Uncapped #12 | Marc Andreessen from a16z

[00:00] Here's what I encourage. Break the fourth wall. Yeah. Here's what I would encourage people to do. Here's the thought experiment to do. Just write down two leaves in the middle of the night with nobody around, doors locked. Write it down on a piece of paper and let's pull it out in 10 years. Write down a piece of paper, two lists. What are the things that I believe that I can't say? And then what are the things that I don't believe that I must say? [00:20] All right. I am so excited to be here with Mark Andreessen. Mark, thank you so much for doing this with me today. Jack, it's a pleasure. So what I wanted to start with was the topic of small funds, big funds. We had Josh Koppelman on the podcast, and he made a point that resonated around fund size, the outcomes in venture, and sort of just like looking at the math of all of it. And I think as venture funds have grown, it sort of spoke to a lot of people about like kind of what the plan is and sort of how tech is going to go. And so I guess to start, [00:50] your thoughts around that whole dynamic. Obviously, you've got a big venture firm. And so I just want to hear kind of your perspective on this whole topic to start. So let's start by saying, like, Josh is a longtime friend and I think is a hero of the industry. And I say that because, you know, he started First Front Ventures back in the very dark days. I forget the exact year, but, you know, back during the dark days after the 2000 crash. And in fact, you know, there was a period of time back there when, you know, the total number of

[01:20] And, you know, actually, Ben and I were two of them. But, you know, this was sort of the heyday of, you know, Ryan Conway and, you know, kind of a Reid Hoffman and a very small group of people who were kind of brave enough to invest in new companies at a point in time when, you know, basically everybody believed the Internet was over. Like the whole thing was done. And so I just think that was an incredibly heroic, brave act. It obviously worked really well. You know, turns out by low, sell high actually is a good strategy. It was very good. It's very nerve wracking when you're trying to do it, but it does work. [01:50] And, you know, the companies that he's supported have gone on to become incredibly successful. And we've worked with him a lot. So, you know, we're a big fan of his. And then second, as I would say, I didn't actually I heard I heard there was a discussion. I never as a rule. I never I never read or watch anything I'm involved in. [02:20] And so, like, how's the math shake out? And basically, you know, the question he was sort of posing broadly is, are the outcomes going to be much bigger? You can own a lot more. You can hit a lot more winners. But it was sort of like that math question. So I'll say a couple of things. So one is, look, venture is actually a customer service business in our view. So start with that. So it's actually a customer service business. There are two customers. There are the LPs and there are the founders. And we think of them both customers. And so, you know, at the end of the day, the market's going to figure this out. And the LP money is going to flow to where, obviously, they think the opportunities are.

[02:50] founders are certain, you know, as you know, the best founders definitely pick who their investors are. It's actually very unusual, right? Asset class. It's the only asset class in which the recipient of the capital picks the, you know, picks the, you know, actually cares where the money comes from and picks it. So the market will figure this out. I think the big thing, to respond in your general point, I think the big thing is the world has really changed. And so, you know, modern venture capital in the form that we understand it is basically, you know, there were examples of venture capital going back to like the 15th century or something [03:20] Isabella and Christopher Columbus and whalers off the coast of Maine in the 1600s and so forth. But modern venture capital was basically a product of the 50s and 60s. Originally, this guy, Jock Whitney from the Whitney family, sort of created the model. George Dorio, who's an MIT professor, created a version of it. And then, you know, then the great, you know, the great heyday of the 1960s VCs, Arthur Rock and those guys and everybody that followed Don Valentine and Pierre Lamond and Tom Perkins and so forth. Gene Kleiner, you know, all those guys. [03:50] venture playbook and it became a very well-established playbook. And it sort of consisted in two parts. One was a sense of what the companies were going to be like, right? And then the other was what the venture firm should be like. And so the playbook was the companies are basically tool companies, right? Basically all successful technology companies that were venture funded in that 50-year stretch were basically tool companies, right? Picks and shovel companies. So mainframe computers, desktop computers, smartphones, laptops, internet access, software, SaaS, databases, routers,

[04:20] you know, disk drives, all these things, word processors, tools, right? And so, you know, you buy the tool, the customer buys the tool, they use the tool, but it's a general purpose technology sold to lots of people. Basically, around 2010, I think the industry permanently changed. And the change was the big winners in tech more and more are companies that go directly into an incumbent industry, right? Like insert directly. And I think the big turning point on [04:50] have been specialist software for taxi dispatch that you sell to taxi cab operators. Uber in 2010 was, screw it, we're doing the whole thing. Airbnb in 2000 would have been booking software for bed and breakfasts, right, running on a Windows PC, right? And then Airbnb is just like, screw it, we're doing the whole thing. And so, and, you know, Chris Dixon came up with this sort of term, the full stack startup, which he kind of meant. But the other way to think about that is just you're actually, that the company is delivering [05:20] Which is basically quicker to get there. Also, I suppose you get more margin capture when you do it that way and you just get the technology seeped in rather than having to sell it through. Is that the idea?

