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Speaker 1: I p c V is Masters in Business with Barry
Speaker 1: Ridholts on Bloomberg Radio this week on the podcast this
Speaker 1: was so much fun. I cannot begin to tell you
Speaker 1: what a delightful time I had. Mark Andresen of Andres
Speaker 1: and Horowitz, an absolute tour to force conversation about everything
Speaker 1: from valuation to psychological impact of market crashes too, are
Speaker 1: we or are we not in a bubble? The significance
Speaker 1: of of UH founders, and and how are you better
Speaker 1: off with somebody who has people skills um but isn't
Speaker 1: a technologist or a technologist who doesn't necessary fairly have
Speaker 1: the social skills? On and on. We covered so much
Speaker 1: ground so quickly, absolutely fascinating. It was an incredible, incredible conversation.
Speaker 1: It's one of those things where you just say, how
Speaker 1: privileged am I to sit in a conference room, indeed
Speaker 1: the conference room where Andreason Horowitz gets pitched from various
Speaker 1: startups and have a ninety minute chat with someone with
Speaker 1: his just amazing understanding of where tech came from, where
Speaker 1: it is today, and where it's going. I could babble
Speaker 1: about this endlessly, but rather than gush, why don't we
Speaker 1: just listen to the conversation with no further ado. My
Speaker 1: podcast conversation with Mark Andreson of andres In Horowitz. This
Speaker 1: is Masters in Business with Barry Ridholtz on Bloomberg Radio.
Speaker 1: My special guest today is Mark Andreason. He is the
Speaker 1: co founder and general partner of venture capital firm Andreson Harowitz.
Speaker 1: He comes with a storied background. He co created the
Speaker 1: Mosaic Internet browser, co founded Netscape, sold to a O
Speaker 1: L for a few billion dollars. Co founded loud Cloud,
Speaker 1: also sold to HP for a few billion dollars. Crunch
Speaker 1: Base notes that Andreson Harowitz has over five hundred investments
Speaker 1: in three D one companies, a number of exits via
Speaker 1: I p O s and acquisitions. I could go on
Speaker 1: and on about his curricular vita, but really he speaks
Speaker 1: for himself, so let's jump right into this, Mark Andreason,
Speaker 1: welcome to Bloomberg Radio, and thank you for hosting us here.
Speaker 1: In Andrews and Harrowitz. I'm thrilled to be on him
Speaker 1: and it's great to have you here. The I love
Speaker 1: your facilities. We we love all the artwork and everything here.
Speaker 1: It seems to be like a very civilized place to
Speaker 1: to work. It's like, I don't know said, being a
Speaker 1: venture capitalist is like being an airline pilot, long stretches
Speaker 1: of boardom followed by moments of sheer terror. We try
Speaker 1: to have a calm atmosphere that makes a lot of sense.
Speaker 1: Let's let's go back to the beginning. Your Your big
Speaker 1: idea in was that people would want internet access in
Speaker 1: their homes. Now that's a given today we want internet
Speaker 1: access wherever we are seven But twenty five plus years
Speaker 1: ago that wasn't very obvious. What led you to say
Speaker 1: in I have an idea an Internet browser. Yes, I
Speaker 1: would say it was even beyond not obvious. It was
Speaker 1: considered ridiculous. So the idea that basically it was well
Speaker 1: known in that the Internet was for academics and nerds,
Speaker 1: and that there was there was no use case for
Speaker 1: Mary people like it was just incomprehensible, like why would anybody,
Speaker 1: how would anybody even have the technical capability to even
Speaker 1: consider getting online, much less of anything that they could
Speaker 1: do productively was their online. Um, I've since actually in
Speaker 1: your sense that actually learned a principle that I have
Speaker 1: generalized out that it explains what happened, which is what
Speaker 1: William Gibson, the science famous science fiction author wrote Neuromancer.
Speaker 1: It was a very influential book in our industry. He
Speaker 1: he says, his his line is the future is already here,
Speaker 1: it's just not evenly distributed yet. And there are many
Speaker 1: applications to that line. It's so it's such a fabulous insight.
Speaker 1: And so the new ideas, this is something I've really
Speaker 1: come to believe, is the new ideas already exist. Uh,
Speaker 1: there are a few ideas that actually materialized out of
Speaker 1: thing air. They generally already exist somewhere, and they exist
Speaker 1: somewhere in a lab, right if they exist somewhere in
Speaker 1: a fringe group or in an underground movement or something
Speaker 1: like that. And so what happened here was and this
Speaker 1: this is the part that's just I think probably pure luck.
Speaker 1: Um is I went to college at University of Illinois,
Speaker 1: which at that time was one of four universities in
Speaker 1: the country that had been funded by the government to
Speaker 1: be the hubs for what at the time was called
Speaker 1: the NSF net, which was what became the Internet. And
Speaker 1: so then there's there's a whole program developed in the
Speaker 1: eighties around supercomputers. And this is what you know when Elgar,
Speaker 1: when Elgar claimed credit for creating the Internet, this is
Speaker 1: what he was talking about, was the funding, UH for
Speaker 1: for this program to wire these universities. And so we
Speaker 1: had on campus in the level of broadband that people
Speaker 1: have in their homes today. Um, and we had the
Speaker 1: use We saw the use cases. You saw everybody using
Speaker 1: all this stuff. Now it wasn't at the level of
Speaker 1: sophistication is today, but you could you could see that,
Speaker 1: you could see all the use cases. You can see
Speaker 1: many people liked it. But the expectation was you had
Speaker 1: in college and then you would graduate and you would
Speaker 1: go off into life and you would just give it up.
Speaker 1: And that was the part where I was like, uh
Speaker 1: and s f NET was after darker NEET, but before
Speaker 1: full on internet for the public. Is that a fair explanation. Yeah,
Speaker 1: that's right, So our DARPA. ARPA was known as ARPA,
Speaker 1: now known as DART, but funded a military network which
Speaker 1: was originally conceived as a way to do nuclear command
Speaker 1: and control in the event of bad things happening in
Speaker 1: the world. Therefore the importance of packet switching UM had
Speaker 1: to be able to respond even after you've been attacked
Speaker 1: by nuclear You've got a network with you know, it's
Speaker 1: a hundred nodes and then twenty of them get wiped
Speaker 1: out by attack, and you still have to have the
Speaker 1: network has to still keep running. In traditional networks don't
Speaker 1: keep running, and at least in theory packets which networks
Speaker 1: can keep running. So so that was the that Then
Speaker 1: this is like fifty years ago they all figured this
Speaker 1: up out and then in the eighties that the idea
Speaker 1: got generalized out to the idea that civilian researchers should
Speaker 1: be able to use this technology. UM. In particular, actually
Speaker 1: the government was funding these national supercomputer centers that were
Speaker 1: buying a super expensive supercomputers to put on four or
Speaker 1: five college campuses, and then they wanted to provide access
Speaker 1: to scientists from all over the country to be able
Speaker 1: to access those and so they trans basically took the
Speaker 1: template of our pendet, turned it into nsf net and
Speaker 1: allowed anybody to love with permission to log into those
Speaker 1: computers have temporary time. You would have a few minutes
Speaker 1: or hours whatever it was. And and that's eventually where
Speaker 1: led to uh the full on internet. But let's let's
Speaker 1: talk about the other name and Andres and Harowitz Ben Harrowitz.
Speaker 1: You guys have been working together for a long time.
Speaker 1: Have you made that partnership work? And how did it
Speaker 1: really begin? Because if if what I've read is to
Speaker 1: be believed, some of it started out a little little rocky.
Speaker 1: Ben Ben took great delight in his book uh In
Speaker 1: in describing the origins of the relationships. So um uh
Speaker 1: so at this point where an old married couple. Um,
Speaker 1: and so you know, I guess the good news is
Speaker 1: we can finish each other sentences. Bad news is we
Speaker 1: usually try to finish each each other's sences. So um, so,
Speaker 1: you know, we we've had a long running partnership and
Speaker 1: friendship for you know, for a very long time, now
Speaker 1: twenty two years. I guess, um the origin of it actually,
Speaker 1: so he was he wasn't early he was one of
Speaker 1: the early guys actually to jump int an escape early
Speaker 1: on when it was when Escape was telerotical idea actually
Speaker 1: came over from Lotus, which at the time was this
Speaker 1: big important, you know, dominant software company eventually booked by IBM.
Speaker 1: Actually fun story by M. After he left, IBM bought
Speaker 1: Lotus for I think three and a half billion dollars
Speaker 1: at the time, which was a blockbuster deal in retrospect,
Speaker 1: I'd spent three and a half billion dollars. They could
Speaker 1: have bought the entire Internet instead of Lotus. They could
Speaker 1: have bought every Internet company and every I s P
Speaker 1: and they could have owned the whole thing. So anyway,
Speaker 1: he saw the future. Not the first time ib AM
Speaker 1: missed a boat what is it and probably won't be
Speaker 1: the last big companies. Yeah that we all we all
Speaker 1: at some point tend to tend to do that. But
Speaker 1: um uh, he saw, you know, he I think, to
Speaker 1: his great he saw the future. He saw he saw
Speaker 1: what was going to happen, I mean, even more clearly
Speaker 1: than a lot of other people who were involved back down,
Speaker 1: and so he jumped over um and then you know,
Speaker 1: an Escape was a was a very short right, but
Speaker 1: it was very intense. It was a pressure cooker, and
Speaker 1: so it was very easy to see internally who was
Speaker 1: high potential who wasn't UM, And so we had him
Speaker 1: on a very fast promotion path basically from the day
Speaker 1: he joined. And I think had we potential? Is that
Speaker 1: that's the phrasey Yeah, high potential like UM, you know young?
Speaker 1: You know basically you're always trying these organizations to find
Speaker 1: the young managers who you think are going to be
Speaker 1: able to scale and grow and eventually become the leaders
Speaker 1: of the company. Right, And so I think that I
Speaker 1: think had had an escape stayed and we sold a
Speaker 1: company in had had we stayed independent, I think he
Speaker 1: would have ended up as the CEO at some point.
Speaker 1: He was just still very young at that point. But
Speaker 1: it's just very clear how much but how smart he was,
Speaker 1: and how good of a leader he was, and how
Speaker 1: good his judgment was. UM. And so when we then
Speaker 1: after we saw the company, we then had the opportunity
Speaker 1: to start a new company, and we just we became
Speaker 1: clear that we wanted to work together. So let's talk
Speaker 1: about UM, Jim Clark, UM I became I always kind
Speaker 1: of knew who Jim Clark was. But then Michael Lewis
Speaker 1: is the new new thing is what really ted Jim
Speaker 1: Clark for me? Um, what was that like, meaning, Jim Clark,
Speaker 1: how did you guys start to work together? Yeah, so Jim,
Speaker 1: that was again probably struck a luck in my career.
Speaker 1: Jim called me one day out of blue. Also a
Speaker 1: friend of his, an associate of his who he had
Speaker 1: worked with. So he had been the founder of this
Speaker 1: company called Silicon Graphics, which at the time had a
Speaker 1: reputation similar to Google's reputation today. It was considered the
Speaker 1: sort of the gold standard Silicon Valley company that all
Speaker 1: the green engineers wanted to work for. It was very
Speaker 1: much this is when after the movie Terminator two came
Speaker 1: out and they were redefining this whole idea of three
Speaker 1: D special effects and they were reading it was just
Speaker 1: this kind of amazing moment for this company. But he
Speaker 1: he left for a variety of reasons, um, and decided
Speaker 1: he wanted to start a second company. Um. And so
Speaker 1: this is a little bit little bit like Larry Page
Speaker 1: leaving Google or Mark Zuckerberg leaving Facebook and saying I
Speaker 1: need to start a new company. Um and then um,
Speaker 1: but he had hired everybody he knew who was smart,
Speaker 1: who he had ever worked with into Silicon Graphics, and
Speaker 1: so they weren't available to start a new company with him,
Speaker 1: and so he literally needed fresh people. So he got
Speaker 1: together with a group of friends and basically made a
Speaker 1: list of p bowl who were in the industry who
Speaker 1: he had not yet worked with UM and he actually
Speaker 1: I was culminated at a list of about a dozen
Speaker 1: people who he approached at various stages and said, you
Speaker 1: know what, do you want to consider doing something together UM,
Speaker 1: which culminated in a big dinner in Palo Alto with
Speaker 1: like the full dozen of us. And then at the end,
Speaker 1: at the end of the whole process, I was the
Speaker 1: only one left standing. Really, that's fascinating, by the way,
Speaker 1: it wasn't because necessarily I think he knocked some of
Speaker 1: the others out of the process, but also a lot
Speaker 1: of people they were just like they had jobs, they
Speaker 1: were committed, they weren't willing to take yet another leap.
Speaker 1: And this was a pretty also people forget like ninety
Speaker 1: four we started escaping ninety four. It was very similar
Speaker 1: mood in the valley then to what happened ten years
Speaker 1: later after the dot com crash. It was a very
Speaker 1: dark time in the valley um. That valley had had
Speaker 1: a severe economic crash in one and was still kind
Speaker 1: of in the Dould rooms at niny four. So the
Speaker 1: idea of a startup was considered kind of a radical
Speaker 1: thing and and potentially a dangerous thing from a career standpoint,
Speaker 1: And so it wasn't the most obvious thing in the
Speaker 1: world for people to leap into the into the new
Speaker 1: thing and so and then in contrast, I had just
Speaker 1: arrived out of college. I had nothing. I didn't think
Speaker 1: the lewis, you have no baggage, you were ready to go.
Speaker 1: So I always have this vision of the reason Netscape
Speaker 1: led to this explosion of new technologies. At the time,
Speaker 1: Microsoft pretty much was the only game in town, and
Speaker 1: very often I just envisioned young guys with great ideas
Speaker 1: going to venture capitalists and and every pitch meeting someone
Speaker 1: ends up saying, what prevents Microsoft from building this into
Speaker 1: into their operating system? And if you didn't have an
Speaker 1: answer to that, thanks for coming by, see you later.
