20VC: Marc Andreessen on The Future of Venture Capital: Will a16z Go Public | Why Labour Displacement with AI is Wrong | Why Introspection is Dangerous | Why "Diamonds in the Rough" is BS in VC | Why a16z Invested $300M into Adam Neumann｜The Twenty Minute VC (20VC): Venture Capital | Startup Funding

I'm competing with myself.

Life just gets a lot simpler if you just assume everything is your own fault.

Everybody's kind of feeling tense and nervous and anxious and fearful and so forth, but everybody's pretending they're not feeling that way.

I think every time we passed on a promising venture company over price, I think it's been a mistake.

There's nothing that we're missing today that we could solve by going public.

The tech industry is more centralized in Silicon Valley than it has been in its entire existence.

This entire labor displacement thing is 100% incorrect.

It's completely wrong.

Essentially every large company is overstaffed.

I think a lot of them are overstaffed by 75%.

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Mark, you probably don't know this, but I started this show when I was 18 years old.

And you were one of three names that I wanted to have on the show back in 2015.

I have to admit, I've ticked off the other two.

And so I'm a bit worried that I'm going to have to stop after doing this show.

But I'm so touched that you agreed to join me.

So thank you for joining me.

Good.

I'm thrilled to be here.

Now I was running listening to every show that you've done before and you recently said that you don't introspect.

Introspection is potentially overrated.

I really struggled with this because I thought we learned from mistakes and I valued experience in that way.

Can you help me understand the lack of value placed on introspection, and do we not learn from mistakes?

You know we do learn from mistakes.

But the problem is learning from mistakes sometimes is good and sometimes it's bad right.

And if you just talk business for a moment, like in the venture mindset, this is a very big problem.

There's a founder version of the mistake.

There's a venture version of the mistake.

The founder version of the mistake is...

If a founder starts a company in a category and the founder doesn't work, the founder is then emotionally angry at that category for the rest of his life and will not acknowledge when there's something that's going to work in that category.

And I've just seen that over and over and over again.

And that's fine, because most founders go on to do other things, and that's fine and good and it generally doesn't damage them from a business standpoint.

In venture, the same thing happens.

If you invest in a category, or if you invest in a kind of company or you invest in a kind of founder and it doesn't go well, it's extremely easy to learn from the mistake and to basically say all right, I touched that hot stove, I'm never doing it again.

And then, you know, you can tell me what happens next, right?

Which is the next thing shows up and pattern matches.

And it's the thing that you should invest in and you have the chance to invest in.

But you touch the scalded stove and you know you're.

You know you're learning from your mistakes, right?

You're doing the responsible thing and so you don't do it.

And so I think there's something that's particularly pernicious about learning from your mistakes in venture capital.

And then I think that's also somewhat true about life.

You get married multiple times, as they say, it's the triumph of hope over experience.

Like, I think probably you want hope to triumph over experience in that domain.

And I think there's a lot of other domains of life in which that's probably true.

I totally understand what you're saying, especially when you say about hey, it's easy to lose money in a sector and then think the sector by nature is cursed, or

It's so difficult.

You can't make money in healthcare.

You can't make money in X. I'm old enough to remember internet search.

Like you can't make money in internet search.

Like the internet search companies in the 1990s did not work out well.

When you are guiding conversation, when you are guiding partners, how do you ensure that they have a fresh mind with every new company and every new investment and are not plagued by the downsides that have bluntly lost money before?

By the way, just the other example, by the way, is AI.

AI was a tremendously good way to lose a lot of money in venture capital from 1945 to 2017.

I mean look, when I was getting my computer science degree in the late 80s, AI was the one field that you knew would never succeed.

Like there had actually been an investment boom for AI in the 80s and it failed.

And everybody, including all the computer scientists were like, yeah, this field is dead.

And that happened like five times over the course of AI over the last 80 years.

And so like, you know, so again, another great example.

So look, I think a couple of things in terms of how we run our firm or how you run a firm like this.

So one is, as you well know, there are two categories of mistakes, right?

There's the mistake of commission and there's the mistake of omission.

Or there's the mistake of cost and there's the mistake of opportunity cost.

And so, of course, the mistake of cost is you invest 10 million in a startup.

It fails, you lose the money.

That's bad.

The mistake of omission is you don't invest in Google.

And you lose $100 billion of opportunity cost, right?

And so, of course, venture is like the most polarized possible economic field in which this is true.

And, by the way, if you're running a bond business or something, a debt business or something where you can't lose money or the whole thing doesn't work, then obviously you can't run in this kind of model.

And in that case, you better learn from your mistakes.

But in venture I think you're always much more worried about the mistake of omission than you're worried about the mistake of commission.

And then to your question like I think in a lot of ways that's the key thing that Ben and I do at this point in our lives and in our roles at the firm is, you know, we're not like micromanaging the investment decisions of the firm.

And we have, I think, spectacular senior partners and junior partners that are doing a great job of that.

And we're in the room for it and so forth, but we're generally not advocating for or against a deal.

But what we are trying to do is to get everybody to constantly have this, let's say, risk forward, worry about the mistake of omission, over the mistake of commission mindset, this anti Scalded stove phenomenon.

You know, we just routinely remind people like yeah, you're emotional about this because of your bad experience three years ago, or six years ago or 10 years ago.

And just like let that go.

You no longer have to pay for that sin and you're completely liberated to be able to kind of let that emotion you know fade into the distance and be able to focus on the opportunity in front of you.

My biggest regret or omission experience is one of your companies.

Actually, it's 11 laps.

We could have invested at the seed round, but we would have only got 1% mark.

And naturally, as an emerging manager, I thought it was important to retain the high ownership model I promised my LPs.

How do you reflect or advise me on when to break the rules versus when to maintain doing what I said I would do?

So you know, quite honestly, it's the simplest answer in the world and it's the hardest answer in the world.

And it's the answer that I think every great investor ends up resolving to 30 years in, frankly.

I actually had this discussion actually with Arthur Rock, you know, who's sort of virtually the creator of Modern Venture Capital.

And he actually wrote a paper on this topic.

And I'll just give you his conclusion, which is also my conclusion.

Arthur Rock for people who don't know, he invested in Apple and Intel in the seed rounds and in many, many other great companies for 30 years was that he would have been a better venture investor had he fed all of the business plans and pitch deck straight into the shredder upon receiving them and if he had spent 100 of his time on the resume.

And I think that's basically right, which is, the great founders will basically buy you enormous upside that may break rules in all kinds of directions and may break precedent in all kinds of directions.

And the world's best business plan, executed by a mediocre team, will almost certainly get lapped by a great team.

Let me say, having said that, this sounds easy.

Of course, why is that hard is because it's somewhat tautological, right?

Because we define great founders as the ones that have great outcomes.

And so it's a lot easier after the fact to be able to say oh yeah, you know, Steve Jobs is a great founder, when you look at the success of Apple.

But nevertheless, I think that is the answer, which is, when you have special people, You should back them almost, you know, basically almost, without consideration of other factors.

And when you don't, you shouldn't.

And at the end of the day, that simply is the core thing.

How do you think about detecting greatness in founders when your benchmark is founders at late stage or when they're great?

You obviously have been on the board of Facebook for many years with Zuck and seen him at a later stage as well as an early stage.

I spend my time interviewing public company CEOs all the time, Mark.

I'm so used to really fine-tuned Daniel Ek.

When I meet a seed founder that's rough and unpolished, of course they don't seem as good.

How do you think about that challenge in projecting earlier and seeing if they're good, given how much time you spend with perfection?

I'll just say, look, I think people have different takes on this.

My personal formula is basically as follows, which is you need high IQ as table stakes.

Like you just need somebody who's like incredibly smart.

My basic test is if I have my notebook open and they're talking, am I like writing down lots of notes or not?

And if I'm writing out lots of notes and I'm learning from them then, like that, that indicates that their level of you know, intelligence and some of the other attributes that we'll talk about, but you know, indicates you know clearly that they're very smart.

But I think that's table stakes because I think just intelligence, you know there are many people who are very smart, who are just grinders or just you know The clerk mentality.

You know, put me in the back office somewhere, or you know doing research or something, and I'm never going to build something.

And that's fine.

But, you know, IQ is not enough.

I think the second thing you need really is what my partner, Ben calls courage, which is basically an absolute determination to succeed and to be able to, you know, confront problems directly and to be able to basically pound through anything.

And there's various kinds of ways to phrase this, but I think the Navy SEALs have the term embrace the suck.

