WEBVTT - Interview With Marc Andreessen: Masters in Business (Audio) 0:00:00.160 --> 0:00:02.480 The future may not be clear, but our commitment is 0:00:02.640 --> 0:00:04.480 so when you sit with an advisor at Merrill Lynch, 0:00:04.559 --> 0:00:07.200 we'll put your interests first. Visit mL dot com and 0:00:07.280 --> 0:00:09.680 learn more about Merrill Lynch an affiliated Bank of America. 0:00:09.800 --> 0:00:12.240 Merrill Lynch makes available products and services offered by Merrill Lynch. 0:00:12.280 --> 0:00:14.640 Pierce Veneran Smith Incorporated or Register Broker Dealer. Remember s 0:00:14.680 --> 0:00:20.880 I p c V is Masters in Business with Barry 0:00:21.000 --> 0:00:25.920 Ridholts on Bloomberg Radio this week on the podcast this 0:00:26.000 --> 0:00:28.600 was so much fun. I cannot begin to tell you 0:00:28.720 --> 0:00:32.800 what a delightful time I had. Mark Andresen of Andres 0:00:32.800 --> 0:00:38.000 and Horowitz, an absolute tour to force conversation about everything 0:00:38.159 --> 0:00:44.760 from valuation to psychological impact of market crashes too, are 0:00:44.840 --> 0:00:47.800 we or are we not in a bubble? The significance 0:00:47.840 --> 0:00:52.720 of of UH founders, and and how are you better 0:00:52.760 --> 0:00:56.800 off with somebody who has people skills um but isn't 0:00:56.800 --> 0:01:00.480 a technologist or a technologist who doesn't necessary fairly have 0:01:00.560 --> 0:01:03.680 the social skills? On and on. We covered so much 0:01:03.720 --> 0:01:10.560 ground so quickly, absolutely fascinating. It was an incredible, incredible conversation. 0:01:11.319 --> 0:01:14.520 It's one of those things where you just say, how 0:01:14.560 --> 0:01:18.000 privileged am I to sit in a conference room, indeed 0:01:18.040 --> 0:01:22.640 the conference room where Andreason Horowitz gets pitched from various 0:01:22.800 --> 0:01:27.520 startups and have a ninety minute chat with someone with 0:01:27.720 --> 0:01:33.920 his just amazing understanding of where tech came from, where 0:01:33.959 --> 0:01:36.880 it is today, and where it's going. I could babble 0:01:36.920 --> 0:01:40.400 about this endlessly, but rather than gush, why don't we 0:01:40.560 --> 0:01:44.520 just listen to the conversation with no further ado. My 0:01:44.680 --> 0:01:51.080 podcast conversation with Mark Andreson of andres In Horowitz. This 0:01:51.520 --> 0:01:55.600 is Masters in Business with Barry Ridholtz on Bloomberg Radio. 0:01:56.200 --> 0:02:00.680 My special guest today is Mark Andreason. He is the 0:02:00.800 --> 0:02:05.200 co founder and general partner of venture capital firm Andreson Harowitz. 0:02:05.520 --> 0:02:09.600 He comes with a storied background. He co created the 0:02:09.639 --> 0:02:14.480 Mosaic Internet browser, co founded Netscape, sold to a O 0:02:14.639 --> 0:02:17.600 L for a few billion dollars. Co founded loud Cloud, 0:02:18.120 --> 0:02:22.400 also sold to HP for a few billion dollars. Crunch 0:02:22.480 --> 0:02:26.400 Base notes that Andreson Harowitz has over five hundred investments 0:02:26.440 --> 0:02:31.000 in three D one companies, a number of exits via 0:02:31.240 --> 0:02:34.520 I p O s and acquisitions. I could go on 0:02:34.600 --> 0:02:39.160 and on about his curricular vita, but really he speaks 0:02:39.200 --> 0:02:43.160 for himself, so let's jump right into this, Mark Andreason, 0:02:43.639 --> 0:02:46.880 welcome to Bloomberg Radio, and thank you for hosting us here. 0:02:47.120 --> 0:02:49.480 In Andrews and Harrowitz. I'm thrilled to be on him 0:02:49.520 --> 0:02:51.760 and it's great to have you here. The I love 0:02:51.800 --> 0:02:54.680 your facilities. We we love all the artwork and everything here. 0:02:54.720 --> 0:02:57.639 It seems to be like a very civilized place to 0:02:57.639 --> 0:02:59.679 to work. It's like, I don't know said, being a 0:02:59.760 --> 0:03:02.680 venture capitalist is like being an airline pilot, long stretches 0:03:02.720 --> 0:03:05.919 of boardom followed by moments of sheer terror. We try 0:03:05.960 --> 0:03:08.640 to have a calm atmosphere that makes a lot of sense. 0:03:08.840 --> 0:03:11.640 Let's let's go back to the beginning. Your Your big 0:03:11.680 --> 0:03:16.840 idea in was that people would want internet access in 0:03:16.919 --> 0:03:20.120 their homes. Now that's a given today we want internet 0:03:20.120 --> 0:03:24.359 access wherever we are seven But twenty five plus years 0:03:24.400 --> 0:03:29.960 ago that wasn't very obvious. What led you to say 0:03:30.040 --> 0:03:34.359 in I have an idea an Internet browser. Yes, I 0:03:34.360 --> 0:03:36.440 would say it was even beyond not obvious. It was 0:03:36.480 --> 0:03:39.960 considered ridiculous. So the idea that basically it was well 0:03:40.000 --> 0:03:42.760 known in that the Internet was for academics and nerds, 0:03:43.280 --> 0:03:45.400 and that there was there was no use case for 0:03:45.520 --> 0:03:48.360 Mary people like it was just incomprehensible, like why would anybody, 0:03:48.400 --> 0:03:50.640 how would anybody even have the technical capability to even 0:03:50.680 --> 0:03:53.680 consider getting online, much less of anything that they could 0:03:53.720 --> 0:03:57.880 do productively was their online. Um, I've since actually in 0:03:58.320 --> 0:03:59.960 your sense that actually learned a principle that I have 0:04:00.000 --> 0:04:01.920 generalized out that it explains what happened, which is what 0:04:02.000 --> 0:04:04.760 William Gibson, the science famous science fiction author wrote Neuromancer. 0:04:05.280 --> 0:04:07.160 It was a very influential book in our industry. He 0:04:07.160 --> 0:04:10.480 he says, his his line is the future is already here, 0:04:10.480 --> 0:04:13.119 it's just not evenly distributed yet. And there are many 0:04:13.160 --> 0:04:17.520 applications to that line. It's so it's such a fabulous insight. 0:04:18.120 --> 0:04:19.800 And so the new ideas, this is something I've really 0:04:19.800 --> 0:04:22.000 come to believe, is the new ideas already exist. Uh, 0:04:22.040 --> 0:04:24.200 there are a few ideas that actually materialized out of 0:04:24.200 --> 0:04:26.559 thing air. They generally already exist somewhere, and they exist 0:04:26.560 --> 0:04:28.720 somewhere in a lab, right if they exist somewhere in 0:04:28.760 --> 0:04:31.160 a fringe group or in an underground movement or something 0:04:31.240 --> 0:04:33.279 like that. And so what happened here was and this 0:04:33.279 --> 0:04:35.159 this is the part that's just I think probably pure luck. 0:04:35.680 --> 0:04:37.840 Um is I went to college at University of Illinois, 0:04:38.320 --> 0:04:40.680 which at that time was one of four universities in 0:04:40.720 --> 0:04:42.640 the country that had been funded by the government to 0:04:42.680 --> 0:04:44.560 be the hubs for what at the time was called 0:04:44.600 --> 0:04:47.560 the NSF net, which was what became the Internet. And 0:04:47.600 --> 0:04:49.880 so then there's there's a whole program developed in the 0:04:49.880 --> 0:04:52.640 eighties around supercomputers. And this is what you know when Elgar, 0:04:52.720 --> 0:04:54.599 when Elgar claimed credit for creating the Internet, this is 0:04:54.640 --> 0:04:57.200 what he was talking about, was the funding, UH for 0:04:57.200 --> 0:04:59.440 for this program to wire these universities. And so we 0:04:59.520 --> 0:05:03.400 had on campus in the level of broadband that people 0:05:03.440 --> 0:05:05.640 have in their homes today. Um, and we had the 0:05:05.720 --> 0:05:07.720 use We saw the use cases. You saw everybody using 0:05:07.760 --> 0:05:09.159 all this stuff. Now it wasn't at the level of 0:05:09.279 --> 0:05:11.839 sophistication is today, but you could you could see that, 0:05:11.839 --> 0:05:13.160 you could see all the use cases. You can see 0:05:13.200 --> 0:05:15.440 many people liked it. But the expectation was you had 0:05:15.440 --> 0:05:16.960 in college and then you would graduate and you would 0:05:17.000 --> 0:05:18.840 go off into life and you would just give it up. 0:05:19.240 --> 0:05:20.800 And that was the part where I was like, uh 0:05:21.279 --> 0:05:24.600 and s f NET was after darker NEET, but before 0:05:25.000 --> 0:05:28.840 full on internet for the public. Is that a fair explanation. Yeah, 0:05:28.880 --> 0:05:33.159 that's right, So our DARPA. ARPA was known as ARPA, 0:05:33.200 --> 0:05:35.880 now known as DART, but funded a military network which 0:05:35.960 --> 0:05:38.239 was originally conceived as a way to do nuclear command 0:05:38.279 --> 0:05:40.720 and control in the event of bad things happening in 0:05:40.760 --> 0:05:43.720 the world. Therefore the importance of packet switching UM had 0:05:43.760 --> 0:05:46.640 to be able to respond even after you've been attacked 0:05:46.680 --> 0:05:48.960 by nuclear You've got a network with you know, it's 0:05:48.960 --> 0:05:50.680 a hundred nodes and then twenty of them get wiped 0:05:50.680 --> 0:05:51.960 out by attack, and you still have to have the 0:05:51.960 --> 0:05:53.920 network has to still keep running. In traditional networks don't 0:05:53.960 --> 0:05:55.880 keep running, and at least in theory packets which networks 0:05:55.920 --> 0:05:57.960 can keep running. So so that was the that Then 0:05:58.000 --> 0:05:59.840 this is like fifty years ago they all figured this 0:06:00.040 --> 0:06:02.440 up out and then in the eighties that the idea 0:06:02.520 --> 0:06:04.799 got generalized out to the idea that civilian researchers should 0:06:04.800 --> 0:06:07.320 be able to use this technology. UM. In particular, actually 0:06:07.360 --> 0:06:10.400 the government was funding these national supercomputer centers that were 0:06:10.400 --> 0:06:13.600 buying a super expensive supercomputers to put on four or 0:06:13.640 --> 0:06:16.240 five college campuses, and then they wanted to provide access 0:06:16.279 --> 0:06:17.840 to scientists from all over the country to be able 0:06:17.839 --> 0:06:20.240 to access those and so they trans basically took the 0:06:20.279 --> 0:06:22.600 template of our pendet, turned it into nsf net and 0:06:22.680 --> 0:06:25.280 allowed anybody to love with permission to log into those 0:06:25.320 --> 0:06:28.599 computers have temporary time. You would have a few minutes 0:06:28.720 --> 0:06:31.880 or hours whatever it was. And and that's eventually where 0:06:32.320 --> 0:06:35.640 led to uh the full on internet. But let's let's 0:06:35.680 --> 0:06:38.719 talk about the other name and Andres and Harowitz Ben Harrowitz. 0:06:39.200 --> 0:06:41.600 You guys have been working together for a long time. 0:06:42.080 --> 0:06:44.720 Have you made that partnership work? And how did it 0:06:44.760 --> 0:06:47.920 really begin? Because if if what I've read is to 0:06:48.040 --> 0:06:51.640 be believed, some of it started out a little little rocky. 0:06:52.160 --> 0:06:54.520 Ben Ben took great delight in his book uh In 0:06:54.800 --> 0:06:57.919 in describing the origins of the relationships. So um uh 0:06:58.040 --> 0:07:00.360 so at this point where an old married couple. Um, 0:07:00.520 --> 0:07:03.160 and so you know, I guess the good news is 0:07:03.200 --> 0:07:05.320 we can finish each other sentences. Bad news is we 0:07:05.400 --> 0:07:09.240 usually try to finish each each other's sences. So um, so, 0:07:09.600 --> 0:07:11.440 you know, we we've had a long running partnership and 0:07:11.440 --> 0:07:12.960 friendship for you know, for a very long time, now 0:07:13.040 --> 0:07:16.520 twenty two years. I guess, um the origin of it actually, 0:07:16.600 --> 0:07:18.320 so he was he wasn't early he was one of 0:07:18.400 --> 0:07:20.360 the early guys actually to jump int an escape early 0:07:20.440 --> 0:07:22.920 on when it was when Escape was telerotical idea actually 0:07:22.920 --> 0:07:24.520 came over from Lotus, which at the time was this 0:07:24.560 --> 0:07:27.720 big important, you know, dominant software company eventually booked by IBM. 0:07:28.720 --> 0:07:32.040 Actually fun story by M. After he left, IBM bought 0:07:32.080 --> 0:07:33.760 Lotus for I think three and a half billion dollars 0:07:33.760 --> 0:07:36.040 at the time, which was a blockbuster deal in retrospect, 0:07:36.120 --> 0:07:37.840 I'd spent three and a half billion dollars. They could 0:07:37.840 --> 0:07:40.880 have bought the entire Internet instead of Lotus. They could 0:07:40.880 --> 0:07:42.960 have bought every Internet company and every I s P 0:07:43.040 --> 0:07:45.080 and they could have owned the whole thing. So anyway, 0:07:45.080 --> 0:07:47.400 he saw the future. Not the first time ib AM 0:07:47.480 --> 0:07:49.600 missed a boat what is it and probably won't be 0:07:49.640 --> 0:07:51.920 the last big companies. Yeah that we all we all 0:07:51.920 --> 0:07:53.280 at some point tend to tend to do that. But 0:07:53.480 --> 0:07:56.200 um uh, he saw, you know, he I think, to 0:07:56.320 --> 0:07:57.800 his great he saw the future. He saw he saw 0:07:57.840 --> 0:07:59.640 what was going to happen, I mean, even more clearly 0:07:59.640 --> 0:08:01.560 than a lot of other people who were involved back down, 0:08:01.600 --> 0:08:04.000 and so he jumped over um and then you know, 0:08:04.040 --> 0:08:06.560 an Escape was a was a very short right, but 0:08:06.600 --> 0:08:08.360 it was very intense. It was a pressure cooker, and 0:08:08.360 --> 0:08:10.520 so it was very easy to see internally who was 0:08:10.600 --> 0:08:13.120 high potential who wasn't UM, And so we had him 0:08:13.160 --> 0:08:15.080 on a very fast promotion path basically from the day 0:08:15.080 --> 0:08:17.680 he joined. And I think had we potential? Is that 0:08:17.920 --> 0:08:20.320 that's the phrasey Yeah, high potential like UM, you know young? 0:08:20.400 --> 0:08:22.520 You know basically you're always trying these organizations to find 0:08:22.560 --> 0:08:23.960 the young managers who you think are going to be 0:08:24.000 --> 0:08:25.760 able to scale and grow and eventually become the leaders 0:08:25.800 --> 0:08:27.720 of the company. Right, And so I think that I 0:08:28.000 --> 0:08:29.760 think had had an escape stayed and we sold a 0:08:29.760 --> 0:08:32.199 company in had had we stayed independent, I think he 0:08:32.200 --> 0:08:33.840 would have ended up as the CEO at some point. 0:08:34.320 --> 0:08:35.959 He was just still very young at that point. But 0:08:36.040 --> 0:08:38.040 it's just very clear how much but how smart he was, 0:08:38.120 --> 0:08:39.800 and how good of a leader he was, and how 0:08:39.800 --> 0:08:43.439 good his judgment was. UM. And so when we then 0:08:43.720 --> 0:08:45.480 after we saw the company, we then had the opportunity 0:08:45.520 --> 0:08:47.880 to start a new company, and we just we became 0:08:47.920 --> 0:08:50.040 clear that we wanted to work together. So let's talk 0:08:50.120 --> 0:08:54.719 about UM, Jim Clark, UM I became I always kind 0:08:54.720 --> 0:08:57.319 of knew who Jim Clark was. But then Michael Lewis 0:08:57.480 --> 0:09:00.400 is the new new thing is what really ted Jim 0:09:00.480 --> 0:09:05.319 Clark for me? Um, what was that like, meaning, Jim Clark, 0:09:05.400 --> 0:09:08.320 how did you guys start to work together? Yeah, so Jim, 0:09:08.400 --> 0:09:10.160 that was again probably struck a luck in my career. 0:09:10.320 --> 0:09:13.439 Jim called me one day out of blue. Also a 0:09:13.480 --> 0:09:15.280 friend of his, an associate of his who he had 0:09:15.280 --> 0:09:17.000 worked with. So he had been the founder of this 0:09:17.080 --> 0:09:19.520 company called Silicon Graphics, which at the time had a 0:09:19.559 --> 0:09:22.360 reputation similar to Google's reputation today. It was considered the 0:09:22.440 --> 0:09:24.920 sort of the gold standard Silicon Valley company that all 0:09:24.920 --> 0:09:26.480 the green engineers wanted to work for. It was very 0:09:26.559 --> 0:09:28.480 much this is when after the movie Terminator two came 0:09:28.480 --> 0:09:30.240 out and they were redefining this whole idea of three 0:09:30.280 --> 0:09:32.760 D special effects and they were reading it was just 0:09:32.840 --> 0:09:35.160 this kind of amazing moment for this company. But he 0:09:35.360 --> 0:09:37.720 he left for a variety of reasons, um, and decided 0:09:37.760 --> 0:09:39.679 he wanted to start a second company. Um. And so 0:09:39.760 --> 0:09:41.360 this is a little bit little bit like Larry Page 0:09:41.440 --> 0:09:43.559 leaving Google or Mark Zuckerberg leaving Facebook and saying I 0:09:43.600 --> 0:09:46.480 need to start a new company. Um and then um, 0:09:46.720 --> 0:09:49.080 but he had hired everybody he knew who was smart, 0:09:49.120 --> 0:09:51.400 who he had ever worked with into Silicon Graphics, and 0:09:51.480 --> 0:09:54.240 so they weren't available to start a new company with him, 0:09:54.240 --> 0:09:57.360 and so he literally needed fresh people. So he got 0:09:57.400 --> 0:09:59.360 together with a group of friends and basically made a 0:09:59.400 --> 0:10:01.280 list of p bowl who were in the industry who 0:10:01.400 --> 0:10:04.280 he had not yet worked with UM and he actually 0:10:04.400 --> 0:10:06.080 I was culminated at a list of about a dozen 0:10:06.160 --> 0:10:09.400 people who he approached at various stages and said, you 0:10:09.400 --> 0:10:11.679 know what, do you want to consider doing something together UM, 0:10:11.760 --> 0:10:13.719 which culminated in a big dinner in Palo Alto with 0:10:13.800 --> 0:10:15.360 like the full dozen of us. And then at the end, 0:10:15.440 --> 0:10:16.559 at the end of the whole process, I was the 0:10:16.600 --> 0:10:19.840 only one left standing. Really, that's fascinating, by the way, 0:10:19.840 --> 0:10:21.480 it wasn't because necessarily I think he knocked some of 0:10:21.520 --> 0:10:22.840 the others out of the process, but also a lot 0:10:22.880 --> 0:10:24.720 of people they were just like they had jobs, they 0:10:24.760 --> 0:10:27.240 were committed, they weren't willing to take yet another leap. 0:10:27.320 --> 0:10:29.760 And this was a pretty also people forget like ninety 0:10:30.559 --> 0:10:33.160 four we started escaping ninety four. It was very similar 0:10:33.679 --> 0:10:35.360 mood in the valley then to what happened ten years 0:10:35.440 --> 0:10:37.200 later after the dot com crash. It was a very 0:10:37.280 --> 0:10:39.720 dark time in the valley um. That valley had had 0:10:39.760 --> 0:10:43.800 a severe economic crash in one and was still kind 0:10:43.800 --> 0:10:45.839 of in the Dould rooms at niny four. So the 0:10:45.920 --> 0:10:47.880 idea of a startup was considered kind of a radical 0:10:47.960 --> 0:10:50.360 thing and and potentially a dangerous thing from a career standpoint, 0:10:50.640 --> 0:10:52.199 And so it wasn't the most obvious thing in the 0:10:52.240 --> 0:10:53.880 world for people to leap into the into the new 0:10:53.960 --> 0:10:55.760 thing and so and then in contrast, I had just 0:10:55.840 --> 0:10:57.679 arrived out of college. I had nothing. I didn't think 0:10:57.720 --> 0:10:59.760 the lewis, you have no baggage, you were ready to go. 0:11:00.120 --> 0:11:03.160 So I always have this vision of the reason Netscape 0:11:03.280 --> 0:11:08.320 led to this explosion of new technologies. At the time, 0:11:08.400 --> 0:11:12.240 Microsoft pretty much was the only game in town, and 0:11:12.440 --> 0:11:17.600 very often I just envisioned young guys with great ideas 0:11:17.760 --> 0:11:21.760 going to venture capitalists and and every pitch meeting someone 0:11:21.920 --> 0:11:25.079 ends up saying, what prevents Microsoft from building this into 0:11:25.320 --> 0:11:27.840 into their operating system? And if you didn't have an 0:11:27.840 --> 0:11:30.360 answer to that, thanks for coming by, see you later. 