[05:50] dispatch or for bed and breakfast bookings. The problem is you're selling advanced technology into incumbents that are not themselves technology companies. And so are they actually going to take those tools and then actually build the thing that the technologists know should actually get built? More modern version of that is what you see now happening with cars. So who's going to build the self-driving electric car? Is it going to be an incumbent who's able to adjust, who's buying good components to be able to do that? Or is it going to be a Tesla or a Waymo that's going to do [06:20] SpaceX and NASA, I suppose. Exactly. Yeah. You could there are many companies that sell technological components that go into rockets. But was any of that going to lead to the existing rocket companies making the rocket that's going to land on its butt and then be relaunched within 24 hours? Right. And so and by the way, same thing, Airbnb or Uber, it had had you sold a the Uber Uberized version of taxi dispatch software to the taxi operators. Yeah. Would it have resulted in the Uber customer experience? And so I think basically what happened was and there's sort of, [06:50] Peter says these things are overdetermined. So it's a bunch of things that happened. But it was sort of the smartphone completed the diffusion kind of challenge for getting computers in everybody's hands. And then mobile broadband completed internet access in everybody's hands. And then the minute you had that, there was just no longer, you just had this ability to get directly to people in a way that you just never had. You didn't have to like have a giant marketing campaign. You didn't have to, you know, have a giant established, you know, consumer brand. And so there was a way to kind of get to market that didn't previously exist. And then, you know, and then look, also consumers just evolved. And, you know, people, especially, you know,

[07:20] millennials were just much more comfortable with technology than the boomers were. Yeah. And they, you know, the sort of Gen X was entering, you know, and boomers and millennials were kind of entering their consumer prime at the time this happened. And then you started having these big successes. And so you started lining up Uber, Airbnb and Lyft and SpaceX and Tesla. And, you know, you kind of you start stacking these up. And at some point you're like, all right, there's a pattern here, right? There's there's a thing that's happening. And and that's what's happening. We're 15 years into that. And what's happened now is basically that idea now has blown out basically across every industry. Right. [07:50] tools, picks and shovels business. Today, it's a much larger and broader and more complicated, basically, process of applying technology into basically every area of business activity. The result of that is that the companies are much bigger. Like when you're both the picks and the shovels to yourself of the whole company, you're much bigger. And that changes venture math. Yeah, you eat the market, right? And so Tesla ends up being worth more. There have been points in time in the last five years when Tesla has alone been more valuable than the [08:20] Like you go through this and Uber is worth far more than the totality of every black cab operator. Yeah. And taxi cab company that ever existed. Airbnb is worth far more than the breakfast industry ever was. And by the way, it turns out some of these markets just turn out to be much larger than people think. Right. When we do a retrospective on our analysis over 15 years, like one of the things that's been hardest for us to do is to do market sizing. And sometimes we overestimate market size, but it's more often the other way. More often. Well, for the winners, more often it's the other way. I guess the the net blend is that you underestimate it.

[08:50] And this goes to venture economics. So the core thing on venture bets is because venture doesn't run on leverage, because nobody will bank a startup or a venture firm for leverage because there's no assets when these things start. It's asymmetric. You can only lose one X, but you can potentially make 1,000 X. And so that means then there's two errors in venture. There's the error of commission where you invest in the thing that fails, and then the area of omission where you don't invest in the thing that succeeds. [09:20] And of course, just in the math, overwhelmingly, the error that matters is the error of omission. And so if you run an analysis, and by the way, lots of people did this, you run an analysis that says ride sharing is only ever going to be as big as taxi cabs. That leads you to the error of omission and not making the bet, and therefore the difficulty with market sizing. In your view, does that only apply up to a certain size? And you look at some of the rounds that now happen at huge valuations in companies that would otherwise be a large IPO. [09:50] $10 billion at $100 billion or something like that. Does the power law still apply up there? How do you think about that type of round? Or do you see venture capital sort of turning into private equity at some level at the higher end of things? Yeah. So I think there's two questions kind of embedded in there. One is, why aren't these companies public? That's one question. And then the second question is, whether they're public or not, can they actually... Is it still the lose one, win 20 type of dynamic? Yeah. So I think there's a bunch of ways to look at that. So the smartest public investors I've met with basically have the view that the public

[10:20] market actually works just like the private market with respect to this dispersion of returns. The extreme case I'll make sometimes is it may be that there's no such thing as a stock. It may be that there's only an option or a bond. And the reason is because there's fundamentally two ways to run a company. One is to try to shoot the moon. One is to try to build for the future. And then the other way is to try to harvest the legacy. And if you're shooting for the moon, the big risk of that is, you might fail, right? It might not work, but if it works, you have this telescoping effect [10:50] And historically, the returns in the public market have been driven by a very small number of the big winners in exactly the same way they've been driven by that in the private market. In fact, you see that playing out right now in the S&P 500. So one of the things I've been saying for years now is the S&P 500 is no longer the S&P 500. It's like the S&P 492 and the S&P 8. So there's like 492 companies in the S&P that have no desire at all, right, just like watching their behavior to like really charge hard at the future. Like they don't want to do it. They won't do it. They're not doing it. And then eight are betting everything. [11:20] Eight are all in, right? And then I always say, you know, who are the eight? And everybody always knows who the eight are. It's completely obvious who the eight are because they're the ones that are building all the new things. And then again, if you disaggregate like public market returns over the last 10 years, you see this just dramatic explosion of value among the eight. And you see a relatively modest growth of the 492. So even the S&P 500 is like having a portfolio of like bonds and options. And it's like incredibly barbelled.