So there's something to that.

I always like the old Looney Tunes cartoons and I always like to say I want the founder, who leaves a founder-shaped hole in any brick wall that he runs into like a cartoon character.

My favorite is when they run off a mountain and they keep running.

I don't know if you see this.

Yeah.

And then they're suspended in midair for a moment and they hold up the sign and it says, oops.

Or my favorite one actually of that is there was one of the little kid characters in it.

At one point little, I don't know little pig or something did the thing and he goes out over the cliff and he's hanging in midair and holds up a sign and he says I'm in second grade.

They haven't taught us about gravity yet.

Which, by the way, of course, this also happens in startups.

Reid Hoffman told me to build a parachute on the way down.

Yeah, exactly.

Yeah, that sounds great.

Get out your knitting needle and get going.

And so, and then I think the third thing, so sort of IQ plus courage.

And then I think it's something and this is kind of courage, but I would describe it as like I don't know something fundamental.

It's like drive, ambition.

You know, I occasionally quote Nietzsche.

It's will to power, it's sort of this determination, because you know, courage can just be.

I'm going to solve problems.

And like that, I would argue that's not enough.

And you know, Ben might say that that's not what he means, but like it's not just solving problems.

There's something about, like you know, ambition and you know in the world being what it is.

Some you know that ambition.

A lot of people express that as like ambition.

You know ambition to change the world, improve the world, humanity.

I think that stuff's all great.

I think those founders are great.

I think those missions are often very compelling at you know attracting.

You know lots of smart people.

I think that's great.

But I do think there's a more fundamental ambition, which is I want to build something of my own that really demonstrate, and I want to really demonstrate what I can do.

And I have a very primal drive to do that.

And you know it gets kind of.

You know people cast moral aspersions on it and they call it greed or whatever.

So people don't want to talk about that.

And it's not I'm not even talking about the money component.

I'm talking about like I want to build something.

And then what I find on that, that one in particular, actually number two and three.

You don't necessarily see them on the resume, but you can generally see them in the background.

And I think if you spend enough time with people, you can get a sense of like okay, was their entire life basically a sequence of basically things being handed to them.

And then you know sort of credential achievement, you know which is, which is a lot of what kind of we see in the sort of elite workplace.

Or do you have somebody where it's like, oh, when they were 14, they built this.

When they were 17, they built that.

When they were 20, they did this.

And you know whether that's building a product or a technology or a company, or you know an art or like whatever it is.

You know sort of this primal drive to create.

Do you find drive through pain the most contributing factors to success?

I mean, the full version of the theory is all the great founders are broken in some way, right?

And so they've got the you know and you get into kind of psychoanalysis quickly, but you get into the kind of broken home you know, or you know Steve Jobs being adopted or whatever.

And you kind of have all these stories.

And you know the metaphor is like when the bone breaks, it either doesn't heal or when it heals, you know it's stronger.

And so you're trying to get people who are kind of responding to kind of childhood pain through kind of overachievement.

And I think there's something to that.

And, in particular, I think, what there is to that that is really important.

I often talk about it of like you need some reason to get out of bed in the morning.

It's not just I have a job, or it's not just I don't want to embarrass myself, or it's not just I want to be responsible.

You have to have like a primal reason when things are really, really bad, when the shit really hits the fan.

And you're just miserable and like you dread checking your email and you just simply like, do not want to know like, what the new bad news is, because there's so much bad news that you just can't even cope with what you have.

Like you need a very, very, very primal reason to get out of bed and continue to fight that way.

And so I think there is something about you know, maybe trauma in the background that explains that.

Having said that, some of the best founders in history have no trace of trauma in their background that I can tell.

And I'll just give you two examples.

Zuckerberg is one who you know grew up in a classic upper middle class.

You know New Jersey household very close to his parents and his family.

And then Bill Gates.

His father was a lion of the Seattle establishment and he went to all the best prep schools in Harvard.

And again, as far as I know, had a perfectly great childhood.

People who knew both of those guys in their teenage years said like, these are driven guys.

It's very core to their origin stories.

And so you have to be open to the idea that some people are just born that way.

What's your primal reason today for continuing to build Andreessen with the ferocity and ambition that you still have?

Well, of course, that would require introspection.

I don't know if I'm going to give you- I'm elegantly backing into it, okay?

I don't know if I'm going to give you a great answer to that.

I'll tell you what I tell myself is at this point.

What I tell myself is I'm sort of I'm competing with myself.

I am trying to figure out how to be the best possible version of what I can be and what I can do.

And so the way I think about it basically is like okay, how good did you read?

Was it Jocko Willink's book Extreme Ownership?

Did you ever come across that?

I love Jocko Willink.

I also listen to his motivational talks when I go to the gym.

Brilliant.

100%.

And you know his thing on extreme ownership, right?

For people who haven't heard his thing on extreme ownership is just, you know, famous Navy SEAL commander, very accomplished guy, you know, and the kind of guy people would happily follow into battle or would be a great CEO or great founder.

You know that kind of personality.

And he has this thing, he says extreme ownership and he says look, life just gets a lot simpler if you just assume everything is your own fault.

Right.

And it's just like oh, I don't know, like you know whatever whatever, this LP didn't invest, or this founder didn't take my money, or whatever.

It's like, oh, OK, it's my fault.

It's not his fault.

It's my fault.

Clearly, I didn't do a good enough job.

Clearly, I can do better.

And then it basically his argument is it gets you kind of productively focused on improvement.

And so I founded that, like put it this way when I'm in my own head and I'm mad about somebody doing something that I don't like, the number one stress relieving thing I can do is I can say oh, that's my fault.

Right?

Because then it gives me ownership of the problem and it gives me something that I can do.

And then, by the way, it also drains away resentment, right?

It means that I'm not resentful and angry at somebody else, right?

Because I'm just like, okay, I'll just improve myself on that.

I operate in that psychology as much as I can.

I try to maintain that psychology.

I do that.

By the way, I recommended to Ben when that book came out, I fell in love with it.

And I recommended to Ben, I said, we need to send this to all of our founders and like teach this.

And he's like, Mark, you're out of your mind.

Like our founders, already have the problem where they take too much of the weight of the world on themselves.

They're already miserable half the time.

We don't need to settle them with more of that.

But I think there's something very powerful in that.

It also has the enormous advantage of it becomes an intrinsic motivation over an extrinsic motivation.

So it's not a motivation to put points on a board.

It's not a motivation to achieve a certain net worth.

It's not a motivation to whatever be in some league table to win some prize.

These sort of external markers.

Because the problem with all the external markers of success is it's the...

Are you going to get up in the morning when it really, really sucks?

Like the extrinsic motivations don't do that.

You need something intrinsic.

And for me, that's the intrinsic motivation, which is like, I know I can do this better.

You said that you're competing with yourself.

Do you feel you're your best version of yourself today?

I think I'm in my best version of myself relative to all my prior versions of myself, but I'm still far short of what I would like to be.

So I know of many, many areas of improvement.

What's the biggest one that you'd like to change?

Oh, I mean, I mean, there's like, I don't know, there's probably like a hundred.

So like, I'll give you an example.

I have a, I have a strength and a liability, which is I get emotional.

The advantage of emotion is like when I, when I commit, I deeply commit, but I fall in love with things and I become incredibly determined and I'll I'll kind of go, you know, very long lengths out of a sense of of, of emotion or love.

The negative is I will get emotional and I've spent a lot of time and people who know me will tell you I've spent a lot of time trying to not, let's say, get negatively emotional in meetings.

Do you care what people say about you?

It's something I'm trying to work on, but I still desperately care honestly Mark, and it desperately upsets me when I read bad things.

So I have a bunch of friends in the entertainment business who I look at and I say like there's no way I could possibly do what you do, which is like make myself vulnerable on an 80 foot screen that way.

And they're like, yeah, that's that's the you know, that's the hard part.

And then I always ask, like, you know, do you read your own reviews?

Like, do you read what people say about you?

And they all basically say this exact same thing, which is they say, I tell everybody I don't.

And then, of course, I do.

Right.

And so it's very hard to avoid that.

I do think don't read the comments is generally a very good life guideline.

By the way, I will say YouTube comments have gotten much better.

So maybe your YouTube comments are productive now.

But I think in general, don't read the comments is helpful.

I mean, it's really hard.

I mean, you know, everybody's human.

I think it's really hard when somebody like is cursing you out or calling you, you know, saying horrible things.

You know, it's very hard for that not to stick.