0:11:30.760 --> 0:11:36.479 And Netscape allowed everybody to say, hey, we could bypass 0:11:36.600 --> 0:11:40.440 the operating system and do this online. Am I remotely 0:11:40.640 --> 0:11:45.559 close to the that early nineties understanding of of what 0:11:45.760 --> 0:11:48.560 who was then the dominant software player. Yeah, so strategically 0:11:48.600 --> 0:11:50.280 I think that's right and that that was a big effect. 0:11:50.280 --> 0:11:51.599 But I would say there was an equal kind of 0:11:51.640 --> 0:11:53.640 effect at the same time that was at least as important, 0:11:53.679 --> 0:11:56.720 which was unlocking the potential of the people in the valley. 0:11:56.800 --> 0:12:00.360 So the most astonishing thing to me, um was I 0:12:00.360 --> 0:12:01.840 mean because because the Internet, like I said, the Internet 0:12:01.880 --> 0:12:03.520 stuff was not we started to escape like this was 0:12:03.559 --> 0:12:04.959 not considered like, oh yeah, this is a great idea. 0:12:05.040 --> 0:12:07.439 Most people like, Okay, this is nutty, Like everybody knows. 0:12:07.520 --> 0:12:09.200 It was common that everybody knows you can't make money 0:12:09.240 --> 0:12:11.520 on the Internet. There's probably to do it. Commercial activity 0:12:11.520 --> 0:12:13.839 on the Internet was actually illegal until en right, it 0:12:13.880 --> 0:12:16.480 actually was not permitted, but because it was federally research 0:12:17.720 --> 0:12:20.599 that this is before the days of dot com. It 0:12:20.679 --> 0:12:23.320 was just dot edge you and yeah, but you could 0:12:23.320 --> 0:12:24.839 have do comment, you couldn't do any commerce, you couldn't 0:12:24.840 --> 0:12:27.120 be transactions. It was there was these called acceptable use 0:12:27.200 --> 0:12:29.440 limits because it was federally funded and they didn't they 0:12:29.480 --> 0:12:31.720 hadn't legalized it yet. So um, we started to asking 0:12:31.840 --> 0:12:33.439 kind of right right as they switched it. So, but 0:12:33.520 --> 0:12:35.640 it was widely views Number one it's illegal. Um. And 0:12:35.720 --> 0:12:37.720 then number two, even if it were legal, people wouldn't 0:12:37.720 --> 0:12:39.079 want to do it because you can't trust the Internet. 0:12:39.120 --> 0:12:40.800 There's hackers and thieves and all this stuff and it's 0:12:40.840 --> 0:12:43.040 just not something. And then ordinary people just won't do this, 0:12:43.120 --> 0:12:46.960 and so so it was very contintuitive. Um. Within a year, though, 0:12:47.240 --> 0:12:50.240 like with by when the sort of conventional wisdom, people 0:12:50.280 --> 0:12:51.839 started to get exposed to it and they started to 0:12:51.880 --> 0:12:53.040 have it in their lives and I started to say, 0:12:53.080 --> 0:12:54.880 oh wow, I actually like this and this this starts 0:12:54.880 --> 0:12:57.840 to making more sense. There was then this amazing flood 0:12:57.880 --> 0:13:00.720 of talent. We're all these incredibly sharp people in Silicon 0:13:00.840 --> 0:13:04.000 Valley who had worked on previous generation sub technology for 0:13:04.080 --> 0:13:06.640 the previous twenty years. They turned out they were still here, 0:13:06.880 --> 0:13:08.640 right and so, and they were either at the older 0:13:08.679 --> 0:13:10.360 companies or they were just parked, you know, kind of 0:13:10.440 --> 0:13:11.920 on the beach, and all of a sudden there was 0:13:11.960 --> 0:13:13.439 a new thing and they just all showed up out 0:13:13.440 --> 0:13:16.080 of nowhere um. And so it was like this materialization 0:13:16.120 --> 0:13:18.280 of human capital and talent basically out of thin air. 0:13:18.320 --> 0:13:20.520 And I was just astonished and say, these incredibly talented 0:13:20.559 --> 0:13:24.000 people coming in, engineers, marketers, salespeople, and then all that 0:13:24.080 --> 0:13:25.080 you know, all the other people you need to make 0:13:25.080 --> 0:13:26.840 a company go hr people and lawyers and all these 0:13:26.840 --> 0:13:29.400 people find its people. They just show up, and all 0:13:29.400 --> 0:13:31.200 of a sudden, you've got this company that's like fully 0:13:31.280 --> 0:13:32.679 up and running with all these people with all these 0:13:32.679 --> 0:13:35.040 skills and experiences that you didn't even I didn't even 0:13:35.120 --> 0:13:36.880 think was possible. Well did they. And this is the 0:13:36.920 --> 0:13:38.319 magic of the valley. But I mean this is the 0:13:38.360 --> 0:13:40.040 people's side of the magic of the valley. As the 0:13:40.120 --> 0:13:42.319 human capital. Well that the people will flow into the 0:13:42.360 --> 0:13:45.160 next opportunity much more aggressively than then you'll find, I think, 0:13:45.160 --> 0:13:46.719 anywhere else in the world. So when I when you 0:13:46.800 --> 0:13:49.640 say they just show up, in my mind's eye, you 0:13:49.800 --> 0:13:52.120 have Stanford, you have Berkeley, you have all these great 0:13:52.200 --> 0:13:56.719 universities nearby, cal Tech Um, you have a history of 0:13:56.960 --> 0:14:00.400 of companies going back to Fairchild, Semi can Doctor and 0:14:00.520 --> 0:14:04.120 what have you, plus a lot of defense and NASA 0:14:04.240 --> 0:14:08.800 related stuff, So you would you would envision it's almost 0:14:08.880 --> 0:14:11.800 like all the parts are are they're just waiting for 0:14:11.960 --> 0:14:16.680 something to crystallize it and send everybody off. So I've 0:14:16.679 --> 0:14:19.600 always looked at this as this is kind of a 0:14:19.720 --> 0:14:22.720 magic one of the magic parts of the country, and 0:14:23.600 --> 0:14:25.880 Boston is similar, and d C is similar, and and 0:14:25.960 --> 0:14:28.840 now Seattle has it, and to a lesser degree, Portland's 0:14:29.080 --> 0:14:31.800 has that same sort of Once you get a critical 0:14:31.920 --> 0:14:34.800 mass of human capital, well all bets are off. Who 0:14:34.840 --> 0:14:39.080 knows where this goes? Although you seemingly have known where 0:14:39.160 --> 0:14:41.480 this was going to go before many other people in 0:14:41.560 --> 0:14:44.920 some cases but not others. What was your So to 0:14:45.000 --> 0:14:47.880 get back to the original question about Michael Lewis's New 0:14:47.920 --> 0:14:50.520 New Thing, I assume you read the book. Did you 0:14:50.680 --> 0:14:54.040 enjoy it? Did it ring true? Uh? Do you recognize 0:14:54.040 --> 0:14:56.600 a lot of the characters and it even people you 0:14:56.680 --> 0:14:59.400 may may not necessarily know. I would say, you're captured 0:14:59.440 --> 0:15:00.960 a moment in time which is sort of the top 0:15:01.000 --> 0:15:03.360 of the dot com bubble um. And then it captured 0:15:03.400 --> 0:15:05.480 a part of Jim's personality, which is the ability to 0:15:05.560 --> 0:15:08.200 kind of materialize new ideas out of thin air into existence. 0:15:08.800 --> 0:15:10.800 I don't think it captured, in fairness to Jim, I 0:15:10.800 --> 0:15:13.560 don't think it captured his depth as much as so 0:15:14.080 --> 0:15:15.600 that's hard to do if you're hard to do so 0:15:16.080 --> 0:15:18.600 just specifically Jim Jim, and the book tells a lot 0:15:18.640 --> 0:15:21.080 of his life stories. He had very very interesting background 0:15:21.160 --> 0:15:23.400 but basically culminated ultimately in the Navy and so forth, 0:15:23.440 --> 0:15:25.480 but ultimately culminated in THEO had a PhD in computer 0:15:25.560 --> 0:15:27.960 science from the University of Utah, which was actually the 0:15:28.120 --> 0:15:30.080 creation origin point for a lot of than things in 0:15:30.120 --> 0:15:32.400 our industry today. Actually, there was something special that happened 0:15:32.440 --> 0:15:35.680 University of Utah in the sixties and seventies, um and uh, 0:15:35.880 --> 0:15:37.960 basically all of computer graphics and video games and all 0:15:37.960 --> 0:15:39.280 this stuff and all the stuff that led to s 0:15:39.360 --> 0:15:41.120 g I. Ultimately it was all kind of conceived. The 0:15:41.200 --> 0:15:44.240 ideas were conceived actually Utah at that time. Pixar it 0:15:44.320 --> 0:15:46.080 all if you'd like trace Pixar back. It all flows 0:15:46.120 --> 0:15:48.280 back to this moment in time at the University of Utah. 0:15:48.320 --> 0:15:50.200 And so so anyways, say to PhD and CS and 0:15:50.200 --> 0:15:52.400 then he went to Stanford. He's a professor at Stanford, right, 0:15:52.440 --> 0:15:54.040 and then he just decided he was the life of 0:15:54.040 --> 0:15:58.720 an academic was not. Academics don't have the largest yacht 0:15:58.760 --> 0:16:00.480 in the world, and he was building one of the 0:16:00.600 --> 0:16:03.320 largest sailing vessels. I think he wanted to play a 0:16:03.360 --> 0:16:05.240 little more than he wanted to teach or at least 0:16:05.520 --> 0:16:07.160 that's my take. Oh so this is part of the 0:16:07.240 --> 0:16:09.680 thing also that yeah he's so that that that and 0:16:09.880 --> 0:16:11.680 becoming a big part of the book. Um, But I 0:16:11.680 --> 0:16:13.440 would then again, I would just say what was missed 0:16:13.560 --> 0:16:15.120 was when I worked with Jim and other people over 0:16:15.240 --> 0:16:16.960 to Jim will tell you like he goes just as 0:16:17.000 --> 0:16:19.240 deep as he goes broad like he is he is 0:16:19.520 --> 0:16:22.200 very deeply in the details of technology. He's not. He's not. 0:16:22.640 --> 0:16:24.120 The book makes it, I think, come across like he 0:16:24.160 --> 0:16:26.000 kind of glosses over the details and leads those to 0:16:26.080 --> 0:16:28.440 the other to other people. Uh we I did not 0:16:28.480 --> 0:16:30.800 find a big case like he's incredibly deep in technology. 0:16:30.880 --> 0:16:33.720 He's an incredibly comprehensive thinker on all aspects of business. 0:16:33.840 --> 0:16:36.240 Like he he goes really really deep. It's just that's 0:16:36.280 --> 0:16:38.440 not quite as I don't know, not quite as sexy 0:16:38.480 --> 0:16:40.880 for the book, I guess. Um. And so yeah, it 0:16:40.960 --> 0:16:42.880 captured part of his personality, but it didn't capture the 0:16:42.960 --> 0:16:45.080 depth and the seriousness and the application and his role 0:16:45.160 --> 0:16:48.640 really as a primary inventor and inventor not just if ideas, 0:16:48.640 --> 0:16:51.240 but inventor of actual technologies and then also by the way, 0:16:51.320 --> 0:16:53.240 as a recruiter. Um. He's one of the great all 0:16:53.320 --> 0:16:56.000 time people who can gather other people around them, and 0:16:56.080 --> 0:16:58.680 he's he's really good at painting a picture. Um, and 0:16:58.760 --> 0:17:01.520 he's because he's so deep the technology he carries tremendous. 0:17:01.760 --> 0:17:03.280 There's a lot of people who are promotional, right, a 0:17:03.280 --> 0:17:04.560 lot of people will show up and they'll say we're 0:17:04.560 --> 0:17:06.560 gonna do X, y Z. And the engineers will be like, well, 0:17:06.800 --> 0:17:08.440 you don't like what you know? Where did you go 0:17:08.520 --> 0:17:10.960 to school? Like what's your professional credential to be able 0:17:11.000 --> 0:17:13.000 to have this concept? And why do you think we're 0:17:13.000 --> 0:17:14.440 just gonna do all this for you? Whereas a gym 0:17:14.520 --> 0:17:17.760 he's like, he's like an actual technology legend, right, who 0:17:17.800 --> 0:17:19.919 probably knows more about the topic than you do. Um. 0:17:20.040 --> 0:17:22.120 And so he paints the picture and then he gets 0:17:22.200 --> 0:17:24.960 buy in from people, you know, incredible amazing people. So 0:17:25.240 --> 0:17:27.000 and so there's just he he has a level of 0:17:27.080 --> 0:17:29.520 seriousness and capability that I think is just way beyond 0:17:29.600 --> 0:17:31.640 what what what what? Michael is able to paint that book. 0:17:32.000 --> 0:17:36.399 So the Netscape I p O is something. So we 0:17:36.480 --> 0:17:38.520 went public. So we're in public eighteen months after founding. 0:17:39.960 --> 0:17:42.080 I remember that because I was a junior trader. I 0:17:42.200 --> 0:17:44.399 was the logo on the desk, and it was just 0:17:44.560 --> 0:17:48.680 a day of mayhem, and that really be started a 0:17:48.880 --> 0:17:52.359 run of technology and internet companies for the next few years. 0:17:53.240 --> 0:17:56.000 What was that ride like? That had to be insane? Yeah, 0:17:56.000 --> 0:17:57.359 I know, it was crazy, like being shot out of 0:17:57.400 --> 0:17:59.520 a rocket, like and not just me, like the whole 0:17:59.520 --> 0:18:01.600 the whole value had that had that had that experience, 0:18:01.640 --> 0:18:03.240 and so it really was it was what you meant. 0:18:03.240 --> 0:18:05.159 It was the establishment of a new platform. It was 0:18:05.240 --> 0:18:08.120 the establishment of this kind of new front here. Um. 0:18:08.280 --> 0:18:09.760 It was the you know, the idea that all of 0:18:09.800 --> 0:18:11.719 a sudden, you there were these thousands of new businesses 0:18:11.800 --> 0:18:13.679 could get created on top. It was this idea, all 0:18:13.680 --> 0:18:16.040 of a sudden, that people are connected. It's actually really striking. 0:18:16.200 --> 0:18:19.240 Um if you look. So the dot com crash right 0:18:19.320 --> 0:18:21.600 hit in two thousand, um, and then all these ideas 0:18:21.840 --> 0:18:23.520 that were viewed then as all the dot com ideas 0:18:23.560 --> 0:18:25.199 that were viewed as genius and NTE nedty eight were 0:18:25.240 --> 0:18:27.560 viewed as just complete lunacy and idiocy. And in two 0:18:27.600 --> 0:18:31.440 thousand com doesn't make any sense being the classic example, right. Um, 0:18:31.840 --> 0:18:35.320 So it's actually really striking all those ideas are working today. UM, 0:18:35.480 --> 0:18:37.040 I can't think of a single idea from that era 0:18:37.119 --> 0:18:38.720 that's not working today. And the kicker to the pest 0:18:38.760 --> 0:18:40.600 dot com story is there's a company, Chewy that just 0:18:40.680 --> 0:18:43.480 comes out for three billion dollars right out of Florida, 0:18:43.520 --> 0:18:46.239 which is online pet food sales, like two weeks ago, right, 0:18:46.320 --> 0:18:48.320 and so even online pet food sales turns out to 0:18:48.359 --> 0:18:50.840 be a gigantic and very successful business. And so basically 0:18:51.160 --> 0:18:55.199 the community, the community, the tech community, the Silicon Valley community, 0:18:55.200 --> 0:18:57.479 the global community that got connected to the internet very 0:18:57.520 --> 0:19:00.840 quickly between and call it actually came up with all 0:19:00.880 --> 0:19:03.520 the ideas, like they all people are very creative, and 0:19:03.560 --> 0:19:05.040 all of a sudden there was just like if you 0:19:05.160 --> 0:19:07.040 read you remember you remember there was a magazine back 0:19:07.040 --> 0:19:09.280 then called The Industry Standard, which became kind of the 0:19:09.320 --> 0:19:11.720 defining kind of bible of the time. And if there 0:19:11.760 --> 0:19:13.359 was a period where if you read the Industry Standard 0:19:13.400 --> 0:19:14.959 after the crash, you're just like all these people were 0:19:15.000 --> 0:19:17.000 just all high, like this is just this is just nuts. 0:19:17.320 --> 0:19:19.199 If you read it today, it's like a direct forecast 0:19:19.280 --> 0:19:21.639 of what's actually happening, right, Like, all this stuff actually 0:19:21.800 --> 0:19:24.080 is happening, it's all working. So and so it was 0:19:24.119 --> 0:19:27.800 an amazing unleashing of talent and creativity and ideas interrupted 0:19:28.080 --> 0:19:30.760 by a very bad crash. Um, but it has sense. 0:19:31.000 --> 0:19:33.000 All those ideas have sense, really come true. One of 0:19:33.040 --> 0:19:36.040 the things I'm always hearing about is how well this is. 0:19:36.200 --> 0:19:38.399 This is just like the dot com era. The valley 0:19:38.480 --> 0:19:43.120 is booming. This all ends badly. But when we this week, 0:19:43.160 --> 0:19:47.280 we've been in everywhere from Berkeley to Palo Alto to 0:19:47.359 --> 0:19:51.520 pleasant In to Mountain View, this looks to me much 0:19:51.600 --> 0:19:55.360 more like a robust economy. Then hey, this is completely 0:19:55.480 --> 0:19:58.639 unhinged and it's a train wreck waiting to happen. You 0:19:58.800 --> 0:20:02.800 live through the last version of the dot com bubble. 0:20:03.560 --> 0:20:08.679 How is this time so different in nature? The obvious 0:20:08.760 --> 0:20:11.000 thing is a lot of these companies are actually making money. 0:20:11.720 --> 0:20:13.639 Some of them are making a lot of money. So um. 0:20:13.920 --> 0:20:15.920 In fact, now the accusation is they're making too much money, 0:20:16.000 --> 0:20:18.840 which is the criticism on the other side. So that 0:20:19.000 --> 0:20:21.679 just means they're efficient and productive. It doesn't mean anything 0:20:21.840 --> 0:20:24.320 is wrong exactly. So yes, from your from your lips 0:20:25.119 --> 0:20:28.280 so um. So I guess I'd say, I guess I'd 0:20:28.320 --> 0:20:30.880 say the economist, actually, there's a theory actually in economics 0:20:30.960 --> 0:20:33.440 on this which they called the economists called the depression 0:20:33.560 --> 0:20:36.359 baby effect, which is basically it's based on it's been 0:20:36.359 --> 0:20:38.680 studies papers written about this. If your google, depression babies 0:20:38.720 --> 0:20:41.600 will pop up. UM investors who were in the stock 0:20:41.640 --> 0:20:44.199 market nine ever went back into the stock market. Um. 0:20:44.240 --> 0:20:45.600 They stayed out of the stock market for the rest 0:20:45.640 --> 0:20:48.800 of their lives because proved definitively right that stocks are 0:20:48.800 --> 0:20:51.359 fundamentally unsafe. And if you look at the chart of it, 0:20:51.680 --> 0:20:54.040 literally from ninety nine, you don't get back to break 0:20:54.080 --> 0:20:57.440 even untill nineteen fifty four. It's twenty five years later. 0:20:57.920 --> 0:21:00.719 It's a full generation has to be one, grow up, 0:21:01.080 --> 0:21:03.480 get jobs and start investing in order for the market 0:21:03.560 --> 0:21:07.040 to get above exactly with no memory and the investors 0:21:07.560 --> 0:21:09.600 that's exactly that. And then by the twenty five years 0:21:09.600 --> 0:21:11.120 exactly right. And then the other kicker is it takes 0:21:11.119 --> 0:21:13.359 another fifteen years after that to get another actual bubble. 0:21:13.840 --> 0:21:16.280 The next stock market bubble did not materialized until the 0:21:16.320 --> 0:21:20.840 late sixties. The full forty years, the hits a thousand, 0:21:20.880 --> 0:21:24.080 it's not over it for another sixteen years, quite quite amazing, 0:21:24.359 --> 0:21:26.040 exactly so. So, anyway, the point is, if you if 0:21:26.080 --> 0:21:28.919 you live through one of these scarring crashes, you get 0:21:29.000 --> 0:21:32.320 psychologically marked, you get you get traumatized. And by the 0:21:32.359 --> 0:21:34.000 way that you there is everybody, right, It's not just 0:21:34.080 --> 0:21:36.000 the investors, it's also the people who follow the market. 