, oh, it was just another one of these momentary blips. And the way I remember it, we'd have to look at the chart. But the way I remember it is fundamentally that from 2000 to 2005, there were like five discrete moments where it like fell apart. It kept cascading down. And my favorite version of the story is we took our company loudcloud public in September 2000, and while we were on the road, we were on the road for three weeks. And while we were on the road, the NASDAQ fell in half. Right. But that was just like one of those things. And so the answer to your question is, put it this way, by 2003, 2004, you knew that it was really bad. And then what are the indicators? The indicator that everybody really knows it is the longs. I'll get fired, they lose their money and then the PMs actually get terminated. And until that happens, there's still, I would say, tremendous amounts of either uncertainty or you could say denial.
- [08:30]
Charlie Songhurst
One of the great years for owning Internet stocks was 2003 because you get the bottom and then you get this huge uplift, I think in ebay, yahoo, maybe it's 2004, sure. But VC wasn't good through that entire period up to 07. Why is it that public markets is good in 03 and 04 but VC just has sort of almost like a lost 7 years ex google between 2000 and 2007?
- [08:51]
Marc Andreessen
I would just say, look, you could maybe say this, you could say the entrepreneurial ecosystem got completely flattened by 03.04. The idea of starting a company was ludicrous. Got it.
- [09:02]
Charlie Songhurst
So maybe created too much fear in potential entrepreneurs.
- [09:04]
Marc Andreessen
Yeah, that's right. And Then look, the VC's panic. Say this. One of the cardinal sins you get into in venture is you're actually paying attention to what they're saying on tv, in particular on the financial news. And so it's like the NASDAQ cracks. Very hard to keep yourself out of that psychology and to be enthusiastic about making an investment. But of course, if you're a vc, the rational thing to do if you're a VC is to keep. So Fred Wilson's the guy who kind of really walked me through this originally and he said, look, his version of this would be, yeah, like bubbles bust. Like it's all random and crazy and we never know what's going on in the whole thing. And you get wrapped up in the psychology. And so his rule of thumb always was you have a disciplined mechanical process for the pace of investment and then also for the pace of exits and you don't deviate from it. And a lot of that justification would be precisely so that you keep investing at the bottom. Everybody, it's so funn. And you see this in the stock market. Everybody says, oh, buy low, sell high. Everybody's an expert in bubbles. Everybody's read the books, the whole thing. But when the market has caved in, it is just. It's actually really funny because it's like negativity. It's like just overwhelmingly, you people are idiots. This whole thing is stupid. It's never going to recover. There's 18 macro explanations, you're going to recover. And then actually at the real bottom, the other thing I found is people just completely stop talking about it. Yes. Like, it just the idea of like.
- [10:21]
Charlie Songhurst
Startups, cryptomarkets are a case study in the Same.
- [10:24]
Marc Andreessen
It's just like it never even existed. It's just like, it's like the thing you would never bring up at a dinner party. And maybe to your point, that's what happened with Internet startups in 2003, 2004, which is you would not talk about it if you could possibly avoid it.
- [10:34]
Charlie Songhurst
So in some ways the social status of Internet startups in Otheli is similar to crypto in like 2020.
- [10:40]
Marc Andreessen
Yeah. So the great kind of joke of that time was the two great kind of VC trends, startup trends of the late 90s were so called Internet companies, but B2 business to consumer and then B2B business to business. And by 2003 the line was B2B meant back to banking and B2C meant back to consulting. Right. And so like oh, and then this in turn is why you'll enjoy this a great deal. This in turn is why the employment decisions of graduating Harvard and Stanford business school students are such a great indicator, possibly the best indicator of all of what's happening in the market. Because if they go into tech, the market's overblown and if they go into banking consulting, it's a great time to make VC investments. And that maybe has been the best indicator I've seen the whole time. Because of the social status aspect.
- [11:25]
Charlie Songhurst
Yes.
- [11:25]
Marc Andreessen
Right.
- [11:25]
John Collison
I think what you're describing is you don't think you're capable of making macro calls. So you just have to decide what are sensible areas to be investing in over multi decade time horizons, Tech startups, generally crypto, you know, American dynamism, pick your lane and then you dollar cost average into them. And then sometimes there'll be bubbles, like there'll be crypto 2021 moments. But that's fine because if you put the same dollars into these areas, I mean rough numbers, but kind of consistently put dollars into these areas each year, the winners will more than make up for the years where everything was hopelessly undervalued. Is that basically your framework on this?
- [11:57]
Marc Andreessen
I would say that's mostly true. What I would modify that is it's actually not dollar cost averaging. If you're doing it in the stock market, it's dollar cost averaging. If you're doing it in venture, it's not dollar cost averaging. The reason is because if you make the right venture investment, it doesn't matter how much money you put in, the upside is so great. And if you make the wrong venture investment, you lose all the money.
- [12:15]
Charlie Songhurst
How much money you put in 100k I think would be 30,000x what's that? Sorry, Andy Bertelsheim's 100k, Battleshine's 100k into Google would have been 30,000x.
- [12:25]
Marc Andreessen
That pays for a lot of other venture capital. In venture capital, it just turns out that the amount of money invested has almost nothing to do with anything. And you're not trying. Well, here's another thing. You never in venture want a bargain shop ever, ever.
- [12:38]
John Collison
No, I agree with that.
- [12:40]
Marc Andreessen
What you need to do. So I guess the way I would just modify what you said is it's just you need to keep investing. Yes. The danger is not investing too cheap or too dear. The danger is literally stopping. Sure.
- [12:49]
John Collison
But when I was saying dollar cost averaging, it was the fixed amount of money that you deploy. Because I think the way people get into trouble is 2021 comes along and they raise some giant fund and that one has very poor returns. But if you invest 100 million each year, then you'll do pretty well.
- [13:05]
Marc Andreessen
And you could also say this. The smartest LPs. So David Swensen, who was considered to be the smartest portfolio manager for liquid portfolios, wrote a book where he goes through the following and he talked about this a lot, which basically is for something like venture, you really got to look at it. You cannot rationally evaluate venture based on a single moment in time, a single fund, a single sector, any of that stuff. You have to basically look at it over a long enough period of time where you wash out the specific effects.
- [13:28]
Charlie Songhurst
Of what the proof that is the inter vintage volatility in any given VC is incredible. Which shows so much of it is just.
- [13:39]
John Collison
Yeah, a top VC firm will have some 15x funds and some.
- [13:43]
Charlie Songhurst
But it's two or three because Google's founded in 99. So at the height of a bubble, Meta's founded 2004 at the bottom. There's no pattern that ties to macro. It appears to be almost stochastic. You just can't predict. You've just got to keep doing it.
- [13:57]
Marc Andreessen
Yeah, that's exactly right. And I would say that's sort of the core fundamental kind of truth of venture, which is really, it's something for people with a 20, 30, 40, 50 year time horizon. You have to get across, you have to get all the way across the cycles. Because what happens otherwise if you're an lp, what happens otherwise is the minute you have a fund that's terrible, you pull out. And that's precisely when you should have been going in the same behavior on the LP side that you see on the VC side. And so the smart LPs, what they all have in common is when they're making a decision to invest in a venture fund, they're making a decision to invest in that fund for the next five or six months.
- [14:26]
Charlie Songhurst
How much of an advantage for VC is having good LPs?
- [14:28]
Marc Andreessen
Extremely. Extremely. Extremely, extremely. Again, this is very predictable. What happens is every time the market is hot, new LPs show up and pile in. And then when the market declines, they back out. And so the firm that have the VCs who understand the Swensen model are able to sustain over time and able to continue to invest in the downturn. Many new VC funds are raised in every bull market from basically tourist LPs. Those tourist LPs are extremely reliably prone to pull out.
- [14:56]
Charlie Songhurst
So obviously that leads to the big question, which is how causal are the VCs themselves to the outcomes of the companies? It's the big, big question.
- [15:05]
Marc Andreessen
I have a theory on it, but I have an indirect theory on it. But I definitely should not let entrepreneur answer this question. But I just made an incredible strategic mistake. This is where it all went south. Rand Racing. You can see the look on his face already.
- [15:21]
John Collison
One, presumably VC itself is very impactful because Stripe was just, as a practical matter, not profitable for quite a few years. And I think that was the correct way to build Stripe. And so like so many companies, you build a bunch of tech, and Stripe in particular, you build a bunch of tech and businesses start adopting it and they start growing. So you've two lagged curves. One is you have to build all this stuff and then businesses start using it and then those businesses grow themselves. And we just had Toby from Shopify here. Shopify is now a massive business on Stripe, but they weren't when they started working with us in 2012. And so it's just the classic R and D thing of you do work now for economic payoff later. And I think that tends to work well in tech. And then with specific VCs, it feels like the, I want to talk about kind of the Silicon Valley high trust thing. VCs act as a very efficient matching algorithm between neophyte founders such as myself and experienced executives. And so you have this incredible talent engine. And I think in a weird way, people often miss it's not about the money. At some level, people miss that. It's about putting together a team in a very short order to go do this hard thing. And I think VCs are actually pretty instrumental in that.
- [16:36]
Charlie Songhurst
I'll add in from the Angel Perspective. The single strongest correlation of how a company will perform is how high status the VC does. The Series A is within the stack ranking of VCs. It is far more predictive, sadly than my own selection or any other variable I can find. It's almost deterministic.
- [16:57]
Marc Andreessen
And look, some of that is because the top tier VCs can get the best VX right and some of that is self fulfilling prophecy. So here's my analysis, having been on both sides of the table, John, mapping what you said. My analysis basically is that if you think about mechanically what's happening with a startup, a startup needs to basically get into a loop in which it's accruing more and more resources as it goes. And those resources are qualified executives, technical employees, future downstream financing, positive brand momentum, public perception, customers, revenue, throw weight in the government, all of these resources that you need to be able to succeed as a business. And so it's this there's a snowball rolling down the hill phenomenon, which is you're either a snowball rolling down the hill, picking up resources as you go, gaining size and scale and scope and power as you go, or you're not and you're kind of stuck at the top of the hill as a snowflake and you're just not going anywhere. And so the question is kind of, how do you get into this kind of aggregation of resources thing? Economists call this, what's the term for the things that are at the height of the power? Preferential attachment. What is this term?
- [17:54]
John Collison
A sort of baiting of companies.
- [17:55]
Marc Andreessen
It's the Matthew principle. It's a Matthew principle from the Bible, which is he who has a lot will get more and he doesn't. And so when a company gets momentum, you hear about momentum. When a company gets momentum, what it means is the next resource that you need is preferentially willing to attach to your thing as opposed to somebody else. That's the mechanical process that drives the.
- [18:13]
Charlie Songhurst
Power law creates a chicken and egg question which is does the product create the company or does the company gather enough resources to create a product?
- [18:20]
Marc Andreessen
Yeah, so that's part of it. But again, to create the product, it's not just like, it's often not just a process, it's also like, okay, you got to create the engineers and then you got to actually feel the product. To give an example, you got to have, you got to have top end security engineers. There are only so many top end security engineers. Where do they want to work? They want to work at the top companies. If you're A brand new startup. How do you convince them that you're going to be a top company? You raise money from a top tier vc. So that happens over and over again. The prosaic way that I put it is my experience as a founder is a top tier VC is a bridge loan of credibility at a point in time when the startup maybe deserves it but just doesn't have it yet. And that credibility is harvested in the form of primarily personnel, money and brand. And those three things turn out to be really important. In the beginning, we're talking about the.
- [19:04]
John Collison
Silicon Valley ecosystem here, and you referenced Andy Bechtolsheim and his investment in Google. One thing that I find funny about that story is that's the case where he just wrote 100k check to them. He actually wrote 100k check to Google Inc. Even though they didn't have a company. And I think he got in his Porsche and drove off and is like, here you go. But there was no terms, there was no nothing. And that obviously worked out really well for him. But that's not unusual. I've heard other stories. I think we even got some check like that where again, it was just like, tell me the terms later. And Silicon Valley is very high trust. How did that come about?
- [19:36]
Marc Andreessen
Let me tell you. That story is a great story and that is true. I will tell you. There is another part of that story, which is the venture firms that turned down Google in the series A, which is the other side of things that maybe we should talk about. Because in retrospect, it all looks obvious at the time.
- [19:49]
John Collison
It's not sure, but it wasn't obvious.
- [19:51]
Marc Andreessen
Maybe that reinforces what you're saying, which is. It's definitely not obvious. Look, I think it's just, quite frankly, you could have all kinds of theories about this, do all kinds of things, talking about how wonderful everybody is. I think the practical reality is anybody who's been in the Valley for a while has had the experience, typically in the form of scar tissue, where there was some kid in a T shirt with some crazy idea and you were like, okay, that's great.
- [20:09]
John Collison
Matrix roll in. Oh, the opposite.
- [20:10]
Marc Andreessen
Yeah, yeah. You pat them on the head and they go off on their way and then they turn around, five years later it turns out, oops, that was Mark Zuckerberg. Shit. I had my moment. I had my chance. The problem with missing, right? Remember, it's category one, okay.
- [20:21]
Charlie Songhurst
That's a tremendous thing. FOMO leads to high trust. That sort of has a cynical truth to it. Feels weird.
- [20:27]
Marc Andreessen
Yeah. If you sit Around. Yeah, it goes to category one versus category two error again. It goes back to the economics which is Andy's $100,000 if he got stolen, he only loses $100,000. If he gets it right, he makes the 30,000X return. And so there's this thing, what you learn over time is the category 2 errors are much, much worse. And they torture, by the way, they torture you for fucking decades because you read about the success cases that you've screwed up all the way up. And so you just learn like you have to be extremely open minded for people.
- [20:57]
Charlie Songhurst
I have a confession here which is when I tell entrepreneurs off to cbc, I say, look, don't try and convince them you're going to be successful. Just try and create a fear that there's this possibility for the next 20 years they might regret this. It's so painful as their sort of past personal billion that they missed.
- [21:12]
Marc Andreessen
When the company goes bankrupt, at least it ends like it's over. The pain is over. When you pass on the company that succeeds, the pain is forever.
- [21:20]
John Collison
It's like the asymmetry of shorting. You're kind of shorting the entrepreneur.
- [21:22]
Marc Andreessen
Oh yes, absolutely, 100%. It's a horrible mistake. And so as a consequence there's just this thing of what it leads to is this incredible sense of possibility, an incredible sense of optimism in a very positive way, which is like you just need to be extremely open to the idea that you're going to run into the next big thing at any moment and you really want to put and say karmically you want to really put yourself out there to be part of that.
- [21:40]
John Collison
I think that's true, but I think that's maybe a different thing you're describing. That kind of success can come from anywhere. There's a big asymmetry in success where companies can 10,000x whereas they can't go down by more than 1x from their present position. But it seems like particularly the business culture and even kind of moving outside the fact that startups get really big is particularly high trust. So you have all of investing happens based on handshakes and people can just shake hands on this is going to happen and trust that everything happens there. Even when it comes to when we buy companies, we generally agree with the founders at a high level the terms and there might be kind of a single page or a two page term sheet and obviously lots of due diligence will happen after that. But it won't be the kind of east coast, you know, process, private equity process. After that, where everyone's trying to pull a fast one and you can't trust the lawyers as fast as you can throw them. So it seems to me there's a particular kind of high trust relationship in how all the actors work with each other.