Speaker 1: And Netscape allowed everybody to say, hey, we could bypass
Speaker 1: the operating system and do this online. Am I remotely
Speaker 1: close to the that early nineties understanding of of what
Speaker 1: who was then the dominant software player. Yeah, so strategically
Speaker 1: I think that's right and that that was a big effect.
Speaker 1: But I would say there was an equal kind of
Speaker 1: effect at the same time that was at least as important,
Speaker 1: which was unlocking the potential of the people in the valley.
Speaker 1: So the most astonishing thing to me, um was I
Speaker 1: mean because because the Internet, like I said, the Internet
Speaker 1: stuff was not we started to escape like this was
Speaker 1: not considered like, oh yeah, this is a great idea.
Speaker 1: Most people like, Okay, this is nutty, Like everybody knows.
Speaker 1: It was common that everybody knows you can't make money
Speaker 1: on the Internet. There's probably to do it. Commercial activity
Speaker 1: on the Internet was actually illegal until en right, it
Speaker 1: actually was not permitted, but because it was federally research
Speaker 1: that this is before the days of dot com. It
Speaker 1: was just dot edge you and yeah, but you could
Speaker 1: have do comment, you couldn't do any commerce, you couldn't
Speaker 1: be transactions. It was there was these called acceptable use
Speaker 1: limits because it was federally funded and they didn't they
Speaker 1: hadn't legalized it yet. So um, we started to asking
Speaker 1: kind of right right as they switched it. So, but
Speaker 1: it was widely views Number one it's illegal. Um. And
Speaker 1: then number two, even if it were legal, people wouldn't
Speaker 1: want to do it because you can't trust the Internet.
Speaker 1: There's hackers and thieves and all this stuff and it's
Speaker 1: just not something. And then ordinary people just won't do this,
Speaker 1: and so so it was very contintuitive. Um. Within a year, though,
Speaker 1: like with by when the sort of conventional wisdom, people
Speaker 1: started to get exposed to it and they started to
Speaker 1: have it in their lives and I started to say,
Speaker 1: oh wow, I actually like this and this this starts
Speaker 1: to making more sense. There was then this amazing flood
Speaker 1: of talent. We're all these incredibly sharp people in Silicon
Speaker 1: Valley who had worked on previous generation sub technology for
Speaker 1: the previous twenty years. They turned out they were still here,
Speaker 1: right and so, and they were either at the older
Speaker 1: companies or they were just parked, you know, kind of
Speaker 1: on the beach, and all of a sudden there was
Speaker 1: a new thing and they just all showed up out
Speaker 1: of nowhere um. And so it was like this materialization
Speaker 1: of human capital and talent basically out of thin air.
Speaker 1: And I was just astonished and say, these incredibly talented
Speaker 1: people coming in, engineers, marketers, salespeople, and then all that
Speaker 1: you know, all the other people you need to make
Speaker 1: a company go hr people and lawyers and all these
Speaker 1: people find its people. They just show up, and all
Speaker 1: of a sudden, you've got this company that's like fully
Speaker 1: up and running with all these people with all these
Speaker 1: skills and experiences that you didn't even I didn't even
Speaker 1: think was possible. Well did they. And this is the
Speaker 1: magic of the valley. But I mean this is the
Speaker 1: people's side of the magic of the valley. As the
Speaker 1: human capital. Well that the people will flow into the
Speaker 1: next opportunity much more aggressively than then you'll find, I think,
Speaker 1: anywhere else in the world. So when I when you
Speaker 1: say they just show up, in my mind's eye, you
Speaker 1: have Stanford, you have Berkeley, you have all these great
Speaker 1: universities nearby, cal Tech Um, you have a history of
Speaker 1: of companies going back to Fairchild, Semi can Doctor and
Speaker 1: what have you, plus a lot of defense and NASA
Speaker 1: related stuff, So you would you would envision it's almost
Speaker 1: like all the parts are are they're just waiting for
Speaker 1: something to crystallize it and send everybody off. So I've
Speaker 1: always looked at this as this is kind of a
Speaker 1: magic one of the magic parts of the country, and
Speaker 1: Boston is similar, and d C is similar, and and
Speaker 1: now Seattle has it, and to a lesser degree, Portland's
Speaker 1: has that same sort of Once you get a critical
Speaker 1: mass of human capital, well all bets are off. Who
Speaker 1: knows where this goes? Although you seemingly have known where
Speaker 1: this was going to go before many other people in
Speaker 1: some cases but not others. What was your So to
Speaker 1: get back to the original question about Michael Lewis's New
Speaker 1: New Thing, I assume you read the book. Did you
Speaker 1: enjoy it? Did it ring true? Uh? Do you recognize
Speaker 1: a lot of the characters and it even people you
Speaker 1: may may not necessarily know. I would say, you're captured
Speaker 1: a moment in time which is sort of the top
Speaker 1: of the dot com bubble um. And then it captured
Speaker 1: a part of Jim's personality, which is the ability to
Speaker 1: kind of materialize new ideas out of thin air into existence.
Speaker 1: I don't think it captured, in fairness to Jim, I
Speaker 1: don't think it captured his depth as much as so
Speaker 1: that's hard to do if you're hard to do so
Speaker 1: just specifically Jim Jim, and the book tells a lot
Speaker 1: of his life stories. He had very very interesting background
Speaker 1: but basically culminated ultimately in the Navy and so forth,
Speaker 1: but ultimately culminated in THEO had a PhD in computer
Speaker 1: science from the University of Utah, which was actually the
Speaker 1: creation origin point for a lot of than things in
Speaker 1: our industry today. Actually, there was something special that happened
Speaker 1: University of Utah in the sixties and seventies, um and uh,
Speaker 1: basically all of computer graphics and video games and all
Speaker 1: this stuff and all the stuff that led to s
Speaker 1: g I. Ultimately it was all kind of conceived. The
Speaker 1: ideas were conceived actually Utah at that time. Pixar it
Speaker 1: all if you'd like trace Pixar back. It all flows
Speaker 1: back to this moment in time at the University of Utah.
Speaker 1: And so so anyways, say to PhD and CS and
Speaker 1: then he went to Stanford. He's a professor at Stanford, right,
Speaker 1: and then he just decided he was the life of
Speaker 1: an academic was not. Academics don't have the largest yacht
Speaker 1: in the world, and he was building one of the
Speaker 1: largest sailing vessels. I think he wanted to play a
Speaker 1: little more than he wanted to teach or at least
Speaker 1: that's my take. Oh so this is part of the
Speaker 1: thing also that yeah he's so that that that and
Speaker 1: becoming a big part of the book. Um, But I
Speaker 1: would then again, I would just say what was missed
Speaker 1: was when I worked with Jim and other people over
Speaker 1: to Jim will tell you like he goes just as
Speaker 1: deep as he goes broad like he is he is
Speaker 1: very deeply in the details of technology. He's not. He's not.
Speaker 1: The book makes it, I think, come across like he
Speaker 1: kind of glosses over the details and leads those to
Speaker 1: the other to other people. Uh we I did not
Speaker 1: find a big case like he's incredibly deep in technology.
Speaker 1: He's an incredibly comprehensive thinker on all aspects of business.
Speaker 1: Like he he goes really really deep. It's just that's
Speaker 1: not quite as I don't know, not quite as sexy
Speaker 1: for the book, I guess. Um. And so yeah, it
Speaker 1: captured part of his personality, but it didn't capture the
Speaker 1: depth and the seriousness and the application and his role
Speaker 1: really as a primary inventor and inventor not just if ideas,
Speaker 1: but inventor of actual technologies and then also by the way,
Speaker 1: as a recruiter. Um. He's one of the great all
Speaker 1: time people who can gather other people around them, and
Speaker 1: he's he's really good at painting a picture. Um, and
Speaker 1: he's because he's so deep the technology he carries tremendous.
Speaker 1: There's a lot of people who are promotional, right, a
Speaker 1: lot of people will show up and they'll say we're
Speaker 1: gonna do X, y Z. And the engineers will be like, well,
Speaker 1: you don't like what you know? Where did you go
Speaker 1: to school? Like what's your professional credential to be able
Speaker 1: to have this concept? And why do you think we're
Speaker 1: just gonna do all this for you? Whereas a gym
Speaker 1: he's like, he's like an actual technology legend, right, who
Speaker 1: probably knows more about the topic than you do. Um.
Speaker 1: And so he paints the picture and then he gets
Speaker 1: buy in from people, you know, incredible amazing people. So
Speaker 1: and so there's just he he has a level of
Speaker 1: seriousness and capability that I think is just way beyond
Speaker 1: what what what what? Michael is able to paint that book.
Speaker 1: So the Netscape I p O is something. So we
Speaker 1: went public. So we're in public eighteen months after founding.
Speaker 1: I remember that because I was a junior trader. I
Speaker 1: was the logo on the desk, and it was just
Speaker 1: a day of mayhem, and that really be started a
Speaker 1: run of technology and internet companies for the next few years.
Speaker 1: What was that ride like? That had to be insane? Yeah,
Speaker 1: I know, it was crazy, like being shot out of
Speaker 1: a rocket, like and not just me, like the whole
Speaker 1: the whole value had that had that had that experience,
Speaker 1: and so it really was it was what you meant.
Speaker 1: It was the establishment of a new platform. It was
Speaker 1: the establishment of this kind of new front here. Um.
Speaker 1: It was the you know, the idea that all of
Speaker 1: a sudden, you there were these thousands of new businesses
Speaker 1: could get created on top. It was this idea, all
Speaker 1: of a sudden, that people are connected. It's actually really striking.
Speaker 1: Um if you look. So the dot com crash right
Speaker 1: hit in two thousand, um, and then all these ideas
Speaker 1: that were viewed then as all the dot com ideas
Speaker 1: that were viewed as genius and NTE nedty eight were
Speaker 1: viewed as just complete lunacy and idiocy. And in two
Speaker 1: thousand com doesn't make any sense being the classic example, right. Um,
Speaker 1: So it's actually really striking all those ideas are working today. UM,
Speaker 1: I can't think of a single idea from that era
Speaker 1: that's not working today. And the kicker to the pest
Speaker 1: dot com story is there's a company, Chewy that just
Speaker 1: comes out for three billion dollars right out of Florida,
Speaker 1: which is online pet food sales, like two weeks ago, right,
Speaker 1: and so even online pet food sales turns out to
Speaker 1: be a gigantic and very successful business. And so basically
Speaker 1: the community, the community, the tech community, the Silicon Valley community,
Speaker 1: the global community that got connected to the internet very
Speaker 1: quickly between and call it actually came up with all
Speaker 1: the ideas, like they all people are very creative, and
Speaker 1: all of a sudden there was just like if you
Speaker 1: read you remember you remember there was a magazine back
Speaker 1: then called The Industry Standard, which became kind of the
Speaker 1: defining kind of bible of the time. And if there
Speaker 1: was a period where if you read the Industry Standard
Speaker 1: after the crash, you're just like all these people were
Speaker 1: just all high, like this is just this is just nuts.
Speaker 1: If you read it today, it's like a direct forecast
Speaker 1: of what's actually happening, right, Like, all this stuff actually
Speaker 1: is happening, it's all working. So and so it was
Speaker 1: an amazing unleashing of talent and creativity and ideas interrupted
Speaker 1: by a very bad crash. Um, but it has sense.
Speaker 1: All those ideas have sense, really come true. One of
Speaker 1: the things I'm always hearing about is how well this is.
Speaker 1: This is just like the dot com era. The valley
Speaker 1: is booming. This all ends badly. But when we this week,
Speaker 1: we've been in everywhere from Berkeley to Palo Alto to
Speaker 1: pleasant In to Mountain View, this looks to me much
Speaker 1: more like a robust economy. Then hey, this is completely
Speaker 1: unhinged and it's a train wreck waiting to happen. You
Speaker 1: live through the last version of the dot com bubble.
Speaker 1: How is this time so different in nature? The obvious
Speaker 1: thing is a lot of these companies are actually making money.
Speaker 1: Some of them are making a lot of money. So um.
Speaker 1: In fact, now the accusation is they're making too much money,
Speaker 1: which is the criticism on the other side. So that
Speaker 1: just means they're efficient and productive. It doesn't mean anything
Speaker 1: is wrong exactly. So yes, from your from your lips
Speaker 1: so um. So I guess I'd say, I guess I'd
Speaker 1: say the economist, actually, there's a theory actually in economics
Speaker 1: on this which they called the economists called the depression
Speaker 1: baby effect, which is basically it's based on it's been
Speaker 1: studies papers written about this. If your google, depression babies
Speaker 1: will pop up. UM investors who were in the stock
Speaker 1: market nine ever went back into the stock market. Um.
Speaker 1: They stayed out of the stock market for the rest
Speaker 1: of their lives because proved definitively right that stocks are
Speaker 1: fundamentally unsafe. And if you look at the chart of it,
Speaker 1: literally from ninety nine, you don't get back to break
Speaker 1: even untill nineteen fifty four. It's twenty five years later.
Speaker 1: It's a full generation has to be one, grow up,
Speaker 1: get jobs and start investing in order for the market
Speaker 1: to get above exactly with no memory and the investors
Speaker 1: that's exactly that. And then by the twenty five years
Speaker 1: exactly right. And then the other kicker is it takes
Speaker 1: another fifteen years after that to get another actual bubble.
Speaker 1: The next stock market bubble did not materialized until the
Speaker 1: late sixties. The full forty years, the hits a thousand,
Speaker 1: it's not over it for another sixteen years, quite quite amazing,
Speaker 1: exactly so. So, anyway, the point is, if you if
Speaker 1: you live through one of these scarring crashes, you get
Speaker 1: psychologically marked, you get you get traumatized. And by the
Speaker 1: way that you there is everybody, right, It's not just
Speaker 1: the investors, it's also the people who follow the market.