[11:50] People get cynical on this and they say, well, you know, if not for the eight, you know, the stop. You're like, yeah, but that's the whole point. That's the whole point. Right. If you have a healthy, functioning capitalist economy, the whole point is some number of these things are going to go nonlinear. This is like when someone says, oh, they're not a very good investor, but they invested in name that hundred billion dollar company. So they got lucky. Well, you're like, OK, yeah, that's the point. That's the job. That's the desired outcome. That's the thing. You know, any of us who, you know, this is kind of a classic joke, like joke adventure, like, isn't there just a way to invest in the good companies, not the bad companies? [12:20] Like, yeah, like, OK, for 60 years, we've been trying to figure that out. Here's a fun fact in the analysis. Over the last 60 years, every one of the really great venture firms through that period missed most of the great companies while they were while they were investing. The best firms in the world, whether it's, you know, Kleiner Perkins in the 90s or Bestmark in the 2000s or Sequoia in the 2010s or whatever, like they just like flat out missed most of the winners in each cohort. And on one hand, you're just kind of like, wow, I can't can't you do better than that. But you've had these super geniuses for a very long time trying to do better than that. [12:50] We could have a whole separate conversation about why this is so difficult. The thing you said about companies building the whole stack, roll-ups are super popular. Is it fair to take from what you said that you're bullish on that strategy or not necessarily? And basically just to walk out what I mean. Instead of building accounting software and selling it to the accounting firms, just buy an accounting firm, become an accounting firm, AI, fire yourself, which I think is becoming a more popular strategy. Do you like that or is there a nuance why it's different to buy something rather than build it yourself from the beginning?

[13:20] whole roll-up thing. Yeah, let's come back to the venture question because I was still winding up into that. But however, this is actually also relevant to that. So yeah, so there are a bunch of really good firms that are trying to do this roll-up thing. I mean, the opportunity with it is kind of very obvious. The challenge with it is just cultural change of an incumbent is just, a legacy company is just really difficult. Charlie Munger was once asked a few years ago, he said, GE, I think was the company that's going through a big issue at the time. And he was asked [13:50] idea. I don't even know how you would change the culture at a restaurant. Yeah, that's funny. Right. Like, how do you do that? It's really hard. Right. It's really hard. Yeah. And so, you know, you have to have a theory on that. I mean, people, they do have people doing it, do have theories. I think we're much more oriented towards just trying to back. Well, I think it gets a little into this like private equity. It's a little bit of the venture private equity blend I see happening is related, not even just in dollar size, but in the mindset here. Well, this is where I go back to my bonds versus options thing. Like fundamental, the way [14:20] call options, which seems completely insane, except when they pay off, they pay off spectacularly well. But a lot of them expire out of the money, and statistically, top-end venture capital has a 50-plus percent. Yeah, yeah, yeah. Okay, well, yeah, I just want to get your hot take. I really wanted to hear about this, but yeah, we can go back to the venture math thing, because I think there's a lot more in there. Okay, good. So, look, so anyway, so what's happened is the world has changed. The number of companies that are being founded that are going to be important, it keeps expanding. The number of categories that those companies are in keeps expanding. Those companies are more complicated now.

[14:50] because they're full stack. They're in these incumbent industries. And then the winners are getting bigger. And again, you just look at that in the market. Look, we have, you know, of the S&P 8, they're all venture-backed, right? Every single one of them is venture-backed. They are, on any given day, any one of them is bigger than the entire national stock market of countries like Germany and Japan and the UK. Right? And so the telescoping effect. The numbers are just absurd. The telescoping effect of victory is just incredible, right? [15:20] We started our firm kind of as this was happening, and we looked at it, and we said, all right, this is different. You could sit here and do things the old-fashioned way, but the world is moving on. And then this goes back to the customer service aspect. The founders who are starting these kinds of companies need something different. It's not sufficient anymore to just have investors who were operating the way that they were investing for the previous 50 years. That's not the value proposition that they need. That's not the help that they need. So there's a different way to do it. [15:50] The venture industry, it had to restructure in order to basically accommodate the change in the market. Now, having said that, I don't think that's an argument that it's just, therefore, big firms win everything. That's definitely not my thesis. And by the way, that's also not how I'm deploying my own money, which I want to talk about because I'm living what I'm about to say. Which is, I think what happens is what Nassim Taleb calls the barbell. And the way to think about the barbell is basically you basically have a continuum. And on the one side of the continuum, you have high scale. And on the other side, you have high specialization.