- [22:34]
Charlie Songhurst
I was going to ask Mark why the east coast and why Europe hasn't generated a Silicon Valley, whereas like, you know, you have Detroit, but then Korean Japan copies it. And I think maybe he's actually already answered the question, which is maybe because I haven't had those 10,000 exit turns, they haven't instilled the fear of FOMO. And it's the fear of FOMO that means you've got to sort of take a trusting bet on a new person. And maybe that's the kernel that creates a high trust ecosystem.
- [23:03]
Marc Andreessen
Yeah. And maybe just add. I think maybe you're right that I was being a little bit too cynical in my answer. It's also that you want your reputation to project into the future. Right. And so if you have a reputation, right, it's a fairly close knit community, if you have a reputation for being helpful and being positive and constructive and value add, then that plays well because then that person, the person you've done something nice for, is going to introduce you to other people in the future. And even it's a very repeat game. Right, right. It's the ultimate repeating game. And so there's that. And then look, I think the other side of it that you guys kind of alluded to, but I think is very important, which is it's not zero sum. When I talk to my friends in Hollywood, which is not that far away and is its own entrepreneurial ecosystem, if you talk to anybody in Hollywood, they're like, oh my God, this is a shark tank. You're lucky if your friends knife you in the chest. Generally it's in the back. It's this constant thing. And the reason is because there's just at least my analysis, there's a fixed amount of money to be spent and made in movies, for example, and if my movie gets green lit, it means yours doesn't. And so even if we're close friends, we're going to undermine each other as much as possible. Whereas in tech, at least historically, you have this multiplicative kind of generative thing where it keeps expanding.
- [24:05]
Charlie Songhurst
So why did nowhere else manage to get that ecosystem going? If you look at the history of this last 50 years, one of the the stories that will come out is an utter uniqueness that tech almost became a Silicon Valley or At least a West coast monopoly. There's no precedent for that in any other industry.
- [24:22]
Marc Andreessen
Well, I think we're back to that. Yeah, exactly. You see this in data, actually already is. AI was reconsolidating tech into basically two places on Earth and only one in the West.
- [24:31]
Charlie Songhurst
No part of the industrial economy had that dynamic. What is it?
- [24:34]
Marc Andreessen
So there have been a long parade of officials from other cities in the US and from other countries who have come to the Valley in the last 30 years. I've met with many of them. They all ask that question. I answered as follows, which is there are or a set of things that you need, all in combination. And then usually at that point, they get a stricken look on their face and they say, well, what if we can't do any of those things?
- [24:52]
John Collison
And so what if we build a really linear city?
- [24:55]
Marc Andreessen
Exactly. Well, actually, it's surprising the number of people. And I'm always. I don't want to badmouth people because I'm always, people should try to make these things work, and I'm proud of them for trying. But literally the number where it's like, wow, if we just built the right buildings, this would happen. That's actually fairly common. And anybody who's been to Silicon Valley knows exactly.
- [25:11]
John Collison
Yeah. The key to it is, go on El Camino Real. It's not the buildings.
- [25:13]
Marc Andreessen
It is definitely not the buildings. So I think it's a formula, and I think it's a list of things. And it's like baking a cake. They all have to be in the cake. And the best way I think I can describe it is it's a set of things that have to do with stability and maturity and rule of law. So you need, like, absolute contract law. You need liquid deep capital markets. You need expert specialists in all these different areas that really have real experience accounting and everything else. And so there's like a maturity and a depth, and it's that stuff that developing American countries struggle with. But at the same time, you need like the Wild west, and you need the spirit of adventure and the craziness and the willingness to take risks. And if somebody fails.
- [25:51]
Charlie Songhurst
And that's what the east coast missed.
- [25:53]
Marc Andreessen
And that's what the east coast missed. And that's what Europe doesn't. Right. At least when I talk to my friends on the east coast or my friends in Europe, that's what they're like, well, we can't do that. I can't take that kind of career risk. Like, that's crazy. And look, in a lot of countries and In a lot of cultures, if you take a risk like that and it doesn't work, it's a real problem.
- [26:08]
John Collison
I'm sorry, why is there more risk taking on the west coast versus the East Coast?
- [26:11]
Marc Andreessen
Because, like the frontier, there's no established hierarchy.
- [26:15]
Charlie Songhurst
So it was the frontier.
- [26:16]
Marc Andreessen
The frontier. It's the frontier. It's all in. Taylor, it's all in. What's his name? The Winslow, the frontier guy from like.
- [26:22]
Charlie Songhurst
I was gonna say to Bonfire of the Vanities too.
- [26:24]
Marc Andreessen
Okay, sure.
- [26:24]
Charlie Songhurst
You go join, like Goldman Sachs, you would join McKinsey, you would join existing institutions and go up them. On the east coast, those just didn't exist. On the west coast, you effectively had a country of 50 to 70 million.
- [26:34]
John Collison
Like, there was Wells Fargo, there was, you know, there's lots of institutions, you know, that you could join.
- [26:39]
Charlie Songhurst
But were they put prestigious enough that they sort of. That they trapped young talent? Another way to say this is why did sort of Stanford do so much better than Harvard and mit? Because obviously the input quality is the same. So there has to be something in the place they're sitting that creates a difference.
- [26:56]
Marc Andreessen
I think there's a frontier spirit. I mean, I really do. So, like, I think.
- [26:59]
John Collison
But you're always skeptical of cultural explanations in other places.
- [27:02]
Marc Andreessen
There's clearly a talent aggregation effect. Like, so there's clearly a talent aggregation effect that takes place inside the U.S. i mean, look, most of the great people in Silicon Valley did not grow up in Silicon Valley. My wife grew up here in Palo Alto. I call her a townie. Right. By the way, she has three more degrees than I do. So it's definitely not a status thing. But most people are imports. They get imported all through the entire rest of the country and around the rest of the world. And so it's definitely a selector and attraction point for talent. And that's a big part of it. But look, I think if you just trace the history, like every step, it's not an accident that both Silicon Valley and Hollywood are the places that they are, because the people involved went west as far as they could before they were literally stopped by the Pacific Ocean. It was the ultimate selector in the build out of the country to the people who were the most oriented towards risk and to your point, independence and doing their own thing. And that was true in the gold rush days in 1850, where San Francisco was ground zero for that. It's equally true today. Hollywood is the exact same thing. Hollywood's case is actually funny because one of the reasons they need to get so far away is they were trying to evade Thomas Edison's patent enforcers because Thomas Edison owned the patent for the film cameras and the original Hollywood entrepreneurs had no desire at all to pay for that. And then Edison would hire the Pinkertons to come bust up the movie. Movie sets. Right. And so. But you see what I'm saying? Rogue, renegade, iconoclastic.
- [28:19]
Charlie Songhurst
And how about in tech versus true, do you think that certain people didn't move because it wasn't a fun city that had hit the scale of London on, oh, 100%.
- [28:27]
Marc Andreessen
Yeah. I mean, look, we all have lots of friends in New York and London and they're all just like, wow, my friends in New York, I don't know, if you get two pints of this into them, they'll be like, they literally don't understand why anybody doesn't live in New York, York.
- [28:40]
John Collison
Oh, I mean, I think they'll tell you that at 9am in the Monday.
- [28:42]
Marc Andreessen
Morning, you need to get. Adrian, that is also very complicated.
- [28:45]
John Collison
It's the New Yorker cover.
- [28:46]
Marc Andreessen
I was trying to. Yes.
- [28:47]
Charlie Songhurst
I was trying to be a mining camp. You have to be willing to move to the mining camp.
- [28:50]
Marc Andreessen
I think so. And then, you know, you get. And then this gets into the danger. This is like the back to banking, back to consulting thing. The danger in a lot of ways is it becomes established. And when it becomes established, it starts to attract establishment people.
- [29:02]
John Collison
The social network problem, right?
- [29:03]
Marc Andreessen
Exactly. And in that sense, the downturn, as much of a pain in the butt as they are, are probably helpful.
- [29:09]
Charlie Songhurst
You go back to banking, you go back to consulting.
- [29:11]
Marc Andreessen
Yes. And the only people who are left. And by the way, this was Silicon Valley. When I arrived in 93, this had happened. And then this was Silicon Valley in 2004, as we discussed, which is you flush all the status secrets, you flush all the tourists.
- [29:22]
John Collison
It's like fuel management for fire, correct?
- [29:24]
Marc Andreessen
Exactly. 100%. You clear out the brush. Now, look, how long can this last? I don't know. We're in a country that has at least certainly over the last 60 years, has had a strong tendency towards stagnation. The thing that has kept this whole thing, I think, is just that there are these new platforms, these new paradigm shifts in technology.
- [29:42]
John Collison
Everyone loves the defense company explanation for Silicon Valley. How much?
- [29:46]
Marc Andreessen
That's part of it. That's part of it. So Steve Blank has done the best reconstruction of this. The typical Silicon Valley history goes back to like the 1950s with HP, in the 1960s with the chip companies. But the real history, I think he makes a Very compelling case. The real history was actually defense tech startups in the 1920s, 1930s. And you still see remnants of that if you drive around Sunnyvale, Mass.
- [30:06]
John Collison
Ames hangers.
- [30:07]
Marc Andreessen
But this is the place where I forget the exact early radar and early missile guidance systems and all that stuff. Avionics, a lot of that was innovated here in the exact same way. And that was like a third years ago.
- [30:17]
Charlie Songhurst
If you could go back, could you a B test it? Is there any way you could have made Silicon Glen or whatever the Boston corridor was called successful? Well, they did and keep it successful versus the Valley.
- [30:28]
Marc Andreessen
That's the problem.
- [30:29]
Charlie Songhurst
Was there a point where it could have gone the other way or was it sort of inevitable from the 50s in 1970? Does it go both ways still?
- [30:36]
Marc Andreessen
So when I arrived in the Valley in 93, I think it's fair to say the Valley in Boston were probably considered neck and neck and sort of half legs, half. And in Boston these are kind of forgotten now, but Dec. Dec. Digital, it was like a huge, extremely important company. Ashton Tate, the inventor of the word processor, I think was there. Lotus was there. 1, 2, 3 was there. And then you had later years, other great companies, EMC and others. And then there's a great book called Soul of a New Machine, which is one of the great all time startup books, which is about a supercomputer company, Boston in the late 80s. It was just extremely excellent literary book and it really tells the story of a startup, but it also tells the story of Boston in that time and plays. So a lot of leading edge supercomputing stuff was there, by the way. Thinking Machines was there. The original supercomputer company.
- [31:22]
John Collison
The original thinking machines.
- [31:23]
Marc Andreessen
The original thing. Exactly. Yeah. So Denny Hillis sort of the company that's the forerunner of what we think of today as large scale AI, grid, cloud stuff was there. And look, MIT was there and was a tremendous. Generated huge numbers of smart people. And so it worked really well for a long time. And then basically in the mid-90s, it separated. And then people in Boston will say that again, two points in. They'll say that the final blow was probably when Mark Zuckerberg could not raise venture capital for Facebook and had to leave and come west.
- [31:54]
John Collison
That was a meaningful signal.
- [31:55]
Marc Andreessen
That was sort of the last. That was sort of the last.
- [31:57]
John Collison
Maybe we can call that the chapter marker.
- [31:58]
Marc Andreessen
Yeah, I was just like, okay, if we couldn't do that one. And then by the way, in the counterfactual, had he stayed in Boston, maybe there would be an Entirely new ecosystem there that doesn't exist today. Yeah, so I think basically it just, it worked for a while and again, this is why I locked in on frontier spirit. So what Boston has is all the stability aspects that we were talking about. So if they just didn't have the same frontier spirit and it just turned out that back to preferential attachment, it just turned out on the margin the smartest people from MIT wanted to come here and that was basically it.
- [32:27]
Charlie Songhurst
If that's how you move ecosystems, sort of same question, but for companies, what's the company that could have been a trillion that did that? You would have to change the least to make it a trillion. They get that one exec, they get that one lawsuit. It just goes differently.
- [32:41]
Marc Andreessen
I mean there's many, many, many. I mean the all time story of that is a company called Digital Research which should have been Microsoft. And there's a famous. I can tell the whole. Please. Oh yeah, okay, okay. So the story roughly goes as follows. It's in the books, but it roughly goes as follows, which is. So Bill Gates and Paul Allen had this little software company originally in Albuquerque, down the street from Better Call Saul, I imagine, which they moved to Seattle and they were, they were building programming tools for computers. And so when I first used Microsoft as a kid, it was Microsoft basic. They were a compiler company or interpreter company, not an OS company. And then there was this PC wave with all these basically these sort of cat and dog kind of early PCs from 76 to 82. And they basically sold the BASIC interpreter to all those companies. And that's how they got going. But they weren't in the operating system business. And then IBM decided famously to enter the PC business. And, and then there was a network connection with Bill Gates mother and the CEO of IBM and they were on a board together and it resulted in the IBM team coming out and going up to Seattle and buying a license to Microsoft basic, which is what everybody did in those days. And then the IBM team asked Bill Gates what operating system should we use? And he's like, oh, well, the standard operating system for PCs is called CPM, which at the time was true. It was the standard operating system for early business PCs. And they said, well, who makes that? And he said, well, there's a company called Digital Research down in Santa Cruz in California. There's this guy, Gary Kildahl, you should go see him. And this was the synergistic relationship that he had with Digital Research at that time. So the story goes, the IBM team, which is 20 lawyers in blue suits get on a plane, go to Santa Cruz. They show up at the office to meet with Gary Kildall, discuss licensing cpm. And Gary Kildall, being a frontier like person, decided not to come to the meeting. Decided he'd rather go flying that day. John, actually that's a reasonable thing to want to do. And instead had his wife, who was the company's general counsel, negotiate the engine. IBM was famous for its lawyers and the lawyer was not about to sign the NDA. And the day ended inconclusively. And the IBM team was like, all right, this is ridiculous. And they went back up to Seattle and they told Gates, if you can't find us an operating system, the deal for the interpreter is off. And Bill said, give me a few days. And Bill literally went down the street to an independent developer named Tim Patterson, licensed what at the time was called qdos, Quick and Dirty Operating System System, which is the true name of DOS for a $50,000 flat fee, turned around and sold it to IBM that created Ms. DOS. The kicker to the story is 30 years later, Gary Kildall was knifed to death in a bar fight. Oh my God. Yes.
- [35:11]
Charlie Songhurst
Oh God.
- [35:12]
Marc Andreessen
Sorry.
- [35:13]
Charlie Songhurst
That's like a change.
- [35:14]
Marc Andreessen
I didn't want to bring the room down but like it should have like, you know, again, counterfactual and who knows, who knows, who knows? But like, you know, but I think.
- [35:21]
John Collison
No, it seems hard to argue that Digital Research would have become a trillion dollar company because. Because Bill Gates had such a killer commercial instinct that there were. I mean, obviously the IBM OS moment was the biggest moment, but there were several other moments in Microsoft's history where they steered things and it doesn't feel like if they get the IBM OS pick that then it just, you magically become a giant company.
- [35:44]
Marc Andreessen
Oh no, definitely you don't magically become the giant company. But again, this goes back to preferential attachment. Whoever got that IBM, whoever got that IBM deal is a classic. It's impossible to remember how important IBM was at that time. IBM in the mid-80s was 80% of the market capitalization of the entire tech industry. Like they were the absolute gorilla. And by the way, the IBM PC and then the clones, ultimately that came out of it like completely standardized the industry. But like all of the PC companies from before that went away like it was an extinction level event for everybody else. And so whoever got that deal, had he not gotten that deal, it's not even clear Microsoft would have stayed in business. No. Having said that, he gets obviously credit for everything.