Speaker 1: It's also people who write about the market. It's also
Speaker 1: people who work at the company's Everybody gets traumatized. And
Speaker 1: so we had it. We we haven't entire We had
Speaker 1: and have an entire generation of depression babies, including me
Speaker 1: right um in Silicon Valley who went through two thousand UM.
Speaker 1: That's significant for a couple of reasons. One is just
Speaker 1: I would argue that right the narrative basically since two
Speaker 1: thousand four has been its bubble two point oh. I
Speaker 1: think exactly the opposite has been a it's been a
Speaker 1: long term bust. I think text talks have been undervalued
Speaker 1: sort consistently basically since two thousand two three, and even
Speaker 1: to this day are probably undervalued relative to where they
Speaker 1: should be. Void. We come back to that. But then
Speaker 1: the other thing is happening is now finally enough time
Speaker 1: is passing. It's now we're coming you know, seventeen years
Speaker 1: since the crash, so now finally we're getting enough kids
Speaker 1: coming to the valley who don't have a memory of
Speaker 1: the crash. They don't have post crash traumatic They were
Speaker 1: like in fourth grade, right, and so they just they
Speaker 1: were like busy with legos, like they just it's not
Speaker 1: a relevant concept. And so when and you get these
Speaker 1: weird conversations we find are selling these conversations where you're
Speaker 1: telling these cautionary tales right of what happened in nine
Speaker 1: and they just look at you like Grandpa, like you know,
Speaker 1: tell us about the model t like it's just an
Speaker 1: absurd kind of thing. And by the way, it's not
Speaker 1: that there's a good or a bad. It's just people
Speaker 1: have different life experiences. But my point is like the
Speaker 1: balance is shifting well, and so and you just have
Speaker 1: you have this new generation of people in the valley
Speaker 1: are just like let's let's just go, let's go build things,
Speaker 1: like let's not be held back by the superstition of
Speaker 1: what happened. Let's go build new things. And then to
Speaker 1: your point, like these things have worked. When we were
Speaker 1: building Netscape, the man maximum addressable market size for our
Speaker 1: company was Internet users that were most run dial up
Speaker 1: and worked to their desktop PCs, which were super slow
Speaker 1: and crewed compared to today and now was you know,
Speaker 1: you have three billion people with smartphones and mobile broad
Speaker 1: down in the world on its way to six billion,
Speaker 1: and so like this stuff is working like that, it
Speaker 1: actually came true. The fascinating thing every time when the
Speaker 1: NASDAC regains its regained its two thousand peak not too
Speaker 1: long ago, people said, here we are, it's going to
Speaker 1: crash again, and and you look. I always look at
Speaker 1: those folks and say, well, wait a second, that was
Speaker 1: an infinite pe. You now have companies actually not just
Speaker 1: making money, but making boatloads of money. And it's fifteen
Speaker 1: years later. So whatever the problems were, then, how do
Speaker 1: you just assume at this price level it's the same thing.
Speaker 1: Clearly something very different is going on today. So so
Speaker 1: sticking with that that point, when when you hear people
Speaker 1: saying Silicon Valley is in a bubble again, look at
Speaker 1: all these unicorns. Here comes the train wreck. Do you
Speaker 1: just kind of shrug to yourself? What's your reaction to that?
Speaker 1: So those have been the headlines for excuse me every
Speaker 1: year since two thousand four. So two thousand four, so two.
Speaker 1: They'll get it right eventually. You just keep saying the
Speaker 1: same thing over and over in the two thousand four,
Speaker 1: two thousand four, granted two thousand one to two thousand
Speaker 1: three were very bad, so fully granted two thousand four,
Speaker 1: there were two M and A events, Uh, Yahoo bought
Speaker 1: two companies million dollars each, Flicker and Delicious and those
Speaker 1: that launched that created the bubble two point on narrative,
Speaker 1: but in other words, like if anything at tech works
Speaker 1: and if any company attack ever succeeds, it's therefore obviously evidence, right,
Speaker 1: and so that that's been the narrative the entire time.
Speaker 1: We and we've done we've we've done dex on this.
Speaker 1: We have dex on our website, like we've done detailed
Speaker 1: analytics on every aspect of the financial numbers and the
Speaker 1: flows of money and the whole thing. And you go
Speaker 1: through the whole thing, and when you when you do
Speaker 1: the analysis, I think correctly, like just objectively correctly, it's
Speaker 1: just crystal clear how out of control everything got really
Speaker 1: between two thousand and how relatively plasmdate it's been. It's
Speaker 1: been ever since. Um. But it just just it's people,
Speaker 1: don't you know. It's the kind of thing people just
Speaker 1: have a very strong emotional resp It's a depression maybe effect.
Speaker 1: People have an emotional response right starting sponses I got
Speaker 1: tricked once, I'm not gonna get tricked right, and so
Speaker 1: it's just it's led to that's continuous, in my view,
Speaker 1: underestimation of what's happening. Right, It's it's led to the
Speaker 1: opposite problem, which is people are really deeply if they
Speaker 1: were overestimating, overestimating what was happening in idea, they're underestimating
Speaker 1: it and they're still underestimating it today, which makes sense.
Speaker 1: Everything is probably still undervalua, which makes sense if you
Speaker 1: come out after that experience and you are negatively tinged
Speaker 1: with that. G I got burned less time because valuations
Speaker 1: didn't make sense. Fast forward fifteen years. That doesn't leave
Speaker 1: these folks, So that permanently colors and they're you know,
Speaker 1: other related studies. People graduate college into a recession. It
Speaker 1: not only affects their earnings power over the course of
Speaker 1: their lifetime, it affects their philosophical outlook. They are actually
Speaker 1: biased and expect recessions to occur more often than they
Speaker 1: actually do. It's um our wet wear is kind of
Speaker 1: deeply flawed. So you're a builder, um, you've you've created
Speaker 1: a couple of a couple of companies, including this one.
Speaker 1: In your mind's eye, Are you a founder, are you
Speaker 1: a venture capitalist or a little bit of both. So
Speaker 1: I think of myself as an engineer first, um, and
Speaker 1: everything else after that. And so it's kind of the core.
Speaker 1: And then you never know how much of this is
Speaker 1: self delusion, of course, but um, I think my assumption
Speaker 1: is we're all self del and you and occasionally if
Speaker 1: you glimpse a little reality, fantastic and they either work
Speaker 1: for you or they don't. So no, I was trained
Speaker 1: as an engine I was always had sort of an
Speaker 1: engineering mindset, and I was trained as an engineer, training
Speaker 1: at a great engineering school, and so I just I
Speaker 1: always few my I'm just trying to figure out how
Speaker 1: things work and then try how to make them work better. Um.
Speaker 1: And I'm far more interested in figuring that out than
Speaker 1: in trying to draw value judgments on them, were trying
Speaker 1: to have other you know, kinds of debates around them.
Speaker 1: And so um uh that's just been you know, the
Speaker 1: core of the thing. And so that to the extent
Speaker 1: that my companies have worked, it's because they built products
Speaker 1: that people wanted. Um. To the extent that this you
Speaker 1: know that this firm works is because we're going we're
Speaker 1: finding those products and the people who build those products
Speaker 1: early um and betting on them. And so it's it's
Speaker 1: sort of engineering as the core discipline. And then and
Speaker 1: then we we we are lucky enough, in my view,
Speaker 1: to live in a system in which you know that
Speaker 1: that rewards that skill in the sense of people can
Speaker 1: build things, right, people can build things, are encouraged to
Speaker 1: build things, that culturally encouraged to build things, and those
Speaker 1: things might be new products, but those things also might
Speaker 1: be new companies. Back in two thousand eleven, you wrote
Speaker 1: a fascinating screed called Software is Eating the World. Not
Speaker 1: only did it end up becoming a meme that when
Speaker 1: fairly viral, it turned out you were not just a
Speaker 1: little bit right, you were very right. Tell us about
Speaker 1: what motivated you to to put that those words on paper. Yes,
Speaker 1: it was a two part at Towns. One was to
Speaker 1: explain what was actually happening, and actually a lot of
Speaker 1: it was actually against the bubble narrative. The bubble the
Speaker 1: new bubble narrative was so strong at that point that
Speaker 1: I wanted to articulate a view of what was happening
Speaker 1: that was not just this is all a bunch of
Speaker 1: a bunch of hot air, so partially explanatory but also
Speaker 1: also an attempt to forecast UM. And specifically in the piece,
Speaker 1: I sort of lay out a forecast for the future
Speaker 1: UM in three parts UM, which I think is the
Speaker 1: part that kind of remains the section that remains provocative today.
Speaker 1: The three parts maybe recap them quickly so so so
Speaker 1: part one is UM. Every product or service UM that
Speaker 1: can become software will become software UM. And there's a
Speaker 1: long conversation we can have. That's that's the big theme
Speaker 1: of what's happening in Silicon Valley right now, I think
Speaker 1: is that we're we're we are now going after entire
Speaker 1: industries that used to be dominated by by just like retail,
Speaker 1: retail storefronts or numbers or so is this applification or
Speaker 1: is this just the move to pure solf were Appification
Speaker 1: is the consumer experience, right, which is there everything that
Speaker 1: can be experienced as an app? If you can if
Speaker 1: you want you know, you need, You want a mortgage,
Speaker 1: it should be an app. Right, you want life insurance,
Speaker 1: it should be an app. You want to order pizza,
Speaker 1: it should be an app. Like every everything should just
Speaker 1: happen through that, through that front end. But but it's
Speaker 1: deeper than the app because it's the complete back it's
Speaker 1: all the back end systems of software that may make
Speaker 1: the economy ultimately work. So so so Part one, every
Speaker 1: every every product or service that can become software will
Speaker 1: um Part two therefore, every company that makes those products
Speaker 1: or services has to and will become a software company. Right,
Speaker 1: So companies will become more and more defined by building software,
Speaker 1: just like solic valley companies already like that, selict companies
Speaker 1: or software companies first that then get good at things
Speaker 1: like sales and marketing. Right, Whereas in the rest of
Speaker 1: the economy you have a lot of companies that are
Speaker 1: good at sales and marketing that are trying to bolt
Speaker 1: on software. But sitting here ten years from now, all
Speaker 1: these companies are gonna be software companies first because they're
Speaker 1: gonna have to be fascinating form of the product. And
Speaker 1: then the third sort of most either provocative, arrogant you know,
Speaker 1: or delusional. Uh principle is therefore, in any industry, in
Speaker 1: the long run, uh, the winning company will be the
Speaker 1: best software company. Right, So whoever is the best? Is
Speaker 1: that really all? That? So the question the follow up
Speaker 1: question is how much push pushed back did your original
Speaker 1: writing get and are you still getting pushed back on that?
Speaker 1: That third part of it, Well, the third one is
Speaker 1: very third one is very provocative. Let me give an example,
Speaker 1: but it's pretty it follows logically. It's if you believe
Speaker 1: in deductive reasoning, it makes sense. Well, let's let's pick
Speaker 1: up particularly provocative example. Cars. Right, Um, yeah, so car cars.
Speaker 1: Obviously cars, there's a lot more software cars, and there
Speaker 1: was ten twenty years ago. Everybody knows that. It's a
Speaker 1: step further to say that in ten years, the winning
Speaker 1: car company is going to be the car the car
Speaker 1: company that makes the best software. Right. There's no existing
Speaker 1: legacy car company in the world today that would say
Speaker 1: that that's the case. Right. They would all say that
Speaker 1: they are best at making cars, and that the software
Speaker 1: is a component that goes in the cars. But the
Speaker 1: whole point of being a car company to be great
Speaker 1: at engineering the actual physical automobile to steal and the
Speaker 1: rubber and this all the safety systems and then the
Speaker 1: whole thing. Well, but if you believe self autonomous vehicles
Speaker 1: are coming, that software exactly right, and so that that
Speaker 1: would be our thesis is that no, it's actually going
Speaker 1: to happen is the value will flow to the software layer.
Speaker 1: The the entire experience of being in a car will
Speaker 1: be defined by the software. And then at the limit,
Speaker 1: whichever company that makes cars or makes the intellectual property
Speaker 1: that goes into cars, whichever of those creates the best
Speaker 1: software will will then be the winning company, and we'll
Speaker 1: get the majority of the value, right and including ultimately majority.
Speaker 1: So so what you really define describing is the iPhone.
Speaker 1: This is manufactured in China. I believe they make about
Speaker 1: five dollars pro phone building it together. And then this
Speaker 1: little comple you may know them, they're up the street
Speaker 1: and Cupertino Apple is the one that captures not only
Speaker 1: all the value from the iPhone, but pretty much all
Speaker 1: of the profits from the entire or the profits from
Speaker 1: the entire mobile universe. Is that the same basic concept
Speaker 1: is in an iPhone model for everything else, including automobiles.
Speaker 1: So in general, yes, like so that that's that's the implication, right,
Speaker 1: And that's the exact analogy by the way that the
Speaker 1: car company, the car industry is grappling with right now,
Speaker 1: which is you as you know and phones you used
Speaker 1: to have these companies like Nokia and Rim and others
Speaker 1: that made phones and feud software is just this kind
Speaker 1: of add on the top of the hardware. But the
Speaker 1: hardware I'm not that old. I don't really remember those um.
Speaker 1: And so you know when when you look like car
Speaker 1: CEOs now they're they're all thinking like they're working on this,
Speaker 1: the new generation of car CEOs. They're they're working hard,
Speaker 1: and they're spending a lot of time out here, and
Speaker 1: they spend a lot of time with us, and they're
Speaker 1: they're they're working hard on it. But literally the way
Speaker 1: they frame that question is we we we existing car
Speaker 1: company do not want to be the noive cars like
Speaker 1: and so that that Nokia of cars, that analogy is
Speaker 1: very front and center and in there thinking now at
Speaker 1: one level of detail later or lower than that. Um.
Speaker 1: You know, the iPhone is a particular success of vertical integration.
Speaker 1: UM so Apple. If Apple does that, you know, they
Speaker 1: don't manufacture every component in it, but they assemble the
Speaker 1: whole thing hardware, software together. Sometimes the winner is vertically integrated.