[16:20] in industries that mature and develop in this way, including many industries in the last 100 years, basically what happens is as they mature and enter their kind of full state, as they kind of flower, what happens is they often start with generalists that are neither subscale nor particularly specialized. And then over the fullness of time, what happens is they get disintermediated and then there are scale players on the one side and there are specialist players on the other side. The most obvious example of this in everybody's lives is retail. When I was a kid, there were these things [16:50] But not a great selection and not a great price. Right. And then sitting here today, those are all out of business. They're just crushed by Amazon on one end and then like amazing retail on the other end. Exactly. Exactly. Right. And so and why do you go to Amazon or Walmart or, you know, and by the way, there were even these big box guys, you know, Toys R Us and so forth. And then over time, like Amazon and Walmart even ate that. Because when you go to Amazon or Walmart, what you get is just like an unbelievable selection of basically anything that's a commodity. Right. [17:20] to compete with that if you're subscale on the one hand and then your point and then the specialist retail experience is like the gucci store the apple store yeah you know the the 15 candles they gave us in perrier when you walk in oh they love you like they're so happy to see you exactly right you know they'll they'll do private showings for you and you know they pour the champagne and it's like it's like it's like an entire experience yeah and and so what's happening is and then you just again you see this in like the return you just look on this return standpoint like this is what's happened this is where this is this is how the value is and then what happens is that

[17:50] And then what the consumer does is they build a portfolio of their experiences. And so they buy things at unbelievably cheap prices at Walmart and Amazon. And then that gives them more spending money to be able to spend on the boutique. So this middle, the bar that's in the middle, that's kind of screwed. Yes. What is the mechanic by which they're in trouble? Is it because the customers go away? The founder customers go away. Yeah. Yeah. The founder customers go away. Who are neither getting sort of like the size and scale value, nor are they getting like a special focus. Correct. Exactly. Can you do focus? [18:20] with a $2 billion fund, let's say. So obviously we're at scale, but we do have a specialist approach inside the scale. And so we have investment verticals. They're discrete teams. They have, in some cases, discrete funds. And by the way, they have like trigger puller authority. They can make investment decisions. Like we don't run the firm where Ben and I sit and decide, is this a good investment or bad investment? Like our specialists who make those decisions. And you basically determine that by, this is the size we think you can function. This is the biggest you can function as a specialist in a highly successful way. [18:50] going to put a bunch of those together? Is that like what defines the size? Yeah. Well, so it's sort of, it's stupid. Yes. Yes. But it's two parts. One is what's the, what's the external view is what, what's the size of the market opportunity? Just, [19:00] How much money does this strategy, does this vertical need? How many companies are going to be? How many different, you know, kind of how complex is it? And then the other is the internal dynamic, which is like, you know, you want to like if you're going to have a team, you need everybody around the table being able to have a single discussion and that puts natural limits on how big that can get. What's your limiting reagent to building an even bigger firm? Is it number of productive partners that can do this then? Conflict policy. Conflict policy. That's the single biggest issue by far.

[19:30] if you had all the great GPs all wanted to work here and you had like, that would still be the issue. Yeah. There would be issues. There will, there would be issues for sure to your point that would come with. So what's the conflicts thing? The conflicts thing. So the conflicts thing is the mainline venture firms forever, meaning, meaning the firms that do series A, series B, series Cs, especially series A's and B's. Yeah. The relationship with the founder is just so deep. It's too deep. And if you as a venture firm invest in a direct competitor, it's, it's just, it's a giant issue that the founder you're already invested in will be extremely upset with you. [20:00] By the way, do you think that's practical? Do you think it's all emotions? Like, do you think it's correct that [20:04] that firms shouldn't do conflicts? I would say when we were startup founders, we felt this very deeply. It's just, it's, it's okay. So when you're a startup founder, I'll channel the other side of when you're a startup founder, the whole thing is so tenuous, right? It's just like, is this thing going to work? There's like 18,000 things can go wrong. People are telling you, no, every day, no, I'm not going to come work for you. No, I'm not going to invest in you. No, I'm not going to. And then your board member invests in a competitor and you're like dagger to the heart. Dagger to the heart. And then you literally, what happens is the founder is you have to go to the all hands meeting and explain why your investor has given up on you. Right. And you go [20:34] some song and dance about that. And they're just, and the employees are just like, your employees, basically your employees look at you and they're just like, you, the founder are so weak and lame. Yeah. Right. You can't even get your board member to not invest in a competitor. Exactly. What about the marginal stuff though? Cause like, you know, all these companies are near each other. They blend, they evolve over time. So like, how does this, how does this play out on a practical level for firms? It almost never plays out the way that the founders think it's going to play out. And I say that in two dimensions. Number one, the company, this historically, what we've seen is

[21:04] to each other generally end up not doing so because one or the other of them changes strategies and then they diverge, which by the way is natural because it's like specialization. The company specializes, they end up not competing. But the other thing that happens is two companies that were not competing that you're already invested in pivot into each other. Yeah. And then they're mad at you. And then they're mad. Yes. And then they're very upset. You have to remind them that like that, you know, you didn't know that that was going to happen and it's not your fault. And then they're still upset. And so I would say the founders are not, the founders, and also we [21:34] of where the conflicts are going to be, but that doesn't ameliorate any of the emotion at the time. So it doesn't actually help. It doesn't help for us to explain to the founder, oh, don't worry about this guy who you think is directly competitive because he won't be in a year. Because you can't prove that. And the issue is in the moment. How does that impact your strategy? Meaning, if you know conflicts are this huge issue and you've got a big aggregate fund, and so it's [22:04] which is really good, but SpaceX is, you know, bigger or whatever happens. What does that imply for your strategy when it comes to like, should we, you know, doing C's and A's and things like that versus like say, you know what, let's just wait till like the D. Let's have D be our early stage. That's right. So the most obvious thing you do is you just like, oh, we just need to wait because we need to wait for clarity. Just don't deal with this whole issue. Right. Just wait, just wait. Keep delaying and keep delaying until it's obvious what the answer is. If it's big, it's going to be really big so we can buy later. But then the problem with that is, all right,