- [36:22]
Charlie Songhurst
There is a trend where if you go to the absolute cutting edge of tech, they're so sort of wilderness people that they don't have the conscientiousness.
- [36:29]
Marc Andreessen
Correct.
- [36:30]
Charlie Songhurst
They go fine instead of turning up to the meetings.
- [36:32]
Marc Andreessen
That's right.
- [36:32]
Charlie Songhurst
And it's almost like you get a second generation who go to the frontier but are conscientious enough to institution build and those become the super big companies.
- [36:39]
Marc Andreessen
Yeah. By the way, Dell's another classic case. Data from that same time. Dell Computer was founded at the same time. There's like 400 IBM clone companies at that time that were actually in the process of going under. Most of them just like vaporized. This is later, it's like five years later layer during the down cycle in the late 80s. And that was around the time that Michael Dell and his dorm room decided to enter the PC business. And that's exactly right. He was a version of that. He was a more systematic thinker than the wildcatters who had been in the PC industry before that.
- [37:04]
Charlie Songhurst
Is that how Oracle wins in databases? Because there's a ton of database companies back then.
- [37:08]
Marc Andreessen
Yeah, I think Oracle was a somewhat different story. I think it might have been more of a story of just raw aggression. Larry was always very into Japanese samurai culture and I don't think that was.
- [37:16]
Charlie Songhurst
A mist, that was a moving forward in time. Why did none of the pre Google Internet companies survive? Lycos, Excite, AltaVista, AOL, Yahoo, none of them.
- [37:26]
Marc Andreessen
So I think that you need to really rewind back to the differences between then and now. And I would just say a couple things on that one is like the whole Internet boom bubble, whatever you call it, of that period was basically four years. It was basically four years in and out. For example, the companies you just mentioned, for the most part my company got going in 94. Those companies really got going in 96. By 2000 like that, it was nuclear winter. So it was a four year period. The business models either didn't exist or were brand new. We could spend a lot of time on that. But all the business models that you have today that have these big mega companies, those business models didn't exist. It was still mostly just package software in those days. So it was really hard to build the kind of enduring business that you see today. And then I would say the third thing is the market was so small. So the total market size in 1999 for Internet anything was 50 million people, totally max. Maybe, maybe half of those people were on dial up, which only barely counted by the way. And that was mostly AOL which only barely had Internet support. The way we understand it, they had a browser, but it wasn't like what you're used to. And then the PCs were super slow, the modems were slow. And that was still the media and Internet experience in those days was you dial in for maybe an hour at night from your desk at home. And then businesses, by the way, were just like. Even businesses that had Internet connectivity were doing everything they could to prevent their employees from using it.
- [38:45]
John Collison
All right, how are we doing over here?
- [38:46]
Marc Andreessen
Everyone all right? Very good.
- [38:49]
John Collison
Anyone need anything else?
- [38:50]
Marc Andreessen
Finally. Finally a real Irish bartender. Finally a legitimately Irish bartender.
- [38:56]
John Collison
Need a refill?
- [38:57]
Marc Andreessen
That would be fantastic. Thank you very much. All right, so it was just, it was a very early, crude time as compared to now.
- [39:05]
Charlie Songhurst
So there's another question that leads to which is normally you get sort of bull and bear cases on like crypto or defense or enterprise SaaS. AI seems unique in that there's very little in terms of articulate bear cases about why it matters. In fact, most of the bear cases go the other way, that it's going to destroy the world or something like this. Were there articulate bear cases on the Internet during the bubble?
- [39:25]
Marc Andreessen
Oh, I mean, yeah. I mean, well, the original bear case was just, nobody's ever going to make any money like this. It's ridiculous. And then there was just a huge onslaught of this is just going to be cybercrime and porn and spam and fraud and abuse.
- [39:34]
Charlie Songhurst
So you had the similar sort of equivalent of AI stuff.
- [39:37]
Marc Andreessen
Well, every new technology has a moral panic that it's going to ruin society, consumer technology. And then, look, it was just like this. And then you just use the product and be like, this is a joke. It doesn't really work. Look at how long it takes the images to load. Is anybody really going to put their credit card in? I don't know if bear case is the right term, but there was massive skepticism.
- [39:54]
John Collison
Let's steal man the bear case here for a second. I think the smartest bear case was that the Internet's clearly a cool thing. You guys are getting way over your skis in terms of valuations here. And in particular, you're getting way over your skis in terms of the build out that's happening of the Internet infrastructure where the demand will take a while to catch up. And of course, course that was true where there was a fiber overbuild. And clearly there isn't an AI bubble in the sense that everyone really likes their tokens. The stuff that we're doing With AI or my personal chatgpt usage. I really like that. You're not going to take that away from me. It's not a bubble in that regard and it's sensibly priced and everything like that. It's a true tech better, faster, cheaper story. However, there is a huge ramp up in in AI data center build out. Oracle just had that forex RPO beat that caused their stock to go up 40% in our else and become the richest man in the world. Basically they're doing giant data center projects for AI companies. And one can imagine that there will be a data center bubble where people get too excited about the build out and we build capacity ahead of utilization. And people, finally, it's the last musical chair, people, people build that data center where actually no one wants to lease it. Do you think that is happening will happen? Is that a sensible framework?
- [41:10]
Marc Andreessen
I would say actually that is precisely what happened with the Internet boom. Exactly.
- [41:14]
John Collison
That's my analogy.
- [41:14]
Marc Andreessen
Right, right, that's right. And so for people who don't know this, what happened with the Internet boom was there was this sort of Internet software and services and Netscape and Amazon and these things and by dollars people.
- [41:22]
John Collison
Confused the dot com boom. The Internet stuff didn't matter. It was a telco infrastructure, it was a telco.
- [41:26]
Marc Andreessen
It was almost entirely telco bubble and it was almost entirely telco crash. And you know that for two reasons. One is the sheer amounts of money involved were so much greater on the telco side. And then the other is telco is where the debt came in. To get a really monumental crash, depression, recession, depression, you need a credit bubble. And the credit bubble was 100% I can tell you, not on the tech companies, it was 100% on the telecom companies. And it was massive. And it was like, it was amazing.
- [41:48]
John Collison
And some of them are dodgy stuff going on like world cow.
- [41:50]
Marc Andreessen
And then there was fraud. Right, exactly. And those stories are truly spectacular. My retrospective kind of explanation of what happened consistent with what you were saying basically was there were a small number of people who were building the software and services. And that was because it was just like they all had to be invented from scratch. And then there were just only a small number of people who even understood the software and how you could possibly apply it. There just weren't that many of us running around who did that. And so John Doerr had famously Internet. At some point Internet became a cream that you rub on investors to get them excited. And when that happened, what happened was you had a much larger number of people who had a lot of knowledge about how to put buildings in the ground and how to fill those buildings with fiber. And the good news with being in the data center business in those days, it was data centers. It was data centers.
- [42:30]
Charlie Songhurst
And then how interesting point, which is that when you get a boom because the new people, there aren't enough people with the new skill set to do it, that can never be the epicenter of the bubble. It's always where the 50 year old thoughts of capital are. That's where the epicenter is. So it was telco in the Internet bubble and all those telco people, sort of 50. And so now it's data centers.
- [42:51]
Marc Andreessen
Well, and you need to play the way. Exactly. And the way I would describe it is when the thing takes off, whatever the core thing, when the core thing takes off, there's just too much, much money. There's too much money that wants to come in and participate and it literally cannot participate.
- [43:01]
Charlie Songhurst
But also it comes in the way it knows how.
- [43:03]
Marc Andreessen
It comes in the way it knows how. And so, and this is what you would find at the time, which was you just, you would meet a lot. And I met a lot of these guys. A lot of these, you know, were telco CEOs or people telco start, you know, a lot of these, you know, new telco companies, Global Crossing, all these new companies. Global Crossing was one of the great kind of, you know, boom, blow up kind of stories at the time. And the entrepreneur was this guy, Gary Winick and he was actually a Drexel Burnham, he was a bond guy from the 80s leverage Brown guy. And he just, he figured out like, like, oh, we know how to put buildings in the ground, we know how to build fiber. You go to Cisco, you buy the devices, you rig up the fiber, Corning will sell you the fiber. And it's a known thing. And his expertise was going to the debt market, convince them to finance that, and then he could go just like hoover up capital. And in fact he built tremendously valuable, tremendously important infrastructure. It's just that a bunch of that infrastructure was not actually filled up for 15 years. And in the meantime, much like luxury hotels, it traded hands three times. The people who own that infrastructure today are doing very well, well with it. Many of those companies went under.
- [43:57]
Charlie Songhurst
It would be ironic if AI researchers are still underpaid, but there are too many GPUs per AI researcher.
- [44:04]
Marc Andreessen
Yeah. So this is the thing, and here's where you get into the question of whether you can ever reason by analogy and whether things are actually the same. And so then it's like, all right, is AI the new Internet? And it's like, okay, if AI is the new Internet, then you could maybe plausibly expect this kind of cycle. And for sure, you guys probably meet. I meet people all the time. Which is like, I don't know how to invest in the software side of this, but I know how we're going to do a job. Data center build. And this includes nation states doing this. And so you could say history is repeating itself. The counterargument to that is I don't know that AI and Internet are even remotely comparable.
- [44:36]
Charlie Songhurst
Well, another way to say it is if you could have sped up broadband by maybe five years. The Internet bubble is in a bubble. It just seamlessly goes into 2007. You still had 56k modems in 2001.
- [44:47]
Marc Andreessen
Correct. People forget you remember this, but people forget or don't know this. Home Internet broadband was not common in until after 2005. And I was actually at AOL. I follow this very closely because I was actually, because we sold our company aol. I was at AOL on the executive staff in the board meetings in 1999. And the big question for AOL at that point was how to get from being the narrowband provider to being the broadband provider. Because we knew it would happen at some point, but it was unclear when. And ultimately the company couldn't figure it out. But the question those days was very much. And it was literally, it was cable modems or it was called isdn. It was sort of proto broadband from the telcos, and it just wasn't happening. And in fact, it didn't happen at scale in 2005. And then mobile broadband broadband didn't really happen until like 2012. Right. It was really bad. And people actually forget. The original iPhone from 2007 did not have mobile broadband or apps. Or apps. Right. But it also. It was on the AT&T old. It was on the old, which is useless.
- [45:37]
John Collison
Yeah. 2G.
- [45:39]
Marc Andreessen
So there was this, like, just incredible lag for when an ordinary person could have the kind of experience that you can have today. And so, yeah, so one theory for why, quote, AI is different is like, actually, no, the experience that you're having today just in ChatGPT is just like, so monumentally amazing. Like, it's like fully there's. And, yeah, you have to watch it type the thing out, but the answer is spectacular. And so there's that and then there's the other thing, which is just the metaphor the problem with metaphors, which is one of the theories you could say on this, is the Internet was an interconnecting, it was a network technology, whereas AI is a computing technology. And maybe the only comp for AI that you can have is actually the creation of the computer. Right? Because it's literally, it's the first major reinvention of the fundamental model of what is a computer. And going from the von Neumann architecture to the neural network. And if you trace the history back, they knew in the 1940s that these were the two paths. They knew what the neural network was in 1943. There was a big argument at the time of whether the computer should be based on fundamentally adding machines cache registers, or whether it should be based on brain architectures. And it's just we had to wait 80 years for it to work. But now we have the computer industry V2, which is much more valuable and important because of all of the obvious things it can do that the hyper literal von Neumann machines can't do. And so we've successfully unlocked computer industry v2. It's 10 or 100 or 1000 or a million times more important and valuable. And all of your petty comparisons to bubbles in the 1990s just wash out because, my God, look at what the thing can do. Look at what the thing can do.
- [47:04]
John Collison
AI is funny because it is always the case that the hype cycle for technologies predates the technology being ready for that hype. And so Charlie and I often talk about the mobile Internet hype. Yeah, people are excited about you'll buy cinema tickets on your mobile phone in the 2000s on Nokia 3000, 310, which is not actually how the mobile Internet played out. And even the crypto excitement, the kinds of things people talk about with crypto of like, oh, you'll be able to make payments, whatever. We're finally getting to it in 2025 in any kind of meaningful volumes. But it took a good 15 years from when people started being excited about it. AI is maybe the longest time lag from those things where, like, when was 2001 a space odyssey released? Like, the books that it was based on were the 1950s and then 2001 a space odyssey was the 60s.
- [47:50]
Marc Andreessen
60S.
- [47:50]
John Collison
Yeah, yeah, exact. And that was voice mode with tool use like HAL 9000. And so I find it funny that we had such a specific vision that was pretty much right. But it took a long time for the tech to be. And, you know, there was various waves, you know, Dragon systems, like, you know, the tech wasn't that good. But people were excited about it, apparently.
- [48:12]
Marc Andreessen
There's a book called Rise of the Machines that has the prehistory of AI. And I believe, if I remember correctly, there were actually debates about this in the 1930s. It actually predated even the sort of invention of the neural network.
- [48:20]
John Collison
Okay, so roughly 100 years later, we're.
- [48:22]
Marc Andreessen
Getting around to that. Yeah, they knew in the 30s, and I think Alan Turing and folks like that were involved in that at that time. There's a famous moment in the history on this. So Alan Turing, Claude Shannon, Claude Shannon, the inventor of information theory, two very important guys during World War II. They're building the computer, originally in World War II, to beat the Nazis, crack the codes. And so Alan Turing and Claude Shannon are having lunch at the AT&T Executive Dining Room in Basking Ridge, New Jersey, like 1943. And they're talking about exactly this topic. And Alan Turing starts to, like, raise his voice, raise his voice. And finally he gets up in the middle of the at&t dining room and says, I'm not talking about building a genius computer brain. I'm talking about building a mediocre computer brain, like the president of AT&T. And so they knew, like, I think he knew, that the path that they were on, the von Neumann machine path he was building is this hyper literal, you know, you can almost say like hyper autistic math savant in a bomb, which obviously was not going to be the thing that was going to be English language and write everything else that you were going to want to do. So he knew this is the wrong path, but he just didn't live in the time in which the technology was available to do what he wanted to do. And it just happens that we do.
- [49:25]
Charlie Songhurst
What are you seeing as the emerging heuristics of how the market works? So let me give an example from software. There's no inferior goods market for software. There's no cheap version of Excel or this sort of one.
- [49:36]
Marc Andreessen
There was at one point, there was.
- [49:37]
Charlie Songhurst
At one point, stars, and it didn't succeed, which is the point. But in general, software's gone to one couple company, some horizontal, some vertical, being the best.
- [49:44]
John Collison
Because they're such a great deal.
- [49:45]
Charlie Songhurst
Because it's such a great deal, because the percent of productivity is the same. Is it the same in AI? Do we go with horizontal intelligence? Is there an inferior goods market where you end up with AI and device that's intelligent but not super intelligent, but you don't.
- [49:58]
John Collison
Well, people use worse models.