Speaker 1: There are other times in other industries and PCs were
Speaker 1: like this. The other example, which it's is horizontal in
Speaker 1: structure and so the the other outcome is you'll have,
Speaker 1: for example, Microsoft of cars right where you'll have the
Speaker 1: software layer that that actually ends up and they actually
Speaker 1: in that model they instead of making the car, that
Speaker 1: winning company might just sell it software to all the
Speaker 1: car companies. But then it's like the relationship that Microsoft
Speaker 1: end up having with all the PC companies right where
Speaker 1: the PC companies did all the work of actually making
Speaker 1: the PC and Microsoft got all the money. And so
Speaker 1: the victory for the best software company could go either
Speaker 1: vertical or horizontal, and that that varies a lot, but
Speaker 1: the consist I believe the consistent theme will be the
Speaker 1: company with the best software will exactly your point. They'll
Speaker 1: end up getting most of the profits so and have
Speaker 1: the strategic control, right, they'll they'll be able to dictate
Speaker 1: the future of the industry, but by virtually the fact
Speaker 1: that they control the software. So that naturally leads to
Speaker 1: the question is Tesla an electric car manufacturer or is
Speaker 1: SLA a software company that happens to make a pretty
Speaker 1: good looking car as well? That's right, So this is
Speaker 1: the thing if you squint with and by the way,
Speaker 1: I mean, Ellen is deservedly a legend, and so nothing
Speaker 1: I'm about to say should be interpreted as a criticism
Speaker 1: of Ellen, but just from a historic sweep of history standpoint,
Speaker 1: if you squint at Tesla one way, it looks like
Speaker 1: Apple circa two thousand, you know, seven two eight, where
Speaker 1: they release the iPhone. They just haven't sold very money yet,
Speaker 1: but they're gonna sell a ton and they're going to
Speaker 1: be the vertical winner alli Apple. Another way of looking
Speaker 1: at Tesla is you know their Apple in two with McIntosh,
Speaker 1: and yes they're integrated hardware. Software is good, but other
Speaker 1: people are going to come up with software as well.
Speaker 1: And then there are many other people who make cars,
Speaker 1: and so you know, the whole thing may just you know,
Speaker 1: they may set the model mode for what other people
Speaker 1: end up doing much higher scale. And I think that's
Speaker 1: the big question on Tesla is like, is which way
Speaker 1: is that tip? Obviously Elon is highly determined to make
Speaker 1: sure that he owns the whole stack, and to your point,
Speaker 1: he's incredibly focused on software like he's he is like
Speaker 1: Tesla is deeply deeply immersed in the details, not just
Speaker 1: by the way of the software that obviously runs the car,
Speaker 1: but for example, power management is a big at that's
Speaker 1: just sort of a secret sort of advantage that Tesla
Speaker 1: people and talk about that much is they buy the
Speaker 1: batteries from somebody else, but they write the software that
Speaker 1: manages the power, which is a big part of getting
Speaker 1: the range and the ludicrous mode and the ludicrous mode
Speaker 1: um and then um. And then they're also he's now
Speaker 1: deeply involved in right building, making sure that Tesla. He's
Speaker 1: gonna try to Tesla be the best self driving car,
Speaker 1: which is entirely a software exercise. Um. And so he's
Speaker 1: on it, like he's he's pushing very hard. He's and
Speaker 1: then he's the other car companies are all in, you know,
Speaker 1: more or less reactive mode to what he catches. He
Speaker 1: definitely has the lead right now. But that said, the
Speaker 1: other car companies a trying to figure this out. And
Speaker 1: we now have an entire wave of new automotive software
Speaker 1: companies in Silicon Valley. Right, there's I don't know, there's
Speaker 1: dozens on its way to hundreds of highly capable founders
Speaker 1: and engineers building new kinds of autonomous software for cars,
Speaker 1: by the way, vehicles of all different side shape and description,
Speaker 1: air vehicles, ground vehicles, water vehicles. Right, So there's there's
Speaker 1: a revolution of foot of which Tesla is an important part,
Speaker 1: but it's also become much broader now quite fascinating in
Speaker 1: um in the yearly. I keep coming back to that
Speaker 1: era when venture capitalists with funding startups, people had to
Speaker 1: go out and buy their own servers. They have engineers
Speaker 1: to manage that and build that, and there was a
Speaker 1: giant infrastructure. It would take tens of millions of dollars
Speaker 1: just to open a company. Today that stuff is, if
Speaker 1: not free, will certainly very cheap with Amazon cloud services
Speaker 1: and a whole huge infrastructure. So if you want to
Speaker 1: launch a company today, it doesn't take ten million dollars
Speaker 1: just to open the doors. You could really do things
Speaker 1: on the cheap. How does that shift in infrastructure change
Speaker 1: your job as a venture capitalist when you're looking at companies,
Speaker 1: what do they really need? Do we really need to
Speaker 1: give people million dollars at a bob when they could
Speaker 1: start for a few thousand dollars. So that's exactly right,
Speaker 1: that's exactly what's happened, and we think about that in
Speaker 1: economic terms. It's a very rapid inflation of of input costs,
Speaker 1: which is dramatic. It's like the inflation input the input
Speaker 1: costs for a startup in economic term deflated by a
Speaker 1: factor of like a thousand. That's amazing, which is amazing, Right,
Speaker 1: It's it's hard to actually find a historical precedent for
Speaker 1: that happening. We're used to cost ten million dollars just
Speaker 1: to launch and now you could do it for a
Speaker 1: few grand. Yeah, yeah, we yeah, we routinely get you know,
Speaker 1: we'll get three or four kids in here. The entire
Speaker 1: their entire CAPEX, the entire company is their laptops, right,
Speaker 1: It's that's that's all they happen, and they're good to go.
Speaker 1: That's it, They're good to go. Everything else is like yeah, no,
Speaker 1: it's a hundred a hundred dollar bill of this month
Speaker 1: on their m X for their for their Amazon Cloud
Speaker 1: services to launch the thing and see if it works.
Speaker 1: And so that's that's a dramatic step change. Like that's
Speaker 1: that's huge. I mean, it's very hard to find any any,
Speaker 1: any precedent for that, which is a big reason why
Speaker 1: a lot of so much energy has come back to
Speaker 1: the valley. So as a VC, what that results in
Speaker 1: is that the Darwinian process of running experiments to surface
Speaker 1: the good ideas and the good companies is now happening
Speaker 1: at much higher scale and at a much faster pace, right,
Speaker 1: and so it's a VC it's this is amazing. So
Speaker 1: it's it's not just the pace of acceleration. The second
Speaker 1: ary of ittive is increasing. Well, so it's it's accelerating
Speaker 1: at a faster and faster rate. Yeah. Well, the number one,
Speaker 1: it's just a sheer number of ideas that can explore.
Speaker 1: It can be explored has gone way up, right, because
Speaker 1: there's elasticity. The less it costs to test new idea,
Speaker 1: the more new ideas will get short and more people
Speaker 1: will try to test new ideas. And then right, the
Speaker 1: second is it's just so much faster now, it's just
Speaker 1: the speed to get to market is just so much.
Speaker 1: How do you deal with that? How do you sift
Speaker 1: through a near infinite amount of really fantastic and interesting ideas.
Speaker 1: So that's that's the business. And so that the day
Speaker 1: to day businesses we we see we see evaluate two
Speaker 1: thousand referred qualified startups a year every year, So that
Speaker 1: that's the day job here is to sort and sift
Speaker 1: and filter through the two thousand, and of those of
Speaker 1: two thousand, how many do you end up doing now
Speaker 1: you also do something unusual. You do sort of angel
Speaker 1: funding at a very modest level and then broader funding
Speaker 1: for for more I guess we would say developed or
Speaker 1: advanced companies. So out of those two thousand that get reviewed,
Speaker 1: what does it break down to right now, it's about
Speaker 1: the thirty a year, thirty year, thirty a year out
Speaker 1: of two thousand. Yeah, and I could go through in detail,
Speaker 1: but exactly where, but like that's basically the way. It's
Speaker 1: a little bit more than one percent. By the way,
Speaker 1: I should also say these are two thousand that are referred, right,
Speaker 1: so these these are sent to us. There's some connectivity
Speaker 1: to people we know. So I can give you an
Speaker 1: elevator pitch. Now. Well, now, now now that you're here,
Speaker 1: in fact, you're in, you're in the room, give me,
Speaker 1: give me a few minutes. I'll think up of business models.
Speaker 1: This is the this is the actual room for that. So,
Speaker 1: um so two thousand a year, um and and and
Speaker 1: and then the other side of it is it's not
Speaker 1: just right that. The whole thing with this is it's
Speaker 1: not just is it a good idea a good product,
Speaker 1: it's also who are the people? Right, because these are
Speaker 1: people at the end of the day, these are people businesses,
Speaker 1: and so honestly, most of what we're doing is evaluating people.
Speaker 1: So that was always a question that I find intriguing.
Speaker 1: Very often these ideas come along, there's no patents on them.
Speaker 1: There's almost something in the ether where a lot of
Speaker 1: people get very similar ideas. How often do we see
Speaker 1: four or five different companies in the same space. Hey,
Speaker 1: there's Uber and Lift, and there's Pandora, and go down
Speaker 1: the list, and every time you look at a concept,
Speaker 1: it looks like a lot of people have said, hey,
Speaker 1: you know it would be cool right about now. How
Speaker 1: do you figure out who has not just the best idea,
Speaker 1: but the best way to execute did When you're dealing
Speaker 1: with some really young, inexperienced technologists who very often have
Speaker 1: no business experience either just out of grad school, sometimes
Speaker 1: dropping out of college, that sounds like a near impossible
Speaker 1: decision making process. So we call this the volcano movie problem.
Speaker 1: There there's never just one movie about volcanoes. There's two
Speaker 1: or three or four or five there or two giants.
Speaker 1: There's never just one. There's never two killer there's never
Speaker 1: just one killer media movies, there's got to be too.
Speaker 1: So yeah, so that's a that's the thing. And these ideas, yeah,
Speaker 1: they come in waves, um, and so that's exactly what happened.
Speaker 1: So the thing that we try to go I mean,
Speaker 1: there's a lot of different lenses you apply to when
Speaker 1: you're evaluating people, but one of the ones we really
Speaker 1: dig into hard to try to pull kind of what
Speaker 1: we call kind of the real founders away from the
Speaker 1: people who just like think they have an idea and
Speaker 1: how to try something. So the concept we call the
Speaker 1: idea mazeh One of our partners, Crystallized, wrote a paper
Speaker 1: on a biology front of us and called the idea maze.
Speaker 1: And so the idea maze is it appears on the surface, look,
Speaker 1: this is a cute idea, like and by the way,
Speaker 1: lots of people have this idea. The real founder, the
Speaker 1: really good ones, what you find is they have thought
Speaker 1: about the problem so deeply and for so long that
Speaker 1: they have worked their way through the logic maze of
Speaker 1: how to try the idea and what they're going to
Speaker 1: try next if it doesn't work, and what the implications
Speaker 1: would be if they learn something, and who are the
Speaker 1: people they need to bring into the company, and how
Speaker 1: do they segment the market, and how do they go
Speaker 1: acquire the customers and so all these details. It's it's
Speaker 1: the convert it's all the topics and sort of that
Speaker 1: you don't cover in the first hour of the meeting,
Speaker 1: but you cover in the subsequent five hours when you
Speaker 1: go really deep right with them. And the really good
Speaker 1: founders tend to all have in common is they've been
Speaker 1: all the way through the idea mays on their own
Speaker 1: before they come in and talk to a VC. So
Speaker 1: there is not ideally, in the best case, there's not
Speaker 1: a question that we can ask them in the meeting
Speaker 1: in the first six hours of discussion that they haven't
Speaker 1: already not only have they already thought of the ques,
Speaker 1: they've already figured out the answer for themselves. Right. In fact,
Speaker 1: you actually get to the point with a really good
Speaker 1: really sharpens to the point where they get frustrated because
Speaker 1: they're like, why why is this not all obvious to you?
Speaker 1: People like this, Why are you asking me all these
Speaker 1: stupid questions? I figured this out two years ago, Like
Speaker 1: I already know the like and it should be self
Speaker 1: evidence yourself at everybody, because they figured the whole thing out.
Speaker 1: As as contrasted by the way to the ones who
Speaker 1: haven't done that. If if somebody's only put you know,
Speaker 1: ten or twenty hours and are thinking through something and
Speaker 1: they just decided to put together a pitch, it becomes
Speaker 1: crystal clear because you get eight or ten or twelve
Speaker 1: questions in and they stop being able to answer the questions.
Speaker 1: Now you just they start making they start making up
Speaker 1: the you know, start making up the answers. So you
Speaker 1: just revealed this, so you would all concern that people
Speaker 1: would come in and say, Okay, now I have all
Speaker 1: my ducks lined up, and Mark isn't gonna throw me
Speaker 1: off my pitch. Well, they try to trick us already,
Speaker 1: So if they haven't been through the idea as they
Speaker 1: try to convince this, they have been, but they just
Speaker 1: start making up the answers, and you can you can
Speaker 1: flash that out like you can figure that you can
Speaker 1: if there's part about it and parts content like they
Speaker 1: just can't back up their answers. It's like like this
Speaker 1: is how it's a little bit like how police do interrogations.
Speaker 1: So the way people believe if you're get ever getting
Speaker 1: interrogateted by a company thinks he what he just does
Speaker 1: is he just the questions get more and more detailed. Oh,
Speaker 1: you were your alibi as you were out seeing a
Speaker 1: movie that night. Okay, well what movie? You know? Well,
Speaker 1: what was the opening scene? Right? Well, what you know,
Speaker 1: what was the plot twist at the end? You know, well,
Speaker 1: what kind of what snack? Did you have your popcorn?
Speaker 1: Or did you have salt in your popcorn or not?