I would say I'm pretty happy not paying attention to that.

Are you aware at this point of the concept of the meme of retard maxing?

Do you know what?

If I'm totally honest, I've seen it on like every comment of our thread where I say like oh, I've got Mark coming on the show.

And everyone's like, ask Mark about retard maxing.

Ask Mark about retard maxing.

Honestly, it's one of those moments where I'm just like okay, get back to like my normal research, because I presume retard maxing is not politically correct and I shouldn't ask it.

But you brought up retard maxing, so no.

Well so, first of all, first of all, retard maxing is totally politically correct, because retard is no longer I mean, we now have 18 other terms that apply to people who are, like you know, developmentally disabled.

And so like retard, it now means, it now means something completely different.

And it turns out what it means specifically in the context of retard maxing.

Well, let me explain why I came across this.

So the internet meme machine is just absolutely spectacular.

I think like the process of cultural evolution of internet memes is like absolutely amazing.

I think the whole like clavicular, the terms now are mainstreaming.

And obviously there's many internet meme examples.

One of my favorite websites in life is knowyourmeme.com. the comprehensive catalog of memes.

And so, like the culture evolution of what's happening online I just think is incredible and wonderful in so many ways.

And then I got in this dust up online a couple of weeks ago about introspection that you mentioned.

And then a friend of mine sent me this thing and he said, oh, he's like, oh, here's your answer.

He's like, you're retard maxing.

And I said, I'm what?

And he said, oh, watch these videos.

And there's this guy we can link to who's on YouTube, who has basically I don't know 100 videos on returb maxing.

He's like my new life coach.

I haven't met him, but from a distance.

And it's basically just like, you know, retirement is just like, okay, fine.

Go to work, do a good job, come home.

It's fine.

Start a company, succeeds, fails, it's fine.

Have too much to eat one night at dinner, it's fine.

Go to the gym, don't count your reps, it's fine.

You know, ask a girl if she wants to go out with you, if she says no, it's fine, right?

And so it's the simpler form of extreme ownership, or it's the form of it that basically, maybe another form of it that says I don't need to take all this in on myself, I can just let it go.

The thing I love about the internet Mark, is there is some guy who is doing these retard maxing videos who now has Mark Andreessen as one of his biggest fans.

And you're just like, how great is that?

They're incredible.

Well, it's like 130 minute videos about retard maxing.

And you would think that after the first two minutes, he'd kind of covered it.

Oh no, he got a catalog.

And by the way, they're all hysterical.

They're all absolutely fantastic.

And it's literally like him on his porch in the middle of nowhere with like a cigar and it's like a half hour.

It's just absolutely, absolutely, absolutely spectacular.

And so anyway, like I do think there's something to that which is like okay.

Back to your original question.

It's just like okay, like in addition to all the emotional pain that life has already put on us or that we've already put on ourselves, you know and, by the way, you know a lot of it, legitimately so for the things that we actually do to other people and so forth, but it's just like okay, how much are we gonna torture ourselves?

And you know, there's something about modern culture, modern Western culture, or something where we've become like very guilt oriented and very you know, very into like self-flagellation and very into the concept of the hair shirt.

You know, just like we wear these metaphorical garments that just are like tremendously painful.

And so it's just like all right, like maybe there's a point at which like, some of that is helpful to like correct bad behaviors, but you know it's clearly gone way too far and people get like way too down the rabbit hole on this and it becomes very disabling.

And I, you know, you probably know a lot of people who are like that.

So the way I think about it is like inherently what you you know, what you do, what I do what you know.

Venture startups like look, these are high risk operations.

Right.

And, you know, sometimes they go right, but they go wrong in a thousand ways before they go right.

And then even then they may not work.

So the nature of the beast is like just like tremendous variability and pressure.

By the way, another thing I always thought about a lot as a founder and I really see this now as a VC is that, in particular, founders have a very hard time ever finding anybody they can confide in.

As a founder.

You feel like, if you admit that you have an issue, like you're being a bad leader, right?

Because you're showing a crack in the armor.

And if your people pick that up, they're going to lose confidence in you.

Or if word gets around that, like you're second guessing yourself, or that your thing isn't going well, or that you don't have total confidence in it, then it'll you know.

All of a sudden, investors won't want to invest and candidates won't want to join.

And so there's this need of somebody.

You know, if you're going to lead one of these things, you have to do it with such a brave face, and then you know, kind of.

It's a metaphor that the duck looks totally placid above water and then it's paddling furiously underwater.

And so I just think like, in particular, founders have a very hard time finding anybody that they can actually confide in.

And then what happens is I think everybody individually has an inaccurate view of what everybody else is feeling, because I think in practice everybody's kind of feeling very tense and nervous and anxious and fearful and so forth, but everybody's pretending they're not feeling that way, but everybody thinks everybody else is doing great.

Everybody else thinks they're the only one that's like faking the smiles at the party.

And so I think it's like incredibly important to be able to have an internal psychological mechanism to be able to deal with that and not have that overwhelm you.

And I, at least this week, my nomination is retard maxing.

You can kill me.

You can tell me.

I don't want to ask that.

I remember I did a show with Orlando Bravo and it basically turned into a therapy session and then he kind of became my adopted father.

Gave me a lot of advice.

What am I scared of?

I'm scared that I'll be Macaulay Culkin, Mark.

Do you remember Home Alone?

Yeah.

The kid who everyone knew when he was young and then it's like, oh, yeah, what is he doing now?

Oh, kind of no one knows.

I have nightmares about being Macaulay Culkin of Venture.

What are you scared of?

To me, you're the great Marc Andreessen of Andreessen Horowitz.

You've got nothing to be scared of.

Yeah, I mean, look, I've been through kind of every version of this myself.

There's a famous F Scott Fitzgerald line where he said in the 1920s, where he said you know author of The Great Gatsby, and he said there are no second acts in American lives.

You get one shot and that's it.

And fortunately, I think like he was very, very, very deeply wrong about that.

And I think he was definitely wrong about that for American lives.

And I think I think he was generally wrong about that for lives, at least elsewhere in the West.

Maybe a little bit less so in Europe, but I think still, you know, more than not.

Anyway, the point being like, I mean, look, somebody once told me there are two great stories.

Oh, the glory of it and oh, the shame of it.

And so, oh, the glory of it is like the story of great success.

Oh, the shame of it is a story of like great disaster.

But then the even better version of it is oh the glory of it, followed by oh the shame of it, followed by oh the glory of it, right?

And so the recovery.

And, you know, getting back up on your feet and then reachieving and rebuilding.

And so, you know, I don't know.

I think, as long as you're still alive and as long as you've conducted yourself in a way that you know you haven't brought you know some sort of fundamental like legal issue on your head or something like that.

I think generally, at least in our world.

I think second chances are actually available for a lot of people.

And, by the way, of course, a lot of the great success stories have this in their background, as you know, including Steve Jobs himself.

You mentioned the nature of the beast there being our business.

I've been a student of the business, hence reading so much of your writing for years.

When we look forward, how do you think about the future of venture?

Is it as simple as go big or go home?

Obviously, we see Andreessen be so big now.

So I believe and we try to run the firm this way I believe the core of the business is a permanent state of affairs.

The core of the business is early stage.

The core of the business is a founder or a small founding team with a dream and a clean sheet of paper, ideally a garage.

Although these days, you know, it's hard to keep the kids in the garage.

So maybe they haven't, you know, a house or an office.

Very expensive in Palo Alto market.

It is a not cheap garage.

Palo Alto garages are indeed expensive.

Yes.

But you look a couple of kids in a dream and a clean sheet of paper and then first money in and then the first two years.

That is the core of the business.

That really fundamentally is the core of the business.

A metaphor we use all the time at the firm, it's like startups are like baking a cake.

If you bake the cake, And you leave the sugar out of the cake.

You can't pour sugar out of the cake afterwards and fix your mistake, right?

Sugar has to go in the cake.

That first two years is when you're baking the cake.

Like that first two years when you're really figuring out what the formula is of what you're doing and what the product is and what the company is and what the business is and what the culture is and who the team is.

Like those decisions are like absolutely fundamental.

And if you get those right, As a founder, the payoff from that will go for decades.

And if you get those wrong, even if your company succeeds, you're going to live with those sins forever.

They're going to extrapolate out.

And so that's it.

That is the core of the business.

And many great companies.

Later on bring in lots of other partners and growth stage investors and other people to the team and build boards.

And it's fantastic and it's great.