- [49:59]
Marc Andreessen
The way I would think about it is. If you think about, let's say this is a computer industry V2, what did you experience in computer industry V2? You had many different sizes and shapes of computer computers. And actually what happened at the time was the big ones got built first and then it literally was mainframe and then it was mini computer and then it was sort of server and then it was personal computer and then mobile phone and then embedded devices. Right. And then, by the way, and then it sort of multiplies out where cars and light bulbs and doorknobs and everything else. As you know, what you have as a consequence is the computer industry, and specifically the chip industry is therefore in the form of a giant pyramid where at the top you have a small number of supercomputers and mainframes and at the bottom you have billions and billions of embedded devices and then you have everything else in the middle. And the reason you have that is because you have cost and performance and fit implications for the specific devices. You don't want your light bulb to have to do a round trip to an IBM mainframe or something. It doesn't make any sense. You want to have the embedded device so that it senses whatever you want, senses whether there's light in the room like that, that's like a specific chip. And so I think the scenario in which you only have a few big AI models is a scenario in which not only are those models the smartest, but they're also the cheapest and the most power efficient and the fastest and the easiest to adopt and use for every scenario. And I think that's highly unlikely just because if this is the breakthrough that we believe it to be, and it's the computer industry V2, you're going to want models and everything. You're going to want to say you're going to want AI infused into everything. And then for a lot of those infusion, like you don't need your doorknob to teach you quantum physics, but you do need to be really good at knowing that. But it's you and not somebody else. Right. And so you're going to have like all of these kind of hyper optimized use cases. And so my guess in the way we're betting is that you're going to, you're going to have that pyramid approach. Yeah. And then look, the economics are going to be a big part of that just because, you know, I mean, if only because the doorknob gets to run on local power. Right. And then the process and the doorknob used to do is a tiny fraction of what you need to do when you ask GPT5 a query. And so I think this is Computer.
- [51:58]
John Collison
Industry V2 and how do the markets play out? Where is it just a normal battle price performance with proprietary players? How big a player is open source here? Charlie mentioned Oracle earlier. I feel like people today forget that the proprietary databases used to be the best databases all the way through the 90s. And you had to step one of founding an Internet company was write a check to Oracle and then you can do stuff after that. And then the open source databases, MySQL and Postgres became competitive in the 2000s. Like you don't like me reasoning by analogy too much here, but can you reason by analogy to database world? How does the market structure play out?
- [52:35]
Marc Andreessen
Yeah, no, I think that's right. I think that's right. I think that's actually a good comp. Another one is operating systems. So when I was a kid, the world's best operating systems were specifically, I mean Windows is its own trajectory and iOS, but for what we used to describe as proper computing on real computers like Unix computers and including supercomputers and workstations and advanced scientific applications, things like that. The best versions of Unix were proprietary for a very long time, these really big companies like DEC and PHP and others that had IBM that had their own versions of Unix and they made a lot of money on those. And then Linux, same story. Linux came along, looked like a Toy, and then 10 years later it was better than all the proprietary ones and all the proprietary ones died. That's my guess is it's something like that. I definitely think we'll live in a world of a small number of big models that will be incredibly valuable and incredibly widely used for many things. My guess is we are going to live in a world in which most aggregate AI is going to be executed probably on smaller form factors and probably most of that is going to be open source.
- [53:37]
Charlie Songhurst
So where is ground zero where the rate of change would be highest? Software development somewhere else.
- [53:43]
Marc Andreessen
I mean, software development is a very good candidate for that just because you have people building for themselves, I think, and you kind of have this incredibly tight iterative loop and you see that with these new software, these AI tool companies. So that's a claim. And then by the way, the other advantage of software development is this is a really underrated thing with respect to AI adoption that a lot of the people in the field are missing is software development is not regulated. And so it's like impossible. Well, there is that they are trying, the enemies of progress and freedom are trying and we are fighting them very hard. But it's like AI medicine actually can't move that fast because it's regulated. And AI can't be doctor, you can't get licensed, AI can't be a lawyer, it can't go make an argument at a court and so forth and so on. And so I think it's like, yeah, it's like the unregulated fields populated by the same kinds of people who are building AI.
- [54:29]
John Collison
Charlie had the interesting question of are we overestimating the broad impact and underestimating the specific impact or what if at least for the next five years, as you say AI and medicine or AI and law doesn't make that much progress because of some of the challenges. Challenges. But software engineering is totally transformed.
- [54:47]
Marc Andreessen
So the counter argument, I mean, I think there's a big argument in that direction. And by the way, I actually wrote a whole, I wrote a big substack piece maybe we can link to talking about how the employment shifts everybody's worried about are actually not going to happen anywhere near the velocity people think, because it's like a significant percentage of jobs in the US literally are licensed or unionized or civil service in a way where they literally cannot be replaced. And so I do think there is part of that. Having said that, I think things are going to pop in in really interesting ways. And so, for example, ChatGPT is in fact a better doctor than your doctor today with almost 100% certainty. And just the fact that it can't literally be your doctor doesn't mean you're not going to ask all the doctor questions. And then you already have people online who are taking surreptitious camera phone footage of their own doctor asking ChatGPT during the appointment.
- [55:28]
John Collison
I think the medicine use case is an interesting one because it turns out it was a space where most people were actually intelligence bottlenecked by which I mean, it's like test time, computers, you know, they were getting a very small fraction of their doctor's headspace. And if you put just more thought on the problems, you can get really good outcomes.
- [55:45]
Marc Andreessen
And then medicine, by the way, medicine and law are also. You can also look at the self driving car thing, which is there's always this test for self driving car. There's always been this question of is the requirement perfection? Is the requirement better than the median human driver? And if you apply that same question into law or medicine, it's just overwhelmingly clear that you're better off today with Dr. Chatgpt. Now, in one sense, you can't live your life that way because it can't be your doctor. On the other hand, you can sit there all day long talking to it about your health. By the way, I think there's going to be a lot of tension and a lot of drama in these different fields, as that happens. But here's another argument that comes back around on this, which is the argument of AI is horrible because it's going to lead to five companies controlling everything. It's going to be like, that's it. Monopoly, cartel, fear. There's a bunch of reasons to be suspicious of that, including, including things like open source. But the other reason to be suspicious is, at least with downstream impact, is AI is already maybe the most democratically distributed technology in history. Whatever 600 million people or whatever it is number now is on ChatGPT in like two years. And again, you compare that to Internet adoption, it's like far faster. And of course, the reason is because the Internet exists today to be able to distribute it. But the world's most advanced AI is in an app that 600 million people have. It's not in the one that, that I have or that you have. It's the one that 600 million people have. And so this technology has already, already been hyper. It's been hyper democratized. And so it's going to be in everybody's hands. And people get confused about this because they're like, well, why would big companies do that? And the reason is because the mass market's always the biggest market, right? You want to get to everybody if you're trying to build the most successful company and to be the company that is the most important. And look, for sure, there are always concerns about aggregation of power and centralization of power, for sure. But there's this other thing, which is, what if this is just like the philosopher's stone, the alchemy of sand into thought in literally everybody's hand right out of the gate.
- [57:34]
Charlie Songhurst
If you look back at the old companies, you look at the S&P 500 of 1980, there's not that much change in the success based on tech. That is, it's not like some bank gets better at tech than all the others and just goes past all the competitors. If what you're saying is true, you would say that old companies are going to adapt less well to this and the level of change is going to be unprecedented.
- [57:57]
Marc Andreessen
I believe that to be the case. Well, so again, let's go back to the Computer industry on this. This, I think, is very interesting idea. So we just got the computer and she started out by building the big thing, started by building the mainframe. Thomas Watson Sr. Who ran IBM in the 1950s, said he thought there was a world market for five computers. And it was literally like three, one mainframe each for the three big instruments, insurance companies, and then two for the department of Defense. And that was it. And by the way, at that time, it was true. That was the world market for those computers. For those computers at that time. And then basically over 40 years, you went from mainframe to minicomputer, to client server, to, as you said, to PC and to phone. And so what happened is over 40 years, the technology cascaded down into the mass market. And then today that culminated in the $10 Android smartphone in India. And so that was that AI, at least so far. And by the way, many other categories of new technology in the. In the last 30 years, because smartphone is another example of this or have been the reverse, which is. No, the individual gets it first. The companies are deciding to go for the individual market first because that's the largest market and those are the people who are the easiest to adopt.
- [58:57]
John Collison
It's Andy Warhol, the president drinks the same Coke as you and I. Yeah, exactly.
- [59:01]
Marc Andreessen
And then what happens is over time, what happens is this is what happened with smartphones, and this is what happened with. And this is what I believe is happening with AI, which is the individuals get it first, down adopted first, the small businesses get it second, adopt it second, the big businesses get it third and the government gets it fourth, not because the governments and the big companies couldn't get it faster if they wanted to, but they can't, because they can't absorb it. They have all their rules and then they have all their bureaucracy and they just simply can't absorb it. And so I think there's. And again, it's like at the level of politics sort of structure society, you could say this is like a fight between the power of the individual versus the power of the state. Obviously there's fears of AI surveillance and all these things on the state, but the other side is everywhere. Every individual citizen being super empowered, being a PhD in everything, including how to deal with the state. So everybody all of a sudden is a super lawyer. And then within business, it's the balance of power between small companies and big companies. If you're just looking at speed of adoption, there's no question small companies are adopting fancy.
- [59:56]
John Collison
I was going to ask about that because like Robert Solow said the computer aid shows up everywhere except the productivity statistics. AI productivity is showing up everywhere except the hiring plans of your portfolio companies, companies which still seem to be hiring a lot of humans. What does the realization of significant AI productivity gains look like? Because presumably stodgy large companies you believe will fight the gains at some level, they won't take as much AI productivity as they should.
- [60:21]
Marc Andreessen
So I think the most basic question is the sort of fundamental question of is this a centralizing power or is this a democratization of power?
- [60:28]
John Collison
You think it will make small companies more powerful in the battle against large companies?
- [60:31]
Marc Andreessen
I think there's a really good chance of that. I don't know for sure. We'll see.
- [60:34]
Charlie Songhurst
But it seems certain that it will make younger companies more successful against older companies.
- [60:38]
Marc Andreessen
I would assume so. Or the kinds of companies that have the kinds of. Right, exactly. Less bureaucratic. But you have this let's take the employment, the jobs thing, because that's the one that gets all the headlines, which is like, oh, all the jobs are going to go away because AI is going to do everything. So one version of it is like, ok, that is going to be the thing. This is at least the meme of five companies are going to own the world and you have whatever three years to get out, out for the permanent underclass, whatever this leads to. That the more conventional economic argument is the opposite argument, which is this is going to deliver massive productivity improvements, not just to companies, but also to individuals. When you put a technology in the hands of an individual that massively increases their productivity. And the way I think about that is AI just makes every individual a super PhD in every topic. That's the most dramatic increase in what economists call marginal productivity of the worker that has every existed. And so as a consequence, every single one of those people is now capable of doing so much more than they were ever capable of doing before. Whether they're doing that as like a solo entrepreneur or whether they're doing that as somebody who works in an organization. And so in that version of the world, you don't get the aggregating effects. You get some, but they're swamped by the democratization and the superpowers that every individual gets. And then 10 years from now, we'll do part two of this probably with the same glass of beer at the same room temperature. And we will be shocked by how much AI drove both employment growth and drove incomes. Because again, the conventional economic view is marginal productivity improvements, like you want to hire more people at higher levels of productivity because they can do more. And then you pay them a lot more because they can.
- [62:09]
Charlie Songhurst
A huge part of that is when people think about this, they use intelligence but not imagination. If you go back to 1950, there's some movie there where basically a single person is a seller. Excel, they're all sitting in a big room effectively doing accounting. If you described the sort of computing revolution, they would all say I'm going to lose my job. But the jobs that emerge, video gaming, you couldn't imagine, you couldn't describe. So it's very hard, I think people to overcome the sort of the jobs they can see existing, disappearing, but they can't see the emergence of new categories. But we've always had the emergence of those new categories. And if you take things like sport, which I think is like 3, 4% of the GDP, you could imagine that extending to 20% of GDP and whole new sports emerging. There's vast.
- [62:51]
John Collison
If you get more whole new sports emerging with esports and I mean you can argue many of the existing, like all sports have gotten way bigger over the past five years. Like basketball is way bigger. F1 is obviously way bigger. Just they've all gotten much bigger.
- [63:03]
Marc Andreessen
Yeah, we're even bringing soccer to the U.S. exactly. Seemed inconceivable. No, that's exactly right. And yeah, and then the corollary to that, by the way, this is very difficult, difficult to talk about because people get very upset. But the corollary to that is those old jobs after the fact, you're just like, I can't believe human beings were required to do that. Because literally, like as you're alluding to what happened, the original back breaking Excel work, the original computer was a person sitting at a desk doing manual math all day long. Imagine if I showed up today and told you that's what your kids are going to be doing as a profession, you'd be like, sounds like torture.
- [63:33]
Charlie Songhurst
Have you ever Iain M. Banks, the science fiction author?
- [63:37]
Marc Andreessen
No, I've actually never read that.
- [63:39]
Charlie Songhurst
He tries hard to sort of contemplate what a super advanced society with AI is like. And what's interesting is everyone has stuff that is sort of looks like a job but is actually leisure.
- [63:50]
Marc Andreessen
Well, the best jobs in the world have that characteristic, right?
- [63:52]
Charlie Songhurst
And then you have very complex status hierarchies as people aspire. And if you look at sort of gemenschaftic societies like Formula one or something like that, you have a very clear sort of motivation, states, hierarchy for people within that seems to fulfill a lot of humans.
- [64:06]
John Collison
Are you describing being a VC. I've seen the activities at the conferences.
- [64:09]
Marc Andreessen
VCs go to, exactly as we like to say, it's a 9, 34 profession, it's a country club kind of thing. The other, by the way, great economic fallacy that I just see everywhere right now is this idea that AI is somehow going to be this hyper successful thing, hyper acceleration of productivity and dramatically change everything, destroy all the jobs. And yet somehow that's going to lead to people being immiserated and being poor and not having anything. And the missing element there is that even if that serial plays a out, which I think, as I said, I don't think it's a centralization scenario. But even if it played out, the result would be hyper deflation of prices, which is the thing that people miss. And so the price in that environment, with that level of productivity growth, the price of goods and services will collapse. And things that today cost you a lot of money will all of a sudden all be cheaper, free. This is sort of the everything becomes oversupplied.
- [64:53]
Charlie Songhurst
In Star Trek there's no GDP would be zero because you.
- [64:57]
Marc Andreessen
The replicator does everything.
- [64:58]
Charlie Songhurst
The replicator does everything right.
- [64:59]
Marc Andreessen
And so things that cost 100 cost a penny. In that world. Even real GDP looks like it's shrunk and everybody is much, much, much, much better off. And by the way, this is not the first time there have been periods of sustained deflation in the past.
- [65:13]
Charlie Songhurst
When you say it within categories, look at the spend on CDs, music CDs versus music today.
- [65:19]
Marc Andreessen
I always talk a lot about the so called second Industrial Revolution. So the most sort of the time in which our entire modern world was built with everything from airplanes to freeways and everything, everything else, 1880 to 1930, it's like that 50 year stretch. For a lot of that period they were in essentially a protracted deflationary depression. Because what happened was the technology for acquiring and processing raw materials was advancing so fast that there were gluts in all the different raw materials. It felt like the economy was caving in because prices were collapsing, economic activity was down, GDP was down. In reality, what happened was a massive surge in productivity growth, a massive surge in material prosperity. And over that period, both productivity growth and economic growth advanced something like 3x of our time. But if you read the books at the time, they're obsessed with this problem of like, oh my God, there's this oversupply of iron. What are we ever possibly going to do with it? And it's destroying the economics of the iron production business can you not have.
- [66:14]
John Collison
Low productivity segments of the economy, find ways to, to avoid the prices collapsing too much such that you don't get.
- [66:27]
Charlie Songhurst
This effect and people's cost disease.