0:21:36.040 --> 0:21:37.680 It's also people who write about the market. It's also 0:21:37.680 --> 0:21:40.159 people who work at the company's Everybody gets traumatized. And 0:21:40.200 --> 0:21:42.160 so we had it. We we haven't entire We had 0:21:42.240 --> 0:21:44.800 and have an entire generation of depression babies, including me 0:21:45.359 --> 0:21:48.240 right um in Silicon Valley who went through two thousand UM. 0:21:48.440 --> 0:21:50.560 That's significant for a couple of reasons. One is just 0:21:50.840 --> 0:21:53.160 I would argue that right the narrative basically since two 0:21:53.160 --> 0:21:54.879 thousand four has been its bubble two point oh. I 0:21:54.920 --> 0:21:56.680 think exactly the opposite has been a it's been a 0:21:56.720 --> 0:21:59.680 long term bust. I think text talks have been undervalued 0:21:59.720 --> 0:22:03.480 sort consistently basically since two thousand two three, and even 0:22:03.520 --> 0:22:05.560 to this day are probably undervalued relative to where they 0:22:05.560 --> 0:22:07.719 should be. Void. We come back to that. But then 0:22:07.760 --> 0:22:09.680 the other thing is happening is now finally enough time 0:22:09.760 --> 0:22:11.760 is passing. It's now we're coming you know, seventeen years 0:22:11.800 --> 0:22:14.040 since the crash, so now finally we're getting enough kids 0:22:14.119 --> 0:22:16.240 coming to the valley who don't have a memory of 0:22:16.359 --> 0:22:20.159 the crash. They don't have post crash traumatic They were 0:22:20.200 --> 0:22:22.320 like in fourth grade, right, and so they just they 0:22:22.359 --> 0:22:24.119 were like busy with legos, like they just it's not 0:22:24.280 --> 0:22:26.920 a relevant concept. And so when and you get these 0:22:26.960 --> 0:22:29.360 weird conversations we find are selling these conversations where you're 0:22:29.359 --> 0:22:33.439 telling these cautionary tales right of what happened in nine 0:22:33.440 --> 0:22:36.200 and they just look at you like Grandpa, like you know, 0:22:36.240 --> 0:22:38.439 tell us about the model t like it's just an 0:22:38.480 --> 0:22:40.480 absurd kind of thing. And by the way, it's not 0:22:40.520 --> 0:22:41.920 that there's a good or a bad. It's just people 0:22:41.960 --> 0:22:43.800 have different life experiences. But my point is like the 0:22:43.840 --> 0:22:46.440 balance is shifting well, and so and you just have 0:22:46.560 --> 0:22:48.000 you have this new generation of people in the valley 0:22:48.080 --> 0:22:50.440 are just like let's let's just go, let's go build things, 0:22:50.480 --> 0:22:52.040 like let's not be held back by the superstition of 0:22:52.080 --> 0:22:54.000 what happened. Let's go build new things. And then to 0:22:54.080 --> 0:22:57.040 your point, like these things have worked. When we were 0:22:57.080 --> 0:23:01.639 building Netscape, the man maximum addressable market size for our 0:23:01.640 --> 0:23:04.800 company was Internet users that were most run dial up 0:23:05.200 --> 0:23:08.280 and worked to their desktop PCs, which were super slow 0:23:08.359 --> 0:23:10.000 and crewed compared to today and now was you know, 0:23:10.080 --> 0:23:12.120 you have three billion people with smartphones and mobile broad 0:23:12.119 --> 0:23:13.480 down in the world on its way to six billion, 0:23:13.520 --> 0:23:15.560 and so like this stuff is working like that, it 0:23:15.640 --> 0:23:19.000 actually came true. The fascinating thing every time when the 0:23:19.119 --> 0:23:23.199 NASDAC regains its regained its two thousand peak not too 0:23:23.280 --> 0:23:25.399 long ago, people said, here we are, it's going to 0:23:25.480 --> 0:23:28.000 crash again, and and you look. I always look at 0:23:28.040 --> 0:23:30.800 those folks and say, well, wait a second, that was 0:23:31.000 --> 0:23:34.159 an infinite pe. You now have companies actually not just 0:23:34.359 --> 0:23:38.120 making money, but making boatloads of money. And it's fifteen 0:23:38.240 --> 0:23:41.520 years later. So whatever the problems were, then, how do 0:23:41.600 --> 0:23:44.520 you just assume at this price level it's the same thing. 0:23:44.960 --> 0:23:48.560 Clearly something very different is going on today. So so 0:23:49.080 --> 0:23:52.400 sticking with that that point, when when you hear people 0:23:52.480 --> 0:23:54.639 saying Silicon Valley is in a bubble again, look at 0:23:54.640 --> 0:23:57.520 all these unicorns. Here comes the train wreck. Do you 0:23:57.640 --> 0:24:00.040 just kind of shrug to yourself? What's your reaction to that? 0:24:00.240 --> 0:24:02.640 So those have been the headlines for excuse me every 0:24:02.720 --> 0:24:05.399 year since two thousand four. So two thousand four, so two. 0:24:05.600 --> 0:24:07.399 They'll get it right eventually. You just keep saying the 0:24:07.440 --> 0:24:09.119 same thing over and over in the two thousand four, 0:24:10.040 --> 0:24:12.800 two thousand four, granted two thousand one to two thousand 0:24:12.840 --> 0:24:15.920 three were very bad, so fully granted two thousand four, 0:24:15.920 --> 0:24:18.320 there were two M and A events, Uh, Yahoo bought 0:24:18.400 --> 0:24:22.320 two companies million dollars each, Flicker and Delicious and those 0:24:22.480 --> 0:24:24.760 that launched that created the bubble two point on narrative, 0:24:24.880 --> 0:24:26.960 but in other words, like if anything at tech works 0:24:27.760 --> 0:24:32.280 and if any company attack ever succeeds, it's therefore obviously evidence, right, 0:24:32.280 --> 0:24:34.199 and so that that's been the narrative the entire time. 0:24:34.240 --> 0:24:35.680 We and we've done we've we've done dex on this. 0:24:35.800 --> 0:24:37.200 We have dex on our website, like we've done detailed 0:24:37.200 --> 0:24:39.359 analytics on every aspect of the financial numbers and the 0:24:39.720 --> 0:24:41.040 flows of money and the whole thing. And you go 0:24:41.119 --> 0:24:42.440 through the whole thing, and when you when you do 0:24:42.520 --> 0:24:46.040 the analysis, I think correctly, like just objectively correctly, it's 0:24:46.040 --> 0:24:48.200 just crystal clear how out of control everything got really 0:24:48.200 --> 0:24:51.680 between two thousand and how relatively plasmdate it's been. It's 0:24:51.680 --> 0:24:55.200 been ever since. Um. But it just just it's people, 0:24:55.240 --> 0:24:56.399 don't you know. It's the kind of thing people just 0:24:56.480 --> 0:24:58.560 have a very strong emotional resp It's a depression maybe effect. 0:24:58.560 --> 0:25:00.879 People have an emotional response right starting sponses I got 0:25:00.920 --> 0:25:03.040 tricked once, I'm not gonna get tricked right, and so 0:25:03.200 --> 0:25:05.439 it's just it's led to that's continuous, in my view, 0:25:05.520 --> 0:25:07.840 underestimation of what's happening. Right, It's it's led to the 0:25:07.840 --> 0:25:09.919 opposite problem, which is people are really deeply if they 0:25:09.960 --> 0:25:13.359 were overestimating, overestimating what was happening in idea, they're underestimating 0:25:13.359 --> 0:25:15.480 it and they're still underestimating it today, which makes sense. 0:25:16.400 --> 0:25:18.680 Everything is probably still undervalua, which makes sense if you 0:25:18.840 --> 0:25:22.359 come out after that experience and you are negatively tinged 0:25:22.480 --> 0:25:25.680 with that. G I got burned less time because valuations 0:25:25.720 --> 0:25:29.240 didn't make sense. Fast forward fifteen years. That doesn't leave 0:25:29.320 --> 0:25:32.639 these folks, So that permanently colors and they're you know, 0:25:32.760 --> 0:25:37.000 other related studies. People graduate college into a recession. It 0:25:37.119 --> 0:25:39.639 not only affects their earnings power over the course of 0:25:39.720 --> 0:25:43.399 their lifetime, it affects their philosophical outlook. They are actually 0:25:43.520 --> 0:25:46.600 biased and expect recessions to occur more often than they 0:25:46.600 --> 0:25:49.320 actually do. It's um our wet wear is kind of 0:25:49.560 --> 0:25:55.080 deeply flawed. So you're a builder, um, you've you've created 0:25:55.119 --> 0:25:57.680 a couple of a couple of companies, including this one. 0:25:58.240 --> 0:26:01.320 In your mind's eye, Are you a founder, are you 0:26:01.480 --> 0:26:04.520 a venture capitalist or a little bit of both. So 0:26:04.720 --> 0:26:07.320 I think of myself as an engineer first, um, and 0:26:07.400 --> 0:26:09.600 everything else after that. And so it's kind of the core. 0:26:10.320 --> 0:26:11.359 And then you never know how much of this is 0:26:11.440 --> 0:26:14.040 self delusion, of course, but um, I think my assumption 0:26:14.160 --> 0:26:17.080 is we're all self del and you and occasionally if 0:26:17.119 --> 0:26:19.800 you glimpse a little reality, fantastic and they either work 0:26:19.800 --> 0:26:21.880 for you or they don't. So no, I was trained 0:26:21.920 --> 0:26:23.119 as an engine I was always had sort of an 0:26:23.119 --> 0:26:25.280 engineering mindset, and I was trained as an engineer, training 0:26:25.400 --> 0:26:27.000 at a great engineering school, and so I just I 0:26:27.000 --> 0:26:28.679 always few my I'm just trying to figure out how 0:26:28.720 --> 0:26:31.479 things work and then try how to make them work better. Um. 0:26:31.600 --> 0:26:33.560 And I'm far more interested in figuring that out than 0:26:33.560 --> 0:26:35.560 in trying to draw value judgments on them, were trying 0:26:35.600 --> 0:26:37.320 to have other you know, kinds of debates around them. 0:26:37.320 --> 0:26:40.119 And so um uh that's just been you know, the 0:26:40.200 --> 0:26:41.520 core of the thing. And so that to the extent 0:26:41.600 --> 0:26:43.480 that my companies have worked, it's because they built products 0:26:43.480 --> 0:26:45.520 that people wanted. Um. To the extent that this you 0:26:45.600 --> 0:26:47.399 know that this firm works is because we're going we're 0:26:47.440 --> 0:26:49.320 finding those products and the people who build those products 0:26:49.359 --> 0:26:51.440 early um and betting on them. And so it's it's 0:26:51.440 --> 0:26:53.840 sort of engineering as the core discipline. And then and 0:26:53.920 --> 0:26:56.120 then we we we are lucky enough, in my view, 0:26:56.200 --> 0:26:57.920 to live in a system in which you know that 0:26:58.040 --> 0:27:00.359 that rewards that skill in the sense of people can 0:27:00.480 --> 0:27:03.040 build things, right, people can build things, are encouraged to 0:27:03.040 --> 0:27:05.240 build things, that culturally encouraged to build things, and those 0:27:05.280 --> 0:27:07.000 things might be new products, but those things also might 0:27:07.000 --> 0:27:09.880 be new companies. Back in two thousand eleven, you wrote 0:27:09.920 --> 0:27:14.800 a fascinating screed called Software is Eating the World. Not 0:27:14.960 --> 0:27:17.600 only did it end up becoming a meme that when 0:27:17.680 --> 0:27:21.359 fairly viral, it turned out you were not just a 0:27:21.480 --> 0:27:24.520 little bit right, you were very right. Tell us about 0:27:24.640 --> 0:27:29.200 what motivated you to to put that those words on paper. Yes, 0:27:29.320 --> 0:27:30.840 it was a two part at Towns. One was to 0:27:30.880 --> 0:27:33.320 explain what was actually happening, and actually a lot of 0:27:33.400 --> 0:27:35.399 it was actually against the bubble narrative. The bubble the 0:27:35.440 --> 0:27:37.200 new bubble narrative was so strong at that point that 0:27:37.240 --> 0:27:39.040 I wanted to articulate a view of what was happening 0:27:39.119 --> 0:27:40.399 that was not just this is all a bunch of 0:27:40.520 --> 0:27:43.280 a bunch of hot air, so partially explanatory but also 0:27:43.359 --> 0:27:47.000 also an attempt to forecast UM. And specifically in the piece, 0:27:47.040 --> 0:27:48.840 I sort of lay out a forecast for the future 0:27:49.040 --> 0:27:52.359 UM in three parts UM, which I think is the 0:27:52.400 --> 0:27:55.040 part that kind of remains the section that remains provocative today. 0:27:55.760 --> 0:27:58.359 The three parts maybe recap them quickly so so so 0:27:58.520 --> 0:28:02.119 part one is UM. Every product or service UM that 0:28:02.240 --> 0:28:05.040 can become software will become software UM. And there's a 0:28:05.080 --> 0:28:07.040 long conversation we can have. That's that's the big theme 0:28:07.080 --> 0:28:08.680 of what's happening in Silicon Valley right now, I think 0:28:08.760 --> 0:28:10.880 is that we're we're we are now going after entire 0:28:10.920 --> 0:28:14.439 industries that used to be dominated by by just like retail, 0:28:14.680 --> 0:28:19.200 retail storefronts or numbers or so is this applification or 0:28:19.280 --> 0:28:22.000 is this just the move to pure solf were Appification 0:28:22.040 --> 0:28:23.920 is the consumer experience, right, which is there everything that 0:28:23.960 --> 0:28:25.439 can be experienced as an app? If you can if 0:28:25.440 --> 0:28:26.719 you want you know, you need, You want a mortgage, 0:28:26.720 --> 0:28:28.280 it should be an app. Right, you want life insurance, 0:28:28.280 --> 0:28:29.760 it should be an app. You want to order pizza, 0:28:29.760 --> 0:28:31.280 it should be an app. Like every everything should just 0:28:31.359 --> 0:28:33.320 happen through that, through that front end. But but it's 0:28:33.320 --> 0:28:35.280 deeper than the app because it's the complete back it's 0:28:35.280 --> 0:28:36.919 all the back end systems of software that may make 0:28:36.960 --> 0:28:40.080 the economy ultimately work. So so so Part one, every 0:28:40.200 --> 0:28:42.520 every every product or service that can become software will 0:28:42.840 --> 0:28:46.400 um Part two therefore, every company that makes those products 0:28:46.480 --> 0:28:49.600 or services has to and will become a software company. Right, 0:28:49.640 --> 0:28:52.320 So companies will become more and more defined by building software, 0:28:52.600 --> 0:28:55.240 just like solic valley companies already like that, selict companies 0:28:55.320 --> 0:28:57.840 or software companies first that then get good at things 0:28:57.920 --> 0:28:59.960 like sales and marketing. Right, Whereas in the rest of 0:29:00.000 --> 0:29:01.240 the economy you have a lot of companies that are 0:29:01.240 --> 0:29:02.760 good at sales and marketing that are trying to bolt 0:29:02.800 --> 0:29:05.760 on software. But sitting here ten years from now, all 0:29:05.760 --> 0:29:07.920 these companies are gonna be software companies first because they're 0:29:07.920 --> 0:29:11.200 gonna have to be fascinating form of the product. And 0:29:11.280 --> 0:29:14.680 then the third sort of most either provocative, arrogant you know, 0:29:14.880 --> 0:29:18.160 or delusional. Uh principle is therefore, in any industry, in 0:29:18.200 --> 0:29:20.400 the long run, uh, the winning company will be the 0:29:20.440 --> 0:29:23.600 best software company. Right, So whoever is the best? Is 0:29:23.640 --> 0:29:26.680 that really all? That? So the question the follow up 0:29:26.720 --> 0:29:29.360 question is how much push pushed back did your original 0:29:30.040 --> 0:29:32.800 writing get and are you still getting pushed back on that? 0:29:33.120 --> 0:29:35.040 That third part of it, Well, the third one is 0:29:35.120 --> 0:29:37.360 very third one is very provocative. Let me give an example, 0:29:37.480 --> 0:29:40.560 but it's pretty it follows logically. It's if you believe 0:29:40.600 --> 0:29:43.479 in deductive reasoning, it makes sense. Well, let's let's pick 0:29:43.560 --> 0:29:48.960 up particularly provocative example. Cars. Right, Um, yeah, so car cars. 0:29:49.000 --> 0:29:51.040 Obviously cars, there's a lot more software cars, and there 0:29:51.120 --> 0:29:53.280 was ten twenty years ago. Everybody knows that. It's a 0:29:53.320 --> 0:29:55.240 step further to say that in ten years, the winning 0:29:55.240 --> 0:29:56.680 car company is going to be the car the car 0:29:56.720 --> 0:29:59.360 company that makes the best software. Right. There's no existing 0:29:59.440 --> 0:30:01.520 legacy car company in the world today that would say 0:30:01.520 --> 0:30:02.960 that that's the case. Right. They would all say that 0:30:03.000 --> 0:30:05.120 they are best at making cars, and that the software 0:30:05.160 --> 0:30:06.960 is a component that goes in the cars. But the 0:30:07.000 --> 0:30:08.720 whole point of being a car company to be great 0:30:08.720 --> 0:30:11.440 at engineering the actual physical automobile to steal and the 0:30:11.520 --> 0:30:13.680 rubber and this all the safety systems and then the 0:30:13.720 --> 0:30:16.400 whole thing. Well, but if you believe self autonomous vehicles 0:30:16.440 --> 0:30:19.280 are coming, that software exactly right, and so that that 0:30:19.360 --> 0:30:21.320 would be our thesis is that no, it's actually going 0:30:21.360 --> 0:30:23.760 to happen is the value will flow to the software layer. 0:30:23.880 --> 0:30:26.000 The the entire experience of being in a car will 0:30:26.000 --> 0:30:29.000 be defined by the software. And then at the limit, 0:30:29.080 --> 0:30:33.120 whichever company that makes cars or makes the intellectual property 0:30:33.200 --> 0:30:36.040 that goes into cars, whichever of those creates the best 0:30:36.080 --> 0:30:38.480 software will will then be the winning company, and we'll 0:30:38.520 --> 0:30:41.479 get the majority of the value, right and including ultimately majority. 0:30:41.520 --> 0:30:44.320 So so what you really define describing is the iPhone. 0:30:44.440 --> 0:30:47.360 This is manufactured in China. I believe they make about 0:30:47.400 --> 0:30:50.480 five dollars pro phone building it together. And then this 0:30:50.600 --> 0:30:53.120 little comple you may know them, they're up the street 0:30:53.160 --> 0:30:57.520 and Cupertino Apple is the one that captures not only 0:30:57.560 --> 0:31:00.240 all the value from the iPhone, but pretty much all 0:31:00.280 --> 0:31:03.600 of the profits from the entire or the profits from 0:31:03.640 --> 0:31:08.320 the entire mobile universe. Is that the same basic concept 0:31:08.520 --> 0:31:13.160 is in an iPhone model for everything else, including automobiles. 0:31:13.400 --> 0:31:16.200 So in general, yes, like so that that's that's the implication, right, 0:31:16.240 --> 0:31:18.040 And that's the exact analogy by the way that the 0:31:18.080 --> 0:31:20.040 car company, the car industry is grappling with right now, 0:31:20.120 --> 0:31:22.040 which is you as you know and phones you used 0:31:22.040 --> 0:31:24.080 to have these companies like Nokia and Rim and others 0:31:24.160 --> 0:31:26.239 that made phones and feud software is just this kind 0:31:26.280 --> 0:31:27.760 of add on the top of the hardware. But the 0:31:27.800 --> 0:31:31.760 hardware I'm not that old. I don't really remember those um. 0:31:31.960 --> 0:31:34.200 And so you know when when you look like car 0:31:34.280 --> 0:31:36.240 CEOs now they're they're all thinking like they're working on this, 0:31:36.320 --> 0:31:38.680 the new generation of car CEOs. They're they're working hard, 0:31:38.680 --> 0:31:40.240 and they're spending a lot of time out here, and 0:31:40.440 --> 0:31:41.560 they spend a lot of time with us, and they're 0:31:41.560 --> 0:31:43.280 they're they're working hard on it. But literally the way 0:31:43.320 --> 0:31:46.800 they frame that question is we we we existing car 0:31:46.840 --> 0:31:48.640 company do not want to be the noive cars like 0:31:49.000 --> 0:31:51.440 and so that that Nokia of cars, that analogy is 0:31:51.560 --> 0:31:55.200 very front and center and in there thinking now at 0:31:55.280 --> 0:31:58.239 one level of detail later or lower than that. Um. 0:31:58.320 --> 0:32:00.960 You know, the iPhone is a particular success of vertical integration. 