But You know there really is no substitute for that kind of inception point.

You know that early moment.

There's no substitute for being the investor that does that.

And then you know, as you know, like the investor who's engaged with the company at that stage, it often becomes the key advisor to those founders for the rest of the company's life.

Because you build this incredible emotional bond and then you have complete context on why all the decisions got made and you remember how it first started.

I think there's just no substitute for the early stage.

And I think, a firm like ours.

This is what I always tell our folks look at the end of the day, the early stage business has to work.

If the early stage business works, we have option value in doing all this other stuff, but that always is the core of the business.

To what extent is the late stage fund a function of executing on the omissions of the early stage fund?

So it's basically, I think it's in two parts.

Part of it is yes, fixing the mistakes of omission.

Fixing the mistakes and becoming partners later.

And look, that can work really well.

Those can be very good investments.

And we do get very close to some of those founders.

But again, they always at that point have somebody early on who they're very close to.

So we do see the difference there.

And then look, the other part of it is doubling down, doubling down on the companies that are working or growing.

And I would just say on that part of that's just economics, which is, if you have the chance to do that, you should do that as a professional investor.

There's another really fundamental thing why we decided to go so big in growth on that front, which is this is less true now, but 10 years ago, 15 years ago, these companies would raise money from venture investors, and then they would get to a certain point and then they would raise money from a completely different kind of investor that was not tech-centric.

And then they would all of a sudden end up in the situation where they had a conflict between investment mentalities, a fundamental conflict on the cap table, over things like level of risk, level of reinvestment, how fast they should go public if they should sell the company.

Do they need to replace the founder?

Bring in a professional CEO.

To the extent you bring in non-tech mentality whatever you want to call it, Silicon Valley mentality growth stage investors you do set yourself up for, like you're now going to get a different set of pressures.

And so one of the things we wanted to be able to do is to be able to you know, with our founders that have the chance to build something really great, like we want to be able to be their partner across you know, potentially every round that they do.

And then, as a consequence of that, they can basically preserve our mentality on their cap table for longer and longer and longer,

And I think that that works pretty well.

Is it possible to literally I love what you said there because I love the boutique craftsman style of venture but is it literally possible to care about a 5 million seed check when you have 15 billion that you raise at once?

Yes, and it is, and the reason for that, twofold.

One is just the conceptual kind of reasons that I described, but the other is just on pure economics.

It is

Because, as you know, the upside on the 5 million check is every bit as big as the upside on a 500 million growth investment.

And this is what's so unusual about venture.

If I make a 5 million seed investment and I nail it, I can make 10 billion on that, 100 billion on that.

If I make a 500 million growth investment and I nail it, I can make 10 billion or 100 billion on it.

You see what I'm saying?

It's the same upside.

Do you buy the, oh, entry price doesn't matter because we're going to have $100 billion companies.

I just see the round inflation across every round.

It makes my life harder.

With the greatest of respects.

Large funds make my life harder because you have a different cost of capital.

Do you buy the, if it's $100 billion, the entry price doesn't matter?

Or do you think differently?

Yeah, so look, the enterprise definitely matters, in particular as you go, in particular as the company grows in size.

By the way, it matters for a couple of reasons.

And this is a lesson that gets like relearned over and over again and will be learned many times in the future which is, you know, the old Don Valentine thing which I do think is correct which is more companies die from indigestion than from starvation.

Overfunding is actually very dangerous to the operations of a company.

By the way, this is the one piece of startup advice that I think is like, tremendously grounded in reality, for which everybody has many examples in the past.

No founder ever listens to it.

My track record of ever convincing any founder on this point, I think, is zero, but I will keep trying.

It's so flattering.

Oh, I want to give you money.

Okay.

You think I'm brilliant.

Great.

Yeah.

And then you know they come up with 18 reasons why.

And then they, you know, and then you know I'll really push them on.

And they're like well, we're going to have a lock box and we're going to put the money.

You know it's like no, you're not like I.

I've never had the lockbox.

I've never seen it.

Nobody's ever going to do the lockbox.

Nobody ever does the lockbox.

So back to your question, I would just say look, I think I'll come back to high valuation in a second, but I think there's an actual core fundamental, linked thing that's very important, which is the amount of money.

Overfunding is actually just as dangerous or more dangerous than underfunding, number one.

And then number two look, the problem with these high valuations is like okay God, help you if you need to clear the bar next time and you can't.

Every round sets a post, it sets a threshold, a hurdle for being able to raise in the future.

And this is something that people learn every cycle, kind of for the first time in a hard way.

No new investor wants to do a down round in anybody else's company.

If you put the investor hat on and you're like I'm going to go do a down round in this company because I'm going to be the hero and save the company, or whatever, because it raised too high last time.

And now I'm going to do the rational investment like everybody's just going to hate me.

The employees are going to hate me.

The other investor is going to hate me.

The founders are going to end up hating me.

Nobody ever does a down round in somebody else's company.

Setting these posts high is intrinsically a problem.

Once again, I would say this is advice that generally people completely disregard.

There are problems like that in the system now, and there'll be more problems in the future.

Having said that, I will tell you, at least on the venture side, growth is a little bit different.

On the venture side.

I think every time we passed on a promising venture company over price, I think it's been a mistake.

Have the best companies been the most expansive?

I think the underlying question and tell me if you agree with this the underlying question is the question of diamonds in the rough.

Is that right?

Whenever I've done a good deal, it's never worked out.

That's right.

Okay.

So here's another thing we say in the firm, which is don't ever do diamonds in the rough, only do diamonds.

So this is another thing.

This is actually an investor ego thing, I think, which is you basically say wow, I'm the investor that's going to go find the thing that nobody else knows about.

Another form of this would be like, you know, all these other investors are herd animals.

You know, they're all just copycatting each other.

And like, I'm the one who's going to be different.

I'm going to go do the thing nobody else can think of.

By the way, Peter Thiel does that really well.

Nobody else does that well.

And you're probably not Peter Thiel.

I think you spent a lot of time with Peter.

I would say I am not Peter Thiel.

And yes, and you, the listener, probably are not as well.

Put it this way.

Maybe I could say this, especially if you go online.

There's a tremendous amount of VCs are stupid.

VCs are blind.

They're herd animals.

They're blind.

They're consensus-seeking.

They're heat-driven.

They only do the obvious thing.

You often get this from, they don't appreciate my special thing.

Having said that, the general pattern is and this is like nine out of 10 times, or I would even say probably 99 out of a hundred times, which is like if it's got merit to be investable for venture.

There are a lot of really smart and hungry VCs out there and they are working extremely hard to sniff these things out, and it's their full-time job and it's all they do.

Yeah, I think it's really unusual to have the diamond in the rough.

And usually if it's the diamond in the rough, it usually means two things.

It basically means number one, it means a company that's like offside in some fundamental reason.

It's in the wrong place, right?

Or it was like structured wrong.

There's a reason why it's a diamond in the rough that actually ends up becoming a big problem.

The example people use, which I think is legitimate, which I think there was a point when Uber was available for investment by anybody on AngelList.

So it's like, yeah, every once in a while there's one of those.

Look, there's a reason.

You know this.

There's a reason where if you just look at the great outcomes in venture over the last 50 years, if you just rank the outcomes, it's just like it's the same names over and, over and over again.

And it rotates every decade or so.

There's some rotation in the names.

The other reason you have diamond in the rough is you have a founder who fundamentally is just too ornery to just do things the obvious way.

And they're just like hyper disagreeable.

And they're just like ah, these are often the founders that like have all these theories about how venture is terrible and awful.

And these VCs are all evil.

And they're like very focused on like terms and control and like all this stuff.

And it's just, and they kind of alienate.

And so, and then, by the time you meet them, it's just like they've alienated like six of the mainstream venture firms.

And now they're the diamond in the rough.

And it's like, and again, it's like, okay, every once in a while, one of those is going to succeed.

But like, I'm not sure I would want that to be my business.

Do you need to like the founders you invest in, Mark?

So I say no, opinions vary.

You know, I said earlier, I'm emotional, both in good and bad ways.

Like, you do end up getting very close to people and you do end up wanting to have a high level of trust.

And it certainly helps if you like each other and trust each other and so forth.

But like I would just say, on the other hand, like some of the best founders in history and you know look, I give you example after example in the distant past they were not very likable people.

And a lot of you know.

By the way, the same thing is true of many of the great artists, many of the great filmmakers, many of the great literary geniuses, many of the great philosophers.

You know, many of the great political leaders.