[22:34] Because now you're doing, as you said, now you're basically doing serious Ds. Now you're a pure growth investor. And by the way, there are very good pure growth investors. But like our determination is to stay a top venture investor because we think that's kind of the whole point. Why is it so important? Is it just because it's what you like or is there a strategic reason that it's important to stay doing early? So we've always wanted, I mean, that's the way we've always thought about it is we've always wanted to kind of be the founder's best partner. And like to be the one who's like the closest in, the one that can really be relied upon, the one that's going to be around for the longest amount of time, the one who they can really trust. And it only happens early. [23:04] Like it's, yeah, it's your, it's your early guys. And so it's hard to insert after that. Yeah. And then look, the other thing is like, there are great growth firms that do invest later and have done very well, but I, we just think there's so much information at the early stage. Like, so for example, when we, when we make a growth investment, because we have the active venture business that we have, by the time we make a growth investment, uh, you know, we have either invested in the company for several years or at the very least we've met with them repeatedly over time. And so we, we just, we end up with just like enormous amounts of, of information. And then the other thing, by the way, is, you know, there's, there's, there's kind of time, time arbitrage, which is, you know, sometimes [23:34] the right answer is just like, okay, just invest in SpaceX or whatever later on. But sometimes the answer is no, there's actually a new thing. Do you invest in the MySpace growth round or the Facebook seed round? And if you're not in the early stage, you won't know that because you won't see the early things. And then by the way, the other thing I'd just say is financially, one of the things people say that is inaccurate is they say, if you're running a big fund, you're not going to have the time to spend on the early stage opportunities because you can't justify it before you're putting the money. That's actually not true in venture because

[24:04] in an early stage is just as high as any growth investment, right? Because if you get the right venture investment and you can make $10 billion on the upside case, it's definitely worth my time to spend with you. So I spend as much time as I can with the early stage founders, you know, for that reason. So the barbell, there's, you know, there's big on one end, there's something sort of like me on the other end. Selfishly, I'd love to know, like, you know, I would assume you think it's better to be the big version, but you know, if you were conditioned on needing to be me at the small end of the barbell, like how would you approach it? [24:34] They're both good. And if I were for some reason not doing this, I would immediately do what you're doing. Right. So that's good to hear. Yes. A hundred percent. And then I would say I actually invest this way. So my liquid assets are basically tied up in either A16Z funds on the one side or I run a very aggressive personal investment program in early early basically angel and early stage seed funds. It's because I believe in the barbell. I believe the barbell so much. And so but the conflict thing I wanted I wanted to explain because that's the issue. So the big firm like we do seed investing. [25:04] seed investment, which is like, are we really fully convicted that this is going to be the winner? Even at seed, it creates a conflict for a board seat. There's debates. There's always debates on this. It's like, do the seed ones care as much? Do the growth ones care as much? Do the growth ones care as much? What I tell you is, it's not a logical question. It's an emotional question. And we're just very sympathetic to the founder that needs to be able to justify their authority. We also definitely can't ask while you're making, like, if somebody asked me while they were making an investment, hey, is it okay if we invest in a conflict in a couple of years? I'd be like, what are you talking about? You know, and we've done these things. We tried to, we used to have this thing. We used to have

[25:34] granted thing called a16c seed and we were like well we have a different conflict policy on this and it's it's a great in theory but it's like no it's a16c so the way i think about it basically is like the more successful you are as a as a as a venture firm the bigger the issue this is going to be because the more the people that you were investing in are going to care yeah and so it's it's just it's like the downside of success but like success you know right sure right the only people who like the only investors you don't care whether they just know is if they if they literally if you don't care what they think about anything right if they if they just don't matter at all [26:04] So therefore, it can be simultaneously – both of these things are true. Number one is we still – we definitely do lots of early-stage investing, and we will do – we do make seed bets. But it's just also true that we can't structurally for this – we cannot do all of the seed investments that we would like to do. In fact, we can't even do a tiny fraction of them. It's just like strategically, we just – structurally, we just can't do it. And so – and again, this goes back to the barbell. So that means structurally – it's the same reason why Amazon can't give you the champagne experience, right? It's the same thing. They can't – they're not set up for it. They can't do it. [26:34] the old strategy. And so what has to happen is there has to be the other side of the barbell. There has to be the specialization and intense focus and deep relationship thing. And that's the role of the angel investor and the seed investor. And of course, in startups, that's incredibly important because that's the most formative, right, time in the life of these companies is when they're first getting started, right? And as you know, right, half the time, these are people who haven't, you know, they haven't started a company before, they haven't