0:32:01.280 --> 0:32:03.400 UM so Apple. If Apple does that, you know, they 0:32:03.440 --> 0:32:05.520 don't manufacture every component in it, but they assemble the 0:32:05.560 --> 0:32:11.440 whole thing hardware, software together. Sometimes the winner is vertically integrated. 0:32:11.520 --> 0:32:14.000 There are other times in other industries and PCs were 0:32:14.040 --> 0:32:16.320 like this. The other example, which it's is horizontal in 0:32:16.360 --> 0:32:18.400 structure and so the the other outcome is you'll have, 0:32:18.560 --> 0:32:21.200 for example, Microsoft of cars right where you'll have the 0:32:21.280 --> 0:32:24.120 software layer that that actually ends up and they actually 0:32:24.120 --> 0:32:25.800 in that model they instead of making the car, that 0:32:25.880 --> 0:32:27.800 winning company might just sell it software to all the 0:32:27.840 --> 0:32:30.280 car companies. But then it's like the relationship that Microsoft 0:32:30.400 --> 0:32:32.520 end up having with all the PC companies right where 0:32:32.520 --> 0:32:34.320 the PC companies did all the work of actually making 0:32:34.600 --> 0:32:36.560 the PC and Microsoft got all the money. And so 0:32:37.000 --> 0:32:39.760 the victory for the best software company could go either 0:32:39.840 --> 0:32:42.320 vertical or horizontal, and that that varies a lot, but 0:32:42.480 --> 0:32:44.400 the consist I believe the consistent theme will be the 0:32:44.440 --> 0:32:47.320 company with the best software will exactly your point. They'll 0:32:47.360 --> 0:32:49.640 end up getting most of the profits so and have 0:32:49.760 --> 0:32:52.080 the strategic control, right, they'll they'll be able to dictate 0:32:52.120 --> 0:32:53.760 the future of the industry, but by virtually the fact 0:32:53.760 --> 0:32:55.840 that they control the software. So that naturally leads to 0:32:55.880 --> 0:32:59.760 the question is Tesla an electric car manufacturer or is 0:33:00.040 --> 0:33:02.840 SLA a software company that happens to make a pretty 0:33:02.840 --> 0:33:05.200 good looking car as well? That's right, So this is 0:33:05.240 --> 0:33:06.840 the thing if you squint with and by the way, 0:33:06.920 --> 0:33:08.920 I mean, Ellen is deservedly a legend, and so nothing 0:33:08.960 --> 0:33:10.840 I'm about to say should be interpreted as a criticism 0:33:10.880 --> 0:33:13.600 of Ellen, but just from a historic sweep of history standpoint, 0:33:13.640 --> 0:33:16.000 if you squint at Tesla one way, it looks like 0:33:16.080 --> 0:33:19.560 Apple circa two thousand, you know, seven two eight, where 0:33:19.600 --> 0:33:21.840 they release the iPhone. They just haven't sold very money yet, 0:33:21.880 --> 0:33:23.920 but they're gonna sell a ton and they're going to 0:33:23.960 --> 0:33:26.560 be the vertical winner alli Apple. Another way of looking 0:33:26.600 --> 0:33:29.920 at Tesla is you know their Apple in two with McIntosh, 0:33:30.120 --> 0:33:32.479 and yes they're integrated hardware. Software is good, but other 0:33:32.520 --> 0:33:34.200 people are going to come up with software as well. 0:33:34.360 --> 0:33:36.040 And then there are many other people who make cars, 0:33:36.080 --> 0:33:38.120 and so you know, the whole thing may just you know, 0:33:38.160 --> 0:33:40.200 they may set the model mode for what other people 0:33:40.280 --> 0:33:43.080 end up doing much higher scale. And I think that's 0:33:43.120 --> 0:33:45.080 the big question on Tesla is like, is which way 0:33:45.160 --> 0:33:47.600 is that tip? Obviously Elon is highly determined to make 0:33:47.600 --> 0:33:49.720 sure that he owns the whole stack, and to your point, 0:33:49.760 --> 0:33:52.280 he's incredibly focused on software like he's he is like 0:33:52.440 --> 0:33:55.440 Tesla is deeply deeply immersed in the details, not just 0:33:55.560 --> 0:33:57.440 by the way of the software that obviously runs the car, 0:33:57.520 --> 0:34:00.600 but for example, power management is a big at that's 0:34:00.600 --> 0:34:02.520 just sort of a secret sort of advantage that Tesla 0:34:02.520 --> 0:34:04.720 people and talk about that much is they buy the 0:34:04.760 --> 0:34:06.680 batteries from somebody else, but they write the software that 0:34:06.680 --> 0:34:08.480 manages the power, which is a big part of getting 0:34:08.480 --> 0:34:12.239 the range and the ludicrous mode and the ludicrous mode 0:34:12.440 --> 0:34:14.719 um and then um. And then they're also he's now 0:34:14.760 --> 0:34:17.200 deeply involved in right building, making sure that Tesla. He's 0:34:17.200 --> 0:34:19.239 gonna try to Tesla be the best self driving car, 0:34:19.800 --> 0:34:22.920 which is entirely a software exercise. Um. And so he's 0:34:22.960 --> 0:34:25.279 on it, like he's he's pushing very hard. He's and 0:34:25.320 --> 0:34:27.640 then he's the other car companies are all in, you know, 0:34:27.680 --> 0:34:29.719 more or less reactive mode to what he catches. He 0:34:29.800 --> 0:34:32.480 definitely has the lead right now. But that said, the 0:34:32.520 --> 0:34:34.120 other car companies a trying to figure this out. And 0:34:34.600 --> 0:34:38.200 we now have an entire wave of new automotive software 0:34:38.200 --> 0:34:41.319 companies in Silicon Valley. Right, there's I don't know, there's 0:34:42.200 --> 0:34:44.680 dozens on its way to hundreds of highly capable founders 0:34:44.680 --> 0:34:47.880 and engineers building new kinds of autonomous software for cars, 0:34:48.360 --> 0:34:50.480 by the way, vehicles of all different side shape and description, 0:34:50.520 --> 0:34:53.680 air vehicles, ground vehicles, water vehicles. Right, So there's there's 0:34:53.719 --> 0:34:55.799 a revolution of foot of which Tesla is an important part, 0:34:55.800 --> 0:34:59.279 but it's also become much broader now quite fascinating in 0:34:59.480 --> 0:35:02.560 um in the yearly. I keep coming back to that 0:35:02.719 --> 0:35:07.440 era when venture capitalists with funding startups, people had to 0:35:07.480 --> 0:35:09.600 go out and buy their own servers. They have engineers 0:35:09.640 --> 0:35:11.680 to manage that and build that, and there was a 0:35:11.840 --> 0:35:14.760 giant infrastructure. It would take tens of millions of dollars 0:35:15.400 --> 0:35:18.880 just to open a company. Today that stuff is, if 0:35:19.000 --> 0:35:22.880 not free, will certainly very cheap with Amazon cloud services 0:35:22.920 --> 0:35:26.600 and a whole huge infrastructure. So if you want to 0:35:26.680 --> 0:35:29.360 launch a company today, it doesn't take ten million dollars 0:35:29.520 --> 0:35:32.439 just to open the doors. You could really do things 0:35:32.520 --> 0:35:36.600 on the cheap. How does that shift in infrastructure change 0:35:36.920 --> 0:35:41.120 your job as a venture capitalist when you're looking at companies, 0:35:41.280 --> 0:35:43.279 what do they really need? Do we really need to 0:35:43.320 --> 0:35:47.000 give people million dollars at a bob when they could 0:35:47.080 --> 0:35:49.880 start for a few thousand dollars. So that's exactly right, 0:35:49.880 --> 0:35:51.719 that's exactly what's happened, and we think about that in 0:35:51.800 --> 0:35:54.759 economic terms. It's a very rapid inflation of of input costs, 0:35:55.239 --> 0:35:58.480 which is dramatic. It's like the inflation input the input 0:35:58.520 --> 0:36:00.680 costs for a startup in economic term deflated by a 0:36:00.680 --> 0:36:03.920 factor of like a thousand. That's amazing, which is amazing, Right, 0:36:03.920 --> 0:36:05.960 It's it's hard to actually find a historical precedent for 0:36:06.040 --> 0:36:08.600 that happening. We're used to cost ten million dollars just 0:36:08.800 --> 0:36:10.960 to launch and now you could do it for a 0:36:11.080 --> 0:36:13.600 few grand. Yeah, yeah, we yeah, we routinely get you know, 0:36:13.719 --> 0:36:15.359 we'll get three or four kids in here. The entire 0:36:15.600 --> 0:36:18.359 their entire CAPEX, the entire company is their laptops, right, 0:36:18.480 --> 0:36:21.719 It's that's that's all they happen, and they're good to go. 0:36:21.880 --> 0:36:23.560 That's it, They're good to go. Everything else is like yeah, no, 0:36:23.600 --> 0:36:25.279 it's a hundred a hundred dollar bill of this month 0:36:25.320 --> 0:36:27.480 on their m X for their for their Amazon Cloud 0:36:27.520 --> 0:36:29.040 services to launch the thing and see if it works. 0:36:29.080 --> 0:36:32.359 And so that's that's a dramatic step change. Like that's 0:36:32.440 --> 0:36:34.160 that's huge. I mean, it's very hard to find any any, 0:36:34.200 --> 0:36:35.880 any precedent for that, which is a big reason why 0:36:35.880 --> 0:36:37.120 a lot of so much energy has come back to 0:36:37.160 --> 0:36:39.360 the valley. So as a VC, what that results in 0:36:39.480 --> 0:36:42.360 is that the Darwinian process of running experiments to surface 0:36:42.400 --> 0:36:44.440 the good ideas and the good companies is now happening 0:36:44.520 --> 0:36:47.000 at much higher scale and at a much faster pace, right, 0:36:47.040 --> 0:36:49.160 and so it's a VC it's this is amazing. So 0:36:49.239 --> 0:36:52.600 it's it's not just the pace of acceleration. The second 0:36:52.719 --> 0:36:55.279 ary of ittive is increasing. Well, so it's it's accelerating 0:36:55.320 --> 0:36:57.400 at a faster and faster rate. Yeah. Well, the number one, 0:36:57.440 --> 0:36:59.320 it's just a sheer number of ideas that can explore. 0:36:59.320 --> 0:37:01.319 It can be explored has gone way up, right, because 0:37:01.320 --> 0:37:03.600 there's elasticity. The less it costs to test new idea, 0:37:03.640 --> 0:37:05.439 the more new ideas will get short and more people 0:37:05.480 --> 0:37:07.279 will try to test new ideas. And then right, the 0:37:07.320 --> 0:37:09.239 second is it's just so much faster now, it's just 0:37:09.360 --> 0:37:10.920 the speed to get to market is just so much. 0:37:10.960 --> 0:37:12.360 How do you deal with that? How do you sift 0:37:12.440 --> 0:37:16.960 through a near infinite amount of really fantastic and interesting ideas. 0:37:17.000 --> 0:37:19.080 So that's that's the business. And so that the day 0:37:19.120 --> 0:37:21.799 to day businesses we we see we see evaluate two 0:37:21.880 --> 0:37:26.320 thousand referred qualified startups a year every year, So that 0:37:26.440 --> 0:37:28.000 that's the day job here is to sort and sift 0:37:28.040 --> 0:37:29.719 and filter through the two thousand, and of those of 0:37:29.800 --> 0:37:32.279 two thousand, how many do you end up doing now 0:37:32.360 --> 0:37:35.520 you also do something unusual. You do sort of angel 0:37:35.680 --> 0:37:39.160 funding at a very modest level and then broader funding 0:37:39.640 --> 0:37:42.320 for for more I guess we would say developed or 0:37:42.320 --> 0:37:45.840 advanced companies. So out of those two thousand that get reviewed, 0:37:46.200 --> 0:37:48.080 what does it break down to right now, it's about 0:37:48.080 --> 0:37:50.400 the thirty a year, thirty year, thirty a year out 0:37:50.400 --> 0:37:52.200 of two thousand. Yeah, and I could go through in detail, 0:37:52.239 --> 0:37:54.400 but exactly where, but like that's basically the way. It's 0:37:54.400 --> 0:37:55.880 a little bit more than one percent. By the way, 0:37:55.880 --> 0:37:58.200 I should also say these are two thousand that are referred, right, 0:37:58.280 --> 0:38:00.600 so these these are sent to us. There's some connectivity 0:38:00.600 --> 0:38:02.359 to people we know. So I can give you an 0:38:02.360 --> 0:38:05.160 elevator pitch. Now. Well, now, now now that you're here, 0:38:05.840 --> 0:38:08.320 in fact, you're in, you're in the room, give me, 0:38:08.440 --> 0:38:10.520 give me a few minutes. I'll think up of business models. 0:38:10.719 --> 0:38:12.239 This is the this is the actual room for that. So, 0:38:12.440 --> 0:38:15.080 um so two thousand a year, um and and and 0:38:15.239 --> 0:38:16.560 and then the other side of it is it's not 0:38:16.719 --> 0:38:18.400 just right that. The whole thing with this is it's 0:38:18.440 --> 0:38:19.759 not just is it a good idea a good product, 0:38:19.840 --> 0:38:21.560 it's also who are the people? Right, because these are 0:38:21.600 --> 0:38:23.400 people at the end of the day, these are people businesses, 0:38:23.440 --> 0:38:26.080 and so honestly, most of what we're doing is evaluating people. 0:38:26.800 --> 0:38:29.560 So that was always a question that I find intriguing. 0:38:31.239 --> 0:38:33.960 Very often these ideas come along, there's no patents on them. 0:38:35.120 --> 0:38:37.200 There's almost something in the ether where a lot of 0:38:37.280 --> 0:38:40.279 people get very similar ideas. How often do we see 0:38:40.440 --> 0:38:43.359 four or five different companies in the same space. Hey, 0:38:43.400 --> 0:38:46.160 there's Uber and Lift, and there's Pandora, and go down 0:38:46.239 --> 0:38:48.320 the list, and every time you look at a concept, 0:38:48.680 --> 0:38:50.319 it looks like a lot of people have said, hey, 0:38:50.360 --> 0:38:53.080 you know it would be cool right about now. How 0:38:53.160 --> 0:38:57.280 do you figure out who has not just the best idea, 0:38:57.440 --> 0:39:01.080 but the best way to execute did When you're dealing 0:39:01.160 --> 0:39:06.400 with some really young, inexperienced technologists who very often have 0:39:06.520 --> 0:39:10.719 no business experience either just out of grad school, sometimes 0:39:10.800 --> 0:39:14.279 dropping out of college, that sounds like a near impossible 0:39:14.400 --> 0:39:17.560 decision making process. So we call this the volcano movie problem. 0:39:17.719 --> 0:39:20.759 There there's never just one movie about volcanoes. There's two 0:39:20.880 --> 0:39:23.279 or three or four or five there or two giants. 0:39:23.320 --> 0:39:26.759 There's never just one. There's never two killer there's never 0:39:26.840 --> 0:39:28.560 just one killer media movies, there's got to be too. 0:39:28.640 --> 0:39:31.080 So yeah, so that's a that's the thing. And these ideas, yeah, 0:39:31.080 --> 0:39:33.520 they come in waves, um, and so that's exactly what happened. 0:39:33.560 --> 0:39:36.360 So the thing that we try to go I mean, 0:39:36.400 --> 0:39:38.040 there's a lot of different lenses you apply to when 0:39:38.040 --> 0:39:39.879 you're evaluating people, but one of the ones we really 0:39:39.920 --> 0:39:42.080 dig into hard to try to pull kind of what 0:39:42.160 --> 0:39:43.719 we call kind of the real founders away from the 0:39:43.719 --> 0:39:45.120 people who just like think they have an idea and 0:39:45.160 --> 0:39:47.080 how to try something. So the concept we call the 0:39:47.160 --> 0:39:50.399 idea mazeh One of our partners, Crystallized, wrote a paper 0:39:50.440 --> 0:39:52.680 on a biology front of us and called the idea maze. 0:39:52.680 --> 0:39:56.359 And so the idea maze is it appears on the surface, look, 0:39:56.400 --> 0:39:57.880 this is a cute idea, like and by the way, 0:39:57.920 --> 0:40:00.080 lots of people have this idea. The real founder, the 0:40:00.200 --> 0:40:02.120 really good ones, what you find is they have thought 0:40:02.160 --> 0:40:05.160 about the problem so deeply and for so long that 0:40:05.440 --> 0:40:08.160 they have worked their way through the logic maze of 0:40:08.520 --> 0:40:10.759 how to try the idea and what they're going to 0:40:10.800 --> 0:40:12.760 try next if it doesn't work, and what the implications 0:40:12.800 --> 0:40:14.920 would be if they learn something, and who are the 0:40:14.960 --> 0:40:16.680 people they need to bring into the company, and how 0:40:16.719 --> 0:40:18.320 do they segment the market, and how do they go 0:40:18.400 --> 0:40:21.000 acquire the customers and so all these details. It's it's 0:40:21.040 --> 0:40:23.080 the convert it's all the topics and sort of that 0:40:23.120 --> 0:40:24.680 you don't cover in the first hour of the meeting, 0:40:24.719 --> 0:40:26.560 but you cover in the subsequent five hours when you 0:40:26.680 --> 0:40:29.399 go really deep right with them. And the really good 0:40:29.440 --> 0:40:31.040 founders tend to all have in common is they've been 0:40:31.080 --> 0:40:32.560 all the way through the idea mays on their own 0:40:32.600 --> 0:40:34.239 before they come in and talk to a VC. So 0:40:34.560 --> 0:40:37.160 there is not ideally, in the best case, there's not 0:40:37.239 --> 0:40:39.000 a question that we can ask them in the meeting 0:40:39.440 --> 0:40:41.479 in the first six hours of discussion that they haven't 0:40:41.480 --> 0:40:43.040 already not only have they already thought of the ques, 0:40:43.080 --> 0:40:46.080 they've already figured out the answer for themselves. Right. In fact, 0:40:46.160 --> 0:40:47.520 you actually get to the point with a really good 0:40:47.680 --> 0:40:49.839 really sharpens to the point where they get frustrated because 0:40:49.880 --> 0:40:52.000 they're like, why why is this not all obvious to you? 0:40:52.160 --> 0:40:54.480 People like this, Why are you asking me all these 0:40:54.480 --> 0:40:56.480 stupid questions? I figured this out two years ago, Like 0:40:56.520 --> 0:40:58.839 I already know the like and it should be self 0:40:58.880 --> 0:41:01.759 evidence yourself at everybody, because they figured the whole thing out. 0:41:02.040 --> 0:41:04.920 As as contrasted by the way to the ones who 0:41:04.960 --> 0:41:06.680 haven't done that. If if somebody's only put you know, 0:41:06.760 --> 0:41:08.480 ten or twenty hours and are thinking through something and 0:41:08.520 --> 0:41:10.200 they just decided to put together a pitch, it becomes 0:41:10.200 --> 0:41:12.479 crystal clear because you get eight or ten or twelve 0:41:12.560 --> 0:41:14.239 questions in and they stop being able to answer the questions. 0:41:14.320 --> 0:41:16.719 Now you just they start making they start making up 0:41:16.760 --> 0:41:18.560 the you know, start making up the answers. So you 0:41:18.680 --> 0:41:20.960 just revealed this, so you would all concern that people 0:41:21.000 --> 0:41:23.120 would come in and say, Okay, now I have all 0:41:23.200 --> 0:41:25.880 my ducks lined up, and Mark isn't gonna throw me 0:41:26.000 --> 0:41:28.000 off my pitch. Well, they try to trick us already, 0:41:28.040 --> 0:41:29.480 So if they haven't been through the idea as they 0:41:29.520 --> 0:41:30.800 try to convince this, they have been, but they just 0:41:30.840 --> 0:41:33.480 start making up the answers, and you can you can 0:41:33.520 --> 0:41:35.279 flash that out like you can figure that you can 0:41:35.360 --> 0:41:37.160 if there's part about it and parts content like they 0:41:37.200 --> 0:41:39.520 just can't back up their answers. It's like like this 0:41:39.640 --> 0:41:41.920 is how it's a little bit like how police do interrogations. 0:41:42.239 --> 0:41:44.040 So the way people believe if you're get ever getting 0:41:44.040 --> 0:41:45.719 interrogateted by a company thinks he what he just does 0:41:45.800 --> 0:41:48.520 is he just the questions get more and more detailed. Oh, 0:41:48.719 --> 0:41:50.160 you were your alibi as you were out seeing a 0:41:50.160 --> 0:41:52.160 movie that night. Okay, well what movie? You know? Well, 0:41:52.239 --> 0:41:54.120 what was the opening scene? Right? Well, what you know, 0:41:54.200 --> 0:41:55.920 what was the plot twist at the end? You know, well, 0:41:56.000 --> 0:41:57.920 what kind of what snack? Did you have your popcorn? 