Speaker 1: Just go deeper and deeper and deeper and deeper until
Speaker 1: you finally freak out because you can't like make up
Speaker 1: all these people. So it's it's it's the same kind
Speaker 1: of thing. And so the reason why I say it
Speaker 1: so openly is it would be good for us if
Speaker 1: more founders actually went through the full idea mas like,
Speaker 1: it would be great for us if more founders came
Speaker 1: in here having thought much more deeply about what they're doing.
Speaker 1: And this is part of the pop where the popular
Speaker 1: narrative startups is probably a little bit problem at the
Speaker 1: popular narrative startups is it's like the popular narrative and
Speaker 1: invention is that these are somehow Eureka moments. It's this
Speaker 1: sudden flash of brilliance and you know, you're just you're
Speaker 1: just you know. And by the way, these companies all
Speaker 1: these origin myths like oh, I was just a kid
Speaker 1: doing this and this idea came to me and like
Speaker 1: loan behold boom Facebook, right, And that's not at all
Speaker 1: how it works, right, It's it's this incredibly deep and
Speaker 1: elaborate process of thinking, uh and work that actually leads
Speaker 1: to these things happening. And so I think for people
Speaker 1: to be if more founders understand the concept of the
Speaker 1: idea MAS and they set the bar higher for themselves
Speaker 1: and the level of thought they'll put in their ideas,
Speaker 1: then I think we benefit from that. What could your
Speaker 1: future hold more than you think? Because at Merrill Lynch
Speaker 1: we work with you to create a strategy built around
Speaker 1: your priorities. Visit mL dot com and learn more about
Speaker 1: Merrill Lynch than affiliate Bank of America. Merrill Lynch makes
Speaker 1: available products and services offered by Merrill Lynch. Pierce, Feder
Speaker 1: and Smith Incorporated, a register broth for dealer. Remember s
Speaker 1: I PC. We talked about some of the unicorns before
Speaker 1: we talked about this ends badly. I'm gonna I'm gonna
Speaker 1: skip those questions. Let let me before I get to Facebook,
Speaker 1: let me I have to ask a question. I love
Speaker 1: the show Silicon Valley. I know that, uh, Mike Judge
Speaker 1: and Alec Burg have described you as an unofficial writing
Speaker 1: consultant to this, So tell us about your experience with
Speaker 1: the show. And I have to I'm a fan of Portlandia,
Speaker 1: and having been to Portland's several times, I came away
Speaker 1: with the impression that, oh, this isn't a sitcom, it's
Speaker 1: a documentary. How true is that for? For Silicon Fact's
Speaker 1: my understanding, Portlandia is literally true? Right? It certainly feels
Speaker 1: that way to put a camera in for a normal
Speaker 1: nor Yes, exactly, Silicon Valley is exact same way. So
Speaker 1: so and all I have to confess I've still only
Speaker 1: seen the season get Out. I haven't seen yet. It's
Speaker 1: so hilarious. I know, I'm sure it is. I just
Speaker 1: the first season was so perfect, just gonna stop. I
Speaker 1: just I couldn't. I don't know. I've just had a
Speaker 1: mental block. Um, I haven't seen the one from the
Speaker 1: most recent one this Sunday, and people are telling me
Speaker 1: it's just so hilarious and over the time funnies and
Speaker 1: it just rings. Especially being out here, It's like, oh, okay,
Speaker 1: I recognize him. It rings really true. Do you have
Speaker 1: a get feedback from people saying, hey, what are you
Speaker 1: doing to us? Excuse me? Like Mark, you're kind of
Speaker 1: making us look silly. What are you doing from who? Exactly?
Speaker 1: Random people? People you know, other vcs, other founders, other
Speaker 1: other because there are very few people come out of
Speaker 1: the show with their reputation. And so that's the thing
Speaker 1: I can't call. I can't comment past I can't comment
Speaker 1: past the first season. I will say the first season
Speaker 1: was perfect, and I will tell you so that the
Speaker 1: secret of that show, at least the secret of the
Speaker 1: first season, which I consider a work of art. Ums.
Speaker 1: I Judge himself started his career as a chip engineering
Speaker 1: in Silicon Valley, UM and if you if you meet
Speaker 1: him at actually it's it's not what you'd expect. Like
Speaker 1: he's one of the lead, you know, the leading creative
Speaker 1: comedy geniuses of our era, the creator of all these
Speaker 1: you know, Pavis and Butthead and all these things, and
Speaker 1: which is fascinating because he started out so wildly overbroad idiocracy,
Speaker 1: and you work your way down the list, and as
Speaker 1: he seems to have gotten older and maybe his artistic
Speaker 1: vision matured, it went from insane to overbroad to slapstick too. Oh,
Speaker 1: this is mildly a parody and somewhat of cinema verity,
Speaker 1: although I think he'd Idiocracy was also a documentary. Um,
Speaker 1: I was a documentary, but five years ahead of his time, right,
Speaker 1: exactly right, and so um and so he just he
Speaker 1: has a very precise um uh. He has a very
Speaker 1: precise understanding actually how things work here, more so than
Speaker 1: I think people would think. Um, and so it comes
Speaker 1: across and then and then his you know, his partners
Speaker 1: are also geniuses, and so it comes across. So that's good.
Speaker 1: I would also say, for people who haven't seen it,
Speaker 1: Halt and Catch Fire, uh in a completely different, hundred
Speaker 1: eighty degree different movies. It's a dramatic. It's a drama.
Speaker 1: There's no Halt and Catch Fire fire. It's not funny
Speaker 1: at all. It's it's a it's a very serious show. Halton.
Speaker 1: Catch Fire is a show on AMC that's I think
Speaker 1: in its third season now. Um. It is a period piece.
Speaker 1: Unlike the Silic Value is HBO, Silicon Value is current
Speaker 1: Time Fires a period peace set in the early eighties
Speaker 1: at the birth of the PC. UM. But it's the
Speaker 1: story basically, it's the it's a fictionalized story of the
Speaker 1: creation of the company Compact and then the birth of
Speaker 1: the PC industry and the birth of the PC clone
Speaker 1: industry at a time when IBM was by far the
Speaker 1: dominant company in the industry right and and so it's
Speaker 1: a but it's a very um it's a spookily accurate
Speaker 1: portrayal of what a startup is actually like, and it's
Speaker 1: actually really funny. The critics of the show in the
Speaker 1: first season, it was getting criticized for being too melodramatic,
Speaker 1: like this is all too superheated and too emotional, and
Speaker 1: I'm thinking, nope, this is It's like they put a
Speaker 1: camera in a startup like this, this is what they're
Speaker 1: actually like. Everybody would like to And this is also
Speaker 1: part of the thing we see all the time is
Speaker 1: everybody wants to pretend that startups are fun, and it
Speaker 1: turns out start ups are no fun. No, it's a
Speaker 1: lot of work, a lot of work, and it is
Speaker 1: a stomach churning process um of being told no by
Speaker 1: everybody and being told your idea is stupid and it's
Speaker 1: just not stop. Just you just feel like as a
Speaker 1: start every started founding, they just feel like they're under assault.
Speaker 1: All that, it's all and catch fired as a very
Speaker 1: good job capturing the other side of that. What what about, um,
Speaker 1: the incubators like hy Combinator or back Monity, What about
Speaker 1: those where all right, this is a little more founder
Speaker 1: friendly environment with a little more support and a little
Speaker 1: less um of of that negative CASTI gade that you
Speaker 1: were referring to. Yeah, so they're they're fantastic, Like they're
Speaker 1: they're fantastic. They've been usually additive to the to the valley. UM.
Speaker 1: The big thing that why Combinator and other firms like
Speaker 1: it are doing is they're bringing people in earlier. UM.
Speaker 1: And so write the path once upon a time, I
Speaker 1: mean I was maybe an exception of this, but the
Speaker 1: path once upon a time was you go work, you know,
Speaker 1: in a real job for five or ten or fifteen
Speaker 1: years and your real experience before you try one of
Speaker 1: these things, because you need to build the skill set. UM. Basically,
Speaker 1: what why see basically viewed is almost like the fifth
Speaker 1: year of college or something where they have they have
Speaker 1: ability to pull in you know, kids. A lot cases
Speaker 1: are people who just haven't been exposed to startups and
Speaker 1: able to They basically try to spin them up much
Speaker 1: more quickly in their careers. They talk openly about this, right,
Speaker 1: it's like it's it's it's sort of the new career path,
Speaker 1: um so. And then it as part it's also part
Speaker 1: of this increased our winnie and kind of feeding frenzy
Speaker 1: that we're talking about. So as long as we throw
Speaker 1: enough competitors gladigators into the ring, will end up with
Speaker 1: that many more survivors that potentially can can be something
Speaker 1: one day. Yeah, and I suspect I think, you know,
Speaker 1: part of the impact that these things have are the
Speaker 1: companies that come out of them, you know, out of
Speaker 1: the programs. I suspect the long run effects positive effects
Speaker 1: will be even bigger sort of the second, third, fourth generation. Right.
Speaker 1: So it's it's you know, the the y C Finnders
Speaker 1: this year, right, the ice Finders got don't a hundred
Speaker 1: and fifty companies in the batch right now or something
Speaker 1: like that, Like, you know, some of them is gonna succeed,
Speaker 1: a lot of them are going to fail. But to me,
Speaker 1: that's almost beside the point because it's all the people
Speaker 1: in those companies. It's three people who are working on
Speaker 1: those companies, and then what those people are gonna do
Speaker 1: not just this year, but five years from now, ten
Speaker 1: years from now. And so these people are being set
Speaker 1: up on a career path um where they should be
Speaker 1: able to do amazing things years from now. One of
Speaker 1: the nice things about Silicon all his failure isn't considered
Speaker 1: a mark of shame. It's so this this startup blew up,
Speaker 1: and that startup didn't make it, and we killed this,
Speaker 1: but we pivoted this one. And you know, sometimes the
Speaker 1: fifth or six time is a draw. Yeah, that's right,
Speaker 1: and so you get you get the Yeah, the first
Speaker 1: startup doesn't work, you do you do get more swings
Speaker 1: at the bat, and you do get and by the way,
Speaker 1: you get different experiences like your if your first up
Speaker 1: doesn't work, it's very often it ends in it's called
Speaker 1: an aquahier where you end up getting sold a big company,
Speaker 1: or you just or some people just go and get
Speaker 1: a job just to recover from the trauma of going
Speaker 1: through a start up work. But then you get skills, right,
Speaker 1: so then you have you have your startup experience. You
Speaker 1: have now a experience maybe working at a great you know,
Speaker 1: growth company where you're learning how that stuff works. When
Speaker 1: it when it's actually running at scale, right, and then
Speaker 1: five tenures and you start to learn how to manage
Speaker 1: people and you sort of pick up these skills and
Speaker 1: then you go start another company, right, And so there's
Speaker 1: there is a sort of repeated swings at the bat
Speaker 1: um kind of effect that happens. And I think that
Speaker 1: these incubators just give people basically an early swing at
Speaker 1: the bat that maybe otherwise didn't exist. Coming up, we
Speaker 1: continue our conversation with Mark andreeson discussing the unique structure
Speaker 1: of Andrew Uson Horowitz. I'm Barry Ridhults. You're listening to
Speaker 1: Masters in Business on Bloomberg Radio. I'm Barry Ridholts. You're
Speaker 1: listening to Masters in Business on Bloomberg Radio. My extra
Speaker 1: special guest today is Mark Andreason. He is the co
Speaker 1: founder and general partner of the venture capital firm Andrews
Speaker 1: and Horowitz. He co created the Mosaic Internet browser, co
Speaker 1: founded Netscape, and has done more things over the past
Speaker 1: decade or two than most of us will do in
Speaker 1: our lifestyle entire lifespans. Let's talk a little bit about
Speaker 1: the firm we're sitting in, which is quite lovely. It
Speaker 1: is a very relaxing zen vibe heerre um with the
Speaker 1: blonde wood and the just generally soothing atmosphere. Not what
Speaker 1: you imagine when you think up think of the startup
Speaker 1: community and and Silophone Valley. Tell us how you structured
Speaker 1: the firm and what was the thinking behind it? Yeah,
Speaker 1: so the big thing. So we're trying to create, We're
Speaker 1: trying to work with founders to create something out of nothing. Right,
Speaker 1: and so at the time we invest in most companies,
Speaker 1: there's not a lot there. And then the path is
Speaker 1: going to be a five, ten, fifteen year path to
Speaker 1: get to you know, to get to something important and significant.
Speaker 1: So you're really playing a very long game. It's not
Speaker 1: two years. Hey, we've got to start looking for an exit. Yeah,
Speaker 1: it's it's my friend and friends at CNBC, right, have
Speaker 1: the show Fast Money, and I'm always pitching them. It's
Speaker 1: like you need the car market needs slow money, right,
Speaker 1: and the slow money should be on every day and
Speaker 1: every day it should just be right, you know, well,
Speaker 1: what's happened today that matters? And the answer is yeah, nothing, Um,
Speaker 1: you know, what's what's going on? You know? Not much? Okay,
Speaker 1: I'll see tomorrow, right and so and and and you
Speaker 1: know they start looking the start ups are working incredibly hard.
Speaker 1: Like the startups, you know, there's all kinds of activity
Speaker 1: at the startups. But the investors, say the vcs who
Speaker 1: freak out on a daily, weekly, monthly basis with these
Speaker 1: companies like burn themselves to a crisp, like because stuff
Speaker 1: these companies to cast. And so we go into it
Speaker 1: just knowing it's gonna be with every company is going
Speaker 1: to be this long running journey, and it just takes time.
Speaker 1: It takes at least five years to build something that
Speaker 1: has real value, and it takes at least ten years
Speaker 1: to build something that's going to endure for long, you know,
Speaker 1: for for for another ten years after that, and so
Speaker 1: it's it's just to be this this, this, this long thing.
Speaker 1: And then I mentioned earlier like so much of this
Speaker 1: people like we we like to I think, brag on
Speaker 1: like how good we are I thinking about the ideas
Speaker 1: and the technical and stuff, and then we do spend
Speaker 1: a lot of time on that stuff. But I think
Speaker 1: a lot of it is partnering with really high potential people.