[27:04] And so like they need to learn a lot and they need people to work with them on being able to do this and they need to figure out how to actually do these things. And so there have to be and there are like incredibly high quality seed investors, angel investors on that side of the barbell. The big firms presumably, you know, if we succeed, we succeed by generating large numbers of aggregate dollars and a very good percentage return. The seed investors have this perpetual opportunity to just absolutely shoot the lights out. Yeah. Right. On upside. And you can you know, there are seed funds that generate like 200 X, 300 X returns. [27:34] And so these are both good strategies. They're both adapted to the current reality of the market. There's just two things that fall out of that. One is the death of the middle, which is it just doesn't make sense to have the old fashioned series A, series B, six GPs, $[redacted address] waiting for people to walk in the door. Like those days are over and those funds are shutting down like that while it's going away. And then the other thing that happens that causes some of the tension is this. What is a successful seed investor do? Right. [28:04] But then you're going from one side of the barbell back to the middle, and you're creating that same problem again. And I think that's where the tension is coming from. I also feel like the mechanic that happens a lot of times is when you grow the fund, you raise a huge fund, and then you start deploying it into things just because you've got to deploy at some pace. And so the threshold for you've got to deploy $400 million this year, and I only see $700 million worth of investable things, I'm going to do four-sevenths of them.

[28:34] 11th of it, you'd pick better, hopefully, which I think is a huge weekend. I think that's part of it, but I think the related thing is your competitive set has changed. What we find with seed investors who migrate up and then regret it later, what we find is what they didn't realize was their competitive set. Right, because now they're going for bigger, more competitive rounds against you and Sequoia. Yeah, all of a sudden, okay, now you're competing for- $15 million, be good luck. Right, right, exactly. And look, market fundamentalist, if you have a better value proposition than Sequoia, you should go off with that. [29:04] Like I would just say, that's a bad way to live. Yeah. And I think that's what happened. That is what has happened to a bunch of the seed funds that have gotten larger. Why is it so rare for somebody to break through and get, I mean, you did it. And that's one that happened in the last 15 years. Maybe there's a couple others, maybe. But why is it as rare as it is? It seems like almost more rare than a new big company. Yeah. In a way. Yeah. That's true. In fact, our analysis actually when we started was there actually hadn't been, I think there had been two firms. And you're a recollection. I mean, Thrive also. So Thrive was after us. [29:34] I mean, they've done great. But before us, in the 30 years before us, we think that there were only two new VCs that actually punched through to become top tier. In other words, VCs that were not either firms that were built in the 60s and 70s or firms that weren't derivations of those firms. Founders Fund? No, no, no, no. Founders Fund started actually around the same time we did. They were a little bit earlier, but around the same time. But I mean over the preceding 50 years. Seven Rosen. You won't even recognize these things. I need to read a book or something.

[30:04] funded compact computer, which was the big winner. And then they went on to become a successful firm. This guy, Ben Rosen, early leader in the space. And then there was a firm called Hermann Winblatt, which was a software specialist firm in the late 80s, early 90s. Those are the only two that punched into the top end while they were operating. Wow. Neither one of them sustained it. But they got there. They got there for a bit. But that was like the success case. Yeah. So this is a little bit like Elon looking at the history of the car industry and saying, you know, Tucker Automotive in the 1950s. So it's so rare. It's very, very rare. So why is it that rare? Two reasons I think it's rare. [30:34] So there's the intimate reason for it and then a sort of macro reason for it. Intimate reason for it is just like you're going to have this incredible – as the founder, you're going to have this incredibly intimate experience, very close trust relationship with whoever you're working with. And it's like can you reference them? Do they have a history and track record of the kinds of behavior that you need and the kinds of insight that you need? And it's just like it's very hard to do that. It's very easy for an existing firm that has a long track record of success to prove that. It's very hard if you don't. So that's like the close-in reason. [31:04] back to the way the world is changing is we always believe the thing that you want from your venture firm is power um so the thing as a startup that you want is you want them to like fill in all the missing pieces that you don't yet have when you're starting a company that you need you need to succeed and so you need power and so you need power it means like you need the ability to be able to like actually go meet customers and have them take you seriously uh you need the ability to go get publicity and like you know major you know channels you know it used to be media and i was podcast um and be able to like get taken seriously you need to be able to be taken seriously

[31:34] recruits, right? Because there's thousands of startups recruiting for engineers. What makes yours stand out? I sometimes describe it as venture firm is providing a bridge loan of a brand. Until you have your own brand that's big or bigger for your own space than the VC, you're borrowing your VC's brand. Exactly. And that has been very effective for a long time. And that was how we looked at it when we were founders. That's why you did media from the beginning? Yeah. Oh, that's one of the reasons. It's one of the reasons, yes, but a very powerful one. A very major one. And then, by the way, you also need ability to raise downstream money, right? You're going to have to need to raise money again. [32:04] a lot of money or they need to be connected to a lot of money. Yeah, exactly. Right. Exactly. And so you just better if they just have it. Yeah. I think full stack. Well, then, by the way, now you're getting also like again, you think like tools companies just never got into like, for example, politics. Right. Or just let's just say global affairs, global events like what's happening with, you know, like what's happening with how do you navigate the world? Right. How do you navigate Washington? You know, the regulators show up and they want to kill you. Like, how do you navigate that? Or you're like, it's again in some, you know, giant fight with the EU or what? Like so [32:34] They're getting involved in very complicated macro, political, geopolitical situations much more early. And they have to, in some cases, they have to escalate up to senior government officials, head of state, major heads of sovereign wealth funds. They need to get to CEOs of major companies. How do you get to the CEOs? You're a new AI company, and you're trying to redefine visual production for movies. How do you get to the studio heads? The studio heads just don't have time to meet with 1,000 startups. So where are they going to meet with you?