0:41:58.000 --> 0:41:59.360 Or did you have salt in your popcorn or not? 0:42:00.040 --> 0:42:01.959 Just go deeper and deeper and deeper and deeper until 0:42:02.000 --> 0:42:03.960 you finally freak out because you can't like make up 0:42:03.960 --> 0:42:06.000 all these people. So it's it's it's the same kind 0:42:06.000 --> 0:42:07.400 of thing. And so the reason why I say it 0:42:07.480 --> 0:42:09.200 so openly is it would be good for us if 0:42:09.239 --> 0:42:11.759 more founders actually went through the full idea mas like, 0:42:11.880 --> 0:42:14.040 it would be great for us if more founders came 0:42:14.040 --> 0:42:15.920 in here having thought much more deeply about what they're doing. 0:42:16.239 --> 0:42:17.760 And this is part of the pop where the popular 0:42:17.840 --> 0:42:19.960 narrative startups is probably a little bit problem at the 0:42:20.000 --> 0:42:22.360 popular narrative startups is it's like the popular narrative and 0:42:22.440 --> 0:42:25.040 invention is that these are somehow Eureka moments. It's this 0:42:25.120 --> 0:42:27.239 sudden flash of brilliance and you know, you're just you're 0:42:27.320 --> 0:42:28.920 just you know. And by the way, these companies all 0:42:28.960 --> 0:42:30.600 these origin myths like oh, I was just a kid 0:42:30.680 --> 0:42:32.080 doing this and this idea came to me and like 0:42:32.239 --> 0:42:35.359 loan behold boom Facebook, right, And that's not at all 0:42:35.440 --> 0:42:37.600 how it works, right, It's it's this incredibly deep and 0:42:37.680 --> 0:42:40.480 elaborate process of thinking, uh and work that actually leads 0:42:40.480 --> 0:42:42.120 to these things happening. And so I think for people 0:42:42.160 --> 0:42:44.560 to be if more founders understand the concept of the 0:42:44.600 --> 0:42:47.000 idea MAS and they set the bar higher for themselves 0:42:47.320 --> 0:42:48.800 and the level of thought they'll put in their ideas, 0:42:49.040 --> 0:42:51.600 then I think we benefit from that. What could your 0:42:51.640 --> 0:42:54.120 future hold more than you think? Because at Merrill Lynch 0:42:54.239 --> 0:42:56.160 we work with you to create a strategy built around 0:42:56.239 --> 0:42:58.919 your priorities. Visit mL dot com and learn more about 0:42:58.960 --> 0:43:01.440 Merrill Lynch than affiliate Bank of America. Merrill Lynch makes 0:43:01.440 --> 0:43:03.719 available products and services offered by Merrill Lynch. Pierce, Feder 0:43:03.719 --> 0:43:05.600 and Smith Incorporated, a register broth for dealer. Remember s 0:43:05.719 --> 0:43:09.480 I PC. We talked about some of the unicorns before 0:43:10.320 --> 0:43:12.959 we talked about this ends badly. I'm gonna I'm gonna 0:43:12.960 --> 0:43:16.480 skip those questions. Let let me before I get to Facebook, 0:43:16.560 --> 0:43:20.279 let me I have to ask a question. I love 0:43:20.360 --> 0:43:24.440 the show Silicon Valley. I know that, uh, Mike Judge 0:43:24.480 --> 0:43:28.920 and Alec Burg have described you as an unofficial writing 0:43:29.080 --> 0:43:33.400 consultant to this, So tell us about your experience with 0:43:33.600 --> 0:43:38.359 the show. And I have to I'm a fan of Portlandia, 0:43:38.840 --> 0:43:41.440 and having been to Portland's several times, I came away 0:43:41.880 --> 0:43:44.279 with the impression that, oh, this isn't a sitcom, it's 0:43:44.320 --> 0:43:48.160 a documentary. How true is that for? For Silicon Fact's 0:43:48.160 --> 0:43:51.760 my understanding, Portlandia is literally true? Right? It certainly feels 0:43:51.800 --> 0:43:54.120 that way to put a camera in for a normal 0:43:54.200 --> 0:43:56.880 nor Yes, exactly, Silicon Valley is exact same way. So 0:43:57.600 --> 0:43:59.480 so and all I have to confess I've still only 0:43:59.520 --> 0:44:02.799 seen the season get Out. I haven't seen yet. It's 0:44:03.000 --> 0:44:05.279 so hilarious. I know, I'm sure it is. I just 0:44:05.400 --> 0:44:08.360 the first season was so perfect, just gonna stop. I 0:44:08.480 --> 0:44:09.960 just I couldn't. I don't know. I've just had a 0:44:10.000 --> 0:44:12.920 mental block. Um, I haven't seen the one from the 0:44:13.000 --> 0:44:15.759 most recent one this Sunday, and people are telling me 0:44:15.960 --> 0:44:20.000 it's just so hilarious and over the time funnies and 0:44:20.080 --> 0:44:24.680 it just rings. Especially being out here, It's like, oh, okay, 0:44:24.760 --> 0:44:27.480 I recognize him. It rings really true. Do you have 0:44:27.520 --> 0:44:29.719 a get feedback from people saying, hey, what are you 0:44:29.840 --> 0:44:35.040 doing to us? Excuse me? Like Mark, you're kind of 0:44:35.120 --> 0:44:38.760 making us look silly. What are you doing from who? Exactly? 0:44:39.320 --> 0:44:43.000 Random people? People you know, other vcs, other founders, other 0:44:43.239 --> 0:44:46.320 other because there are very few people come out of 0:44:46.360 --> 0:44:48.759 the show with their reputation. And so that's the thing 0:44:48.800 --> 0:44:51.160 I can't call. I can't comment past I can't comment 0:44:51.200 --> 0:44:53.479 past the first season. I will say the first season 0:44:53.600 --> 0:44:55.200 was perfect, and I will tell you so that the 0:44:55.400 --> 0:44:57.040 secret of that show, at least the secret of the 0:44:57.040 --> 0:44:59.880 first season, which I consider a work of art. Ums. 0:45:00.000 --> 0:45:02.840 I Judge himself started his career as a chip engineering 0:45:02.840 --> 0:45:05.879 in Silicon Valley, UM and if you if you meet 0:45:05.960 --> 0:45:07.800 him at actually it's it's not what you'd expect. Like 0:45:07.840 --> 0:45:09.320 he's one of the lead, you know, the leading creative 0:45:09.719 --> 0:45:12.359 comedy geniuses of our era, the creator of all these 0:45:12.400 --> 0:45:13.960 you know, Pavis and Butthead and all these things, and 0:45:14.440 --> 0:45:19.439 which is fascinating because he started out so wildly overbroad idiocracy, 0:45:19.560 --> 0:45:21.680 and you work your way down the list, and as 0:45:21.800 --> 0:45:25.160 he seems to have gotten older and maybe his artistic 0:45:25.280 --> 0:45:30.799 vision matured, it went from insane to overbroad to slapstick too. Oh, 0:45:31.480 --> 0:45:35.520 this is mildly a parody and somewhat of cinema verity, 0:45:35.719 --> 0:45:38.640 although I think he'd Idiocracy was also a documentary. Um, 0:45:38.800 --> 0:45:41.680 I was a documentary, but five years ahead of his time, right, 0:45:41.960 --> 0:45:45.320 exactly right, and so um and so he just he 0:45:45.440 --> 0:45:48.440 has a very precise um uh. He has a very 0:45:48.440 --> 0:45:50.960 precise understanding actually how things work here, more so than 0:45:51.000 --> 0:45:53.040 I think people would think. Um, and so it comes 0:45:53.080 --> 0:45:55.000 across and then and then his you know, his partners 0:45:55.040 --> 0:45:57.359 are also geniuses, and so it comes across. So that's good. 0:45:57.600 --> 0:45:59.279 I would also say, for people who haven't seen it, 0:45:59.360 --> 0:46:02.600 Halt and Catch Fire, uh in a completely different, hundred 0:46:02.640 --> 0:46:05.040 eighty degree different movies. It's a dramatic. It's a drama. 0:46:05.120 --> 0:46:07.160 There's no Halt and Catch Fire fire. It's not funny 0:46:07.160 --> 0:46:09.960 at all. It's it's a it's a very serious show. Halton. 0:46:10.000 --> 0:46:11.880 Catch Fire is a show on AMC that's I think 0:46:11.920 --> 0:46:15.000 in its third season now. Um. It is a period piece. 0:46:15.360 --> 0:46:18.399 Unlike the Silic Value is HBO, Silicon Value is current 0:46:18.480 --> 0:46:20.959 Time Fires a period peace set in the early eighties 0:46:21.000 --> 0:46:22.640 at the birth of the PC. UM. But it's the 0:46:22.680 --> 0:46:24.640 story basically, it's the it's a fictionalized story of the 0:46:24.640 --> 0:46:26.960 creation of the company Compact and then the birth of 0:46:27.000 --> 0:46:28.880 the PC industry and the birth of the PC clone 0:46:28.880 --> 0:46:30.800 industry at a time when IBM was by far the 0:46:30.880 --> 0:46:33.640 dominant company in the industry right and and so it's 0:46:33.680 --> 0:46:37.080 a but it's a very um it's a spookily accurate 0:46:37.400 --> 0:46:40.040 portrayal of what a startup is actually like, and it's 0:46:40.040 --> 0:46:42.520 actually really funny. The critics of the show in the 0:46:42.560 --> 0:46:45.000 first season, it was getting criticized for being too melodramatic, 0:46:45.560 --> 0:46:47.759 like this is all too superheated and too emotional, and 0:46:48.000 --> 0:46:49.800 I'm thinking, nope, this is It's like they put a 0:46:49.840 --> 0:46:52.839 camera in a startup like this, this is what they're 0:46:52.840 --> 0:46:54.960 actually like. Everybody would like to And this is also 0:46:55.000 --> 0:46:56.120 part of the thing we see all the time is 0:46:56.120 --> 0:46:57.960 everybody wants to pretend that startups are fun, and it 0:46:58.000 --> 0:46:59.360 turns out start ups are no fun. No, it's a 0:46:59.360 --> 0:47:01.239 lot of work, a lot of work, and it is 0:47:01.320 --> 0:47:04.359 a stomach churning process um of being told no by 0:47:04.440 --> 0:47:06.319 everybody and being told your idea is stupid and it's 0:47:06.400 --> 0:47:08.719 just not stop. Just you just feel like as a 0:47:08.719 --> 0:47:10.680 start every started founding, they just feel like they're under assault. 0:47:10.719 --> 0:47:12.719 All that, it's all and catch fired as a very 0:47:12.760 --> 0:47:15.719 good job capturing the other side of that. What what about, um, 0:47:15.960 --> 0:47:20.160 the incubators like hy Combinator or back Monity, What about 0:47:20.320 --> 0:47:24.320 those where all right, this is a little more founder 0:47:24.440 --> 0:47:27.080 friendly environment with a little more support and a little 0:47:27.160 --> 0:47:31.120 less um of of that negative CASTI gade that you 0:47:31.200 --> 0:47:33.919 were referring to. Yeah, so they're they're fantastic, Like they're 0:47:33.920 --> 0:47:36.600 they're fantastic. They've been usually additive to the to the valley. UM. 0:47:36.719 --> 0:47:39.040 The big thing that why Combinator and other firms like 0:47:39.160 --> 0:47:41.600 it are doing is they're bringing people in earlier. UM. 0:47:41.760 --> 0:47:44.000 And so write the path once upon a time, I 0:47:44.040 --> 0:47:45.279 mean I was maybe an exception of this, but the 0:47:45.320 --> 0:47:47.520 path once upon a time was you go work, you know, 0:47:47.600 --> 0:47:49.440 in a real job for five or ten or fifteen 0:47:49.480 --> 0:47:51.080 years and your real experience before you try one of 0:47:51.080 --> 0:47:54.280 these things, because you need to build the skill set. UM. Basically, 0:47:54.320 --> 0:47:56.160 what why see basically viewed is almost like the fifth 0:47:56.239 --> 0:47:58.000 year of college or something where they have they have 0:47:58.040 --> 0:48:00.239 ability to pull in you know, kids. A lot cases 0:48:00.280 --> 0:48:02.239 are people who just haven't been exposed to startups and 0:48:02.280 --> 0:48:04.279 able to They basically try to spin them up much 0:48:04.280 --> 0:48:06.840 more quickly in their careers. They talk openly about this, right, 0:48:06.920 --> 0:48:08.759 it's like it's it's it's sort of the new career path, 0:48:09.520 --> 0:48:11.759 um so. And then it as part it's also part 0:48:11.760 --> 0:48:13.640 of this increased our winnie and kind of feeding frenzy 0:48:13.640 --> 0:48:15.279 that we're talking about. So as long as we throw 0:48:15.440 --> 0:48:18.480 enough competitors gladigators into the ring, will end up with 0:48:18.600 --> 0:48:22.439 that many more survivors that potentially can can be something 0:48:22.520 --> 0:48:24.600 one day. Yeah, and I suspect I think, you know, 0:48:24.680 --> 0:48:26.200 part of the impact that these things have are the 0:48:26.239 --> 0:48:27.759 companies that come out of them, you know, out of 0:48:27.760 --> 0:48:30.680 the programs. I suspect the long run effects positive effects 0:48:30.680 --> 0:48:33.239 will be even bigger sort of the second, third, fourth generation. Right. 0:48:33.280 --> 0:48:35.680 So it's it's you know, the the y C Finnders 0:48:35.760 --> 0:48:38.000 this year, right, the ice Finders got don't a hundred 0:48:38.000 --> 0:48:39.399 and fifty companies in the batch right now or something 0:48:39.440 --> 0:48:41.759 like that, Like, you know, some of them is gonna succeed, 0:48:41.800 --> 0:48:43.440 a lot of them are going to fail. But to me, 0:48:43.560 --> 0:48:45.839 that's almost beside the point because it's all the people 0:48:45.920 --> 0:48:48.120 in those companies. It's three people who are working on 0:48:48.120 --> 0:48:50.120 those companies, and then what those people are gonna do 0:48:50.200 --> 0:48:51.840 not just this year, but five years from now, ten 0:48:51.920 --> 0:48:54.319 years from now. And so these people are being set 0:48:54.400 --> 0:48:56.440 up on a career path um where they should be 0:48:56.480 --> 0:48:58.680 able to do amazing things years from now. One of 0:48:58.719 --> 0:49:01.960 the nice things about Silicon all his failure isn't considered 0:49:02.000 --> 0:49:04.960 a mark of shame. It's so this this startup blew up, 0:49:05.000 --> 0:49:06.680 and that startup didn't make it, and we killed this, 0:49:06.800 --> 0:49:09.640 but we pivoted this one. And you know, sometimes the 0:49:09.719 --> 0:49:11.680 fifth or six time is a draw. Yeah, that's right, 0:49:11.719 --> 0:49:13.040 and so you get you get the Yeah, the first 0:49:13.080 --> 0:49:14.880 startup doesn't work, you do you do get more swings 0:49:14.920 --> 0:49:16.319 at the bat, and you do get and by the way, 0:49:16.440 --> 0:49:18.719 you get different experiences like your if your first up 0:49:18.760 --> 0:49:20.520 doesn't work, it's very often it ends in it's called 0:49:20.560 --> 0:49:22.520 an aquahier where you end up getting sold a big company, 0:49:22.600 --> 0:49:23.799 or you just or some people just go and get 0:49:23.800 --> 0:49:26.319 a job just to recover from the trauma of going 0:49:26.360 --> 0:49:28.960 through a start up work. But then you get skills, right, 0:49:29.040 --> 0:49:31.120 so then you have you have your startup experience. You 0:49:31.239 --> 0:49:33.440 have now a experience maybe working at a great you know, 0:49:33.520 --> 0:49:35.600 growth company where you're learning how that stuff works. When 0:49:35.600 --> 0:49:37.799 it when it's actually running at scale, right, and then 0:49:37.880 --> 0:49:39.600 five tenures and you start to learn how to manage 0:49:39.640 --> 0:49:41.480 people and you sort of pick up these skills and 0:49:41.520 --> 0:49:44.520 then you go start another company, right, And so there's 0:49:44.840 --> 0:49:46.480 there is a sort of repeated swings at the bat 0:49:46.800 --> 0:49:48.759 um kind of effect that happens. And I think that 0:49:49.120 --> 0:49:52.200 these incubators just give people basically an early swing at 0:49:52.200 --> 0:49:54.520 the bat that maybe otherwise didn't exist. Coming up, we 0:49:54.600 --> 0:49:59.080 continue our conversation with Mark andreeson discussing the unique structure 0:49:59.520 --> 0:50:02.640 of Andrew Uson Horowitz. I'm Barry Ridhults. You're listening to 0:50:02.800 --> 0:50:07.160 Masters in Business on Bloomberg Radio. I'm Barry Ridholts. You're 0:50:07.239 --> 0:50:11.000 listening to Masters in Business on Bloomberg Radio. My extra 0:50:11.080 --> 0:50:14.160 special guest today is Mark Andreason. He is the co 0:50:14.360 --> 0:50:18.000 founder and general partner of the venture capital firm Andrews 0:50:18.080 --> 0:50:21.719 and Horowitz. He co created the Mosaic Internet browser, co 0:50:21.920 --> 0:50:25.440 founded Netscape, and has done more things over the past 0:50:25.520 --> 0:50:27.680 decade or two than most of us will do in 0:50:27.760 --> 0:50:31.120 our lifestyle entire lifespans. Let's talk a little bit about 0:50:31.680 --> 0:50:35.040 the firm we're sitting in, which is quite lovely. It 0:50:35.239 --> 0:50:39.800 is a very relaxing zen vibe heerre um with the 0:50:40.400 --> 0:50:45.759 blonde wood and the just generally soothing atmosphere. Not what 0:50:46.080 --> 0:50:49.280 you imagine when you think up think of the startup 0:50:49.360 --> 0:50:53.520 community and and Silophone Valley. Tell us how you structured 0:50:53.600 --> 0:50:56.680 the firm and what was the thinking behind it? Yeah, 0:50:56.719 --> 0:50:59.920 so the big thing. So we're trying to create, We're 0:51:00.000 --> 0:51:02.080 trying to work with founders to create something out of nothing. Right, 0:51:02.080 --> 0:51:03.840 and so at the time we invest in most companies, 0:51:03.880 --> 0:51:06.200 there's not a lot there. And then the path is 0:51:06.239 --> 0:51:08.480 going to be a five, ten, fifteen year path to 0:51:08.560 --> 0:51:11.640 get to you know, to get to something important and significant. 0:51:11.680 --> 0:51:13.640 So you're really playing a very long game. It's not 0:51:13.760 --> 0:51:16.000 two years. Hey, we've got to start looking for an exit. Yeah, 0:51:16.000 --> 0:51:18.200 it's it's my friend and friends at CNBC, right, have 0:51:18.280 --> 0:51:20.160 the show Fast Money, and I'm always pitching them. It's 0:51:20.160 --> 0:51:22.120 like you need the car market needs slow money, right, 0:51:22.160 --> 0:51:23.920 and the slow money should be on every day and 0:51:24.080 --> 0:51:25.680 every day it should just be right, you know, well, 0:51:25.760 --> 0:51:29.440 what's happened today that matters? And the answer is yeah, nothing, Um, 0:51:29.760 --> 0:51:31.839 you know, what's what's going on? You know? Not much? Okay, 0:51:31.880 --> 0:51:34.000 I'll see tomorrow, right and so and and and you 0:51:34.040 --> 0:51:35.839 know they start looking the start ups are working incredibly hard. 0:51:35.840 --> 0:51:37.520 Like the startups, you know, there's all kinds of activity 0:51:37.520 --> 0:51:40.080 at the startups. But the investors, say the vcs who 0:51:40.160 --> 0:51:42.160 freak out on a daily, weekly, monthly basis with these 0:51:42.160 --> 0:51:44.760 companies like burn themselves to a crisp, like because stuff 0:51:45.040 --> 0:51:47.719 these companies to cast. And so we go into it 0:51:47.840 --> 0:51:50.040 just knowing it's gonna be with every company is going 0:51:50.080 --> 0:51:51.799 to be this long running journey, and it just takes time. 0:51:51.840 --> 0:51:53.759 It takes at least five years to build something that 0:51:54.080 --> 0:51:55.600 has real value, and it takes at least ten years 0:51:55.640 --> 0:51:57.680 to build something that's going to endure for long, you know, 0:51:57.760 --> 0:51:59.320 for for for another ten years after that, and so 0:51:59.400 --> 0:52:01.880 it's it's just to be this this, this, this long thing. 0:52:01.960 --> 0:52:04.200 And then I mentioned earlier like so much of this 0:52:04.400 --> 0:52:06.360 people like we we like to I think, brag on 0:52:06.480 --> 0:52:07.840 like how good we are I thinking about the ideas 0:52:07.880 --> 0:52:09.239 and the technical and stuff, and then we do spend 0:52:09.239 --> 0:52:10.400 a lot of time on that stuff. But I think 0:52:10.440 --> 0:52:13.200 a lot of it is partnering with really high potential people. 