Speaker 1: In a lot of cases, you know, to your point,
Speaker 1: like don't have that much experience at the time they
Speaker 1: start their companies UM or or even people with more
Speaker 1: career experience who haven't done a startup before, right where
Speaker 1: there's a whole new set of things they have to learn,
Speaker 1: and then we try to work and help them, you know,
Speaker 1: grow and become better. Uh and and and you know,
Speaker 1: develop the skills that they need to build important companies
Speaker 1: um and so the whole firm is kind of engineered
Speaker 1: around those ideas. Right. So, as an example, we will
Speaker 1: never back a startup if we think it's outcome is
Speaker 1: it's going to get bought. Like every once in a while.
Speaker 1: It's really like if there's a slide in the dock
Speaker 1: that says excess strategy, you don't get bought by Google
Speaker 1: in three years like for ten X, like we won't.
Speaker 1: We won't find the company spent a lot of time
Speaker 1: on that. But like we're we're know, you want to
Speaker 1: create a company that worst case scenario exists on its
Speaker 1: own for the foreseeable decades in the future, and if
Speaker 1: someone happens to acquire them, great, But that's not the target.
Speaker 1: That's the kicker, as the companies that actually get bought
Speaker 1: are the ones that don't have to get bought, the
Speaker 1: ones that actually could have stood on their own because
Speaker 1: those are the ones that actually value that value, right exactly.
Speaker 1: So that's the twist on the whole thing. But so
Speaker 1: we're we're always backing these companies with and these people
Speaker 1: with an eye towards long run independence, developing something of
Speaker 1: of deepen enduring value. UM. So one is just the timeframe, Um,
Speaker 1: that's important part. A second part is how we coach
Speaker 1: and mentor and work with the founders and the team
Speaker 1: that the founders built around them, And that has to
Speaker 1: do with our how we how we s left general
Speaker 1: partners for our firm with the people who make the
Speaker 1: pull the trigger investments and go on the boards. Um.
Speaker 1: And there is all our our big claim to fame
Speaker 1: there is all of our general partners are former founders
Speaker 1: and our CEOs of tech startups. And so when we
Speaker 1: go on a board, it's always the case with us
Speaker 1: that you're sitting with somebody who has been through the
Speaker 1: same situation that you're in right now and has had
Speaker 1: to make the difficult decision and has had to live
Speaker 1: with the consequences of that decision, right. And so it's
Speaker 1: just it's a grounding in the in the advice and
Speaker 1: the guidance that you get that I think just goes
Speaker 1: deeper than you know. And there by the way, there
Speaker 1: are great vcs who have no operating experience or little
Speaker 1: operating experience, and some of them are actually very very
Speaker 1: good investors. But there's there's just so much in that
Speaker 1: intimate relationship with the founder and with the with the
Speaker 1: team that I think benefits from having the credibility from
Speaker 1: having actually been you guys. You guys also do something
Speaker 1: unique in that every partner is on every investment, as
Speaker 1: opposed to you do software, you do semi conductor. I'll
Speaker 1: do this. Every partner participates in every investment. Is that
Speaker 1: an accurate statement? So we do that. There is there's
Speaker 1: always a single GP on the board, so there's somebody
Speaker 1: who's focused on you. But then the way the firm
Speaker 1: ist structured is everybody shares equally in the in the
Speaker 1: results of that. So we so basically we've just there's
Speaker 1: a lot of things we've done in the firm to
Speaker 1: design the firm to be a zero politics environment, to
Speaker 1: be so what you discover what you do rowe politics
Speaker 1: and environe your politics environment with respect to how the entrepreneurs,
Speaker 1: I mean, I can Garantie. We've ruled out all politics
Speaker 1: in the firm. I'm just saying, as far as the
Speaker 1: founder's experience, that they should never run into for a second,
Speaker 1: it shouldn't be this guy in the firm likes this,
Speaker 1: but this guy is fighting against fighting again. So what
Speaker 1: you often find in a lot of entry capital firms
Speaker 1: since they present as united front and then there's a
Speaker 1: tremendous amount of in fighting this taking place. It's by
Speaker 1: the way, it's the same thing you see and like
Speaker 1: you'll see on on Wall Street, a lot like whis
Speaker 1: just for example, there's just a battle for the there's
Speaker 1: a battle for the profits, like there's a battle for
Speaker 1: the carry. And so for me to get more money,
Speaker 1: somebody else is to get less money. And that least
Speaker 1: to this weird adverse thing where I actually want the
Speaker 1: other guys deals to fail because then I'll have more
Speaker 1: negotiating leverage in my comp you know, discussion or there
Speaker 1: will be a battle between who wins the deal, right
Speaker 1: the maybe the entrepreneur starts the conversation with one GP,
Speaker 1: but maybe the entrepreneur really would rather have another GP
Speaker 1: with the more relevant skill set right in the same
Speaker 1: firm on their board, sure, and a lot of firms
Speaker 1: that that starts World War three. Internally, at our firm,
Speaker 1: everybody's fine with that. Another thing, a little twist that
Speaker 1: we have. We don't have a promotion path in the
Speaker 1: firm to general partner UM. So the way most other
Speaker 1: firms are structured as they have young people in the
Speaker 1: firm who get promoted up the rights over time. But
Speaker 1: it's a competitive process, right, So you'll have twenty junior
Speaker 1: people who are competing for you know, six sort of
Speaker 1: UM junior g P slots who are competing for two
Speaker 1: g two senior GP slots of course ten or fifteen years,
Speaker 1: and so they're in a constant knife fight with each other,
Speaker 1: right because they're it's just like had a law firm.
Speaker 1: I was gonna say, it sounds like the big big
Speaker 1: Wall Street or park Ev and you law firms where
Speaker 1: it's just a blood bath and when they make the
Speaker 1: announcements of partners, there's a handful of happy people and
Speaker 1: a lot of other people getting their resumes together and
Speaker 1: it's no fun for anyone. And so when that struck,
Speaker 1: that's exactly right. So when that structure works well, that
Speaker 1: leads to a very brutally Darwinian effective eat what you
Speaker 1: kill environment where you're you're breeding for you're basically breeding
Speaker 1: sharks for maximum infectiveness. The problem is, as a client
Speaker 1: of one of those firms, you get caught crosswise in
Speaker 1: the politics right, and you do not get you basically
Speaker 1: only get access to the people who have the direction
Speaker 1: sentive to help you in the firm. You don't get
Speaker 1: access to the rest of the firm. And that's the
Speaker 1: typical experience that founders have with vcs, which is they
Speaker 1: get promised the resources of the firm, they get what
Speaker 1: they get in practice is one person that seems really counterproductive.
Speaker 1: It's very kind of productive and and in our come
Speaker 1: by the way, a lot of our work with companies
Speaker 1: is working with our companies to help them resolve these
Speaker 1: kinds of issues with the other vcs. So because you're
Speaker 1: you guys are also co investors with other other ventures.
Speaker 1: So we just don't and again, like this may work
Speaker 1: for other firms, we just decided to take a different
Speaker 1: mentality where we don't have that kind of you ever
Speaker 1: get caught in the kind of crossbar because it doesn't exist. Um,
Speaker 1: so that's a big thing. And then the other big
Speaker 1: thing that we do is a firm um is, we
Speaker 1: do believe deeply in the idea that the founders not
Speaker 1: in every case, but in a lot of cases, really
Speaker 1: should be able to if they're if they want to,
Speaker 1: and if they're able to do it, they should they
Speaker 1: should run their own companies. And we could have a
Speaker 1: long conversation about that. Um. The other thing that we
Speaker 1: do is we really try to help arm up the
Speaker 1: founders who don't have a lot of deep business experience
Speaker 1: with all of the connectivity the network access that the
Speaker 1: professional CEOs will tend to have. So so the technical
Speaker 1: found technical founder starts a company right, and then you know,
Speaker 1: big part of it is are I think, just gonna
Speaker 1: be good at managing and leading, which is where the
Speaker 1: GP relationship is really critical mentoring. Do you find that
Speaker 1: very often engineers and people with that sort of technical
Speaker 1: skill set, um, the stereotype is they're socially awkward. They
Speaker 1: lack the usual skill set that a CEO typically has. Yeah,
Speaker 1: so that is often the case. But also the reverse
Speaker 1: is often the case, which is the highly social you know,
Speaker 1: the CEO is had of central casting have you know,
Speaker 1: the the great hair and the you know, brilliant smiles,
Speaker 1: and the great, you know, just the great in front
Speaker 1: of the crowd. They often not always, but they often
Speaker 1: lack the technical grounding to determine the direction of a
Speaker 1: technology company. And so and again like these are these
Speaker 1: are stereotypes, and they're overly broad, but they are patterns.
Speaker 1: There is some truth to it. Started in this case.
Speaker 1: And so so what we're now everything, I would say
Speaker 1: the the kicker everything adventure is on an exception basis, right,
Speaker 1: and so by definition we're not looking for the pattern,
Speaker 1: we're looking for the exception. And so we're looking for
Speaker 1: the to your point, the very particular technical founder, who,
Speaker 1: by the way, may start out without a lot of
Speaker 1: these social skills, and may start out without really knowing
Speaker 1: how to deal with customers, or may start out not
Speaker 1: really knowing how to manage people or hire people. And
Speaker 1: then we're trying and if they're willing and able to learn,
Speaker 1: we will then put a lot of effort into helping
Speaker 1: them become great at those things. By the way, it's
Speaker 1: the same astray on the other side when it comes
Speaker 1: time some of our companies we do end up with
Speaker 1: professional CEOs, and then we look for the professional CEO.
Speaker 1: Is that not only have that skill, but also then
Speaker 1: go deep on products and technology, and so you're and
Speaker 1: and and those are both exceptions like those are these
Speaker 1: are not on both sides, these are rare people. So
Speaker 1: so it makes me wonder is it easy to take
Speaker 1: someone who has the technical skills and teach them to
Speaker 1: be a CEO, because it sounds like gets challenging to
Speaker 1: take a CEO and say, by the way, on the side,
Speaker 1: we want you to get your you know, your ms
Speaker 1: in in computer science over at Stanford at night, that
Speaker 1: that doesn't seem like your first breakthrough product. At the
Speaker 1: same time, the same time, I would think it's easier
Speaker 1: to teach the inexperienced, unskilled but really sophisticated technology technologist
Speaker 1: the people skills then vice versa. So in the tech industry,
Speaker 1: we firmly believe exactly what you said from the general
Speaker 1: pattern as we want to find the great technical founder
Speaker 1: and helping become a great CEO, and that then, exactly
Speaker 1: at your point, that's easier than finding a great CEO
Speaker 1: and trying to turn them into a great product technology visionary.
Speaker 1: And I think the history of our industry confirms this,
Speaker 1: like nine out of ten roughly of the big successful
Speaker 1: tech companies in the last frankly hundred years have been
Speaker 1: run by their founders for a long periods of time
Speaker 1: for this reason, starting with you Litt Packard and Intel
Speaker 1: and you know many many many others you know now
Speaker 1: today Facebook and Google, right, um, And so that's the
Speaker 1: thing now because it's easier though doesn't mean it's easy, right,
Speaker 1: So you know, it is a real like for these
Speaker 1: people to learning um. You know, for for an engineer
Speaker 1: who has not managed a large organization before to learn
Speaker 1: how to do that, like that's a big thing that
Speaker 1: they really have. They have to really want to do it,
Speaker 1: and some of them just simply don't. And then you
Speaker 1: pair them up with somebody who them come up with
Speaker 1: a pair configuration where they can work with somebody who
Speaker 1: can help them with that UM. And then some of
Speaker 1: them just simply can't write. They just hit the wall
Speaker 1: where it's just not something that they're going to be
Speaker 1: able to do. And so that there there, there in
Speaker 1: lies the difficulty of implementing the theory. But that's that's
Speaker 1: that's our that's what we do. So so two things
Speaker 1: immediately come to mind when you bring that up. The
Speaker 1: first is you have Larry and surgery, who are technologists
Speaker 1: who eventually UM partner up with with their chairman, Eric Schmidt,
Speaker 1: who who basically brings them along and teaches them how
Speaker 1: to be c e O S or co c e
Speaker 1: O S or what if we want to call them.
Speaker 1: But the other example that leaps to minds is Marcus
Speaker 1: Zuckerberg and Facebook. So let's let's talk about that for
Speaker 1: a moment. You're a friend of his, you're a mentor.
Speaker 1: Tell us how that relationship came about and how how
Speaker 1: have you helped Zuckerberg become one of the leading CEOs
Speaker 1: in the world. So, first of all, I should disclaim
Speaker 1: most credit on this, which is Mark has done most
Speaker 1: of this on Zone. He has been advised and helped
Speaker 1: along the way by a lot of people. So I'm
Speaker 1: not I'm not going to take any sort of giant,
Speaker 1: giant credit on this one. Um I did that. I
Speaker 1: did get to I did get to see it, and
Speaker 1: you know I was I did get to be in
Speaker 1: the room for a fair amount of it. So um
Speaker 1: So I met Mark through Peter tele after he first
Speaker 1: invested in the company, and this was when Facebook was
Speaker 1: four or five people sitting in bean bags. UM in
Speaker 1: Palo alto uh in an office with very colorful graffiti
Speaker 1: on the walls in the very early days. Um, and
Speaker 1: it was just crystal clear from the start. I mean
Speaker 1: it was not I don't think clear that Facebook was
Speaker 1: going to become you know, the heam come because just
Speaker 1: how how often does that ever happen? And how how
Speaker 1: can you actually predict that? Do you want you want
Speaker 1: me to go through the list of how often that's
Speaker 1: happened with you? Or should we save that for a
Speaker 1: later segment? Not not very not very freaking often. I
Speaker 1: can tell you that. So um so uh. I will say, like,
Speaker 1: it was very clear from the beginning that Mark was
Speaker 1: a I call him a learning machine. Um, he just
Speaker 1: siphons in information. And then this this goes to what
Speaker 1: I mentioned earlier. It's it's it's it's technical founders. It's both. Um,
Speaker 1: it's both can they do it? But also do they
Speaker 1: want to do it? And a big part of that
Speaker 1: for both of those is can they learn? And by
Speaker 1: the way, there there are people who just simply hit
Speaker 1: the wall where they just do not want to learn anymore,
Speaker 1: Like and we've all dealt with people like that where
Speaker 1: say they're impervious to new information, right, because they've deliberately
Speaker 1: set themselves up where it's like any new information at
Speaker 1: this point would be a threat. And so I'm just
Speaker 1: I'm done. They tap out and finished. They just they
Speaker 1: piked like they just peeked in terms of everything that
Speaker 1: they're ever going to know and absorbed like that's just
Speaker 1: the way that they've decided to live their lives. And
Speaker 1: so to do what Mark has done, you need to
Speaker 1: be these that opposite of that. You need to just
Speaker 1: constantly be pulling in new information until actually curious devouring
Speaker 1: whatever comes cross every possible topic that you can imagine
Speaker 1: it's going to be relevant to what you're doing. And
Speaker 1: so Mark, Mark has just been the way I think Marcus,
Speaker 1: he's the most systematic person I think I've ever worked
Speaker 1: with it, just pulling it and just extracting the information. Um.