- [66:29]
John Collison
Yeah, like we've gotten much better at healthcare over the past 50 years and yet.
- [66:35]
Marc Andreessen
Yes, yes. So bowel's cost disease, but also just simply government. You see this today. So basically it's like today what happens if you chart, it's this famous chart. If you chart basically the prices of products across all these sectors, what you.
- [66:45]
John Collison
See the deflationary economy and the inflationary economy.
- [66:47]
Marc Andreessen
Yeah, there's two different economies. And the deflationary economy is like everything, electronic, everything, software, everything, media, by the way, basically everything. All light manufacturing, clothes and everything. Well, not housing. So the price of clothes collapses, the price of housing hyper rises.
- [67:01]
John Collison
Oh, sorry, I was saying they accelerate.
- [67:02]
Marc Andreessen
On the other side, on the non productive side, you've got housing, education and health care. And that sort of, I think explains a lot of the politics and sort of feeling of our society right now, which is just like every. Everything that's optional and fun is getting super cheap and everything that's actually necessary to raise a family is getting hyper expensive. Exactly to your point. It's because these are two different economies. And then you look at, this gets complicated. But if you look at housing and health care and education, what they all have in common is heavy government interference, specifically of the form of restricting supply. In all cases, the government basically restricts how many houses can get built, they restrict how many doctors can get licensed, they restrict how many universities can get accredited. And then because restricted supply leads to prices skyrocketing, the voters get mad and so then the politicians subsidize. In all three of those markets there's massive government subsidies, federal student loan programs, federal mortgage programs, federal healthcare programs, and if you insert basic economics, if you constrain supply, you cause prices to rise. And if you subsidize demand, you cause prices to rise. And so I think this is basically the state of the western democracies over the last 50 years is every step of the way as the price of the American dream. Housing, education and health care. As the price of those rise, the pressure from the government to subsidize increases, which just drives the prices higher. And so you're in this ever escalating spiral.
- [68:26]
John Collison
I'm presumably you're concerned about more of that. Like everyone was making fun of the Boston City Council objecting to Waymo and maybe voting to preserve driving jobs and everything like that. And so we find more categories to Turn into healthcare education.
- [68:39]
Marc Andreessen
Sinecure is fundamentally. And then almost cost disease kicks in because now you have this. Then you have the hyper incomes being earned by people in the deflating sectors where there's massive productivity growth and then people in health care get to command those wages and then the whole thing compounds and gets worse by default. This is what the governments are going to do. By default. It's what they're. Exactly. And then there's a really tricky political economy thing to this, which is like the voters. It's very hard to tell the voters like don't vote for the guy who says he's going to subsidize housing more. Right.
- [69:10]
John Collison
So are you worried about this as a political future?
- [69:12]
Marc Andreessen
Yes, 100%. Well, I think it's our. So I think this is our political present.
- [69:17]
John Collison
Sure, sure. I'm seeing an expanded version of 100%.
- [69:19]
Marc Andreessen
An expanded version, 100%. I'll give you. Well, the latest example of this latest example. So remember the dock workers? Remember the dock workers strike?
- [69:25]
John Collison
Yeah, I do.
- [69:25]
Marc Andreessen
Okay. Remember the guy with the gold chain, the whole thing? And we found out about the dock workers and you dig into it and you're like, oh, the dock workers, dockers union.
- [69:33]
John Collison
European ports are way more productive than.
- [69:35]
Marc Andreessen
The US because you have these unions and they have a tremendous amount of political stroke. One of the things that was discovered during that process that I didn't know is that in prior union agreements with the dock workers, they already had a one to one ratio of people sitting at home doing nothing to every productive dock worker as a consequence of the last, whatever, 60 years of these things. So basically there's a long history here that just never became visible in public, which is every time any kind of new automation shows up at the docks, the dock workers renegotiate the contract to preserve the jobs, which literally means people sitting at home. And that was before the most recent agreements. And that's just a micro example that's easy to pick on. The much larger example is the civil service public sector unions. Obviously here we're into teachers unions and nursing unions and all of these things. And then here we're into this fairly amazing, bizarre world we've been in for the last 50 years where you have, especially around government, you have both civil service protections and union protections. Right, Exactly. So by default, the political economy makes all of this worse and worse. By the way, this is why I think inflation doesn't mean what it used to. Inflation 50 or 100 years ago used to mean the price of raw materials was so important. In the economy that you felt it very directly. Now, as you say, you've got.
- [70:46]
John Collison
It's hard to talk about a single bundle.
- [70:47]
Marc Andreessen
Yeah. Because it's, it's not the same thing. And this is the thing where you can't build a family off of the price of the iPhone. Just because everybody has infinite media on their iPhone for free does not mean that they feel good if they can't buy a house.
- [70:59]
John Collison
I liked your. What was your inflation stat of if there's a hole in your drywall, it's cheaper to put a flat screen TV over it than it is to repair the drywall.
- [71:09]
Marc Andreessen
100%. Exactly.
- [71:11]
Charlie Songhurst
Let me drag us back to AI. Used to have the 10X engineer. You're going to have the 1000X engineer with AI.
- [71:18]
Marc Andreessen
Yeah, for sure. I think you already do in practice. And of course, we have had. For a long time. I mean, we've had the 1 000X engineer for a long time. It's just. It's becoming. Yeah, yeah. It's becoming more visible. It's going to apply in more areas of software. And then, look, the other thing is just the payoff to software has been rising because the markets are so much larger now. You know, this goes back to the, you know, why would this time be different with AI versus the Internet, which is just like, okay, this is the first time in human history that you've had 5 billion people connected on an interactive network. And if you are a provider of products and services that go into that market, if it worked, it may or may not work, but if it works, it can get sort of infinitely large and actually really fast now. And so what is the upside? How many people are there in the world who are going to pay whatever it is, 20 bucks a month for the world's best AI? It's not all 5 billion, but it's a much larger number than you would have had 10 or 20 or 30 years ago. And maybe it's just simply market size.
- [72:14]
John Collison
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- [73:12]
Charlie Songhurst
You've been super early to crypto with a 16Z. It's probably the area where there's been the Most concentration of VC performance. New paradigm, not that many others. Two questions. Why did so VCs focus on crypto and then how important are stablecoins going to be?
- [73:29]
Marc Andreessen
So sorry, the first question is why did they or why did they, why didn't they, didn't they.
- [73:34]
Charlie Songhurst
Status or what.
- [73:35]
Marc Andreessen
I've observed, I mean so one is you could always just say the easy explanation is just they didn't understand it or they were focused on other things. What I've observed is that as technology has become more important, people's belief systems have a lot more to do with technology. So your worldview, the part of your brain that thinks about things like a larger and larger percentage of that is devoted to technology. And of course if you're a VC, that's like 100%. And then whatever you're spending your time on, you force whatever myths, legends, religion, cults. So it means the same question of why is the press so much more focused on technology than they were 15 years ago?
- [74:09]
Charlie Songhurst
Essentially it was harder to be politicized about AOL and ebay.
- [74:12]
Marc Andreessen
Yeah. Who could get. Yeah, exactly. I think what we observed is a lot of VCs who were very logical and dispassionate on topics like SaaS for which there's no religion.
- [74:22]
Charlie Songhurst
It's hard to get political motivation.
- [74:23]
Marc Andreessen
It's hard to get political motivation. For some reason there was something about crypto where they just got locked in on yeah the politics or the whatever. And it was just like oh, so my theory of it after a while because I just met so many people who would just like foam with. And it wasn't even that they were like oh, we don't think it'd be valuable. They would be like oh, it's evil, it's full on evil. It's a scam, it's a fraud, it's a this, it's that if it works, it's evil. If it doesn't work, it's evil. One of my tentative conclusions was just like money pisses people off. And so. So making money through tech is usually an indirect process. In this case there was a more direct aspect. People get really. People have always built up all kinds of weird religious and political views around money. And yeah, literally what we experienced was people just got really upset. And we can never understand it because it's like, what's the point of being a venture capitalist of all things? What's the point about being negatively upset about a new technology?
- [75:11]
John Collison
And in particular it feels like it requires high openness. Where there's something about early crypto. Crypto where it attracted folks like Balaji, where there was all these grand pronouncements of like, oh, bitcoin will supersede the nation state. Just like it led to a lot of that kind of slightly cultish, very cyberpunk. It really reminds me of the. What's the John Perry Barlow letter?
- [75:36]
Marc Andreessen
Declaration of Independence of cyberspace.
- [75:38]
John Collison
Exactly, exactly. John Perry Barlow is the Declaration of Independence of cyberspace. There's a lot of that kind of vibe about crypto. And so it required one to be open minded enough to think there could be something here. And I think most people are not that high openness.
- [75:51]
Marc Andreessen
High openness. And then it also got. But you're not that high openness building on that. Well, I'm. Yeah, I don't know, but I'm not introspective so I don't have to think about that. It also got right coded. I think it got right wing coded because it got like libertarian coded early. Especially in the 2010s when things, everything got politicized. Anything coded, right, liberty, libertarian was bad. And then quite honestly, and maybe this will piss people off if I say it, but quite honestly, if you actually want to understand it, how it works, it actually is quite difficult. It is a complex technical thing and I think maybe people don't understand the tech. Maybe people literally don't understand. I dealt with this a lot when I would deal with people who were causing us trouble in public and I literally would try to explain it to them and I just fundamentally couldn't. By the time you're using the phrase Byzantine generals problem, you're done. It's never going to work.
- [76:38]
John Collison
My observation is we have a friend who it talks about how crypto contains multitudes. And that's the important thing you have to internalize because the criticism you will hear is sometimes something like, oh, there's a lot of scams in crypto.
- [76:50]
Marc Andreessen
That's right.
- [76:51]
John Collison
And it's like, okay, crypto is this big box and within this big box there's a lot of scams happening. There's like Vitalik types who are really interested in developing new protocols. There's people using it as a store of wealth, especially in emerging market countries. There's people who are just interested in speculative number go up games. There's people who are passionate about developing new payment systems and they're working on bitcoin lightning or something like that. It's this big box that contains so much different stuff and there are strengths and there are weaknesses or there are things that we might not like. Again, I don't like some of the rug pulling scam aspects, but it's just a big box with a whole lot of different stuff in it. And people seemed incapable of reasoning that way.
- [77:34]
Marc Andreessen
They see what they want to see. Plus it was also like you want to see the tech guys taken down a notch and this is some way that tech guys are manufacturing magic money. And then maybe another more focused way of what you're saying is every new form of financial technology associated has been historically associated with some form of bubble and crash and sort of scams along with that. And the classic example of that that I think is illustrative for crypto, the investment of paper money. John Law, John Law invented paper money in France about 360 years ago and it immediately sparked what became the South Sea bubble. And actually he ended up basically like his life did not go well after.
- [78:08]
Charlie Songhurst
That because people fled to Venice.
- [78:10]
Marc Andreessen
Fled to Venice and basically died poor.
- [78:13]
John Collison
High yield finance, maybe another example.
- [78:14]
Marc Andreessen
What's that?
- [78:15]
John Collison
High yield finance like Michael Milken.
- [78:16]
Marc Andreessen
Oh yeah, yeah. Junk bonds were completely discredited by the time Mike Milken was sent to jail. Yeah, junk ponds had been completely discredited because everybody, again the moral story, everybody knew that it led to like this massive bubble of all these deliberately high risk bonds. Who would ever do that a decade later? That market was much larger than it ever had been in the 80s and was extremely well respected and played a huge role in the build out of everything since. And so new kinds of money lead to new kinds of scams, lead to.
- [78:44]
Charlie Songhurst
New bubbles, new kinds of money. How do you think about stablecoins?
- [78:48]
Marc Andreessen
Yeah, so stablecoins I would say primarily what I think is spend super healthy, helpful to have stablecoin succeed because it's just an obvious incredible use case. It's worked incredibly well. They're being used all over the World for many different reasons. The numbers are now extremely large. I think it's great. It was originally, you guys probably know it was originally part of Vitalik's early work. He had a very unfortunate. Do you remember the original name for stablecoins?
- [79:13]
Charlie Songhurst
No.
- [79:13]
Marc Andreessen
Colored coins. Oh yes. Only an ESL speaker would pick that name. But the idea, right, the idea was a crypto token wrapping a rope world asset. So that was part of the original thinking on all this stuff. It's worked incredibly well for dollars. I believe that will work incredibly well for many other kinds of assets. It's great. Now having said that the crypto purist natives are like well that's sort of, that's not the main thing because it's a bridge technology of the old world. I think it's great and I think it's fantastic that you have such a successful use case.
- [79:43]
Charlie Songhurst
So Fintech has generally not produced great companies or giant companies because it's been country by country in our post.
- [79:49]
Marc Andreessen
In fact he's really upset about the wa.
- [79:55]
Charlie Songhurst
You end up with these very mediocre companies like Stripe, but they're fantastically managed. It seems like stablecoins could lead to the global scalability in fintech that has been the prerequisite to making super valuable tech companies.
- [80:09]
Marc Andreessen
I mean we've had some fintech ones that we're very proud of, including Stripe. It's just the level of one is regulation and then payments is different because.
- [80:19]
Charlie Songhurst
They did did go global.
- [80:20]
Marc Andreessen
They did go global. Not many companies regulatory constraints there as well. And then the last decade in particular a lot of the western countries they've been pinning on a crusade against any kind of financial innovation just on general principle. And so there's been these real regulatory government headwinds and then just look like dealing with the banks, dealing with the credit card companies, dealing with these. They're not psyched at the idea of some kid with some new idea. They can just not. And so even if you have regulatory clearance, can you actually implement the thing is an open question. And so I just think there's a lot of glue, a lot of stickiness. And then I mean look, you could also say to be fair, you could also say, look, it's a high hurdle to go to a consumer and to say you should trust your money with some new company. So there's like a whole issue there. So yeah, I agree with your optimistic point of view. Yeah, this was always, this was all, I mean this was always part of the crypto philosophy which was programmable money. If you had programmable money. Then all of a sudden you could have financial services work a lot more like software. You could have a much higher rate of innovation. And you're right, maybe we're starting to get there.
- [81:23]
John Collison
Was there someone who really got you into crypto?
- [81:25]
Marc Andreessen
I would say the main person was my partner, Chris Dixon, who was very early and had figured it out. And then we were involved in Coinbase early on and so Brian and Fred at Coinbase were super helpful in helping us understand it.
- [81:35]
John Collison
And how do you think.
- [81:37]
Marc Andreessen
Sorry, biology. Actually, biology is at the. The head of, of that list.
- [81:40]
John Collison
And how do you think Chris cracked it so early?
- [81:42]
Marc Andreessen
So Chris is just Chris always. Chris's entire life has been this pursuit of. It's just how he thinks. He's just born to do this. And it's been, you know, it's in pursuit. He uses these terms. He used one term. He says what nerds do on nights and weekends is one way to look at it. The second way to look at it is good ideas that look like bad ideas. And then his third, most recent version of that is like Internet cults. It's like if it has like a thriving subreddit, then like something's going on. It's the other side of the people's negative emotion. On this is the things that become movements early. Like the Internet enables movements.
- [82:17]
John Collison
Is there something that's. Yeah, this is the homebrew computer cloud thing.
- [82:21]
Marc Andreessen
That's right.
- [82:21]
Charlie Songhurst
John, how do you think about Stablecoins for you?