There's a lot of cases where these people are like not likable.

So I say, no, you don't.

Because I think, like if you're trying to fulfill your personal emotional needs at work, like I think that's a very fundamental problem and you shouldn't try to do that.

It's the Harry S. Truman quote, if you need a friend, get a dog.

Another version of this is we always say, do not bring your whole self to work.

Whatever you do, do not bring your whole self to work.

If you show up and you're a professional and you're great to deal with and you're very productive and you add value in every engagement that you do, and if that's true for you as a VC and you're working with a founder, you're never friends and you just like have a great working relationship and you don't.

You know, and the company in the later years whatever sells or whatever, and you never talk to each other again like.

I've seen that work many times and i think it's totally fine.

Mark, do you want to take andrew some public?

It's the question that came up time and time again.

But when you look at the machine that's been built, would you like to take it public?

There's nothing that we're missing today that we could solve by going public.

By the way, it's also increasingly true of a lot of the companies that we both invest in.

And so I don't think so.

I mean, I would never rule anything out.

Ben and I have run public companies before.

Ben's been the CEO of a public company before.

And so, you know, we know what that entails.

My funny version of the story.

So when we first started A16Z, we went around and we met with a lot of the top VCs at the time.

This is in 2009, 2008, 2009.

I kind of pitched them on what we were doing and got a variety of very interesting feedback.

And some of them became very helpful to us and really helped us, but we got some very interesting feedback.

And one legendary VC told us at the time.

He said the thing you're gonna hate the most about being a VC is you're gonna hate the LPs.

They are just like the worst people in the world.

And he gave us what we call the mushroom talk, which is, he said, you need to treat LPs like mushrooms, which is, you put them in a cardboard box, you put the lid on the cardboard box, you put the box under the bed and you don't open it for two years.

And we said, OK, that's one mentality.

And then we said, well, wait a minute.

We've been running public companies for the last 15 years.

We've been dealing with hedge fund managers.

Say what you will about LPs, like whatever you think.

At least when you walk in the room, you know they're not short your stock.

If you want to deal with pain in the ass investors, go public.

And of course, what we found is our LPs have been incredible.

Our LPs have been incredibly supportive.

They've been incredible partners.

Obviously, we tried to treat them as partners, but it's just been an incredibly productive relationship.

And as you know, the best LPs understand.

They understand venture.

They understand the time horizon.

They understand the risk aspects that we were talking about earlier.

And they've given us license to do a tremendous number of things you know that have been very risky, of which you know some have worked and some haven't.

And so it's been an incredibly productive partnership.

And so I just go all through that to say, like, I can imagine venture firms going public.

I think you'd have to have a real theory on the value that you would get.

And you would have to really sign up for what it really takes to run a public company these days, which I would just say, like public company CEOs have a very hard job.

If you were a betting man, who would go public first, Andreessen or General Catalyst?

That's a good question.

I haven't actually talked to Haymont about that.

He is certainly to say this.

He's certainly building a firm that could go public, but I don't know whether he would or not.

Interesting.

How big a check do you have to write as an LP to get in a meeting with Marc Andreessen?

Oh, I would shut that question to my head of IR.

Fair enough.

It was a press.

I was just intrigued.

Well, I will say this.

It's actually, I think, the same answer as your question about you care about the 5 million investment.

There are certain LPs that are really, really smart.

And then specifically, there are certain LPs that are very influential in the LP community.

They are not necessarily the same LPs as the ones who write the biggest check.

And so I should say probably shouldn't get into names, but there are certain LPs where I would 100.

Meet with them, independent of check size.

Those are the really great ones.

What product do you not have in the Andreessen suite today that you would most like to have?

So the two that we've kicked around for a long time are public equity on the one hand, and then credit on the other hand.

I think there's really good reasons to do both.

And then there's issues with both.

Issues specifically with respect to doing them inside of IntraFirm.

And so we've never kind of hit the catalyst moment where we've pulled the trigger on either one.

But those would probably be the two nominations.

Asking you about diamonds in the rough.

I would say that I'm in Europe and so location can help you find diamonds in the rough.

Do you think you have to be in San Francisco today or Silicon Valley today if you're building an AI company?

So let me start by saying, I wish that we could decentralize tech.

You know, I come across as a Silicon Valley partisan a lot and a Northern California partisan.

I should, by the way, note, I didn't grow up here.

You know, I'm an immigrant, I'm an internal in the US immigrant to California.

By the way, I haven't left, which is- You haven't gone to Miami?

I got lots like, why has he moved to Miami?

I'm like, has he moved to Miami?

My research tells me no, but fuck, okay.

Maybe he's done a Sergei.

No, I'm a California.

I'm a California.

I'm very dug into California.

And so like look, I am very keenly.

I am not a Silicon Valley partisan in the sense of like I think everything should be in Silicon Valley, or I think it'd be good if everything was in Silicon Valley.

Like, I don't believe that.

And I am a very, very keen student of all the issues in silicon valley and i i could spend a long time taking you through them.

You probably know them all already.

But like, silicon valley has real issues as a place including, by the way, just like practical issues cost, cost of living, cost of housing, cost of transportation commutes like, and then when you get into politics and It's a whole nother parade of horribles.

And so like, there are a lot of issues.

And then, you know, look, San Francisco proper, there are a lot of issues.

Like, you know, it's a city that 100% does not want to grow.

It's a city for which like the voters on average do not want business to be there.

It's a city that has real issues for quality of life and so forth.

And so I would love to see the industry spread throughout the US and then spread throughout the world.

I would love to see that.

I was very optimistic about that happening in 2020, 2021.

I thought COVID was obviously horrible the sudden phenomenon of video conferencing and then Slack, and then virtual workplace, and all the hybrid and all these new methods, management methods and technologies that were brought to bear to help companies decentralize and run from home.

I was blown away in 2020 that the banking system didn't collapse, the stock market didn't collapse.

Then it turned out you could just put all these companies online and they could just keep running.

The Valley didn't collapse.

In fact, a lot of Valley companies grew a lot.

And so I was very enthusiastic, between 2020 and, let's say 2023, that we had cracked the code on how to finally get away from the geographic constraints of Silicon Valley.

I think in the last two years.

I think that that process has, like whiplash, reversed in an incredible way.

And I think the tech industry is more centralized in Silicon Valley than it has been in its entire existence.

And I think it's AI.

Very specifically and I think something very close to 100 of the quality AI companies are in California and specifically in a 20-mile radius of where I'm sitting right now.

There are exceptions, and 11 Labs, of course, is one of the big exceptions, and Black Forest Labs, and we have a whole bunch that we're very proud of Mistral.

There are definitely exceptions but, like man, if you look at just like the value creation numbers and if you look at the talent base and if you look at the flow of where people are going, for better or for worse, it's in Northern California.

And so I just think in practice, this region is going to be more central than it's been.

In the next decade, it'll be more central than it's been in the last 50 years.

You mentioned the multitude of problems that are in the Valley and California more generally.

When you look at the state of play in the US today.

Are you more optimistic today or are you less optimistic today?

I'm a lot more optimistic than I was two years ago and I'm a lot less optimistic than I was 20 years ago.

There is something magical in the American.

I don't know what you want to call it gestalt character, psyche.

Quite honestly, a lot of it is the inflow of people from all over the world.

And a lot of that is the great Europeans who have moved here over the last 400 years.

There's something about having a country that is this big and this powerful and this kind of let's say, lucky and blessed in its geographics and its natural resources and size and scale and all the rest of it that nevertheless is incredibly dynamic and has risk-taking at the core of its DNA and a willingness and a history of like throwing the harpoon at like really big bats in extremely aggressive ways.

And there's just something amazing about that.

And you know you always kind of worry or at least I was kind of, you know I was kind of worried that that's diminishing and kind of.

You know there's this term managerialism, I use a lot.

So he's kind of worried that everything's just becoming managerial, everything's becoming bureaucratic, everything's becoming stale.

And there's certainly lots of aspects of the US in which that's true.

But having said that, it's like when the new thing appears, there's something in the American gestalt that jumps at it like crazy, throws the harpoon unbelievably hard.

And it's exactly what we're seeing in AI right now.

It's actually a thing that's, I think, even really under-discussed.

The level of enthusiasm, capital concentration, the level of determination on the part.

Elon's TeraFab presentation the other night, right?

It's just like, you watch that thing, my jaw's on the floor, right?

I'm just like I cannot believe.

Look, I spend all day with like these incredibly like competent, capable people with all these great ambitions.