Speaker 1: And that was true when he was really young, right
Speaker 1: and was not well known, um and he was very
Speaker 1: determined to go get the information from people who knew.
Speaker 1: And then it's it's only magnified out as he's grown
Speaker 1: and by the way he continue know he's out on
Speaker 1: this tour right now, you know, touring all fifty states,
Speaker 1: like from Mark standpoint that there's all kinds of speculation
Speaker 1: on that. But from Mark standpoint, the whole purpose of
Speaker 1: that is learning, not that he's running for president when
Speaker 1: he turns he's where he swears not, but yes, whole
Speaker 1: when he talks about that, like when you talked about
Speaker 1: that with us, when he said he's gonna go do
Speaker 1: it's all I'm gonna go learn. I'm gonna go learn
Speaker 1: about the Country'm gonna learn about every state. I'm gonna
Speaker 1: learn about people who aren't like me, and and so
Speaker 1: and for me. So for me, it was not surprising
Speaker 1: in the sense of it's completely consistent with how he operates.
Speaker 1: And I think this is an area in which he
Speaker 1: is a much He's a real role model on this,
Speaker 1: Like I I really think, like I think a lot
Speaker 1: of founders like look at Mark and they try to
Speaker 1: drive like how do I get good at I don't know,
Speaker 1: viral marketing or data da whatever product? He just wants
Speaker 1: to take it all. I think if more people just
Speaker 1: look at Mark and said, how do I learn like that,
Speaker 1: they would be much better. You're on the board of
Speaker 1: directors of Facebook. What's the reaction when the CEO and
Speaker 1: founder says, hey, guys, I'm going around the country. I'm
Speaker 1: gonna go to all fifty states because I think people
Speaker 1: have interesting things to say and I want to learn.
Speaker 1: Is there eyebrows raised or it's like, oh, that's just
Speaker 1: Mark being Mark. Go ahead, yeah, I mean Mark, Mark
Speaker 1: does things like that. Mart Market. Is My point is
Speaker 1: Mark has always stretched himself like he stretches. He comes
Speaker 1: up with a quest every year, goes at his question quest,
Speaker 1: the quest. A couple of years ago, I remember he
Speaker 1: was learning some obscure language if memories, sir, I don't
Speaker 1: remember what it was. Mandarin Mandarin right, well, not so obscure,
Speaker 1: but a complex, uh language. So he does a quest
Speaker 1: every year and just basically keeps learning, keeps learning. He's
Speaker 1: been doing this is if you know, I don't know
Speaker 1: for ten years now or something. It's it's and so
Speaker 1: there's been through a variety of things, and he talks
Speaker 1: about this. He's very open about this um and so
Speaker 1: you know, he just he just goes out in siphons.
Speaker 1: And so he's a guy. He's a guy who's literally
Speaker 1: able to learn from some of the most you know,
Speaker 1: experience and accomplish people in the world on certain topics.
Speaker 1: But you know, spend a day on a farm not
Speaker 1: far from where I grew up in Wisconsin and dow
Speaker 1: to milk cows like and he's just as far and
Speaker 1: he's happy to do that. He's absolutely so he's living
Speaker 1: the life he always wants to live. I just want
Speaker 1: to just suck everything I can possibly into my head
Speaker 1: as as rapidly as I possibly can. Well, that's pretty fascinating. Um,
Speaker 1: let's keep going about the deal days you do. I
Speaker 1: want to talk about some some more of the combination
Speaker 1: angel investing late stage. So you do deal days, and
Speaker 1: and how many people will the firm see in a
Speaker 1: given day or week when those are running well, we have,
Speaker 1: like I said, we do about two thousand a year total.
Speaker 1: So there's a whole funnel in the whole system, and
Speaker 1: there's a lot of people in the firm who meet
Speaker 1: companies the whole process of kind of distilling the information.
Speaker 1: So it's you know, it's dozens of week you know,
Speaker 1: kind of across the firm, and then we see pitches
Speaker 1: on usually Monday and Thursday, or Monday Monday Thursday generally, UM,
Speaker 1: and as the GP team and that's you know, I
Speaker 1: don't know, Monday, it was five this week on Thursday,
Speaker 1: I think there's two or three more. Um, and this
Speaker 1: is every week, so there's occasional vacations and stuff, but
Speaker 1: pretty much you're running through three hundred, four hundred pitches.
Speaker 1: The GPS will see everything the way. These are called
Speaker 1: the all GP pitches, and so these are ones where
Speaker 1: everybody's in the room, um, and then many others. There's
Speaker 1: many others that happened during the week where one or
Speaker 1: two or three GPS might see them. Right, So it's
Speaker 1: a giant fun It shrinks down and down until and
Speaker 1: out of those let's call it three hundred a year,
Speaker 1: you're looking at ten percent, very very seriously. Yeah, that's
Speaker 1: about right. And when you decide to do an investment
Speaker 1: in them, are these usually angel fifty thousand dollar rounds
Speaker 1: or these much more substantial rounds or both. Yeah, So
Speaker 1: we don't really do the fifty anymore. We used to
Speaker 1: do more of those when we got started, but we
Speaker 1: don't do those as we tend to get much more.
Speaker 1: We tend to kind of go all in or not.
Speaker 1: So that I could go through that, but like that,
Speaker 1: why not we work, well, why all in? Why not?
Speaker 1: Well we'll get to three other investors and will hedge
Speaker 1: our bets and go in partially. Well, there's still so
Speaker 1: there's there a couple of couple of reasons. UM. One
Speaker 1: is just the level of one is just an economic thing,
Speaker 1: which is for us to be the opportunity. So there's
Speaker 1: costs and then there's opportunity costs. And there's always opportunity
Speaker 1: costs on our time and on our ability. How many
Speaker 1: companies gonna work with? Is it more of the time
Speaker 1: or the money. It's it's more of the time. It's
Speaker 1: more the opportunity costs. It's every deal, every deal and
Speaker 1: we do fills a slot that can't be then filled
Speaker 1: by you know, another hundred deals that you might have
Speaker 1: done instead. And right, so there's a big there's a
Speaker 1: there's always there were any deal you do a big
Speaker 1: risk that you're for closing some other deal that much better,
Speaker 1: and so you have to just think very hard about it.
Speaker 1: And right, it's it's it's it's time um. And then
Speaker 1: UM that that that's a big part of it. UM.
Speaker 1: Then there's also just the economics of it UM, which
Speaker 1: is just as a consequence of that, when when you
Speaker 1: have a hit, like how much of it you actually
Speaker 1: own actually really drives your returns um. And so we
Speaker 1: have a responsibility to our parall piece to try to
Speaker 1: you know, really have the the hits pay off um.
Speaker 1: And then part of it is just a full engagement model,
Speaker 1: like we really don't like giving up. We really don't
Speaker 1: like we don't you know, there there are venture firms
Speaker 1: that if your company is not going well, they just
Speaker 1: they'll mysteriously vanage on the visa website like they just
Speaker 1: never get talked, they get dropped down the memory hole. Um.
Speaker 1: And uh, we don't tend to do that. We're just
Speaker 1: and it comes from the fact we've all been founders
Speaker 1: and CEO is like, we just we don't tend to
Speaker 1: give up. Um, you know what it's like when you're
Speaker 1: on the receiving end of unreturned phone calls. That is right, yeah,
Speaker 1: and so and and my view is like our we
Speaker 1: make our money on the ones that work, and we
Speaker 1: probably I think make our reputations and the ones that don't.
Speaker 1: That's a fascinating line right there, because the math behind
Speaker 1: venture investing is, look, when you go out and buy
Speaker 1: stocks in the market, fifty of them will do nothing,
Speaker 1: thirty of them will work, and uh, ten of them
Speaker 1: will be disasters, and a handful them will work really well.
Speaker 1: The odds are far more daunting with venture investing. It's
Speaker 1: it's almost ten x that you have and I think
Speaker 1: you've you've written this elsewhere. You'll make a hundred investments
Speaker 1: and fifty of them just crash. Okay, But it's the
Speaker 1: one or two at the top of the pyramid that
Speaker 1: pay for the other for the whole thing, right exactly.
Speaker 1: And that's actually roughly the math. So yeah, So fifty
Speaker 1: in top tier venture capital, top descile venture capital across
Speaker 1: forty years of data on this, which we have access
Speaker 1: to a couple different ways. Um, basically half the deal's
Speaker 1: good news is it's not a temper cent success, right,
Speaker 1: it's a fifty percent success right right, So it's not
Speaker 1: as bad as some people think. But it is a
Speaker 1: fifty percent success right, meaning it's a fifty percent failure,
Speaker 1: right um. And then meaning fifty percent failure meaning zero
Speaker 1: return on that half about about about half of the
Speaker 1: go to zero and then and then the other half
Speaker 1: returns between zero and one x. They return, recover some capital,
Speaker 1: but not all they message capital. And then the sort
Speaker 1: of that third quartile of sort of fifty, they return
Speaker 1: you know, one to three x and then it's basically
Speaker 1: the upper quartile that returns sort of you know, god
Speaker 1: Welling returns three x plus. And then if you and
Speaker 1: some of the three x plus is a lot more
Speaker 1: plus than So that's the good the good news. The
Speaker 1: bad news is, yeah, you do get that. You you
Speaker 1: do get the ones where you lose one x pretty frequently.
Speaker 1: The good news is they if they, if they work,
Speaker 1: they can make a thousand x right, and so you
Speaker 1: and then the LP. This is the great thing about
Speaker 1: kind of the venture ecosystem. The LPs don't care. So
Speaker 1: for example, in the data, they don't care how you
Speaker 1: make the money just as on as you do. So
Speaker 1: that in the data, for example, the top performing venture
Speaker 1: from strike out more often called the baby Ruth effect,
Speaker 1: the top performing firms have more zeros. Right, they're swinging,
Speaker 1: they're only swinging for home runs and so and by
Speaker 1: definition in venture, if you're only swinging for home runs,
Speaker 1: you're taking more risk on crazier ideas. Makes sense, and
Speaker 1: it's like it's like you know, the famously they're they're
Speaker 1: Google Fund. It was the fund that Google and it
Speaker 1: had segue right and Segway was a legendary disaster, and
Speaker 1: you know, out all this negative publicity and you know
Speaker 1: they guess what they lost one x their money in
Speaker 1: segue right, guess how much money they made on Google right, right?
Speaker 1: And so so. So the good news on it is
Speaker 1: we we and this is something that we're The US
Speaker 1: in particular has a real edge on this, I think
Speaker 1: is we we have a base of limited partners institutional
Speaker 1: investors in the US that deeply understand that this is
Speaker 1: how it works. And so when we have one that
Speaker 1: goes to zero, they don't call us up and yell
Speaker 1: at us and complain there is They're like, yeah, that's
Speaker 1: the cost of doing business. Um. And in fact, we've
Speaker 1: had helpings ask us why we actually don't have more failures?
Speaker 1: Like are you taking enough risk? Really, what they want
Speaker 1: to know is, okay, of the companies that are working,
Speaker 1: how well are they working? And and we call this
Speaker 1: to how high is up? Question? How high is high
Speaker 1: is up? How big could they get? Right? And then
Speaker 1: if and then literally, Alan venture, if you came back,
Speaker 1: if you were lucky enough in venture to come back
Speaker 1: every year with one big, giant home run, and all
Speaker 1: the rest are failures, they'd be totally happy like so,
Speaker 1: so they would not complain about that at all. And
Speaker 1: of course it's very, very different than how the rest
Speaker 1: of Wall Street operates, no doubt. Do you run into
Speaker 1: every time time there's that thousand X do you run
Speaker 1: into How many times do people say, well, this is
Speaker 1: the next Facebook? No, please stop saying that, do you do?
Speaker 1: You sort of end up in that mode where whatever
Speaker 1: was working, Hey, let me explain to you why our
Speaker 1: company is the next X, y Z. Do these cliches
Speaker 1: begin to make you crazy? Yeah, they do. Well, they're
Speaker 1: they're a tip. They usually the really great founders tend
Speaker 1: not to say that. I hope people are listening to
Speaker 1: all these suggestions. This is gonna be a how to pitch.
Speaker 1: Indrees and Horowitz don't go there without having heard all
Speaker 1: these suggestions from this guy named Mark Andres. And I
Speaker 1: would imagine that at a certain point you halfway through
Speaker 1: a pitch, do you look at each other and like,
Speaker 1: all right, we're done with this. Every once in a while, everyone,
Speaker 1: I will say every once in a while, um, but um,
Speaker 1: but I will say this, um. The privilege of the
Speaker 1: job is that these are two thousand of the smartest
Speaker 1: people in the world in the remains in which they're operating,
Speaker 1: who we get to do with every year, and so
Speaker 1: the other that we we learned so much and even
Speaker 1: the deals we're not gonna we're not gonna do it.