0:52:13.719 --> 0:52:15.239 In a lot of cases, you know, to your point, 0:52:15.320 --> 0:52:17.000 like don't have that much experience at the time they 0:52:17.000 --> 0:52:19.640 start their companies UM or or even people with more 0:52:19.680 --> 0:52:21.759 career experience who haven't done a startup before, right where 0:52:21.800 --> 0:52:23.200 there's a whole new set of things they have to learn, 0:52:23.200 --> 0:52:25.040 and then we try to work and help them, you know, 0:52:25.160 --> 0:52:27.560 grow and become better. Uh and and and you know, 0:52:27.640 --> 0:52:29.800 develop the skills that they need to build important companies 0:52:30.360 --> 0:52:32.320 um and so the whole firm is kind of engineered 0:52:32.360 --> 0:52:34.719 around those ideas. Right. So, as an example, we will 0:52:34.760 --> 0:52:36.759 never back a startup if we think it's outcome is 0:52:36.800 --> 0:52:38.520 it's going to get bought. Like every once in a while. 0:52:38.560 --> 0:52:40.200 It's really like if there's a slide in the dock 0:52:40.320 --> 0:52:42.279 that says excess strategy, you don't get bought by Google 0:52:42.320 --> 0:52:44.480 in three years like for ten X, like we won't. 0:52:44.760 --> 0:52:47.520 We won't find the company spent a lot of time 0:52:47.560 --> 0:52:49.440 on that. But like we're we're know, you want to 0:52:49.480 --> 0:52:52.719 create a company that worst case scenario exists on its 0:52:52.760 --> 0:52:56.160 own for the foreseeable decades in the future, and if 0:52:56.239 --> 0:52:59.200 someone happens to acquire them, great, But that's not the target. 0:52:59.320 --> 0:53:01.359 That's the kicker, as the companies that actually get bought 0:53:01.360 --> 0:53:02.640 are the ones that don't have to get bought, the 0:53:03.160 --> 0:53:04.640 ones that actually could have stood on their own because 0:53:04.640 --> 0:53:07.680 those are the ones that actually value that value, right exactly. 0:53:07.719 --> 0:53:09.640 So that's the twist on the whole thing. But so 0:53:09.800 --> 0:53:12.439 we're we're always backing these companies with and these people 0:53:12.480 --> 0:53:15.120 with an eye towards long run independence, developing something of 0:53:15.239 --> 0:53:18.759 of deepen enduring value. UM. So one is just the timeframe, Um, 0:53:18.920 --> 0:53:21.839 that's important part. A second part is how we coach 0:53:21.920 --> 0:53:24.040 and mentor and work with the founders and the team 0:53:24.080 --> 0:53:25.680 that the founders built around them, And that has to 0:53:25.719 --> 0:53:27.640 do with our how we how we s left general 0:53:27.680 --> 0:53:29.640 partners for our firm with the people who make the 0:53:29.840 --> 0:53:32.200 pull the trigger investments and go on the boards. Um. 0:53:32.320 --> 0:53:34.120 And there is all our our big claim to fame 0:53:34.120 --> 0:53:36.280 there is all of our general partners are former founders 0:53:36.360 --> 0:53:38.880 and our CEOs of tech startups. And so when we 0:53:38.960 --> 0:53:41.600 go on a board, it's always the case with us 0:53:41.640 --> 0:53:43.840 that you're sitting with somebody who has been through the 0:53:43.880 --> 0:53:45.880 same situation that you're in right now and has had 0:53:45.960 --> 0:53:48.040 to make the difficult decision and has had to live 0:53:48.080 --> 0:53:50.759 with the consequences of that decision, right. And so it's 0:53:50.800 --> 0:53:53.080 just it's a grounding in the in the advice and 0:53:53.120 --> 0:53:54.799 the guidance that you get that I think just goes 0:53:54.880 --> 0:53:56.560 deeper than you know. And there by the way, there 0:53:56.600 --> 0:53:58.719 are great vcs who have no operating experience or little 0:53:58.719 --> 0:54:00.640 operating experience, and some of them are actually very very 0:54:00.640 --> 0:54:03.400 good investors. But there's there's just so much in that 0:54:03.480 --> 0:54:05.719 intimate relationship with the founder and with the with the 0:54:05.800 --> 0:54:08.279 team that I think benefits from having the credibility from 0:54:08.280 --> 0:54:10.680 having actually been you guys. You guys also do something 0:54:10.840 --> 0:54:14.759 unique in that every partner is on every investment, as 0:54:14.760 --> 0:54:18.000 opposed to you do software, you do semi conductor. I'll 0:54:18.040 --> 0:54:21.719 do this. Every partner participates in every investment. Is that 0:54:21.840 --> 0:54:24.479 an accurate statement? So we do that. There is there's 0:54:24.480 --> 0:54:26.520 always a single GP on the board, so there's somebody 0:54:26.520 --> 0:54:28.719 who's focused on you. But then the way the firm 0:54:28.760 --> 0:54:31.320 ist structured is everybody shares equally in the in the 0:54:31.400 --> 0:54:33.640 results of that. So we so basically we've just there's 0:54:33.640 --> 0:54:34.880 a lot of things we've done in the firm to 0:54:35.200 --> 0:54:37.560 design the firm to be a zero politics environment, to 0:54:37.640 --> 0:54:40.760 be so what you discover what you do rowe politics 0:54:40.800 --> 0:54:43.280 and environe your politics environment with respect to how the entrepreneurs, 0:54:43.520 --> 0:54:45.160 I mean, I can Garantie. We've ruled out all politics 0:54:45.239 --> 0:54:46.400 in the firm. I'm just saying, as far as the 0:54:46.440 --> 0:54:49.719 founder's experience, that they should never run into for a second, 0:54:49.719 --> 0:54:51.719 it shouldn't be this guy in the firm likes this, 0:54:51.880 --> 0:54:54.600 but this guy is fighting against fighting again. So what 0:54:54.719 --> 0:54:56.439 you often find in a lot of entry capital firms 0:54:56.440 --> 0:54:58.120 since they present as united front and then there's a 0:54:58.160 --> 0:55:00.560 tremendous amount of in fighting this taking place. It's by 0:55:00.560 --> 0:55:01.759 the way, it's the same thing you see and like 0:55:01.920 --> 0:55:03.520 you'll see on on Wall Street, a lot like whis 0:55:03.560 --> 0:55:05.439 just for example, there's just a battle for the there's 0:55:05.440 --> 0:55:06.840 a battle for the profits, like there's a battle for 0:55:06.880 --> 0:55:08.319 the carry. And so for me to get more money, 0:55:08.360 --> 0:55:10.439 somebody else is to get less money. And that least 0:55:10.480 --> 0:55:12.560 to this weird adverse thing where I actually want the 0:55:12.600 --> 0:55:14.560 other guys deals to fail because then I'll have more 0:55:14.600 --> 0:55:17.440 negotiating leverage in my comp you know, discussion or there 0:55:17.440 --> 0:55:19.359 will be a battle between who wins the deal, right 0:55:19.440 --> 0:55:21.759 the maybe the entrepreneur starts the conversation with one GP, 0:55:21.920 --> 0:55:23.919 but maybe the entrepreneur really would rather have another GP 0:55:24.040 --> 0:55:25.759 with the more relevant skill set right in the same 0:55:25.800 --> 0:55:27.520 firm on their board, sure, and a lot of firms 0:55:27.560 --> 0:55:30.040 that that starts World War three. Internally, at our firm, 0:55:30.640 --> 0:55:33.520 everybody's fine with that. Another thing, a little twist that 0:55:33.560 --> 0:55:35.160 we have. We don't have a promotion path in the 0:55:35.200 --> 0:55:37.719 firm to general partner UM. So the way most other 0:55:37.760 --> 0:55:39.320 firms are structured as they have young people in the 0:55:39.360 --> 0:55:41.800 firm who get promoted up the rights over time. But 0:55:41.920 --> 0:55:44.680 it's a competitive process, right, So you'll have twenty junior 0:55:44.719 --> 0:55:46.880 people who are competing for you know, six sort of 0:55:47.120 --> 0:55:49.400 UM junior g P slots who are competing for two 0:55:49.480 --> 0:55:52.440 g two senior GP slots of course ten or fifteen years, 0:55:52.719 --> 0:55:54.480 and so they're in a constant knife fight with each other, 0:55:54.719 --> 0:55:56.399 right because they're it's just like had a law firm. 0:55:56.640 --> 0:55:58.359 I was gonna say, it sounds like the big big 0:55:58.440 --> 0:56:00.759 Wall Street or park Ev and you law firms where 0:56:00.800 --> 0:56:03.200 it's just a blood bath and when they make the 0:56:03.280 --> 0:56:06.080 announcements of partners, there's a handful of happy people and 0:56:06.080 --> 0:56:08.480 a lot of other people getting their resumes together and 0:56:08.600 --> 0:56:11.040 it's no fun for anyone. And so when that struck, 0:56:11.120 --> 0:56:12.880 that's exactly right. So when that structure works well, that 0:56:13.000 --> 0:56:15.320 leads to a very brutally Darwinian effective eat what you 0:56:15.440 --> 0:56:18.120 kill environment where you're you're breeding for you're basically breeding 0:56:18.120 --> 0:56:21.000 sharks for maximum infectiveness. The problem is, as a client 0:56:21.080 --> 0:56:23.200 of one of those firms, you get caught crosswise in 0:56:23.239 --> 0:56:25.560 the politics right, and you do not get you basically 0:56:25.640 --> 0:56:27.200 only get access to the people who have the direction 0:56:27.280 --> 0:56:28.600 sentive to help you in the firm. You don't get 0:56:28.600 --> 0:56:30.160 access to the rest of the firm. And that's the 0:56:30.200 --> 0:56:32.480 typical experience that founders have with vcs, which is they 0:56:32.520 --> 0:56:34.320 get promised the resources of the firm, they get what 0:56:34.360 --> 0:56:37.560 they get in practice is one person that seems really counterproductive. 0:56:37.600 --> 0:56:39.239 It's very kind of productive and and in our come 0:56:39.280 --> 0:56:40.800 by the way, a lot of our work with companies 0:56:40.880 --> 0:56:42.480 is working with our companies to help them resolve these 0:56:42.560 --> 0:56:45.480 kinds of issues with the other vcs. So because you're 0:56:45.560 --> 0:56:48.600 you guys are also co investors with other other ventures. 0:56:48.719 --> 0:56:50.920 So we just don't and again, like this may work 0:56:50.920 --> 0:56:52.600 for other firms, we just decided to take a different 0:56:52.640 --> 0:56:54.279 mentality where we don't have that kind of you ever 0:56:54.280 --> 0:56:56.839 get caught in the kind of crossbar because it doesn't exist. Um, 0:56:56.920 --> 0:56:58.440 so that's a big thing. And then the other big 0:56:58.520 --> 0:57:00.680 thing that we do is a firm um is, we 0:57:00.719 --> 0:57:03.920 do believe deeply in the idea that the founders not 0:57:04.080 --> 0:57:05.839 in every case, but in a lot of cases, really 0:57:05.880 --> 0:57:07.680 should be able to if they're if they want to, 0:57:07.719 --> 0:57:08.960 and if they're able to do it, they should they 0:57:08.960 --> 0:57:10.719 should run their own companies. And we could have a 0:57:10.760 --> 0:57:13.600 long conversation about that. Um. The other thing that we 0:57:13.640 --> 0:57:15.680 do is we really try to help arm up the 0:57:15.719 --> 0:57:17.840 founders who don't have a lot of deep business experience 0:57:17.960 --> 0:57:21.680 with all of the connectivity the network access that the 0:57:21.760 --> 0:57:24.360 professional CEOs will tend to have. So so the technical 0:57:24.400 --> 0:57:26.600 found technical founder starts a company right, and then you know, 0:57:26.680 --> 0:57:27.919 big part of it is are I think, just gonna 0:57:27.920 --> 0:57:29.520 be good at managing and leading, which is where the 0:57:29.600 --> 0:57:33.040 GP relationship is really critical mentoring. Do you find that 0:57:33.240 --> 0:57:35.920 very often engineers and people with that sort of technical 0:57:36.040 --> 0:57:40.600 skill set, um, the stereotype is they're socially awkward. They 0:57:40.680 --> 0:57:44.640 lack the usual skill set that a CEO typically has. Yeah, 0:57:44.840 --> 0:57:47.200 so that is often the case. But also the reverse 0:57:47.320 --> 0:57:49.240 is often the case, which is the highly social you know, 0:57:49.360 --> 0:57:51.920 the CEO is had of central casting have you know, 0:57:52.040 --> 0:57:55.120 the the great hair and the you know, brilliant smiles, 0:57:55.200 --> 0:57:57.680 and the great, you know, just the great in front 0:57:57.680 --> 0:58:00.120 of the crowd. They often not always, but they often 0:58:00.200 --> 0:58:02.600 lack the technical grounding to determine the direction of a 0:58:02.640 --> 0:58:05.160 technology company. And so and again like these are these 0:58:05.200 --> 0:58:07.720 are stereotypes, and they're overly broad, but they are patterns. 0:58:07.960 --> 0:58:11.240 There is some truth to it. Started in this case. 0:58:11.320 --> 0:58:13.560 And so so what we're now everything, I would say 0:58:14.080 --> 0:58:16.880 the the kicker everything adventure is on an exception basis, right, 0:58:16.920 --> 0:58:18.560 and so by definition we're not looking for the pattern, 0:58:18.640 --> 0:58:20.640 we're looking for the exception. And so we're looking for 0:58:20.880 --> 0:58:23.880 the to your point, the very particular technical founder, who, 0:58:23.920 --> 0:58:25.400 by the way, may start out without a lot of 0:58:25.440 --> 0:58:27.760 these social skills, and may start out without really knowing 0:58:27.760 --> 0:58:29.280 how to deal with customers, or may start out not 0:58:29.320 --> 0:58:31.200 really knowing how to manage people or hire people. And 0:58:31.240 --> 0:58:34.160 then we're trying and if they're willing and able to learn, 0:58:34.400 --> 0:58:36.000 we will then put a lot of effort into helping 0:58:36.000 --> 0:58:38.280 them become great at those things. By the way, it's 0:58:38.320 --> 0:58:39.720 the same astray on the other side when it comes 0:58:39.800 --> 0:58:41.600 time some of our companies we do end up with 0:58:41.720 --> 0:58:44.360 professional CEOs, and then we look for the professional CEO. 0:58:44.440 --> 0:58:45.800 Is that not only have that skill, but also then 0:58:45.840 --> 0:58:48.000 go deep on products and technology, and so you're and 0:58:48.120 --> 0:58:50.160 and and those are both exceptions like those are these 0:58:50.160 --> 0:58:53.160 are not on both sides, these are rare people. So 0:58:53.360 --> 0:58:55.240 so it makes me wonder is it easy to take 0:58:55.320 --> 0:58:58.160 someone who has the technical skills and teach them to 0:58:58.280 --> 0:59:01.440 be a CEO, because it sounds like gets challenging to 0:59:01.560 --> 0:59:03.400 take a CEO and say, by the way, on the side, 0:59:03.440 --> 0:59:05.920 we want you to get your you know, your ms 0:59:06.000 --> 0:59:09.560 in in computer science over at Stanford at night, that 0:59:09.760 --> 0:59:12.800 that doesn't seem like your first breakthrough product. At the 0:59:12.880 --> 0:59:14.840 same time, the same time, I would think it's easier 0:59:14.920 --> 0:59:22.000 to teach the inexperienced, unskilled but really sophisticated technology technologist 0:59:22.760 --> 0:59:25.720 the people skills then vice versa. So in the tech industry, 0:59:25.800 --> 0:59:28.280 we firmly believe exactly what you said from the general 0:59:28.320 --> 0:59:29.959 pattern as we want to find the great technical founder 0:59:29.960 --> 0:59:32.040 and helping become a great CEO, and that then, exactly 0:59:32.200 --> 0:59:34.120 at your point, that's easier than finding a great CEO 0:59:34.200 --> 0:59:37.160 and trying to turn them into a great product technology visionary. 0:59:37.560 --> 0:59:39.480 And I think the history of our industry confirms this, 0:59:39.640 --> 0:59:42.280 like nine out of ten roughly of the big successful 0:59:42.360 --> 0:59:45.040 tech companies in the last frankly hundred years have been 0:59:45.160 --> 0:59:46.680 run by their founders for a long periods of time 0:59:46.720 --> 0:59:49.040 for this reason, starting with you Litt Packard and Intel 0:59:49.120 --> 0:59:50.880 and you know many many many others you know now 0:59:50.920 --> 0:59:53.600 today Facebook and Google, right, um, And so that's the 0:59:53.720 --> 0:59:56.880 thing now because it's easier though doesn't mean it's easy, right, 0:59:57.200 --> 0:59:59.120 So you know, it is a real like for these 0:59:59.120 --> 1:00:01.840 people to learning um. You know, for for an engineer 1:00:01.880 --> 1:00:04.120 who has not managed a large organization before to learn 1:00:04.160 --> 1:00:05.800 how to do that, like that's a big thing that 1:00:05.880 --> 1:00:07.720 they really have. They have to really want to do it, 1:00:08.120 --> 1:00:09.640 and some of them just simply don't. And then you 1:00:09.720 --> 1:00:11.600 pair them up with somebody who them come up with 1:00:11.640 --> 1:00:13.640 a pair configuration where they can work with somebody who 1:00:13.640 --> 1:00:15.800 can help them with that UM. And then some of 1:00:15.840 --> 1:00:17.720 them just simply can't write. They just hit the wall 1:00:17.760 --> 1:00:19.280 where it's just not something that they're going to be 1:00:19.320 --> 1:00:21.320 able to do. And so that there there, there in 1:00:21.440 --> 1:00:24.240 lies the difficulty of implementing the theory. But that's that's 1:00:24.440 --> 1:00:26.840 that's our that's what we do. So so two things 1:00:26.920 --> 1:00:28.960 immediately come to mind when you bring that up. The 1:00:29.040 --> 1:00:32.280 first is you have Larry and surgery, who are technologists 1:00:32.320 --> 1:00:39.760 who eventually UM partner up with with their chairman, Eric Schmidt, 1:00:39.800 --> 1:00:43.080 who who basically brings them along and teaches them how 1:00:43.120 --> 1:00:45.560 to be c e O S or co c e 1:00:45.680 --> 1:00:47.040 O S or what if we want to call them. 1:00:47.120 --> 1:00:51.040 But the other example that leaps to minds is Marcus 1:00:51.080 --> 1:00:54.080 Zuckerberg and Facebook. So let's let's talk about that for 1:00:54.160 --> 1:00:56.160 a moment. You're a friend of his, you're a mentor. 