- [82:25]
John Collison
It's funny when you're saying crypto is an Internet cult, we find that it's very vibes based in a funny way where there was always a thing thing of like, you know, Stripe is, you know, pro crypto. We're super excited. Stripe is anti crypto, you know, not going to make us, you know, Stripe is pro crypto. Again. We've never been. That's never how we've conceived of it. We just want to build things that people find useful. And, you know, the bitcoin white paper dropped in 2008, I want to say, and Stripe was founded in 2009. And so we've kind of been watching all along stuff.
- [82:54]
Charlie Songhurst
Wasn't it 2-09-09?
- [82:55]
John Collison
It might have been on 9, you're right. It was just before strength. And so we've just been trying various things. Like we founded Stellar in the early days, we tried bitcoin support. Original bitcoin was a horrible payment method, you know what I mean? And the thing we have really noticed that's really striking is there's a level of consumer adoption and familiarity that allows for a mainstreaming. Like we just worked with Shopify to like they now offer stablecoin payments on all of their checkouts or they're rolling that out in all their checkouts. That's just not a thing that would have been made sense even three or four years ago. And so it's like, you know, we're talking about the Internet stuff. Just at a certain point Google and Facebook and all these companies start to work. And if you try to Launch Facebook in 1998, it doesn't work because there aren't enough, you know, Internet connections. I think there weren't enough wallets for.
- [83:41]
Marc Andreessen
A lot of things to work.
- [83:42]
John Collison
Even you look at the stablecoin supply charts, like we're growing at 40, 50% year over year. Like you don't, you know, it's the grains of rice on the chessboard. You don't need that many years of 40 to 50% year over year growth before it really works. But it's been really striking for us over the past 18 to 24 months where we've been trying to make different things work at various points. And again, we shut off products that don't work, but now all of the products are really working all at once. I had some questions on the Andreessen Horowitz business. Why aren't you a hedge fund? Or why don't you do public investing? You don't have to be a hedge fund. You can just do. But aren't you in the business of predicting tech trends and evaluating companies after.
- [84:20]
Charlie Songhurst
Having done this conversation? We think you might be quite good at it.
- [84:24]
Marc Andreessen
We've considered it. It's just if you guys spend time, if you spend time with public market investors, they just have a very different motion than what we do. And so they just.
- [84:33]
Charlie Songhurst
But is that tradition or is that fundamentally intrinsic to the ontology of the job?
- [84:38]
Marc Andreessen
I think there would be a different way to run public money in a way that, for example, would have caught a lot of the Mag 7. I think. I think that possibility exists. Literally, you could just say it's as simple as apply the venture mindset to mega caps and away you go. Obviously we now know venture scale returns. When you get that right, I would just tell you. I would tell you one of the things that saves venture is that we're locked up and our investors are locked up.
- [85:01]
Charlie Songhurst
It's a feature, not a bug.
- [85:02]
Marc Andreessen
It's an incredible future. In traditional finance theory, they always tell you illiquidity is illiquidity. Is a deficit. And it turns out it's.
- [85:09]
Charlie Songhurst
Which is true. But human. Human nature is a bigger one.
- [85:11]
Marc Andreessen
Human nature.
- [85:12]
Charlie Songhurst
Liquidity would be a feature if we were less messed up.
- [85:15]
Marc Andreessen
It is so incredibly hard to not get sucked into the psychology of the moment. And I spend a lot of time at our firm trying to get people to not be sucked up in the psychology at the moment. For example, it's just like an absolute ban on television news in the office. No, if it's on CNBC today, it does not matter to us. If it does matter to us, we made some horrible mistake eight years ago that we can't fix now anyway. And if it's anything else, we shouldn't be paying attention to it because the whole point of this is things that are going to take. Take five or 10 years in the future to develop, and people just need to get back to work. I would bring that up just as like, here's a very pragmatic challenge. You're running public money with a venture strategy. All right, what's your lockup? Okay, now you got a quarterly lockup. Congratulations, big guy. The market rips your face off. All your investors redeem so much for your strategy. That's just really hard. And then people who have gone out to try to raise money on longer lockups are like, well, why would I do that? Illiquidity is a problem. Why would I lock up now? Position. That's insane. Again, you can say the fact that nobody did that is illustrative of how difficult that is now. I don't know. Maybe at some point we should. Then the other is just flat out opportunity cost, which is, are you really going to spend the time dealing with that that you could be spending Meeting the next Mark Zuckerberg.
- [86:20]
John Collison
You invest in companies that succeed and then go public.
- [86:25]
Marc Andreessen
Can I tell the actual story? We almost did this. We almost started the thing and we're like, all right, we have the venture moteli we have the thing. But because of how the public markets work, we need a public market. We need somebody with some public markets background to even be able to raise the money. He ran a long recruiting process and we got down to the final candidate and we met with him during COVID in, I'm going to say, September 21st. Something around that time, we said, look, just bring to dinner. Do the work of him. Bring your best idea. The one company that you would like him at the portfolio to. Would you like to take it for what it was?
- [86:57]
Charlie Songhurst
No peloton. Oh, my God.
- [87:01]
Marc Andreessen
Which then proceeded to fall 99.9%.
- [87:03]
Charlie Songhurst
So you. Yeah, missed bullet.
- [87:05]
Marc Andreessen
Right. And by the way, at the time, Peloton, and you remember at the time, you remember that we used to talk about this at the time, remember Peloton was like, oh, this is a permanent. Like this is. This isn't just a bike company. You know, this is a movement. Right. This is a cult and this is a brand and this is immediate. And everybody had their theory, subscriptions and recurring revenue and you know, but during.
- [87:19]
John Collison
COVID where people overestimate the permanence of the beast, behavior changes.
- [87:22]
Marc Andreessen
Yes, exactly. Well, there was that, but there was also just these hardware companies do that kind of company fitness is a trend fad driven business historically. And so anyway, it was just like that just felt like a message from God.
- [87:37]
John Collison
Going back to public market investing. So you invest in companies that then go off and succeed and go public, like Coinbase or Airbnb or all these sorts of companies. You then, because they're public, you get to distribute the stock. And so you distribute it to all the LPs. They get their shares. You get your shares. Do you hold the companies? Do you make a decision? Is it formulaic? Is it not formulaic? Are you secretly a public markets investor because you have to make these decisions?
- [88:02]
Marc Andreessen
Yeah. So to be clear, there's two parts to that. Each of us as individuals does do whatever we do with the stock.
- [88:07]
John Collison
Yes, but what do you do?
- [88:08]
Marc Andreessen
What do I do?
- [88:10]
John Collison
Not in specific, but I'm basically saying, do you make active decisions or is it like to.
- [88:14]
Marc Andreessen
Well, let me tell you how we do it as a firm and then individuals, how we do as a firm is we try to make it as mechanical as possible. We're trying to get out of the psychology of whatever's happening at that moment. So you try to define a process up front, but you do want to be discriminating. And so we have a magic box formula of things like quality. Are the founders still running the company? Quality of the founders, are they beating their numbers? What's the growth rate? What's the second derivative?
- [88:40]
John Collison
Is the service like in the pub?
- [88:41]
Marc Andreessen
Exactly. Do they tolerate low performing bartenders? We have some schedule against that. There is a theory afoot and Sequoia is pursuing it, that basically the venture firms and their LPs have left enormous amounts of money on the table by distributing too soon. And that the best strategy, if you back Test over 50 years, the best strategy, at least for the top firms probably would have been to hold everything in perpetuity. Sequoia, notably is trying a strategy where they're trying to do more of that. I will tell you the LPs don't like that, the LPs.
- [89:14]
John Collison
The LPs want their shares of money.
- [89:16]
Marc Andreessen
In and out and they do have a plausible argument that says look, we're not paying you to manage public money. And by the way they have their own needs. And by the way they have their own needs now more than ever. They're under real pressure in a lot of cases. And so if you ask an LP they will tell you, yeah, we want you to try to shoot the lights out on us long dated horizon as possible. Having said that, like as soon as humanly possible get us some money please. Right. And so where this comes up is it's just the thing, should we hold it for another three years and go for another doubling or should we burden hand on that? Anyway, so we try to run that mechanically on the individual side. I mean it really varies by the individual just based on idiosyncratic life circumstances.
- [89:56]
Charlie Songhurst
Off to big company world for a couple of questions. How much should be company companies focus on their competitors?
- [90:03]
Marc Andreessen
I mean so this is a real double edged sword. So the easiest thing in the world is. So the easiest thing in the world is to focus on your competitors because you've got somebody to benchmark against and index against. And it's just been amazing how many other big companies start or stop their VR and AR programs based on whatever Meta is doing at that moment. Like they seem to have outsourced their thinking entirely to Meta. And so there is this like dysfunctional version where you're kind of outsourcing your thought to the competitor. And then there's the Peter critique of like you're getting into these Gerardian kind of spirals. And I think there's something to that. Having said that, I see the other side of that all the time, which is the anti grove side, which is only the paranoid survive. And isn't it great if you have an intellectual framework to be able to not think about your competition? Because that's a lot more fun if your competition is good. Thinking about them is actually really painful. If you have this enlightened point of view that says you don't ever have to think about them, you're letting yourself off the hook.
- [90:55]
Charlie Songhurst
Maybe the answer is whatever's most painful. Thinking about them or not thinking about them is best.
- [90:59]
Marc Andreessen
Well, and this gets to what I've experienced with big companies, what I've experienced with big companies, by the way, this includes in a lot of cases fast growing startups. They Think a lot about their competitors for the purpose of trying to basically essentially ultimately copycat what their competitors are. If your competitor is decent, you assume that for whatever it is they do, you assume they must have, have some analytical reason they're doing it. And so there's this natural tendency to try to build the analytical case to do the same thing. And so there's an over focus in that way. Having said that, I can count the number of true competitive teardowns, I don't know, maybe on one hand that I've ever really seen. Because again, your pain point, the most painful thing in the world is to talk honestly about somebody beating you.
- [91:40]
Charlie Songhurst
Yeah.
- [91:40]
John Collison
I always find the Jeff Bezos we're not competitor focused, we're customer focused. Kind of a clever bit of misdirection because again, at these stripe, we think that our customers are very smart. And so if they're picking something else that is some signal of revealed preference that a well informed person trying to do the best thing for them says this is better than stripe. And so we do a lot of secret shopping, we do a lot of tearing down. We want to understand what's out there. And again, as you say, that shouldn't kind of define the roadmap. You should be able to come up with your own products. But if you're not coming at it from an informed place, something is horribly wrong.
- [92:11]
Marc Andreessen
I think it's some combination of your. You need to be brutally honest with respect to what your actual issues are. And those actual issues include your losing for reason. Xyz.
- [92:19]
Charlie Songhurst
I mean, in some ways what they're saying is bureaucracies avoid pain.
- [92:22]
Marc Andreessen
Yes.
- [92:22]
Charlie Songhurst
And so you need to steer them into pain.
- [92:24]
Marc Andreessen
I would say it slightly differently, which is I have found people willing to tolerate any level of chronic pain in order to avoid, in order to avoid acute pain. And so people would much rather lose slowly over five years than have the conversation that involves a dramatic change to stop losing.
- [92:38]
Charlie Songhurst
Wow.
- [92:39]
Marc Andreessen
And I've seen that over and over again. It's almost impossible to get people to do that. The level of aversion is like incredibly high.
- [92:45]
John Collison
What founders or companies do you respect?
- [92:47]
Marc Andreessen
People seem fine, just bleeding out. I mean, it's just incredible. I mean, you see in other areas of, you know, you see it in politics, you know, I don't name names, but there are political parties, let's say, in various places around the world where you just look at it and you're just like, like, I can't believe that you're willing to inflict this strategy on yourself. With these results that are clearly not working and yet they will not revisit their core assumptions.
- [93:10]
Charlie Songhurst
If you look at companies that have died over the last 20 years, they do seem to these very long sort of operatic debts and they change less than you would think. Do you think that's because people that are prescient and see it just exit and so the people. You've sort of got a selection effect and the people that remain, or is it just that it's too socially awkward of a conversation that says we've.
- [93:33]
Marc Andreessen
Most people would rather just put one foot in front of the other. Most people don't want to rock the boat. Most people don't want to be the skunk at the garden party. Most people don't want to call their own baby ugly. Most people don't want to. Yeah, I mean it's. Most people don't want. They don't want the reputation of being a troublemaker. They don't want the. It's like this thing of, you know, it's a very interesting signal. You have to decide whether you want to send as leader, which is, do you want people to bring you bad news? Because it's like if all people are doing you every day is bringing you bad news, number one, you're going to slit your own wrists because that fucking sucks. And then number two, you don't want people to just be complainers. Maybe the more advanced version is only bring me a problem if you're also bringing me the solution. But okay, now your life is better. But what if there really is a problem and they don't have the solution and it's beyond them and then they're the one that you're going to give the negative performance review to. So by the way, the other twist on the big company failing thing, which I think is really underrated, is the big companies that fail, the way the story gets written is they never figured it out. And the easy example of this is always Kodak, for example. They never figured out digital photography. What you often find in the backstory is, no, they actually figured it out. They did it too soon. Kodak had actually a very active digital camera program before then.
- [94:39]
Charlie Songhurst
They got burned.
- [94:40]
Marc Andreessen
They got burnt.
- [94:40]
John Collison
Twice shy.
- [94:41]
Marc Andreessen
Twice shy. Yahoo, by the way, Yahoo had mobile early. Yahoo. Was all over mobile between 2002 and 2006. And then they got burned so hard on it that by the time the iPhone appeared, like it was too late.
- [94:53]
Charlie Songhurst
Yeah, I think that if you did wap, you were unlikely to succeed in the post iPhone world.
- [94:58]
Marc Andreessen
Yeah, yeah. And quite Frankly, I think a lot of the tech companies you mentioned, the big tech companies, a lot of big tech companies, like they had, they had tcp, they had Internet fully deployed internally, they had TCPIP products. Like they, you know, they actually knew it quite well. They were running it. It just was something that they were very used to that they didn't really think about in any way. And so yeah, there's the status quo bias thing.
- [95:15]
John Collison
So this is a good, very intelligent sounding reasons as to why it won't work from a recent document in a recent.
- [95:21]
Marc Andreessen
People are really good, people are really good at the analytical explanation either as to why something won't work or conversely why something is going to work when it's clearly failing.
- [95:29]
John Collison
But again, you just get to sound very convincing where it's like, that's a great point. We actually tried that 18 months ago and you did. No man steps in the same river twice.
- [95:40]
Charlie Songhurst
That's a good segue into, you've been on many boards. What makes a good one or maybe what makes a bad one?
- [95:45]
Marc Andreessen
I mean, yeah, I mean, step one is if it's a successful company, Step.
- [95:50]
Charlie Songhurst
Two is which way does it cause an effect?
- [95:51]
Marc Andreessen
Step two is if it's a good CEO. I mean, the boards just can't do that. Just practically speaking, the boards just can't do that much. And even that, you know, even the old cliche is to hire, fire the CEO. And even that is like really fraught with peril. Like, it's very easy for a board to like blow that up. By the way, again, it's often, I.
- [96:06]
Charlie Songhurst
Do remember your problem had a how do I hire a professional CEO? And the answer was one sentence. You're expecting a article and it's like, don't, don't. If you need to do that, sell your company.
- [96:14]
Marc Andreessen
Sell your company. And you know, that's probably an overstatement. And there have been some very successful, you know, professional CEOs over the years, John Chambers and Frank Slootman and others. But yeah, look, it's just really hard. It's just like, is the company going to succeed or not? Is the CEO great or not? Is the company on the right side history or not? Like, that's honestly most of it.