[33:04] power. And this has been one of our theories, how we built our firm is you optimize for maximum amount of power in order to be able to give the startups access to it, right? Both the startups that are already in your portfolio, but also the startups that don't even exist yet, right? And again, this goes to why the scale thing matters so much. It's just like, all right, there's a scale aspect of power. There's a big difference between being able to get to everybody who matters and not. Why is it rare for people to be able to accumulate power, even if they were, like, let's say everybody was trying to do it. It's not like everybody could do it. What's the [33:34] to be able to build enough power in that sense. And it's a great way to start with you have to want to. And so we met with all the GPs of all the top firms, basically, when we were starting out because we wanted to see who we could be friends with. And it worked very well in some cases and not well in other cases. But one of them told us this is a GP at a top firm in 2009. And he said, yeah, the venture business is like going to the sushi boat restaurant. And so the sushi boat restaurant is the sushi restaurant where they've got the boats. It's got like a water track. Like a conveyor belt. Conveyor belt, right? And the little sushi boat comes by. [34:04] And there's a tuna roll and there's a shrimp roll and there's this or that. And he said, basically, you just sit on Sand Hill Road. And you're like, we're going to crush these guys. And the startups are going to come in. And he said, you know, if you miss one, it doesn't matter because there's another sushi boat coming up right behind it. And he's just like, you just sit and watch the sushi go by. And every once in a while, you reach into the thing and you pluck out a piece of sushi. And we walked out and said, like, what the hell? That's funny. Like, in what industry? 2009 or something? 2009, yeah. Like, that was a very common. This, again, this was the midsize venture.

[34:34] And when I came, like, look, in 1994. I mean, it might have kind of been like that. It was. It was. When I came to Silicon Valley in 1994, I had never heard the term venture capital. I didn't even know this thing existed. And then as my business partner, Jim Clark, explained it to me. And I was like, there are guys, like, they're just sitting there waiting to give you money. But you see this and you're like, this is going to get eaten alive. Of course. This is absurd. Like, in a minute, anybody takes this seriously. It's all going to change. Right. And so it was this very clubby cartel, you know, basically kind of thing. And again, it was fine as long as the ambitions of the industry were constrained. And then again, look, the tools companies, they didn't need all the power. They needed some of the power. [35:04] Right. But they didn't need all the power. You know, they weren't dealing with like governments. Right. Or, you know, these sort of big macro issues, you know, at least, you know, the early years. Well, OK, so here's another thing that's happened is just the world is globalized. Like so startups 30 years ago, you would spend your first decade just in the US and then you would start to think about Europe and global expansion. And now you just you have to think about being a global company up front because you're going to if you don't like you, other people are going to do it. Yeah. Right. And so you just you have to chin up as an entrepreneur, like the expectations are much higher than they used to be. [35:34] question on this topic of fund size, and then I want to go to AI. What do you think, and I know you've thought about this a lot, what do you think is the limiting factor for the creation of a lot more really big companies? Do you think it's founders? Do you think it's capital? Do you think it's market maturity? Do you think it's underlying tech stuff? If you had to pinpoint the one or two things that you think would allow for there to be way more big companies, what is it?

[36:04] which is people, market, and technology. And I think the answer is sort of all three. And the way I would describe it is there's some limiting issue with just how many markets are there, how big are they, how ready is the market to take something new. Then there's the technology question, which is when is the technology actually – for the venture perspective, technology moves in stair steps, right? And so things become possible in the world of smartphones that just weren't possible. You couldn't do Uber when everybody had a laptop. You had to wait until they had phones, right? And so technology moves in a stair step. [36:34] paradigm shifts, platform shifts. And those just, they come when they come. And until they come, you can't do it. And then the people side, and this is the one that I say vexes me the most, which is like, okay, how do you just get more great founders? And I think part of that is, I think there is definitely a training thing that is real and getting people into the right scene in the right way. And like the thing that my accommodator does or the thing that the Teal fellows do, those are real things and those help a lot. But also there is an inherent, [37:04] There are just certain... There are not infinite number of people running around who have the... You probably figure there's a lot of people who could have built big companies who haven't, though. Well, a lot. A few. Yeah, I don't know. Some. I don't know. Some number. But there must be people who are just like in... [37:19] academia or government or education who are just doing something completely different who if they were attracted to startups would have built a big company so yes but then the other question is like well okay then why didn't they why didn't they do the things required to get themselves in that position well it could have been then like 2001 it was just like too many people were too scared to do it or didn't know about it or whatever but what does that tell you about the people who didn't do it yeah is they they were heard i can tell you who didn't listen to that right it was mark zuckerberg are there more good but let's just press this point harder for a moment which is like i always