1:00:56.480 --> 1:01:00.080 Tell us how that relationship came about and how how 1:01:00.160 --> 1:01:05.960 have you helped Zuckerberg become one of the leading CEOs 1:01:06.200 --> 1:01:08.880 in the world. So, first of all, I should disclaim 1:01:08.920 --> 1:01:11.440 most credit on this, which is Mark has done most 1:01:11.480 --> 1:01:13.880 of this on Zone. He has been advised and helped 1:01:13.880 --> 1:01:15.760 along the way by a lot of people. So I'm 1:01:15.760 --> 1:01:17.200 not I'm not going to take any sort of giant, 1:01:17.520 --> 1:01:19.640 giant credit on this one. Um I did that. I 1:01:19.880 --> 1:01:21.200 did get to I did get to see it, and 1:01:21.440 --> 1:01:22.480 you know I was I did get to be in 1:01:22.520 --> 1:01:24.680 the room for a fair amount of it. So um 1:01:24.920 --> 1:01:27.200 So I met Mark through Peter tele after he first 1:01:27.240 --> 1:01:29.200 invested in the company, and this was when Facebook was 1:01:29.600 --> 1:01:33.160 four or five people sitting in bean bags. UM in 1:01:33.320 --> 1:01:35.920 Palo alto uh in an office with very colorful graffiti 1:01:36.000 --> 1:01:38.920 on the walls in the very early days. Um, and 1:01:39.320 --> 1:01:41.200 it was just crystal clear from the start. I mean 1:01:41.280 --> 1:01:42.840 it was not I don't think clear that Facebook was 1:01:42.880 --> 1:01:45.200 going to become you know, the heam come because just 1:01:45.280 --> 1:01:47.160 how how often does that ever happen? And how how 1:01:47.240 --> 1:01:48.960 can you actually predict that? Do you want you want 1:01:48.960 --> 1:01:50.560 me to go through the list of how often that's 1:01:50.600 --> 1:01:52.720 happened with you? Or should we save that for a 1:01:52.840 --> 1:01:54.960 later segment? Not not very not very freaking often. I 1:01:54.960 --> 1:01:58.320 can tell you that. So um so uh. I will say, like, 1:01:58.400 --> 1:01:59.840 it was very clear from the beginning that Mark was 1:01:59.880 --> 1:02:02.000 a I call him a learning machine. Um, he just 1:02:02.120 --> 1:02:04.560 siphons in information. And then this this goes to what 1:02:04.640 --> 1:02:07.640 I mentioned earlier. It's it's it's it's technical founders. It's both. Um, 1:02:07.800 --> 1:02:09.480 it's both can they do it? But also do they 1:02:09.520 --> 1:02:10.960 want to do it? And a big part of that 1:02:11.120 --> 1:02:13.600 for both of those is can they learn? And by 1:02:13.640 --> 1:02:15.320 the way, there there are people who just simply hit 1:02:15.360 --> 1:02:16.960 the wall where they just do not want to learn anymore, 1:02:17.080 --> 1:02:18.480 Like and we've all dealt with people like that where 1:02:18.800 --> 1:02:21.360 say they're impervious to new information, right, because they've deliberately 1:02:21.360 --> 1:02:23.920 set themselves up where it's like any new information at 1:02:23.960 --> 1:02:25.320 this point would be a threat. And so I'm just 1:02:25.440 --> 1:02:28.440 I'm done. They tap out and finished. They just they 1:02:28.480 --> 1:02:30.240 piked like they just peeked in terms of everything that 1:02:30.280 --> 1:02:31.880 they're ever going to know and absorbed like that's just 1:02:32.000 --> 1:02:33.600 the way that they've decided to live their lives. And 1:02:33.720 --> 1:02:35.520 so to do what Mark has done, you need to 1:02:35.520 --> 1:02:37.440 be these that opposite of that. You need to just 1:02:37.560 --> 1:02:40.880 constantly be pulling in new information until actually curious devouring 1:02:41.080 --> 1:02:43.760 whatever comes cross every possible topic that you can imagine 1:02:43.800 --> 1:02:45.200 it's going to be relevant to what you're doing. And 1:02:45.240 --> 1:02:47.600 so Mark, Mark has just been the way I think Marcus, 1:02:47.600 --> 1:02:49.680 he's the most systematic person I think I've ever worked 1:02:49.720 --> 1:02:53.120 with it, just pulling it and just extracting the information. Um. 1:02:53.280 --> 1:02:55.520 And that was true when he was really young, right 1:02:55.640 --> 1:02:57.680 and was not well known, um and he was very 1:02:58.000 --> 1:02:59.960 determined to go get the information from people who knew. 1:03:00.440 --> 1:03:02.439 And then it's it's only magnified out as he's grown 1:03:02.480 --> 1:03:03.760 and by the way he continue know he's out on 1:03:03.800 --> 1:03:05.680 this tour right now, you know, touring all fifty states, 1:03:05.760 --> 1:03:08.240 like from Mark standpoint that there's all kinds of speculation 1:03:08.280 --> 1:03:10.120 on that. But from Mark standpoint, the whole purpose of 1:03:10.200 --> 1:03:12.880 that is learning, not that he's running for president when 1:03:12.880 --> 1:03:17.160 he turns he's where he swears not, but yes, whole 1:03:17.400 --> 1:03:19.280 when he talks about that, like when you talked about 1:03:19.280 --> 1:03:20.520 that with us, when he said he's gonna go do 1:03:20.560 --> 1:03:22.080 it's all I'm gonna go learn. I'm gonna go learn 1:03:22.080 --> 1:03:23.919 about the Country'm gonna learn about every state. I'm gonna 1:03:23.960 --> 1:03:25.800 learn about people who aren't like me, and and so 1:03:26.040 --> 1:03:28.000 and for me. So for me, it was not surprising 1:03:28.040 --> 1:03:30.400 in the sense of it's completely consistent with how he operates. 1:03:30.640 --> 1:03:32.240 And I think this is an area in which he 1:03:32.400 --> 1:03:34.800 is a much He's a real role model on this, 1:03:34.960 --> 1:03:36.720 Like I I really think, like I think a lot 1:03:36.760 --> 1:03:38.320 of founders like look at Mark and they try to 1:03:38.440 --> 1:03:40.000 drive like how do I get good at I don't know, 1:03:40.120 --> 1:03:42.680 viral marketing or data da whatever product? He just wants 1:03:42.720 --> 1:03:44.200 to take it all. I think if more people just 1:03:44.240 --> 1:03:45.640 look at Mark and said, how do I learn like that, 1:03:46.920 --> 1:03:48.640 they would be much better. You're on the board of 1:03:48.680 --> 1:03:52.120 directors of Facebook. What's the reaction when the CEO and 1:03:52.240 --> 1:03:55.760 founder says, hey, guys, I'm going around the country. I'm 1:03:55.800 --> 1:03:57.920 gonna go to all fifty states because I think people 1:03:58.440 --> 1:04:01.200 have interesting things to say and I want to learn. 1:04:02.200 --> 1:04:04.320 Is there eyebrows raised or it's like, oh, that's just 1:04:04.480 --> 1:04:06.760 Mark being Mark. Go ahead, yeah, I mean Mark, Mark 1:04:06.840 --> 1:04:08.920 does things like that. Mart Market. Is My point is 1:04:08.920 --> 1:04:11.040 Mark has always stretched himself like he stretches. He comes 1:04:11.120 --> 1:04:13.320 up with a quest every year, goes at his question quest, 1:04:13.360 --> 1:04:15.200 the quest. A couple of years ago, I remember he 1:04:15.320 --> 1:04:18.760 was learning some obscure language if memories, sir, I don't 1:04:18.760 --> 1:04:22.800 remember what it was. Mandarin Mandarin right, well, not so obscure, 1:04:22.920 --> 1:04:26.000 but a complex, uh language. So he does a quest 1:04:26.040 --> 1:04:28.840 every year and just basically keeps learning, keeps learning. He's 1:04:28.840 --> 1:04:29.880 been doing this is if you know, I don't know 1:04:29.920 --> 1:04:31.640 for ten years now or something. It's it's and so 1:04:31.800 --> 1:04:33.640 there's been through a variety of things, and he talks 1:04:33.640 --> 1:04:35.880 about this. He's very open about this um and so 1:04:36.000 --> 1:04:37.840 you know, he just he just goes out in siphons. 1:04:37.880 --> 1:04:39.439 And so he's a guy. He's a guy who's literally 1:04:39.480 --> 1:04:40.960 able to learn from some of the most you know, 1:04:41.000 --> 1:04:43.520 experience and accomplish people in the world on certain topics. 1:04:43.560 --> 1:04:44.760 But you know, spend a day on a farm not 1:04:44.800 --> 1:04:46.840 far from where I grew up in Wisconsin and dow 1:04:46.840 --> 1:04:48.360 to milk cows like and he's just as far and 1:04:48.400 --> 1:04:52.560 he's happy to do that. He's absolutely so he's living 1:04:52.600 --> 1:04:54.360 the life he always wants to live. I just want 1:04:54.400 --> 1:04:57.080 to just suck everything I can possibly into my head 1:04:57.520 --> 1:05:02.040 as as rapidly as I possibly can. Well, that's pretty fascinating. Um, 1:05:02.800 --> 1:05:05.920 let's keep going about the deal days you do. I 1:05:06.000 --> 1:05:09.040 want to talk about some some more of the combination 1:05:09.240 --> 1:05:13.400 angel investing late stage. So you do deal days, and 1:05:13.600 --> 1:05:16.080 and how many people will the firm see in a 1:05:16.200 --> 1:05:19.360 given day or week when those are running well, we have, 1:05:19.480 --> 1:05:21.360 like I said, we do about two thousand a year total. 1:05:21.520 --> 1:05:23.240 So there's a whole funnel in the whole system, and 1:05:23.240 --> 1:05:24.400 there's a lot of people in the firm who meet 1:05:24.400 --> 1:05:26.480 companies the whole process of kind of distilling the information. 1:05:26.560 --> 1:05:28.240 So it's you know, it's dozens of week you know, 1:05:28.360 --> 1:05:31.120 kind of across the firm, and then we see pitches 1:05:31.320 --> 1:05:34.560 on usually Monday and Thursday, or Monday Monday Thursday generally, UM, 1:05:34.840 --> 1:05:37.440 and as the GP team and that's you know, I 1:05:37.440 --> 1:05:40.080 don't know, Monday, it was five this week on Thursday, 1:05:40.080 --> 1:05:42.440 I think there's two or three more. Um, and this 1:05:42.600 --> 1:05:45.600 is every week, so there's occasional vacations and stuff, but 1:05:45.640 --> 1:05:49.560 pretty much you're running through three hundred, four hundred pitches. 1:05:49.720 --> 1:05:52.000 The GPS will see everything the way. These are called 1:05:52.040 --> 1:05:53.560 the all GP pitches, and so these are ones where 1:05:53.560 --> 1:05:55.720 everybody's in the room, um, and then many others. There's 1:05:55.720 --> 1:05:57.360 many others that happened during the week where one or 1:05:57.360 --> 1:05:59.280 two or three GPS might see them. Right, So it's 1:05:59.280 --> 1:06:01.920 a giant fun It shrinks down and down until and 1:06:02.000 --> 1:06:04.200 out of those let's call it three hundred a year, 1:06:04.880 --> 1:06:08.360 you're looking at ten percent, very very seriously. Yeah, that's 1:06:08.560 --> 1:06:11.040 about right. And when you decide to do an investment 1:06:11.080 --> 1:06:15.960 in them, are these usually angel fifty thousand dollar rounds 1:06:16.120 --> 1:06:18.880 or these much more substantial rounds or both. Yeah, So 1:06:18.960 --> 1:06:21.280 we don't really do the fifty anymore. We used to 1:06:21.280 --> 1:06:23.080 do more of those when we got started, but we 1:06:23.280 --> 1:06:25.000 don't do those as we tend to get much more. 1:06:25.160 --> 1:06:26.440 We tend to kind of go all in or not. 1:06:27.240 --> 1:06:29.000 So that I could go through that, but like that, 1:06:29.440 --> 1:06:32.040 why not we work, well, why all in? Why not? 1:06:32.280 --> 1:06:34.760 Well we'll get to three other investors and will hedge 1:06:34.800 --> 1:06:37.000 our bets and go in partially. Well, there's still so 1:06:37.200 --> 1:06:39.080 there's there a couple of couple of reasons. UM. One 1:06:39.240 --> 1:06:41.480 is just the level of one is just an economic thing, 1:06:41.520 --> 1:06:43.400 which is for us to be the opportunity. So there's 1:06:43.440 --> 1:06:45.840 costs and then there's opportunity costs. And there's always opportunity 1:06:45.880 --> 1:06:47.720 costs on our time and on our ability. How many 1:06:47.720 --> 1:06:49.560 companies gonna work with? Is it more of the time 1:06:49.720 --> 1:06:51.280 or the money. It's it's more of the time. It's 1:06:51.280 --> 1:06:53.400 more the opportunity costs. It's every deal, every deal and 1:06:53.480 --> 1:06:55.560 we do fills a slot that can't be then filled 1:06:55.640 --> 1:06:57.640 by you know, another hundred deals that you might have 1:06:57.680 --> 1:06:59.680 done instead. And right, so there's a big there's a 1:06:59.760 --> 1:07:01.280 there's always there were any deal you do a big 1:07:01.400 --> 1:07:03.520 risk that you're for closing some other deal that much better, 1:07:03.560 --> 1:07:05.560 and so you have to just think very hard about it. 1:07:05.800 --> 1:07:08.360 And right, it's it's it's it's time um. And then 1:07:08.600 --> 1:07:10.440 UM that that that's a big part of it. UM. 1:07:10.520 --> 1:07:12.720 Then there's also just the economics of it UM, which 1:07:12.840 --> 1:07:14.920 is just as a consequence of that, when when you 1:07:14.960 --> 1:07:16.560 have a hit, like how much of it you actually 1:07:16.560 --> 1:07:19.080 own actually really drives your returns um. And so we 1:07:19.160 --> 1:07:21.440 have a responsibility to our parall piece to try to 1:07:21.520 --> 1:07:23.880 you know, really have the the hits pay off um. 1:07:24.120 --> 1:07:26.080 And then part of it is just a full engagement model, 1:07:26.120 --> 1:07:27.880 like we really don't like giving up. We really don't 1:07:27.920 --> 1:07:30.000 like we don't you know, there there are venture firms 1:07:30.040 --> 1:07:31.720 that if your company is not going well, they just 1:07:31.800 --> 1:07:34.440 they'll mysteriously vanage on the visa website like they just 1:07:34.520 --> 1:07:37.160 never get talked, they get dropped down the memory hole. Um. 1:07:37.640 --> 1:07:39.600 And uh, we don't tend to do that. We're just 1:07:39.960 --> 1:07:41.720 and it comes from the fact we've all been founders 1:07:41.760 --> 1:07:43.160 and CEO is like, we just we don't tend to 1:07:43.200 --> 1:07:45.000 give up. Um, you know what it's like when you're 1:07:45.040 --> 1:07:47.760 on the receiving end of unreturned phone calls. That is right, yeah, 1:07:47.800 --> 1:07:49.520 and so and and my view is like our we 1:07:49.840 --> 1:07:51.080 make our money on the ones that work, and we 1:07:51.160 --> 1:07:53.240 probably I think make our reputations and the ones that don't. 1:07:53.720 --> 1:07:57.760 That's a fascinating line right there, because the math behind 1:07:58.040 --> 1:08:00.960 venture investing is, look, when you go out and buy 1:08:01.000 --> 1:08:03.960 stocks in the market, fifty of them will do nothing, 1:08:04.280 --> 1:08:06.560 thirty of them will work, and uh, ten of them 1:08:06.560 --> 1:08:09.360 will be disasters, and a handful them will work really well. 1:08:09.880 --> 1:08:13.240 The odds are far more daunting with venture investing. It's 1:08:13.320 --> 1:08:16.240 it's almost ten x that you have and I think 1:08:16.320 --> 1:08:19.640 you've you've written this elsewhere. You'll make a hundred investments 1:08:19.760 --> 1:08:25.040 and fifty of them just crash. Okay, But it's the 1:08:25.080 --> 1:08:26.600 one or two at the top of the pyramid that 1:08:26.680 --> 1:08:28.960 pay for the other for the whole thing, right exactly. 1:08:29.040 --> 1:08:31.040 And that's actually roughly the math. So yeah, So fifty 1:08:31.439 --> 1:08:34.040 in top tier venture capital, top descile venture capital across 1:08:34.320 --> 1:08:36.439 forty years of data on this, which we have access 1:08:36.439 --> 1:08:39.240 to a couple different ways. Um, basically half the deal's 1:08:39.479 --> 1:08:41.720 good news is it's not a temper cent success, right, 1:08:41.720 --> 1:08:43.439 it's a fifty percent success right right, So it's not 1:08:43.520 --> 1:08:44.880 as bad as some people think. But it is a 1:08:44.920 --> 1:08:47.280 fifty percent success right, meaning it's a fifty percent failure, 1:08:47.360 --> 1:08:51.320 right um. And then meaning fifty percent failure meaning zero 1:08:51.439 --> 1:08:55.960 return on that half about about about half of the 1:08:56.680 --> 1:08:58.559 go to zero and then and then the other half 1:08:58.600 --> 1:09:02.240 returns between zero and one x. They return, recover some capital, 1:09:02.280 --> 1:09:04.720 but not all they message capital. And then the sort 1:09:04.760 --> 1:09:07.920 of that third quartile of sort of fifty, they return 1:09:08.000 --> 1:09:10.519 you know, one to three x and then it's basically 1:09:10.600 --> 1:09:13.280 the upper quartile that returns sort of you know, god 1:09:13.320 --> 1:09:15.600 Welling returns three x plus. And then if you and 1:09:15.680 --> 1:09:17.559 some of the three x plus is a lot more 1:09:17.640 --> 1:09:19.560 plus than So that's the good the good news. The 1:09:19.600 --> 1:09:20.960 bad news is, yeah, you do get that. You you 1:09:21.040 --> 1:09:23.120 do get the ones where you lose one x pretty frequently. 1:09:23.200 --> 1:09:25.439 The good news is they if they, if they work, 1:09:25.479 --> 1:09:27.519 they can make a thousand x right, and so you 1:09:27.680 --> 1:09:29.559 and then the LP. This is the great thing about 1:09:29.600 --> 1:09:32.840 kind of the venture ecosystem. The LPs don't care. So 1:09:33.000 --> 1:09:34.600 for example, in the data, they don't care how you 1:09:34.680 --> 1:09:35.920 make the money just as on as you do. So 1:09:36.040 --> 1:09:38.280 that in the data, for example, the top performing venture 1:09:38.360 --> 1:09:41.120 from strike out more often called the baby Ruth effect, 1:09:41.439 --> 1:09:44.160 the top performing firms have more zeros. Right, they're swinging, 1:09:44.160 --> 1:09:45.720 they're only swinging for home runs and so and by 1:09:45.760 --> 1:09:47.599 definition in venture, if you're only swinging for home runs, 1:09:47.640 --> 1:09:50.600 you're taking more risk on crazier ideas. Makes sense, and 1:09:50.760 --> 1:09:54.439 it's like it's like you know, the famously they're they're 1:09:54.479 --> 1:09:55.960 Google Fund. It was the fund that Google and it 1:09:56.040 --> 1:09:59.479 had segue right and Segway was a legendary disaster, and 1:09:59.640 --> 1:10:01.640 you know, out all this negative publicity and you know 1:10:01.720 --> 1:10:03.360 they guess what they lost one x their money in 1:10:03.400 --> 1:10:08.080 segue right, guess how much money they made on Google right, right? 1:10:08.600 --> 1:10:10.800 And so so. So the good news on it is 1:10:10.880 --> 1:10:12.800 we we and this is something that we're The US 1:10:12.840 --> 1:10:14.880 in particular has a real edge on this, I think 1:10:15.000 --> 1:10:17.719 is we we have a base of limited partners institutional 1:10:17.800 --> 1:10:20.479 investors in the US that deeply understand that this is 1:10:20.520 --> 1:10:22.479 how it works. And so when we have one that 1:10:22.520 --> 1:10:24.000 goes to zero, they don't call us up and yell 1:10:24.040 --> 1:10:26.920 at us and complain there is They're like, yeah, that's 1:10:26.960 --> 1:10:28.960 the cost of doing business. Um. And in fact, we've 1:10:28.960 --> 1:10:30.920 had helpings ask us why we actually don't have more failures? 1:10:31.000 --> 1:10:33.640 Like are you taking enough risk? Really, what they want 1:10:33.680 --> 1:10:35.599 to know is, okay, of the companies that are working, 1:10:35.720 --> 1:10:38.280 how well are they working? And and we call this 1:10:38.320 --> 1:10:40.639 to how high is up? Question? How high is high 1:10:40.680 --> 1:10:43.479 is up? How big could they get? Right? And then 1:10:43.560 --> 1:10:45.479 if and then literally, Alan venture, if you came back, 1:10:45.520 --> 1:10:47.000 if you were lucky enough in venture to come back 1:10:47.040 --> 1:10:49.800 every year with one big, giant home run, and all 1:10:49.800 --> 1:10:51.800 the rest are failures, they'd be totally happy like so, 1:10:52.040 --> 1:10:53.960 so they would not complain about that at all. And 1:10:54.120 --> 1:10:55.920 of course it's very, very different than how the rest 1:10:55.960 --> 1:10:59.040 of Wall Street operates, no doubt. Do you run into 1:10:59.600 --> 1:11:01.840 every time time there's that thousand X do you run 1:11:01.920 --> 1:11:05.000 into How many times do people say, well, this is 1:11:05.040 --> 1:11:08.240 the next Facebook? No, please stop saying that, do you do? 1:11:08.320 --> 1:11:12.120 You sort of end up in that mode where whatever 1:11:12.320 --> 1:11:14.519 was working, Hey, let me explain to you why our 1:11:14.640 --> 1:11:17.800 company is the next X, y Z. Do these cliches 1:11:17.920 --> 1:11:20.040 begin to make you crazy? Yeah, they do. Well, they're 1:11:20.040 --> 1:11:22.439 they're a tip. They usually the really great founders tend 1:11:22.479 --> 1:11:25.360 not to say that. I hope people are listening to 1:11:26.000 --> 1:11:30.040 all these suggestions. This is gonna be a how to pitch. 1:11:30.360 --> 1:11:34.720 Indrees and Horowitz don't go there without having heard all 1:11:34.800 --> 1:11:39.200 these suggestions from this guy named Mark Andres. And I 1:11:39.240 --> 1:11:42.240 would imagine that at a certain point you halfway through 1:11:42.240 --> 1:11:43.920 a pitch, do you look at each other and like, 1:11:44.040 --> 1:11:46.840 all right, we're done with this. Every once in a while, everyone, 1:11:47.080 --> 1:11:49.280 I will say every once in a while, um, but um, 1:11:49.479 --> 1:11:51.960 but I will say this, um. The privilege of the 1:11:52.080 --> 1:11:55.639 job is that these are two thousand of the smartest 1:11:55.640 --> 1:11:57.599 people in the world in the remains in which they're operating, 1:11:57.600 --> 1:11:59.320 who we get to do with every year, and so 1:11:59.760 --> 1:12:01.800 the other that we we learned so much and even 1:12:01.880 --> 1:12:03.360 the deals we're not gonna we're not gonna do it. 1:12:03.360 --> 1:12:04.720 There's something we've just made a mistake and we've seen 1:12:04.720 --> 1:12:06.160 a pitch that we shouldn't seen because we're never going 1:12:06.200 --> 1:12:08.400 to do the deal for some reason. Um, and there's 1:12:08.439 --> 1:12:10.120 you know, a dozen reasons why that could be the case. Um. 1:12:10.240 --> 1:12:13.160 We generally, you generally learned just a lot of contextual 1:12:13.200 --> 1:12:16.360 information about what's happening in that in that industry because 1:12:16.360 --> 1:12:18.439 these people have to get to that point. They've all 1:12:18.479 --> 1:12:20.519 thought these things through. Really back to the idea amazing 1:12:20.520 --> 1:12:23.040 that we're talking about. So that's that's what you just learned. 