- [96:31]
John Collison
But you think boards matter, then it's.
- [96:33]
Marc Andreessen
One of those things like you can't not have one, which is like you don't want to run. Like, if you run, like if you're on another board, then and you're like as a CEO, legally liable for every screwed up thing that happens, you're much more likely to go to jail. You're much more likely for things to spin out of control. There are real requirements. Governance needs to be taken seriously. You're representing a lot of other people's money, so there's that. And then you do want to have absolute dictatorships with no examination or whatever. And then aspirationally, obviously the hope would be to be able to positively contribute.
- [97:02]
John Collison
Yeah. You're given the governance exponential and you're saying that it's rare that founders are actually removed or CEOs are actually removed. And then even the cases where they are, maybe things are too far gone and everything. And sure, maybe that's true, but I feel like I would make a cultural pitch where let me try this on. You can react to it. We found the stripe board very useful because it's important to have to organize your thinking and have some accountability mechanism where you go on a quarterly basis and talk about things. And then we're doing this for the first time. And so there's lots of people on the stripe board who have a different set of experience and come to us and advise us on various things. And we've gone and tried to pick the hall of fame of various industries who can then go up high on things. I actually notice when I talk to way earlier stage founders, I think they underrate the value of a good board where they are worried about the governance thing. You say where they don't want to give up a whole bunch of board seats and then have to do management of VC personalities and everything, which is true, but they don't seem to take seriously. Again, maybe they just get this from investors, but they don't seem to take seriously the idea that you can put together a group who will meaningfully increase the odds of success of the company. I don't know. Is that just a particular thing? To us, we needed more help than others. Or would you agree with that broadly as a cultural explanation where they're pretty useful culturally for management?
- [98:26]
Marc Andreessen
Yeah. So what you just said is ask what we aspire to. What we aspire to is that the boards that we're on are like that and that the CEOs that we work with want to have a board like that and that we're able to be a contributor to it, and so we aspire to that. I think there are many examples of that being true and hopefully on that, I've been an example of that myself. I think that's all true. Having said that, I guess a board cannot rescue a failing company. Well, yeah, but there Are a lot of people on a lot of boards of a lot of companies that are failing that are spending an enormous amount of time trying to rescue those companies both in and outside of tech. And so it's just a higher order bit is still succeeding or failing and it's still like quality people versus not.
- [99:02]
Charlie Songhurst
It ties into your. Someone's.
- [99:04]
Marc Andreessen
The easiest thing in the world is to go on the board of a company that is going to succeed wildly no matter what you do and then to take credit for it after the fact.
- [99:10]
John Collison
But presumably you believe. I mean that sounds fun but having.
- [99:14]
Marc Andreessen
Been through it, the hardest thing in the world is to be on a team on a board where you're struggling valiantly to keep the ship from going down. And the ship is going down.
- [99:21]
Charlie Songhurst
So that goes back to can you hire.
- [99:22]
Marc Andreessen
I've been on those too.
- [99:23]
Charlie Songhurst
Can you hire great CEOs or are those great CEOs? Someone wants to discover. To me the people that have a reputation for great professional CEOs are actually great stock pickers. They understand tech deeply enough that they pick the company that's in a great position.
- [99:36]
Marc Andreessen
Same thing for vc. Same thing.
- [99:38]
Charlie Songhurst
You can't hire them to turn around a failing company because they self sucked out of it.
- [99:43]
Marc Andreessen
You know, every once, I don't know, there's exceptions to everything. Every once in a while you get.
- [99:46]
Charlie Songhurst
Something that is also a great book which is there's a world full of holistics in PC. Single founders, multiple founders. But there's so many exceptions to neutral.
- [99:55]
Marc Andreessen
One of the things you never back a married couple, then you didn't back Cisco.
- [99:59]
John Collison
You think people understudy the Elon method for running companies 100%?
- [100:04]
Marc Andreessen
Yes.
- [100:06]
John Collison
Maybe just briefly describe that method and then why everyone is so incurious about it.
- [100:12]
Marc Andreessen
Yeah, and there's two reasons they were incurious about it. There was the original reason they weren't curious about it and now there's the new reason they're incurious about it, which is Elon also generates emotion in people. Yeah. So look, you guys know that. How do you run a company? Well, there's been 100 years of management books starting with Alfred Sloan's book Alfred Sloan built General Motors. So Alfred Sloan built. Alfred Sloan famously wrote a book that people like Andy Grove learned from that basically said here's how you build a large multinational multi product line industrial company. And so there's this system and it involves somebody at the top of the company that's sort of overseeing this machine. And fundamentally they're getting reports and Then respond to the reports. And then there's all these rules, both rules sort of inflicted from the outside and rules generated internally. And then there's Elon, who just doesn't do any of that. Just doesn't do any of that. And has a completely different playbook. And the Elon playbook in a nutshell, as far as I can tell, I haven't worked for him directly, but from observing him and working with him, as far as I can tell, it's basically number one, only engineers, you only have your company. People who matter in your company are the engineers, the people who understand the technical content of what you're doing for technology companies. And then you only ever talk to the engineers. You never ever talk to mid level management. If you have it, fine, if they need it or whatever, to do their whatever, vacation policy or whatever, it's fine. But if you are the CEO, to get the truth, you only talk to the line engineer. And so you just ruthlessly violate the chain of command at all times. And then your job as the CEO is every week to finish whatever is the most important bottleneck to the company's progress. And the way that you do that is you parachute in and you find the engineers that are working on that problem and you basically stay up with them all night until they fix the problem. And then if you don't, if there's no current major bottleneck, you spend your time instead doing engineering reviews, specifically engineering reviews, not product reviews, engineering reviews. And you get all the engineers together and you have them each present what they're doing for five minutes. And the result of that is you know every single engineer in the company, you know every, exactly what they're working on. If somebody's not good, you fire them on the spot. If somebody's great, you go all out to get them.
- [102:09]
Charlie Songhurst
Well, what's the inverse of that? Because for 10 years after sort of Steve Jobs, we had people wearing, doing sort of mimetic bad version, wearing turtlenecks, trying to sort of. Social style. Exactly. I was trying to say that more diplomatically. But yes, being an asshole were being.
- [102:24]
Marc Andreessen
That's the misunderstanding.
- [102:25]
Charlie Songhurst
They were being. That was the misinterpretation. What is the danger for entrepreneurs of sort of. What's the bad version of copying Elon?
- [102:33]
Marc Andreessen
Oh, the bad version is. This is the critique. Actually, my partner Ben levies his critique. He's like, Mark, the thing you don't get is as follows, which is that. Which is that assumes you have somebody like Elon who can hold the entirety of every engineering topic and every business topic in their head all at the same time. And so when you're sitting there with the 23 year old engineer and you're working with them to redesign the database architecture or whatever, you actually are qualified to do that. And that you're qualified to do that. Not just that one time, but every time. And then again, this goes right back to the last topic we just talked about, which is like, okay, how many of those people exist who can possibly do that? And we know the answer is 1. I believe the answer is 10 or 100 or 1000. I don't know if it's a million. I tend to think we have more of those people than we think. I see a lot of founders who struggle with this because so my observation for how founders kind of try to figure this out is in the beginning they sort of run everything. You just do everything. You just do everything, run everything. Because you have to. And you have to have a unified vision and you don't have this army of people anyway. And so you just do it. And then at some point your high value board comes to you and says, you idiot, you're micromanaging. You need to bring in all these executives. And then what happens is then you go the other way, you over delegate and then your high function board says, you idiot, you're not involved enough the details. And then you're correct. And then what most of the successful founders I work with do is they end up with a hybrid model where they're like deep in the details on some things, but they have a traditional system on the other hand.
- [103:57]
John Collison
And do you think that works pretty well?
- [103:59]
Marc Andreessen
I think for most of the founders we work with that have very successful outcomes, I think that generally is what they do. I think it works well. But it's not the Elon method. It's not the Elon method. By the way, there's other aspects of the Elon method.
- [104:10]
John Collison
I was going to say, I feel.
- [104:11]
Marc Andreessen
Like there's more, there's other aspects. So another aspect of it is the function and purpose of the legal department is to file lawsuits. And like, I am not interested in all the rest of this stuff. You can go deal with it if you want to. Whatever, whatever, whatever. But like, let's talk. We are going, anybody who goes up against us, we are going to terrorize. Like we are going to declare war. And then of course, as a consequence of declaring war, we're not always going to win all the wars, but we're going to establish like massive deterrence. And so nobody will screw around with us, by the way. Let me give you number three, which is becoming more and more salient, I think, and something we're trying to get. Get our founders to do a lot more of. Number three is it's going to be a cult of personality. And it's going to be a cult of personality not just inside the company, but outside the company. And we're not going to, you know, we're not going to spend any money on marketing. We're not going to put any time in ir. What we're going to do is we're going to put on the show of all time and the company and the stock, you know, and the books and the videos and the products and the jobs are all a function of the cult of personality.
- [105:03]
John Collison
I would add three things to that list too. And you can tell me if you think you agree, read these. One is a focus on. And by the way, I thought the Walter Isaacson book, it got kind of a mixed reception, but I thought if you want to study the Elon method a bit, it was actually pretty useful for that. And so the recent biography one is picking sensible metrics for the business any one moment in time. And so, you know, with SpaceX and you know, as they were kind of building up the launch business, dollars per kilo to orbit being the metric that we want to optimize for. That's not totally obvious that it falls out even kind of Tesla as they're ramping up production, it's like deliveries per week. You could have focused on revenue, you could have focused on profitability, you could have focused on deliveries per year. Like the number of deliveries per week rolling off the factory line is itself an interesting choice of like high level metric. So a big focus on it. I think there's a lot of this in Twitter as well when he took it over. Focus on kind of part of the right metrics that we should be. And some of the criticism that's been levied at X is their focus on engagement minutes on the site has led to things like the ban on URLs, which I think a lot of people think is the debosting of URLs, which a lot of people think is pretty silly. Okay, so one is choosing the right metrics. The second is creating a sense of urgency. And people talk about this as like inventing crises. But I would say the generous version is shortening the time horizons. And so it's funny like Elon Musk going around talking about when he was sleeping on the floor of the factory in Nevada for Tesla that Tesla will go bankrupt if we don't do this and if we don't figure out Model 3 production. Tesla was a $200 billion company by market cap at that time. So it's like Tesla will go bankrupt or do a very, very non dilutive equity raise, but creating a lot of urgency around this idea of fixing production and sleeping on the factory floor, which clearly shortens the timeline. And then the third is actually the businesses are really capital efficient. So I'm curious if you see this with hardware companies. I think sometimes hardware companies can be really indulgent with capital where they say venture capitalists will fund my vision of exploration for five or 10 years. And this is like the risk now is people get into robotics and stuff like this, that you get the self indulgence. And it's like I will do my science project for ages and then I'll maybe figure out a product and figure out how to commercialize it.
- [107:12]
Charlie Songhurst
So the other thing hardware founders do is they fall in love with the hardware and the product.
- [107:16]
John Collison
Yes.
- [107:16]
Charlie Songhurst
And they can almost get in, sort of redefine themselves as like producers of science or beauty or product and sort of forget they're running a business or even worse, start to think of running the business as slightly unpleasant.
- [107:28]
John Collison
Exactly.
- [107:29]
Charlie Songhurst
And maybe even not sort of intellectual enough.
- [107:32]
Marc Andreessen
Right.
- [107:32]
John Collison
And so Elon's companies have always been very capital efficient and like build a bad one and then build a good one. And so the boring company bought a commercial tunnel boring machine before they started developing their own. Tesla had the master plan where they build a low volume roadster before they get to the high volume stuff. SpaceX just for. For what they do has never actually burnt that much capital lifetime. And got grant money. They were selling to the DOD all this kind of stuff. And so yeah. Would you agree with those three? And do you think people can pick and choose because we can take some of those things without maybe the lawsuit department or something.
- [108:02]
Marc Andreessen
Yeah. So I think that's all right. I would maybe add one more thing or kind of distill it out of a bunch of these, which is basically like truth seeking at all cost. At least I find this to be the case with him. And I think this is really, really not, especially People who are mad at him really don't understand this. He really, really genuinely wants to know ground truth and he really, genuinely does not want to know anything that's not ground truth. And again, it goes back to our thing of how to confront bad news. He's absolutely ruthless and relentless in Making sure that he actually understands what's going on. You would think that that's common. And I've not found that to be common at all among people in business. You mentioned related to another thing which, which is you mentioned the thing where we're all like literally with Elon, we're all going to die if we don't get this. We're all going to die. Every other typical startup founder, me, when I was doing it, it's always like you're always trying to come across optimistic, brave face. It's going to be great. Really. Have faith. You should have faith. You shouldn't quit and go to another company. Please stay with us. It's going to be great.
- [108:58]
John Collison
Are you trying to weed out the non believers or something?
- [109:00]
Marc Andreessen
Apparently. I think it's urgency, but it's just literally it is just to be the guy who can show up there and just be like, yeah, this doesn't happen or it's going bankrupt. I mean, the number of other companies where that would happen, that would just, okay, the talent would just bleed out. And then maybe I could add one more thing to this, which is he has what you mentioned Steve. He has what Steve had, which is the people who work for Elon and the people who work for Steve, they often report after the fact that they did the best work of their lives. And they often report that they could have had difficult interactions along the way or they could have had whatever or by the way, maybe it didn't even end well and they're pushed or something. Yeah. And literally they'll say like, wow, like, you know, I got to work on the iPhone.
- [109:42]
Charlie Songhurst
There's a lot of very good ex SpaceX founders and they imbibe a sort of a work ethic that sort of reminds me of, I don't know, Goldman Sachs in the 1990s or something where like they work incredibly hard and they work famous. They think from first principles and they're truth seeking.
- [109:56]
Marc Andreessen
Yeah, that's right.
- [109:57]
Charlie Songhurst
And they're risk taking, both technically and they're risk seeking techniques technically and risk avoiding in business.
- [110:03]
Marc Andreessen
Yeah. So then my version of your question is I call this the question of like the milli elons. It's like, okay, if Elon is like a, if a Full Elon is 1000 milli elons. Right.
- [110:14]
John Collison
You can microdose.
- [110:15]
Marc Andreessen
Yeah. Can you microdose? Right. So can you operate at the level of 100 milli elons or at 10 or at 1? Right. And a huge number of observers of Elon swear it's a Classic thing. He gets a classic feedback. Steve used to get the feedback. Lots of people get the feedback. Just, wow, you're great. If you could just. Only just do 80%. If we could just get the 800 milli Elon version and you could just not do the other 200 elons, it's just like, you'd be so much better. And literally that's like what I found with these guys is they've heard that a thousand times. And it's a completely no opposite statement because there is no for them, there's no reduced version. And so if there's no reduced version of it for them, is a normal person going to be able to construct an optimally titrated dosage of milli elons? And I aspirationally believe that you should be able to learn things and replicate. But it is a system. It's not just a set of practices. It's an entire worldview.
- [111:15]
John Collison
I'm not sure it's a whole system where if you don't have one thing, the whole thing folds apart. I feel like you can.
- [111:22]
Marc Andreessen
The other part of that, though, that would be one. The other way of looking at that, though, is, is the person capable of doing the partial version?
- [111:29]
John Collison
No, that I believe.
- [111:30]
Marc Andreessen
You see what I'm saying?
- [111:31]
John Collison
That I can buy.