And, you know, I get to work with Elon, you know, on some things.

But I watch that thing and I just like my jaws on the floor at the scope of the ambition.

And the honest truth is, Elon would say there's only one place in the world where that could be achieved.

That could be accomplished and achieved.

It's here.

There's only one place in the world where Elon would be able to do what Elon has done over the course of the last 30 years.

Thank God that he came here to do it.

And oh my God, that's amazing.

What the AI companies are doing, the big AI labs, I think is absolutely amazing.

What NVIDIA is doing is absolutely amazing.

There's just something to that.

I understand why a lot of other parts of the world don't want that.

Young Mark would be like, this is crazy.

Why doesn't everybody see this?

Why doesn't everybody do this?

Obviously, it's not all pure upside.

The American character, I think, is rougher than a lot of other countries, a lot of other cultures.

And so there are definitely pros and cons to it.

Do you worry about the inequality that we're seeing in terms of wealth inequality?

To me, it feels like it's greater than it's ever been.

I think we're seeing wealth created in technology larger than it's ever been, obviously.

Do you worry about that wealth inequality?

Yeah.

So to start with, it's definitely not greater than it's ever been.

And we know that because we know history.

And we know, the natural mode of history for thousands of years was like.

There's a strong man like, and we call him the king or the prince right.

Or the whatever tribal leader.

And like, he has all the stuff.

And then there are the serfs.

And then they just like work the fields and they don't have any stuff.

God forbid.

You know, then you know, typically in human history, then they're the slaves and they also don't have any stuff or any rights.

And so I would say the long run state of human history has been like a much greater, more profound level of inequality than anything under capitalism.

And so number one, I would challenge the premise of the question.

And then two is like look, I mean you know the debate, the debate about inequality always is would you rather live in a society that has a faster level of aggregate growth, in a generally rising standards of living across the board, but with greater inequality?

Or would you rather live in a society which has lower standard of living, lower growth or maybe even no growth or declining growth, in which things are more equal?

And, like I said, like I look, I have a lot of European friends who say, like look Mark, you don't understand.

Like for a normal person, living in Spain is like much better than living in the US because, like the baseline is just like much more secure.

And I buy that.

And I think that's probably true.

Having said that, like if you want the country that is going to go to the moon and build AI and all the rest of the stuff that is happening here, of course you're going to have a dispersion of outcomes.

I think if you look at the economic growth rate itself, it actually tells you a lot.

Just as an example, there are a bunch of European countries now that are either flat or shrinking.

Do you worry about the future of Europe when you look at that flat or sinking growth rate for many European countries?

Do you worry about it?

Yeah.

So I would say I am a tremendously, tremendously pro-European.

I am like pro-European at my very core.

Like I'm an Anglophile and a Francophile and a Germanophile.

I love all these countries.

I love all these people.

I think it's absolutely.

You know, every country in Europe, I think, has made like fundamental contributions to civilization.

I think the human capital in Europe is just absolutely amazing.

You'll hate what I'm about to say, but one of my things to the firm is I say we should back every single European founder who moves to the US.

We should just reflexively say yes.

I 100% agree with that.

I think the data would agree with that too.

Yeah, exactly.

And right, that's a combination of two things, right?

That's a combination of just the raw level of talent.

And, by the way, the great education system and like everything else that goes with that, you know which Europe has.

A lot you know, and then, coupled with again, if the move to the US indicates a willingness to seek risk and throw things up in the air, you know to go after a greater level of achievement.

And so, I would love to see Europe flourish.

I would love to see Europe be a full scale like every bit as dynamic and exciting as the US is on all these fronts.

I would love to see AI in Europe be a huge thing.

I would love to see London.

You know, obviously London has already played a key role with DeepMind and, you know, Eleven Labs is, you know, is heavily based there now.

If I were to make you head of the EU, Mark, what would you change about Europe?

You can change anything.

It's a magic wand to incite growth and ambition in a way that would allow us to seek new levels of achievement.

I have had this conversation many times.

So I've, over the course of 30 years, been visited by lots of heads of state, senior officials, people working on different kinds of commissions studying this kind of thing, and so forth.

And basically the conversation's always, it's always the same.

I don't know good news or bad news.

The conversation is always the same.

You know which is?

We really want a Silicon Valley.

You know kind of phenomenon in location X And then I say well okay, then do A B, C.

You know D E, F.

Here are the things that you do to do it.

And then they say, well, what if we can't do those things?

We couldn't do that.

No, no, no, no, no.

Yeah, clearly we can't do those things, but there must be some other set of things we can do.

Do you have an option B?

Exactly.

Well, and this is the thing is you, and I think every one of our listeners can fill in exactly what you know.

ABCDEF are.

By the way, you know, as you know, Mario Draghi just did this, right?

He just like wrote, you know, the Draghi report two years ago.

He just did this.

He just studied the issue.

He just everything's in that, you know, just read that report, do those things.

And you'll notice what's not happening is any of those things.

When you think about all the people that you've met, who have been heads of state or in positions of political power, which one were you most compelled to feel you wanted to invest with, work with?

You'd want to work with them.

So I will say, like in the last five years, it's the heads of, I would say in particular UAE Saudi Qatar, Kuwait.

There is something really special happening in those countries.

I find there's a lot of very talented people politicians, European politicians, heads of state, former heads of state where, when you get them in private, they know everything.

They know what needs to be done.

You just pick a topic and they know it.

Again.

It's almost like the policy discussions have been had so many times that we kind of know all the answers already.

It's just we either like or we don't like the answers.

And it's specifically right, of course.

We like or don't like the consequences of the answers.

We don't like the trade-offs.

But I think there's a lot of people who know, okay, there is a formula.

There are a set of things to be done.

And it could be on this question of having a tech industry, or it could be on some other pressing issue fiscal whatever whatever, whatever the issue is,

And they kind of know what it is.

And then they kind of explain, you know, here's why we can't do that.

And then they kind of go back, and then they kind of go out in public and they kind of kind of half pretend that they don't know what the answer is.

And so I don't know whether that's.

I don't know whether their view of that is encouraging, or I guess the encouraging thing is.

I think the intelligence level is probably higher than it looks.

The discouraging thing is, you know, the courage part of it is probably not quite there.

And then they get unelected and then the cycle starts again.

Well, so there is this.

I mean, no one just talked geopolitics the whole time, but there is this really fascinating, as you know, the big difference the American constitutional system versus the European kind of parliamentary system.

There is this thing where, when an American president becomes deeply unpopular, he sinks down to like 40 approval rating.

When a European politician becomes unpopular, he gets down to like 6%.

Yeah.

They start at 40.

They start at 40 and they just nosedive straight to six.

And so I don't know.

I always look at that and I'm kind of like wow, if you know that your default path is to go from 40 to six, like maybe it's time to try something different.

We did have a prime minister Mark, who once the whole nation was betting on whether I think it was a potato would last longer than her in office or not.

And it was a legitimate prediction marketplace, a potato.

And by the way, it was live streamed.

We needed proof of death of potato.

So there we go.

We brought up kind of the future of Europe and whether you need to be in Silicon Valley because of AI.

When I look forward to how this plays out.

When you project forward, does the gains in AI look like AWS in terms of infrastructure dominance?

Or does it look like the Internet in terms of application value dispersion?

The question that I answered before of like concentration in Silicon Valley is like the main line companies building AI?

Google and OpenAI and Anthropic and Meta and XAI, like Silicon Valley, right?

So that's true for sure.

But I think there's a second phase to it, which again, I'm very excited about.

And the second phase, which relates to your new question.

The second phase is, I think, the benefits of AI.

The power of AI diffuses out globally to a degree people are really not expecting.

And furthermore, I think that's already happening.

And I think this is also an answer, by the way, to your inequality question because, you know, the sort of assumption always is well, you know, surely the biggest companies in the world will have access to the best technology, or the rich people have access to the best technology, or whatever like that.

And it's actually quite striking.

If you look at AI, I think it's the most hyper democratic, small d democratic technology I think we've ever seen.

And it follows kind of the internet and follow smartphones in this, which is why I'm pretty confident this is what's going to happen.

I think it's already happening.

Which is the best AI in the world?

Is the app that you download on your iPhone off the App Store?

The best AI in the world is OpenAI or whatever, whichever one it is, of the you know three four, five that are really in the race.

You download that app.

That's the best AI.

And by the way, look, you're in a quality point.

You're probably gonna have to pay 20 bucks for it.