1:12:23.080 --> 1:12:24.800 You learn and that it's and by the way, once 1:12:24.800 --> 1:12:26.920 your experience that it's just a fire hose of it's 1:12:26.960 --> 1:12:28.240 just the smartest people in the world coming in and 1:12:28.320 --> 1:12:30.080 spending an hour telling you everything they know, like it's 1:12:30.080 --> 1:12:33.439 an amazing how how that was a question? Next question 1:12:33.520 --> 1:12:37.040 is how big of a strategic advantage is getting first 1:12:37.120 --> 1:12:39.840 looks at at two thousand of the smartest people in 1:12:39.880 --> 1:12:41.360 the world. Yeah. Yeah, I think that's a big part 1:12:41.400 --> 1:12:42.640 of it. And I mean, and that's why I'm so 1:12:42.720 --> 1:12:46.360 I've sort of become kind of semi legendary sort of optimist. Um. 1:12:47.000 --> 1:12:49.200 It's really hard, I think, to be pessimistic in this job, 1:12:49.280 --> 1:12:51.519 because you do see all these incredibly fired up people 1:12:51.560 --> 1:12:54.800 with all these incredibly vivid and brilliant ideas, um, and 1:12:54.920 --> 1:12:56.760 you you just you get a sense of the productive 1:12:56.800 --> 1:13:01.120 capacity of capitalism, of the intel rustial pursuits. By the way, 1:13:01.160 --> 1:13:03.280 it's hard to be too negative when you're looking at 1:13:03.479 --> 1:13:06.360 the most optimistic inventions in in the universe. And by 1:13:06.360 --> 1:13:08.400 the way, also the output of the great research universities, 1:13:08.439 --> 1:13:10.000 like so much of what we do is building you 1:13:10.400 --> 1:13:12.040 mentioned earlier, so much of what we do is building 1:13:12.040 --> 1:13:13.560 off and what happens to Stanford and M I. T 1:13:13.640 --> 1:13:15.640 in Berkeley and all these other schools, and it's just 1:13:15.720 --> 1:13:18.160 crystal clear, like how amazing they are. So you know, 1:13:18.200 --> 1:13:20.599 so that it's just this that that that's that's cut 1:13:20.720 --> 1:13:22.439 sort of the psychic payoff from the job is the 1:13:22.479 --> 1:13:24.880 ability to do that. And then it just also i think, 1:13:25.000 --> 1:13:28.080 just becomes clear like there are contra all that, you know, 1:13:28.200 --> 1:13:30.599 the headlines are just all relentless negative these days, there 1:13:30.600 --> 1:13:32.320 are a lot of smart people in the world. There 1:13:32.320 --> 1:13:33.559 are a lot of people have a lot of energy 1:13:33.560 --> 1:13:35.120 in the world who want to legitimately want to build 1:13:35.160 --> 1:13:38.920 new things. Um. It's very exciting and increasingly not just here, right, 1:13:39.000 --> 1:13:40.679 not just in Silicon Valley, not just in the US, 1:13:40.800 --> 1:13:43.200 not just in the West, all over the world, right, 1:13:43.240 --> 1:13:44.560 And and so that that's the other side of it, 1:13:44.640 --> 1:13:47.280 is this, this culture of entrepreneurship is really spreading, um. 1:13:47.439 --> 1:13:49.280 And you know, we're gonna benefit from that in the 1:13:49.320 --> 1:13:51.040 sense of more opportunities, but I think the entire world 1:13:51.080 --> 1:13:53.240 is going to benefit from that. So your focus mostly 1:13:53.360 --> 1:13:55.880 here on the West Coast, primarily Silicon Valley, you're not 1:13:56.040 --> 1:13:58.000 looking at China, You're not looking at India. Is that 1:13:58.120 --> 1:14:02.240 a fair uh servation. So all of our companies want 1:14:02.320 --> 1:14:04.560 to be multinationals, and all of our companies want to 1:14:04.600 --> 1:14:06.400 operate on the ground in all these countries, and all 1:14:06.400 --> 1:14:08.280 of our companies hire a huge number of immigrants, and 1:14:08.360 --> 1:14:10.519 so our our companies by definition, will end up with 1:14:10.600 --> 1:14:13.200 a lot of Chinese immigrant, Indian immigrant. And then by 1:14:13.240 --> 1:14:14.840 the way, a lot of them are actually built offices 1:14:14.920 --> 1:14:17.080 on the ground. A bunch of companies with offices in 1:14:17.200 --> 1:14:20.280 China building up big presences indeed these other countries. UM, 1:14:20.439 --> 1:14:23.040 so we're heavily exposed to the sort of knowledge flow 1:14:23.120 --> 1:14:25.600 and talent that way. UM, we do I guess that 1:14:25.640 --> 1:14:27.479 though we do think venture capital is a craft, there 1:14:27.560 --> 1:14:29.760 is a craft to the business UM and it's it's 1:14:29.760 --> 1:14:31.519 a lot of it's the relationship with the board, the 1:14:31.600 --> 1:14:34.120 board members, and the founders and the team UM. And 1:14:34.240 --> 1:14:38.080 so there's a local dynamic to it. UM. The number 1:14:38.080 --> 1:14:40.120 of venture firms that have successfully figured out how to 1:14:40.160 --> 1:14:42.720 operate in multiple geographies and stay world class, it's a 1:14:42.800 --> 1:14:45.280 very short list, most of the most most generally that 1:14:45.360 --> 1:14:47.240 doesn't work. And so we we've just we've made a 1:14:47.320 --> 1:14:48.840 decision at least for the time being, to try to 1:14:48.880 --> 1:14:51.599 be really good in Silicon Valley. So, by the way, 1:14:51.640 --> 1:14:53.360 we do fund companies outside the valley, but just on 1:14:53.520 --> 1:14:55.799 on an exception basis, like they have to be super special. 1:14:55.960 --> 1:14:57.519 So we do have some of those. So you you 1:14:57.640 --> 1:15:02.559 focus mostly local. Your you're a software absolutist, no clean tech, 1:15:02.760 --> 1:15:06.479 no rocket ships, no electric cars. Is that still true? 1:15:06.600 --> 1:15:10.240 It's it's software and software only, so software at the core. 1:15:10.479 --> 1:15:12.479 So the rule of the rule is software at the core, 1:15:12.600 --> 1:15:14.560 so there has to be We just think there's a 1:15:14.600 --> 1:15:17.200 particular magic around software. There's a particular magic around how 1:15:17.280 --> 1:15:19.360 you can create things with software. Right. It's it's it's 1:15:19.400 --> 1:15:21.360 I call alchemy, like you type on a keyboard and 1:15:21.360 --> 1:15:23.320 then things happen in the real world like that. That's 1:15:23.320 --> 1:15:25.839 an amazing process. There's there's just kind of huge intellectual 1:15:25.920 --> 1:15:28.160 leverage there, and then as a consequence, there is huge 1:15:28.240 --> 1:15:31.400 economic leverage, right, which is there's likes to say capital, 1:15:31.600 --> 1:15:35.040 software is the labor that creates capital. Software is labor 1:15:35.080 --> 1:15:37.439 that Okay, It's the closest thing to magic will ever have. 1:15:37.520 --> 1:15:39.240 It's like typing on the keyboard is like casting a 1:15:39.280 --> 1:15:41.320 spell and then something happens, Right, It's like, you know, 1:15:41.439 --> 1:15:43.840 that's the lift. Lift Guys they type software and then 1:15:43.840 --> 1:15:45.720 all of a sudden, real people are being taken on 1:15:45.720 --> 1:15:47.759 a real rise in real cars, like just by magic, 1:15:47.960 --> 1:15:50.160 Like just the software just caused that to happen. And 1:15:50.320 --> 1:15:53.040 so we are looking for that kind of software leverage, 1:15:53.200 --> 1:15:57.000 the sort of software magic in every company, scalable, magical 1:15:57.360 --> 1:16:01.960 and the ability to convert labor into capital. And then 1:16:02.080 --> 1:16:04.040 as a consequence, but as a consequence of that, our 1:16:04.080 --> 1:16:06.360 companies do end up doing all kinds of different things. 1:16:06.439 --> 1:16:09.240 And so we have some companies that sell software. We 1:16:09.320 --> 1:16:11.200 have some companies that provide softwares a service. We have 1:16:11.280 --> 1:16:13.519 some companies that provide apps. We have some companies that 1:16:13.640 --> 1:16:16.479 are making hardware. We have some companies that are going 1:16:16.520 --> 1:16:20.240 after new new healthcare pursuits and biology, material science like there. 1:16:20.360 --> 1:16:23.400 There's lots of software is becoming so intertwined with the 1:16:23.439 --> 1:16:25.320 world that there are lots of ways to now use it, 1:16:25.400 --> 1:16:27.560 to go to leverage it in a different spaces, and 1:16:27.640 --> 1:16:29.479 so are The range of companies that were funding is 1:16:29.479 --> 1:16:31.519 broader than ever, but they all have software at the core, 1:16:31.720 --> 1:16:36.759 software at the core. Um I started out this segment 1:16:36.840 --> 1:16:39.840 talking about the firm. There's a couple of things I 1:16:39.960 --> 1:16:42.479 have to ask about the firm because I'm fascinated to 1:16:42.560 --> 1:16:45.439 buy it. So you used to blog at p Marca, 1:16:45.680 --> 1:16:47.840 and let me remind you that I warned you to 1:16:47.880 --> 1:16:50.360 pace yourself, young man. You're gonna burn yourself out. I 1:16:50.360 --> 1:16:53.599 don't know if you remember that. And and you tweet 1:16:53.640 --> 1:16:57.960 fairly actively. I know we're on hiatus now and you podcast. 1:16:58.160 --> 1:17:02.120 You guys have a podcast room at this doesn't sound 1:17:02.240 --> 1:17:06.000 like it's the typical forms of communication for the old 1:17:06.120 --> 1:17:09.760 line venture capital front. I mean, everybody has a website 1:17:10.200 --> 1:17:12.200 and there's sort of this interesting, Hey, here are all 1:17:12.240 --> 1:17:14.760 the things we oops, we passed on that we shouldn't have. 1:17:15.200 --> 1:17:18.400 It's sort of this, UM, I guess we could call 1:17:18.479 --> 1:17:24.040 it humility or attempt at humility. Your distult is very different. Here. 1:17:24.320 --> 1:17:27.200 Tell me about the thinking behind that. Yeah, so we're 1:17:27.280 --> 1:17:30.439 just we're trying to teach, like with yourselves, kind of 1:17:30.479 --> 1:17:32.120 has been fundamentally lucky to have seen a lot of 1:17:32.160 --> 1:17:33.960 these things, mentioning these things were trying to teach. We 1:17:34.000 --> 1:17:35.519 think it's by the way to our benefit to teach, 1:17:35.560 --> 1:17:37.200 because if more people know how to do this, then 1:17:37.280 --> 1:17:38.960 there's more companies for us to fund and people for 1:17:39.040 --> 1:17:41.000 us to work with. UM. And then part of it 1:17:41.160 --> 1:17:43.479 is just look, I think technology has gotten very important 1:17:43.479 --> 1:17:45.320 in the world, much more than it used to be, 1:17:45.439 --> 1:17:47.799 and so UM and it's complex and it's hard to understand, 1:17:47.920 --> 1:17:49.599 and so I think and it's hard to understand from 1:17:49.600 --> 1:17:51.920 the outside UM, and so a big part of just 1:17:52.040 --> 1:17:53.679 what we're trying to do is to tell the story 1:17:54.000 --> 1:17:56.640 of what's happening, not just in our firm, but tell 1:17:56.680 --> 1:17:58.479 the story of what's happening in the industry and what's 1:17:58.479 --> 1:18:00.479 happening with all these companies and with the aplications of 1:18:00.520 --> 1:18:02.960 all these technologies. So you mentioned our podcast series. So 1:18:03.000 --> 1:18:05.080 I get no credit for that. Our partners here, UM, 1:18:05.560 --> 1:18:07.560 our partners here have done all the work on that. 1:18:07.720 --> 1:18:11.719 But it's become like I would say, shockingly amazingly important 1:18:11.720 --> 1:18:15.120 and influential among people who care about how technologies affect. 1:18:16.280 --> 1:18:18.439 The level of response we've gotten to that has been 1:18:18.479 --> 1:18:20.120 like an order magnitude beyond what I would have ever 1:18:20.160 --> 1:18:23.320 thought was possible. UM. And the amazing thing is a 1:18:23.400 --> 1:18:25.720 couple of years ago people saying, well, podcast is all 1:18:25.800 --> 1:18:29.360 but over. I just read last week Reid Hoffman of 1:18:29.439 --> 1:18:33.479 LinkedIn is now hosting a podcast. So this is a 1:18:33.560 --> 1:18:36.040 technology that a is not going away as a form 1:18:36.080 --> 1:18:39.880 of communication. What is the benefit to the firm of 1:18:40.000 --> 1:18:42.160 being able to go out and tell a story that 1:18:42.320 --> 1:18:44.799 might not be Hey, here's why you should use injuries 1:18:44.840 --> 1:18:47.680 and Harrowitz. It's never that overt it's always here's some 1:18:47.800 --> 1:18:50.080 interesting things happening in the world of technology you should 1:18:50.120 --> 1:18:51.800 know about. Here's what's happening. A lot of people care 1:18:51.800 --> 1:18:53.120 about I was thinking, a lot of people care about 1:18:53.160 --> 1:18:54.880 this stuff. A lot of people care about the implications. 1:18:54.880 --> 1:18:56.040 A lot of people, by the way, are in a 1:18:56.080 --> 1:18:59.840 position to affect the world, and regulators and journalists and 1:19:00.040 --> 1:19:03.040 people at big companies, um. And so we're trying to 1:19:03.080 --> 1:19:04.920 get to all the people who are decision makers, you know, 1:19:05.080 --> 1:19:07.400 you know, the constituents and the entire ecosystem that have 1:19:07.520 --> 1:19:09.920 to cope with the consequences of technological change. Trying to 1:19:09.960 --> 1:19:11.439 get to those folks. We're trying to pull more people 1:19:11.439 --> 1:19:13.560 into the industry. Right, if more people all over the 1:19:13.600 --> 1:19:15.280 world have a sense of what's happening, then they can 1:19:15.360 --> 1:19:17.679 they can decide they might want to participate. We're trying 1:19:17.720 --> 1:19:20.040 to help people up level of their skills, become more 1:19:20.120 --> 1:19:22.320 knowledgeable about these things. And we I mean, we obviously 1:19:22.360 --> 1:19:24.200 benefit from all that, but just more broadly, like I 1:19:24.240 --> 1:19:27.320 think this is the topic of our time. It's absolutely 1:19:27.520 --> 1:19:30.559 absolutely fascinating. All right, So we're almost at a time 1:19:30.960 --> 1:19:33.839 there's a ton of questions that didn't get to, including 1:19:33.880 --> 1:19:36.160 the speed round. But what I really want to do 1:19:36.320 --> 1:19:38.960 is get to the standard questions. So how many minutes 1:19:38.960 --> 1:19:44.000 can we go over two minutes? That's gonna be tough alright. 1:19:44.080 --> 1:19:47.240 So so, by the way, if I forget to um 1:19:47.479 --> 1:19:49.400 say this, thank you so much for being so generous 1:19:49.479 --> 1:19:52.480 with your time and and and going through such thoughtful, 1:19:53.160 --> 1:19:56.840 detailed answers. These these really been been fascinating. I have 1:19:57.040 --> 1:19:59.240 ten favorite questions. I'm going to just go through a 1:19:59.360 --> 1:20:02.080 two or three of them really quickly. Tell us something 1:20:02.120 --> 1:20:05.680 about your background that most people don't know. Probably big one. 1:20:05.680 --> 1:20:08.080 I grew up in the roal Midwest. I grew up 1:20:08.120 --> 1:20:10.800 in Trump Country. You did, yes, absolutely, And has that 1:20:10.920 --> 1:20:15.120 affected your output on on the world at all? Your outlook? Yeah? Absolutely. 1:20:15.479 --> 1:20:19.400 Early mentors Jim Clark, Jim Barksdale, um with the two 1:20:19.400 --> 1:20:23.200 big ones and say, very complimentary personalities that work together 1:20:23.280 --> 1:20:25.880 very well, but also starkly different in their skill sets 1:20:25.880 --> 1:20:27.599 and orientations. And I learned a lot for both of them. 1:20:27.760 --> 1:20:30.639 The question I get from listeners more than anyone asked 1:20:30.680 --> 1:20:33.280 your guests what their favorite books are? Favorite books? So 1:20:33.400 --> 1:20:36.000 I have three quick nominations, and I'm getting getting the 1:20:36.040 --> 1:20:41.240 hook here, uh Port Charlie's Almanac, The Companion Speeches. I 1:20:41.320 --> 1:20:44.400 think it's tremendous. Um um. Extreme Ownership has been a 1:20:44.439 --> 1:20:47.200 favorite recent book. A guy named Jocko Willink is a 1:20:47.240 --> 1:20:50.200 former Navy seal commander UM, one of the stream ownership 1:20:50.240 --> 1:20:52.759 streame Ownership Um one of the best books on leadership 1:20:53.000 --> 1:20:54.840 I've ever I've ever read in a tremendous by the 1:20:54.880 --> 1:20:58.479 Way word story book as well. UM. And then what 1:20:58.880 --> 1:21:01.880 is the Man? There are so many there's a brand 1:21:01.880 --> 1:21:03.519 new book. O Roberts of Pulsky has a new book 1:21:03.520 --> 1:21:05.840 I've just started on human behavior of his magna Opus 1:21:05.840 --> 1:21:08.880 on human behavior. He's the great evolutionary theorist. And so 1:21:09.120 --> 1:21:10.680 that would probably be the third one that that's the 1:21:10.720 --> 1:21:12.559 new one, but it looks very exciting. And then our 1:21:12.600 --> 1:21:15.600 final question, what is it that you know about technology 1:21:15.680 --> 1:21:19.280 and venture capital investing today that you wish you knew 1:21:20.120 --> 1:21:22.680 five plus years ago when you were first starting out. Oh, 1:21:22.920 --> 1:21:25.719 there are no bad ideas. There are only early ideas. 1:21:26.200 --> 1:21:29.240 No bad ideas, just earlier ideas happen. It'll all happen. 1:21:29.320 --> 1:21:31.360 I've become convinced now it'll all happen. Every smart person 1:21:31.360 --> 1:21:32.760 who comes in here with a crazy idea, it's all 1:21:32.800 --> 1:21:35.280 going to happen. At some point, they all happen. It's 1:21:35.320 --> 1:21:38.160 just a question to win. We have been speaking with 1:21:38.360 --> 1:21:42.280 Mark Andreason of Andrews and Horowitz. UH. If you enjoy 1:21:42.400 --> 1:21:44.840 this conversation, be sure and check out all our other 1:21:44.920 --> 1:21:48.560 such chats. You can find them on SoundCloud, Apple iTunes 1:21:49.200 --> 1:21:51.720 and Bloomberg dot com. I would be remiss if I 1:21:51.840 --> 1:21:54.920 did not thank our hosts, Mark Andreason and the crew 1:21:54.960 --> 1:21:57.760 here at Andreason Horowitz, as well as Mike Batnick, who 1:21:57.840 --> 1:22:00.679 is my head of research and help put these stans together. 1:22:01.080 --> 1:22:04.160 We love your comments, feedback and suggestions right to us 1:22:04.240 --> 1:22:08.280 at m IB podcast at Bloomberg dot net. I'm Barry Ridholts. 1:22:08.400 --> 1:22:12.599 You're listening to Masters and Business on Bloomberg Radio. Our 1:22:12.680 --> 1:22:14.880 world is always moving, so with Merrill Lynch you can 1:22:14.880 --> 1:22:18.000 get access to financial guidance online, in person or through 1:22:18.000 --> 1:22:20.280 the app. Visit mL dot com and learn more about 1:22:20.280 --> 1:22:22.760 Merrill Lynch. An affiliated Bank of America. Mery Lynch makes 1:22:22.760 --> 1:22:25.160 available products and services offered by Merrill Lynch Pierce Federan 1:22:25.160 --> 1:22:27.360 Smith Incorporated or Registered Broker Dealer Member s I PC