Speaker 1: There's something we've just made a mistake and we've seen
Speaker 1: a pitch that we shouldn't seen because we're never going
Speaker 1: to do the deal for some reason. Um, and there's
Speaker 1: you know, a dozen reasons why that could be the case. Um.
Speaker 1: We generally, you generally learned just a lot of contextual
Speaker 1: information about what's happening in that in that industry because
Speaker 1: these people have to get to that point. They've all
Speaker 1: thought these things through. Really back to the idea amazing
Speaker 1: that we're talking about. So that's that's what you just learned.
Speaker 1: You learn and that it's and by the way, once
Speaker 1: your experience that it's just a fire hose of it's
Speaker 1: just the smartest people in the world coming in and
Speaker 1: spending an hour telling you everything they know, like it's
Speaker 1: an amazing how how that was a question? Next question
Speaker 1: is how big of a strategic advantage is getting first
Speaker 1: looks at at two thousand of the smartest people in
Speaker 1: the world. Yeah. Yeah, I think that's a big part
Speaker 1: of it. And I mean, and that's why I'm so
Speaker 1: I've sort of become kind of semi legendary sort of optimist. Um.
Speaker 1: It's really hard, I think, to be pessimistic in this job,
Speaker 1: because you do see all these incredibly fired up people
Speaker 1: with all these incredibly vivid and brilliant ideas, um, and
Speaker 1: you you just you get a sense of the productive
Speaker 1: capacity of capitalism, of the intel rustial pursuits. By the way,
Speaker 1: it's hard to be too negative when you're looking at
Speaker 1: the most optimistic inventions in in the universe. And by
Speaker 1: the way, also the output of the great research universities,
Speaker 1: like so much of what we do is building you
Speaker 1: mentioned earlier, so much of what we do is building
Speaker 1: off and what happens to Stanford and M I. T
Speaker 1: in Berkeley and all these other schools, and it's just
Speaker 1: crystal clear, like how amazing they are. So you know,
Speaker 1: so that it's just this that that that's that's cut
Speaker 1: sort of the psychic payoff from the job is the
Speaker 1: ability to do that. And then it just also i think,
Speaker 1: just becomes clear like there are contra all that, you know,
Speaker 1: the headlines are just all relentless negative these days, there
Speaker 1: are a lot of smart people in the world. There
Speaker 1: are a lot of people have a lot of energy
Speaker 1: in the world who want to legitimately want to build
Speaker 1: new things. Um. It's very exciting and increasingly not just here, right,
Speaker 1: not just in Silicon Valley, not just in the US,
Speaker 1: not just in the West, all over the world, right,
Speaker 1: And and so that that's the other side of it,
Speaker 1: is this, this culture of entrepreneurship is really spreading, um.
Speaker 1: And you know, we're gonna benefit from that in the
Speaker 1: sense of more opportunities, but I think the entire world
Speaker 1: is going to benefit from that. So your focus mostly
Speaker 1: here on the West Coast, primarily Silicon Valley, you're not
Speaker 1: looking at China, You're not looking at India. Is that
Speaker 1: a fair uh servation. So all of our companies want
Speaker 1: to be multinationals, and all of our companies want to
Speaker 1: operate on the ground in all these countries, and all
Speaker 1: of our companies hire a huge number of immigrants, and
Speaker 1: so our our companies by definition, will end up with
Speaker 1: a lot of Chinese immigrant, Indian immigrant. And then by
Speaker 1: the way, a lot of them are actually built offices
Speaker 1: on the ground. A bunch of companies with offices in
Speaker 1: China building up big presences indeed these other countries. UM,
Speaker 1: so we're heavily exposed to the sort of knowledge flow
Speaker 1: and talent that way. UM, we do I guess that
Speaker 1: though we do think venture capital is a craft, there
Speaker 1: is a craft to the business UM and it's it's
Speaker 1: a lot of it's the relationship with the board, the
Speaker 1: board members, and the founders and the team UM. And
Speaker 1: so there's a local dynamic to it. UM. The number
Speaker 1: of venture firms that have successfully figured out how to
Speaker 1: operate in multiple geographies and stay world class, it's a
Speaker 1: very short list, most of the most most generally that
Speaker 1: doesn't work. And so we we've just we've made a
Speaker 1: decision at least for the time being, to try to
Speaker 1: be really good in Silicon Valley. So, by the way,
Speaker 1: we do fund companies outside the valley, but just on
Speaker 1: on an exception basis, like they have to be super special.
Speaker 1: So we do have some of those. So you you
Speaker 1: focus mostly local. Your you're a software absolutist, no clean tech,
Speaker 1: no rocket ships, no electric cars. Is that still true?
Speaker 1: It's it's software and software only, so software at the core.
Speaker 1: So the rule of the rule is software at the core,
Speaker 1: so there has to be We just think there's a
Speaker 1: particular magic around software. There's a particular magic around how
Speaker 1: you can create things with software. Right. It's it's it's
Speaker 1: I call alchemy, like you type on a keyboard and
Speaker 1: then things happen in the real world like that. That's
Speaker 1: an amazing process. There's there's just kind of huge intellectual
Speaker 1: leverage there, and then as a consequence, there is huge
Speaker 1: economic leverage, right, which is there's likes to say capital,
Speaker 1: software is the labor that creates capital. Software is labor
Speaker 1: that Okay, It's the closest thing to magic will ever have.
Speaker 1: It's like typing on the keyboard is like casting a
Speaker 1: spell and then something happens, Right, It's like, you know,
Speaker 1: that's the lift. Lift Guys they type software and then
Speaker 1: all of a sudden, real people are being taken on
Speaker 1: a real rise in real cars, like just by magic,
Speaker 1: Like just the software just caused that to happen. And
Speaker 1: so we are looking for that kind of software leverage,
Speaker 1: the sort of software magic in every company, scalable, magical
Speaker 1: and the ability to convert labor into capital. And then
Speaker 1: as a consequence, but as a consequence of that, our
Speaker 1: companies do end up doing all kinds of different things.
Speaker 1: And so we have some companies that sell software. We
Speaker 1: have some companies that provide softwares a service. We have
Speaker 1: some companies that provide apps. We have some companies that
Speaker 1: are making hardware. We have some companies that are going
Speaker 1: after new new healthcare pursuits and biology, material science like there.
Speaker 1: There's lots of software is becoming so intertwined with the
Speaker 1: world that there are lots of ways to now use it,
Speaker 1: to go to leverage it in a different spaces, and
Speaker 1: so are The range of companies that were funding is
Speaker 1: broader than ever, but they all have software at the core,
Speaker 1: software at the core. Um I started out this segment
Speaker 1: talking about the firm. There's a couple of things I
Speaker 1: have to ask about the firm because I'm fascinated to
Speaker 1: buy it. So you used to blog at p Marca,
Speaker 1: and let me remind you that I warned you to
Speaker 1: pace yourself, young man. You're gonna burn yourself out. I
Speaker 1: don't know if you remember that. And and you tweet
Speaker 1: fairly actively. I know we're on hiatus now and you podcast.
Speaker 1: You guys have a podcast room at this doesn't sound
Speaker 1: like it's the typical forms of communication for the old
Speaker 1: line venture capital front. I mean, everybody has a website
Speaker 1: and there's sort of this interesting, Hey, here are all
Speaker 1: the things we oops, we passed on that we shouldn't have.
Speaker 1: It's sort of this, UM, I guess we could call
Speaker 1: it humility or attempt at humility. Your distult is very different. Here.
Speaker 1: Tell me about the thinking behind that. Yeah, so we're
Speaker 1: just we're trying to teach, like with yourselves, kind of
Speaker 1: has been fundamentally lucky to have seen a lot of
Speaker 1: these things, mentioning these things were trying to teach. We
Speaker 1: think it's by the way to our benefit to teach,
Speaker 1: because if more people know how to do this, then
Speaker 1: there's more companies for us to fund and people for
Speaker 1: us to work with. UM. And then part of it
Speaker 1: is just look, I think technology has gotten very important
Speaker 1: in the world, much more than it used to be,
Speaker 1: and so UM and it's complex and it's hard to understand,
Speaker 1: and so I think and it's hard to understand from
Speaker 1: the outside UM, and so a big part of just
Speaker 1: what we're trying to do is to tell the story
Speaker 1: of what's happening, not just in our firm, but tell
Speaker 1: the story of what's happening in the industry and what's
Speaker 1: happening with all these companies and with the aplications of
Speaker 1: all these technologies. So you mentioned our podcast series. So
Speaker 1: I get no credit for that. Our partners here, UM,
Speaker 1: our partners here have done all the work on that.
Speaker 1: But it's become like I would say, shockingly amazingly important
Speaker 1: and influential among people who care about how technologies affect.
Speaker 1: The level of response we've gotten to that has been
Speaker 1: like an order magnitude beyond what I would have ever
Speaker 1: thought was possible. UM. And the amazing thing is a
Speaker 1: couple of years ago people saying, well, podcast is all
Speaker 1: but over. I just read last week Reid Hoffman of
Speaker 1: LinkedIn is now hosting a podcast. So this is a
Speaker 1: technology that a is not going away as a form
Speaker 1: of communication. What is the benefit to the firm of
Speaker 1: being able to go out and tell a story that
Speaker 1: might not be Hey, here's why you should use injuries
Speaker 1: and Harrowitz. It's never that overt it's always here's some
Speaker 1: interesting things happening in the world of technology you should
Speaker 1: know about. Here's what's happening. A lot of people care
Speaker 1: about I was thinking, a lot of people care about
Speaker 1: this stuff. A lot of people care about the implications.
Speaker 1: A lot of people, by the way, are in a
Speaker 1: position to affect the world, and regulators and journalists and
Speaker 1: people at big companies, um. And so we're trying to
Speaker 1: get to all the people who are decision makers, you know,
Speaker 1: you know, the constituents and the entire ecosystem that have
Speaker 1: to cope with the consequences of technological change. Trying to
Speaker 1: get to those folks. We're trying to pull more people
Speaker 1: into the industry. Right, if more people all over the
Speaker 1: world have a sense of what's happening, then they can
Speaker 1: they can decide they might want to participate. We're trying
Speaker 1: to help people up level of their skills, become more
Speaker 1: knowledgeable about these things. And we I mean, we obviously
Speaker 1: benefit from all that, but just more broadly, like I
Speaker 1: think this is the topic of our time. It's absolutely
Speaker 1: absolutely fascinating. All right, So we're almost at a time
Speaker 1: there's a ton of questions that didn't get to, including
Speaker 1: the speed round. But what I really want to do
Speaker 1: is get to the standard questions. So how many minutes
Speaker 1: can we go over two minutes? That's gonna be tough alright.
Speaker 1: So so, by the way, if I forget to um
Speaker 1: say this, thank you so much for being so generous
Speaker 1: with your time and and and going through such thoughtful,
Speaker 1: detailed answers. These these really been been fascinating. I have
Speaker 1: ten favorite questions. I'm going to just go through a
Speaker 1: two or three of them really quickly. Tell us something
Speaker 1: about your background that most people don't know. Probably big one.
Speaker 1: I grew up in the roal Midwest. I grew up
Speaker 1: in Trump Country. You did, yes, absolutely, And has that
Speaker 1: affected your output on on the world at all? Your outlook? Yeah? Absolutely.
Speaker 1: Early mentors Jim Clark, Jim Barksdale, um with the two
Speaker 1: big ones and say, very complimentary personalities that work together
Speaker 1: very well, but also starkly different in their skill sets
Speaker 1: and orientations. And I learned a lot for both of them.
Speaker 1: The question I get from listeners more than anyone asked
Speaker 1: your guests what their favorite books are? Favorite books? So
Speaker 1: I have three quick nominations, and I'm getting getting the
Speaker 1: hook here, uh Port Charlie's Almanac, The Companion Speeches. I
Speaker 1: think it's tremendous. Um um. Extreme Ownership has been a
Speaker 1: favorite recent book. A guy named Jocko Willink is a
Speaker 1: former Navy seal commander UM, one of the stream ownership
Speaker 1: streame Ownership Um one of the best books on leadership
Speaker 1: I've ever I've ever read in a tremendous by the
Speaker 1: Way word story book as well. UM. And then what
Speaker 1: is the Man? There are so many there's a brand
Speaker 1: new book. O Roberts of Pulsky has a new book
Speaker 1: I've just started on human behavior of his magna Opus
Speaker 1: on human behavior. He's the great evolutionary theorist. And so
Speaker 1: that would probably be the third one that that's the
Speaker 1: new one, but it looks very exciting. And then our
Speaker 1: final question, what is it that you know about technology
Speaker 1: and venture capital investing today that you wish you knew
Speaker 1: five plus years ago when you were first starting out. Oh,
Speaker 1: there are no bad ideas. There are only early ideas.
Speaker 1: No bad ideas, just earlier ideas happen. It'll all happen.
Speaker 1: I've become convinced now it'll all happen. Every smart person
Speaker 1: who comes in here with a crazy idea, it's all
Speaker 1: going to happen. At some point, they all happen. It's
Speaker 1: just a question to win. We have been speaking with
Speaker 1: Mark Andreason of Andrews and Horowitz. UH. If you enjoy
Speaker 1: this conversation, be sure and check out all our other
Speaker 1: such chats. You can find them on SoundCloud, Apple iTunes
Speaker 1: and Bloomberg dot com. I would be remiss if I
Speaker 1: did not thank our hosts, Mark Andreason and the crew
Speaker 1: here at Andreason Horowitz, as well as Mike Batnick, who
Speaker 1: is my head of research and help put these stans together.
Speaker 1: We love your comments, feedback and suggestions right to us
Speaker 1: at m IB podcast at Bloomberg dot net. I'm Barry Ridholts.
Speaker 1: You're listening to Masters and Business on Bloomberg Radio. Our
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