And if you really use it a lot, you're gonna have to pay 200 bucks for it.

But by the way, the free ones are pretty good now.

And, by the way, Google gives away a lot of AI value for free, and Microsoft is starting to do that and others are doing that as well.

But the best AI in the world is the consumerized version that's available to everybody.

And so I think there's a part two to our earlier conversation, which is, I think, people all over the world I mean it's already happening because these apps now they're about to cross a billion users and they're growing fast

And so we're not that many years away from 5 billion people in the world having AI running on 5 billion people who have smartphones and internet access.

And so I think that's such a hyper democratization of the technology.

And so I think the use of AI, the consumer benefit, the business benefit, the economic benefit, I think that has the potential to be decentralized to a radical degree.

I guess the question is really to what extent do we feel it is a just assessment that the models will move into the application layer and erode value?

You know, we saw obviously Anthropic announced security update.

I'm using that as an example because it's ridiculous in my eyes.

And our security update and CrowdStrike and CloudFlare tank 8, 9%.

Obviously, it's not threatening CrowdStrike and CloudFlare today.

Do you think the core models AI OpenAI, for example will move continuously into the application layer and consume more and more of the value chain?

Yeah, so a couple of things.

So one is there's a bigger phenomenon, which is what I was heading towards in my earlier answer.

So there's actually an even bigger phenomenon than that.

And there's actually a paper on this.

Maybe we can link to it.

And it uses the term Schumpeterian economics phenomenon.

After Joseph Schumpeter is the kind of you know, the economist who kind of developed the theory of creative destruction.

And the economist basically goes through and says there's a concept of Schumpeterian economics, Schumpeterian gains.

And the idea of it basically is and he does this whole analysis for a whole bunch of different technologies

And basically when there's a new fundamental technology, whether it's electricity or steam power or computers or the internet or smartphones or, you know, AI.

What actually ends up happening is like something close to 99 of the economic value arrives in the market, not in the form of economic benefit to the companies that make the thing, but rather to the customers.

And the economists call this consumer surplus.

Consumer surplus is all of the benefits that the consumers are getting that they're not fully paying for.

The way this analysis basically works is, if you look at the total amount of economic value creation, for example, downstream of the internet, something like 99 of that accrued to the users of the internet, not the companies that built the internet with a smartphone right.

Who gets the economic value of the smartphone?

Everybody in the world who uses a smartphone to become more productive in their life or in their business gets 99 of the value from the smartphone.

Apple and Google get 1% of the value from the smartphone.

I think it's already that way.

I think it's going to be exactly the same way.

It might even be greater than that.

It might be.

999999 of the value of AI is going to accrue to the users, not to the companies that make the AI.

That's like such a larger economic force.

That's such a larger amount of value, that's just like extending out into the world that, like I said, it's almost like dark matter.

It's like everybody's going to experience that in their own life and in their own business that they run and everything that they build.

You know wherever they are in the world and they're using AI.

And nobody's ever going to really like tally that up or get credit for it.

But if you do the analysis, it's going to turn out where that's like overwhelming, where the gains are.

So your question is basically a question of then fighting for like the 1 that stays captured, you know, kind of in the AI industry itself, which is a very important question.

And of course it's central to what we Well, I guess that actually the question is does that whole economic theory change when we believe that we will see the labor being eaten, when actually software spend is no longer software spend?

It moves into human labor spend, in which case the TAMs explode and we have bigger companies than we could ever have.

But a Harvey of the world actually eats a large part of legal work and junior lawyers.

Does the time explode and how do we feel about that?

Yeah, so you have friends, I'm sure, who were great coders before AI and are now using AI for coding.

What's the thing that they all report?

They're far more productive.

Are they working more or fewer hours than before?

More.

Yeah.

So this entire labor displacement thing is 100% incorrect.

It's completely wrong.

It's classic zero-sum economics.

It's the lump of labor fallacy.

It happens over and over and over again.

It's always been wrong.

It's going Do you even believe it for mediocre people?

And I know that sounds very judgmental and horrible, but most social media managers mark a crap.

I'm getting in trouble for this, not you.

A crap.

If you get a social media tool that is AI driven and can replace an average social media manager for ATT, surely you'd do it.

I don't say this to be insulting, but it's the classic Marxist analysis, which is there's a certain amount of work to be done and either the machines do it or the humans do it.

And so surely those jobs go away.

The answer has to be and this is what technology has always done, and this is what AI is going to do, and this is why I went through the long description that I did of the hyper-democratization of AI.

Every single one of those people who's a social media manager today now has AI.

They all have AI.

They all have AI or they're about to have AI.

And they're going to have it at their fingertips.

And if they want to, and then anything that they want to do in their life, in their work, in their career, in their profession, in their job for the rest of time, they're going to be able to use AI to do those things.

They're going to be able to use AI to become a better version of themselves.

They're going to be able to use AI to be able to learn new skills.

They're going to be able to use AI to become more productive at work.

They're going to use AI to be able to not do a lot of the grunt work they're doing today so that they can do higher value work.

And then now I'm just talking classical economics, which is just kind of the other side from Marxism.

Classical economics says that the actual function, the actual economic function of technology, and this includes AI, the actual function is to raise productivity and specifically to raise marginal productivity of the individual worker.

And again, this has happened many, many times.

You take an individual worker who used to write on pencil and paper and you give them a typewriter.

And then they used to write on a typewriter, and then you give them a word processor, and then they used to do hand accounting and now you give them a spreadsheet.

And and and and, and.

By the way, social media manager, a job that didn't exist before the internet, right?

Technology actually creates a new job.

Maybe I'm a European communist, Mark, but then why are we seeing layoffs?

Why are we seeing layoffs everywhere?

Why is every CEO I'm meeting saying, oh, we're flat headcount or we're reducing?

Oh, that's very easy.

So number one, interest rates.

So interest rates, we're at zero.

And then interest rates went from zero to 5% at record speed like three years ago.

Every big company had to replan.

All of their financial, all of their cost of capital went up five points.

Like they all had to completely replan financials.

And then number two is they all overhired during COVID.

The hiring binge that companies went on in COVID was just like wild, right?

And it was the combination of the two.

It was the interest rates, going to zero during COVID.

And then it was just the complete loss of discipline at all these companies when they went virtual.

And when employees just became a you know an icon on a screen and they just you know, because like yeah, just like go hire, like tons more of them.

And so specifically, what you have happening right now is you have essentially every large company is overstaffed.

We could debate how much, it's at least overstaffed by 25%.

I think most large companies are overstaffed by 50%.

I think a lot of them are overstaffed by 75%.

And now they all have the silver bullet excuse, right?

Ah, it's AI.

Well, I know this for a fact, because number one, I talked to them.

But number two, I know this for a fact because AI until like literally until like December was not actually good enough to do any of the jobs that they're actually cutting.

And so it just can't have been AI.

So the other thing is people look at the hiring rate for new hires and they look at the spike in how hard it is for new college grads to get new jobs.

And again, people peg that on AI.

But I think that's actually two things.

Number one is, of course, the companies that overhired and overinvested and I have to bring down their spend and their headcount.

Obviously they're not going to hire very many people.

So that's part of it.

And then the other is you know, one might make the observation that maybe the skill set of a lot of college graduates over the last decade doesn't necessarily match to the job market.

And that's a very uncomfortable conversation for people to have.

But I think that also if you talk to any employer, they'll immediately tell you that.

Final one before we do a quickfire.

You are probably the best copywriter of our time.

It's Time to Build, American Dynamism, Software's Eating the World.

I picture you in this kind of musky room, kind of American countryside billowing out as you come up with these titles.

What is your copywriting process?

It's the culmination of raw frustration.

That ruins the romanticism of my imagination, but keep going.

It's the Mount Etna exploding phenomenon.

It's basically always when I just literally can't take it anymore.

People are thinking the wrong thing.

Somebody saying something wrong on the Internet, you know, that kind of extrapolated up.

And so it's when I just think like there's a fundamental misperception in the world and it's just not correct.

And then of course, I have that.

You know, I have a sufficient ego to be able to say I can.

I can correct that.

And so it's usually that.

Basically, everything you mentioned, the actual drafting in every case has been like two hours.

It's just like, it's just rip it and go.

But it's because I spent the preceding two years getting increasingly frustrated.

I don't know about you.

Do you have an internal monologue?

Do you talk to yourself in your head?

Are you kidding me?

All the time, especially when I run.

Yeah, exactly right.

And so you're probably like this too.