- [111:32]
Marc Andreessen
Like, are there people who can do the 300 mil Elon version of it? Yes, yes. Maybe I wish I had met more of them by now. And then the other side of that is, why is it understudied? And literally, I think this goes back to the same thing as why do people. People get mad about cryptocurrency is. I think this.
- [111:48]
John Collison
It's tribalism.
- [111:49]
Marc Andreessen
Yeah, it's just something about. There was always something about him and how he operated that caused people to have an emotional response. And then that is now magnified 1000x or a millionx and people are just not having it. And he's got like, his hyper part of it is he's polarized the market very deliberately in the same way that I think a lot of great entrepreneurs do, which is unique. People tend to either love him or hate him. They either love the products, hate the products. That's very helpful from a business standpoint, recruiting standpoint, because it does create this whole, like thing. The thing you don't want in any market is lack of differentiation. He 100% always has that. But as a consequence, I believe there are a lot of people who should be learning a lot more from him who cannot bring themselves to do it to their own detriment.
- [112:32]
John Collison
Can I ask you about the media? So I feel like my framework is this. There are often these new technologies, technologies that then cause an explosion in interesting media activity in new companies and things like that. And so there was the cable boom. And I'm excited for John Malone's new book. But I saw an interview with him recently and he was talking about they just thought up a lot of new channels. When they had this pipe going to people's homes that could support a lot of programming. They had to kind of invent new programming for it. He was talking about creating Fox News because they were like, well, the existing channels seem a little bit to the left and conservative talk rates, radio is really popular. So it seems like conservative news channels should work really well. And it did. So that was cable. And the Internet came along and famously really worked from a media perspective. And in particular, that was the big nail in the coffin for local newspapers where they were the main distribution outlet to people previously for information and the Internet went over the top. I feel like plausibly X is a big enough change to be a new media platform. Like a slightly trivial example, but TPBN is kind of a CNBC competitor. Where I saw Matti from ElevenLabs, a great A16Z company, and they did a fundraise and he went on TPPN to talk about it. But previously that would have been cnbc, but now TPPN is where he chose to go. And that's one example. There's lots of others. Is X that big a deal from a media perspective as to be kind of cable, the Internet, then X, or am I missing something?
- [114:00]
Marc Andreessen
I think it is. And maybe the twist I would put on on the TPBN or the cable thing is one of the things. Actually this is also what I'm about to say, a big deal in sports. There's also now the clip. And clips used to be weird and esoteric, and now clips are the main way that people can consume content.
- [114:15]
John Collison
I see. So X and short form generally.
- [114:17]
Marc Andreessen
Exactly, yeah. For example, a TPBN episode, or for that matter a sports game now generates five or six or eight clips or an interview or hopefully this discussion. And then those clips go hyperviral if you're doing it right. But it's very common when you look at the analytics that the clips get, like a thousand times, the distribution of the actual program itself. And so there is this. I think there's this art form. It's one of the reasons why a lot of historical television shows never figured out what to do with the Internet because they didn't really understand the Internet native artifact was the clip. But the new media properties, the new media entrepreneurs, I think, tend to really understand that. So yeah, I think that's true. Having said that, the impact of the Internet is still mostly what it's been this whole time, which is a disintermediation mechanism. In the cable era, there were only 200 channels or whatever it was. In the Internet there's a billion. So the overwhelming trend is still disintermediation, disaggregation. Yeah.
- [115:09]
John Collison
And substack obviously is the other big trend to me in media right now.
- [115:13]
Marc Andreessen
Substack's a great example because of course, substack as a thing is a central. Substack is a centralizing phenomenon. It's a singular platform and we have growth charts and we proudly go up.
- [115:22]
John Collison
Everything's unbundling and bundling.
- [115:24]
Marc Andreessen
Exactly. But it's not a rebundling in the form of a new magazine. And specifically, the way that substack thinks about it is they're not a publisher, they're a platform. And the distinction is they do not have editorial judgment, they are not trying to create bundles, and the economics are.
- [115:37]
John Collison
Different for the publishers, it's land reform for journalists.
- [115:40]
Marc Andreessen
Yes, exactly. Exactly. Right. But again, you would still say, notwithstanding this success of substack as like a centralized platform, its overall effect is still disintermediation because specifically what it's doing is it's bleeding off many of the talented individual contributors at legacy media to have their own substacks.
- [115:55]
John Collison
It somehow feels to me like we're not done with the media changes.
- [116:01]
Marc Andreessen
I think that's true for sure. Yes. Sorry.
- [116:04]
John Collison
The media changes wrought by just this latest platform change of X and clips. The fact that again, tpbn, which I mentioned, just because it's in our corner of the tech world, is from this year, last year. It's a very new thing and we haven't seen all the last changes.
- [116:20]
Marc Andreessen
Have any predictions for sure. I'd expect to see more of those. Again, I would just say, look, what is the macro thing, the big macro thing happening? And I love what those guys are doing and I love what subsequent. But like the big macro thing, if you just think about the world changing, the big macro thing is TikTok, Instagram and then sure, for from Video NX and a handful of other platforms like that just swamps. That's the macro thing. And so where the future of the macro culture goes, I mean, look, I read substacks, but like 1,000 or 10,000 or 100,000 times more activity is happening on TikTok. And so the macro culture is going to be shaped, I think much more by short form video, at least for the foreseeable future. And then as I'm sure is obvious now, but the role of AI production is about to really change things.
- [117:09]
John Collison
Isn't there also maybe the fact that there's a single global feed now? Like the fact that there's much less personalization in the way because so many things go to the top. And in a way, I really actually don't like the number of videos in my X feed these days. I'm sure they perform in the metrics or something like that, but if I wanted to scroll TikTok, I'd open TikTok. And I don't want all the TikTok videos that get crammed in. Do you guys get these in your feed where you get just random TikTok videos from random accounts in your Twitter feed? And like, no, I'm reading a newspaper here, I'm not trying to watch tv.
- [117:42]
Marc Andreessen
Yeah, no, this was a big. I think the people who run these things have talked about this publicly. But yeah, all the old algorithms of things that your friends like, those are not as effective as just the macro.
- [117:53]
Charlie Songhurst
As the macro, we are almost similar than we think.
- [117:56]
Marc Andreessen
Yeah. But also like the nuances and interconnections are more subtle.
- [118:02]
Charlie Songhurst
It's not the people you know, it's the people you don't know that you have connections with.
- [118:05]
Marc Andreessen
Yeah, exactly. Right. You're probably more like a lot of other people you've never met than you are like the people you know. Yeah. For example, there's that. By the way, having said that, I think the big, I believe the biggest. I think everything we just talked about is very important. I think the biggest, biggest, biggest thing that's happening is just like we really, I think for the first time are entering the true era of free speech. And you know, I think that we started to get at that in the 90s and 2000s and then there was a big reversion in the 2010s with the sort of censorship industrial complex that formed up and all the policies and all the government interference and so forth. And of course a lot of that continues on the part of the governments in particular. But you know, in the US at least, that project has failed. And the platform platforms themselves are really liberalizing out. And then just the sheer volume and scope and variety of content and the number of ways that people have to get messages out in all kinds of ways in the hyper acceleration of culture where the censors don't even know what to ban because they don't even know what half the stuff means. We probably are living in the only true mass era of free speech in human history. And you're seeing things now. I mean, this is all real time, but you just see things now as just a normal user that you never would have seen 10 or 20 or 30 or 50 years ago. There's not even a chance.
- [119:19]
John Collison
So does this lead to a political realignment?
- [119:21]
Marc Andreessen
I believe it does, yeah. So I think this is the big thing. I think Martin Gurry is the guy who has you guys published his book. I think he really nailed it. And I think his thesis and his book came out in 2015 and I think a lot of people said either. Wow. He predicted Trump, which is true to some extent, but that's not the big thing that he predicted. And then I think his prediction is in some ways so funny fundamental that it's easy to just kind of take it for granted and say, oh, of course that's what's going to happen. But it's actually so fundamentally important, I can't stop thinking about it. Which is basically true transparency. True transparency. True free speech is a fundamental solvent, basically dissolving all centralized institutional authority. And the reason for that is centralized institutional authority is never perfect. It often has problems, and in fact, it often has very deep and severe problems as we were just discussing. And the kind of show that a government agency or a big company could put on to claim that they're better than they are, that would have worked under centralized media just simply collapses under conditions of true free peer to peer communication. Like, it just. There are just too many examples of too many things that go wrong for any institution for them to retain their credibility. And then Mark and I have this big debate about this. When I've talked about it, we've had this big debate which is. I'm like, wow, that's fantastic. And he's like, no, Mark, I didn't mean this was good, and I never said this was good. He said to me the following. He said, look, it is true that every major institution is much, much more broken than they have been putting on. He said, however, it is also true that we do not know how to run a society without large centralized institutions. And so he said, those of you, like me, who cheerlead the collapse of centralized institutions have not yet come up with an answer for what exists on the other side. But anyway, point being, like, I think now we're really going to go through that now. We're really going to.
- [120:57]
Charlie Songhurst
The business version of this is you used to be a of part to push a bad product to a strong channel with strong marketing and sales. You just can't do that anymore. The product quality will out. It's deterministic.
- [121:10]
Marc Andreessen
Yeah, that's right. And by the way, you get this phenomenon. You see this all over the place. And you see this in Gallup does this great poll of trust, of trusted institutions. And the numbers are just all cratering. And the cratering, the declines are accelerating. You also see, and again, not to pick on specifics, but you also see this in these political parties. And you have a lot of this happening in Europe right now where these parties come in and they have whatever, 60% approval or whatever, and then six months later they have 15% approval. It's like, what the hell, right? I'll give an American example. Eric Adams in New York is. The incumbent has 9% approval rating. And it's just like, how can you possibly have a system in which the ruler has a 9% approval rating? Well, it's like, well, how did that happen? Well, it's all too transparent. Everything that's going wrong is too transparent. It can't be finesse.
- [121:58]
Charlie Songhurst
The extreme version of this, for good or ill, is that the centralized state is an outcome of centralized media. The nation state is downstream from the newspaper.
- [122:08]
Marc Andreessen
Yeah, that's right. Right. Exactly right. And so, yeah, you just, you don't have a. Yeah, you can't hold it together. You know, another of my counterarguments to Martin was, you know, basically, like, if you look at what the media landscape was like in like, colonial America, it was actually much more like what it's like now than it was like it was in like 1950.
- [122:25]
John Collison
Pamphleteers.
- [122:26]
Marc Andreessen
Pamphleteers. And you'd have like 15 small newspapers in a city like Philadelphia, and you'd have like, just enormous amounts of contention and name calling and all kinds of things. Anonymous bloggers. Anonymous bloggers, yeah, they had all that stuff Benjamin Franklin literally wrote under like 15 different pseudonyms. And he would like set them to be fighting with each other, all these things. And, you know, it's like, I was, look, we've lived this before. And he's like, yes, and it was a time of revolution, Right, Correct. And so to me, that's the. And to me, it's so fascinating. Like, we're really in that now. I feel like that was still being held back as late as last year by the censorship apparatus. And now it's Just like, okay, now it's all coming out. And maybe another way to think about this is the narrative for the last decade has been the Internet is a fountain of misinformation. And there is some truth to that. There is a, A lot of misinformation online. But the other thing is, according to the Martin Gurrie thesis, the Internet is an X ray machine because every actually correct thing that all of these institutions are doing wrong is now being fully ventilated for the first time ever. And they cannot survive that. And that may ultimately include the governments themselves.
- [123:33]
John Collison
We're describing one trend here, which is the move along the decentralization centralization spectrum. And I think I'm not quite as enthusiastic as, or like, it seems pretty complex, that whole spectrum. But the other change to me again seems to be the single global feature that's emerging. So take an example the, the astronomer CEO and that whole thing with, you know, CEO with his HR lady being caught on, on video, that was just the front page of the Internet for that day or those two days. I talked to someone who said they were talking to someone in China and they're like joking about us, but it was just like, you know, prominent in China as well in the news there. And that didn't happen as much 10 or 20 years ago. And I don't even think it happened again, even when we had the Internet and cable media, because we didn't have the clip and the ability for the things to go as big.
- [124:21]
Charlie Songhurst
I guess text is much more. Language barrier is less virality. But it's also language barriers prevent text from crossing borders, clips can cross borders.
- [124:30]
John Collison
And just recommender algorithms for things rise to the top, I think. So all these factors. Do you just have thoughts on the implications of having a single global feed?
- [124:39]
Marc Andreessen
Yeah. So this is kind of the right. This is kind of the monoculture, like global monoculture, maybe. I mean, well, Marshall McLuhan. So Marshall McLuhan had this concept he called the global village. And this is another one of these things where he said, people think I meant it positively and I actually didn't. So he said electronic media formed the entire world into a global village. And he was talking about tv. But you could say TV had a similarity version two, early version of that because it just spread a single video feed much more broadly. And what he said is like, look, he said it used to be that. It used to be that every village was its own village. And so the things that happened in that village, if the wrong man kissed the wrong woman, it was like a really Big deal in that village, but it wasn't a big deal in the next village. Didn't even know about it. Now all of a sudden, the entire world is becoming a single global village. And he said, here's the problem with that, is that villages are really fucked up. They're really dysfunctionally fucked up a lot of the time, right? Because they're panop. Right? Everybody sees everybody else. They're tremendously judgmental. There's tremendous. The social relations have carried tremendous weight. If you end up getting sideways with the social relations of the village, you're in serious trouble. You might get exiled, you might die. They're prone to manias and panics, witch trials. They tend to go crazy. They're hot house environments. They tend to go crazy. And then specifically, I think the next version of that. I don't know if he said this, but other people said this is like cosmopolitan. Societies are, like, written. They're written in nature and they become kind of. They have the ability to have dispassionate communication, discussion. Villages are all about orality. It's all oral, it's all spoken and it's this. So again, it's a social hothouse of spoken and therefore highly emotionalized, de. Intellectualized, highly emotional.
- [126:23]
John Collison
So Marshall McCain thought he was writing about TV culture, but he was actually prescient.
- [126:27]
Marc Andreessen
He was actually writing about culture. I believe that's right. And I think what he would say if he were here today is. I think he would say, yes, congratulations, guys, you got the global village. He would say, the Bible has the parable of the Tower of Babel being a disaster for a very specific reason. If you centralize everybody into a single giant village, you're going to have all the dysfunctionality. You're going to have the crazed panics and freakouts of a village basically happening all the time, which is, you know, which is kind of, you know, which is in fact what we see. You know, I, you know, there's a. There's a. You know, I think our friend Tyler Cohen, you know, at this point, you know, thinks this is all very bad. McLuhan definitely thought it was bad. You know, on the other hand, like, I don't know, like, I grew up in a small town. It wasn't that great, you know, like a disconnected small town wasn't that great either. Like, do you really. Like, do you really. Is it really better to live in a world where there's only a few places where there's access to advanced thinking and cosmopolitanism, or is it actually the fact that everybody on the planet can now be a full part of society and culture.
- [127:25]
John Collison
I feel like there's a Mark Andreessian worldview that you've talked about enough that it's now kind of a thing that exists beyond you that's maybe just being dispositionally optimistic on technology generally and refusing to brick any falseness, nostalgia about the past. Like, you know, I was there in rural small town Wisconsin. It wasn't good, you know.
- [127:46]
Marc Andreessen
Yeah, exactly. Yes, exactly. That's right. That's right. I agree.
- [127:48]
John Collison
Great. Thank you, guys.
- [127:50]
Marc Andreessen
To cheeky points.
- [127:51]
John Collison
Exactly. There you go.