So what happens is I'm just arguing with myself all the time.

And so, by the time I write, I've been arguing with myself in my own head for two years and trying to figure out what the good arguments are.

And then it just all kind of comes, I just like drop it on the page.

I asked Doug Leone this, but I'm intrigued because you have the same challenge.

The weight of your voice is so significant.

How do you ensure that people will fight back when the weight is as great as it is?

So number one, it's nice.

There's an upside to it.

So I don't want to lose the upside.

I do like the upside to it.

But yeah look, the very specific form of that is, I think well, so there's actually, maybe you could say, two problems.

There's the giving advice part.

And then there's actually the just asking questions part, which is also a problem, because people will interpret the questions as advice or directives.

The way I think about it is, if I'm dealing with one of my partners at the firm or if I'm dealing with one of our portfolio CEOs, I just have to be really careful to say look, I don't know what the right thing to do here is.

I don't have the information that you have.

I don't believe I can dictate what this is.

Do you remember the concept of an in-flight magazine?

Does that ring a bell?

No, but tell me.

So in the old days before phones and tablets, when you took an airline flight, there'd be a magazine from the airline in the pocket of the seat.

That's what everybody would kind of sit there and read if they didn't bring anything.

So it'd be like the Southwest Airlines in-flight magazine.

And then the pejorative was like in Venture.

It was basically board members who gave advice by way of in-flight magazine, which is you know.

They flew in for the board meeting.

They read the magazine.

The magazine said you know, Java is going to be a big thing.

And so they said, what's our Java strategy?

Right.

Or for every other new thing that came along.

And, you know, maybe the current version of that is whatever, whatever I read on X yesterday or whatever I saw on a YouTube video or whatever,

Right.

Or in the newspaper.

You do have to be really, really careful, I think, as you get more senior in this field.

Be really careful both in your firm and also with founders.

God forbid telling them what to do A B, suggesting what they do, which is sort of the same as telling them what to do, which is dangerous.

And then C, even just asking questions becomes very dangerous because they interpret the questions.

And so I think you just have to acknowledge that up front and bend over backwards and kind of say look, this is genuinely not what I'm trying to do.

And I'm just going to ask questions and do that.

Generally the way that plays out at our firm is, like I said earlier, Ben and I almost never weigh in on a direct way on an investment that one of our partners is working on.

And the reason is just because we don't want that warping effect to take place.

And specifically because we know we lack the knowledge. to be able to do that.

And so, and in particular, maybe obvious, but doing that in public is particularly dangerous, right?

If there are other people around and then there's like perceived social pressure.

And so if we're going to have like a difficult conversation with somebody or we're going to really question something, it's you know, we have to take it one-on-one and have to be very careful in how often we do that.

We're going to do a quick fire round and we're going to start with an easy one.

Adam Neiman and Flo was a controversial deal.

Why did you do it?

What was the thinking behind it?

So at the height of the WeWork meltdown, when it was in the newspaper every single day and kind of reaching its end point, I talked to a friend of mine who is one of the legends of the real estate world, who I won't name, but is a very, very credible, very famous real estate guy.

He said, look, he's like, whatever people say about this whole thing.

He said look, there are only two people in the history of the world who have built brands, built compelling brands, where people care about the brand, care about the name on the building for commercial real estate and the history of the entire world.

And he said, one of them is president of the United States. and the other is Adam Neumann.

And so he said people need to understand like yeah, this is not like whatever it's going, this one's going sideways now, but like, this guy is like a generational or all-time talent in that industry at doing that.

And of course, not just the brand, but like the value proposition, like the thing that's underneath that.

That really stuck with me, right?

Because then that was up against the absolute wall of negativity, right at the time where people were just tripping all over themselves to just say the worst possible things they could about the guy.

And then, yeah, and then we got to know him after that.

And you know, as you know, I became, you know, thoroughly convinced or reinforced our view that he was a generational talent.

And I think, yeah, we feel very strongly that that is the case.

We're very happy with that investment.

What was the most controversial deal or most disagreeable deal internally from your memory?

I don't think we've had individual deals that are really controversial internally.

So the deal we kind of make with all of our investing partners is they all get to go out on a limb and do the things that other people are going to think are dumb.

They don't generally backbite each other on that.

The bigger issue, I think, is probably more and I put this more on Ben and me than anybody else, but it's just like okay, what are the kinds of investments that we do?

What sectors are in and out of the strike zone?

I'll give you an example.

I mean, the most straightforward example is the deal we didn't do we should have done is the Anduril Series A, which was just sort of obvious that it was going to be special.

And you know Palmer we had worked with Palmer at Oculus and it was just you know, and his colleagues were clearly very capable.

And it was just kind of obvious that, you know, there was something, you know, very special.

But it was just like say, like the politics, the cultural elements of that at the time when it first came around.

I would say we got scared off in a way that i very much regret, and so you'll notice that, like we are now extremely enthusiastic investors in defense tech and in um you know, things involving law enforcement, national security, public safety 100, we would not make that same mistake again, and so i and i think it, i think it has to do with us.

Actually, You see what I'm saying.

It's risk-taking at the conceptual level beyond the level of an individual company.

And then, like I said, it's generally Ben and me when we've screwed that up.

You sit down with your kids and you can tell them one thing that you think would make them the most proud about what you've done.

What would that one thing be?

It's impact on the world and it's in the form of what I described earlier, with the economic idea of consumer surplus.

But conceptually it's just like wow, stuff that I worked on or built or helped build is something that's really like it's all over the world and people all over the world are using it.

And it's been tremendously, on net, tremendously beneficial.

I think that's one.

And then look the other.

The other that I think rises in importance over time is just the number of people that hopefully, I've been able to have a positive impact on.

So you know the number of people who I've been able to, you know, help or support, or help get through hard times or teach different things to who've been on, you know, gone on to be very successful.

And I think it's time, it's time's passing.

It's more of that second category.

Penultimate one, what was the most memorable first founder meeting you've ever had?

Not the best founder or anything like that, just the most memorable first founder meeting.

First meeting with Mark Zuckerberg.

It was amazing.

Mark's like 19 or whatever.

And it was Mark and Sean Parker.

And I knew Sean a little bit, but not well.

And I'd never met Mark before.

And Sean talked the entire time.

Sean literally talked the entire time.

He was just talking a mile a minute, every idea.

It was just absolutely amazing.

And Mark didn't talk.

So Sean and I basically talked the whole time.

And Mark sat and listened.

And I walked away and I was just like, wow, that was really weird.

I was like, one of two things has happened here.

Like either he's completely unsuited for the job because like, he literally doesn't talk, or he's like listening and absorbing everything that people are saying.

And he's going to be on a vertical learning curve like crazy, because he doesn't have the ego need to just like say things he could, he just like absorb.

And of course, it turned out to be to be number two.

And I've talked about this before.

He's just on this incredible learning curve and has been his entire life in the most amazing way.

But yeah, I would say that one.

I've never told that story before, but that was memorable.

The second meeting, I got him to talk.

And by the way, everything Sean said was right and it was all genius.

I would love to have seen that.

Final one.

You've been an incredible entrepreneur.

You've been a great investor.

And you're also an amazing firm builder.

If I were to push you, and one of the greats in venture submitted this one, but I can't tell you who it was.

If I were to push you on which one you'd most like to be remembered for in history, what would it be?

Yeah, entrepreneur.

And you know, Ben and I are lucky in that we've been able to.

You know, A16Z itself has been an entrepreneurial project.

And so, yeah, if I could choose, that would definitely be the one.

Mark, I cannot thank you enough for doing this.

As I said, 10 years I wanted to do this.

So thank you so much for joining me.

Awesome.

Thank you.

I really enjoyed it.

Questions are fantastic.

Look, you've been doing an incredible job, so I also really appreciate the chance.

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📋 Summary

ベンチャー投資における「失敗」との向き合い方

偉大な創業者を見抜く3つの要素

「リタード・マクシング」という生存戦略

シリコンバレーの再集中とAIの民主化

労働代替と経済の未来

結論：起業家としての誇り

🎯Key Sentences

📝Key Phrases

📖 Transcript

📋 Summary

ベンチャー投資における「失敗」との向き合い方

偉大な創業者を見抜く3つの要素

「リタード・マクシング」という生存戦略

シリコンバレーの再集中とAIの民主化

労働代替と経済の未来

結論：起業家としての誇り

ListenLeap でディープラーニング

🎯Key Sentences

📝Key Phrases

📖 Transcript

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