[37:49] which is like okay like if you're not in position to do the thing is the fact that you're not positioned to do the thing meant that you flunked the time you've already flunked the time well i guess the question would be are do is there a subset of people who could build facebook who other than being too scared to do it would have had all the other ingredients and so when everybody's not scared you get more facebook's you know there's a line in the movie i actually never saw the movie but there's a line in the movie if you could have built facebook you would have built facebook yeah yeah yeah that's right that's a good line right and so this is the thing it's like [38:19] You know, are there more great founders today than when you were, let's say, like, do you think there are more now than there were 20 years ago? I believe there are. But like I maybe there's how many more are there? Right. Is it five times more? Is it like 50 percent more or is it? Well, so the number of wins is increasing. So that so we used to talk about the 15, 15 a year that matter. It's that numbers probably if you do the analytics, probably up like 10x. There's like 150, 150 companies a year that like really matter. And the reason is because there's so many more sectors now. Right. [38:49] kind of have to be. You're saying the markets are better more than you're saying the founders are better. Well, maybe a little bit of both. Also, I think the founders are getting better. Part of the founders getting better is they have better training. They're all in the well, start with they're just all online. So when I showed up here in 1994, like literally there's like three books in the bookstore, none of which were that great. Yeah. It's not that the DNA is better. It's that they're now the ecosystem has matured to teach people better. Yeah. And like people come in and they've watched every video, you know, they've watched every episode, you know, your podcast. Hopefully. Right. And they just walk in knowing all this stuff. And then, you know, look and then

[39:19] And, you know, Teal Fellows didn't exist. And that definitely helps. You know, Brian, you know, has this great term, scene plus genius. Right. And so it's just like, you know, the individual genius on his own is always it's always, you know, it's hard to get things done. Yeah. Some people do, but it's difficult. It's more often more often in a profession where you're seeing creativity happen. Yeah. There's almost always a scene, you know, as you know, Silicon Valley is definitely a scene in that way. People people come here and they just they kind of get it. I don't know. They just get better. They just, you know, they meet more people who are like them. They're able to aggregate together. [39:49] other. So yeah, so look, the founders are getting better. There's more of them. But is there, does that mean there's now 10,000 as opposed to 1,000? Yeah. I don't know. And there's 8 billion people on planet Earth. Why are we debating whether it's 1,000 or 10,000? Yeah. Right. And so that I don't know. Yeah. I would hope over the next years and decades, we'll all figure out a way to go make sure we get everybody who can do it and get them to do it. That's a good segue into AI. Do you feel that we're now at the beginning of what is like the new next important [40:18] you know, [40:18] paradigm? Like, is this cloud, but on steroids? Yeah, much, I think much, I think much larger, and I'll explain why. So, yeah, so I described, you know, I described before, right, you know, the triangle people technology market, the technology is ultimately the driver is the technological for venture, the technological step function changes drive the industry. And they always have, right? And so if you talk to the LPs, you can see this is like when there's a giant new technology platform, it's an opportunity to reinvent a huge number of companies and

[40:48] a whole new generation of companies often generally end up being bigger than the ones that they replaced. And so the venture returns map this. And so they come in waves. And the LPs will tell you it's just like, yeah, there was the PC wave, the internet wave, the mobile wave, the cloud wave. Like that was the thing. And then, by the way, in venture, when you get stuck between waves, it's actually very hard, right? Because you've seen this for the last like five years. Like for the last five years, it's like, how many more SaaS companies are there to find [41:10] found like just we're just we're just out of ideas out of categories yeah yeah yeah right and so it's when you have a fundamental technology paradigm shift that gives you an opportunity to kind of rethink the entire industry it would have been very sad by the way if the ai breakthrough didn't happen like the state of venture would be sad i think three years ago this was i mean so when we were talking to rlbs three years ago we're just like basically like you know we're in you know so uh chris dixon has this uh framing he uses he calls it your adventure you're either in uh search mode or hill climbing mode and in search mode you're looking for the hill and it was search [41:40] And three years ago, we were all in search mode. And that's how we described it to everybody, which is like, we're in search mode and there's all these candidates for what the things could be. And AI was one of the candidates, right? It was like a known thing, but it hadn't broken out yet in the way that it has now. And so we were in search mode. Now we're in hill climbing mode. Thank goodness, yeah. Big time. Yeah. Yeah. And then, you know, look, like I said, on the technology breakthrough itself, I think a year ago, you could have made the argument that like, I don't know if this is really going to work because LLMs, you know, hallucinations, you know, it's great that they can write Shakespearean poetry and hip hop lyrics. Can they actually do math?

[42:10] And now it obviously is. And now they obviously can. And I think for me, the turning point moment, the moment for certainty for me was the release of O1. So O1 from OpenAI, the Reasoner, and then DeepSeek R1. The minute those happened kind of back to back. And the minute those popped out, you saw what's happening with that and the scale and law that was around that. You're just like, all right, this is going to work because reasoning is going to work. And in fact, that is what's happening. And I would say, every day I'm seeing product capabilities. I'm seeing new technologies I never thought I would live to see, like really profound. [42:40] cloud or to the internet. I think analogy is to the invention of the microprocessor. I think this is a new kind of computer. Being a new kind of computer means that essentially everything that computers do can get rebuilt, I think. So we're investing against the thesis that basically all incumbents are going to get nuked. And everything is going to get rebuilt. Just across the board. Just across the board. Now, we'll be wrong in a bunch of those cases, because some incumbents will adapt. But the power law, the things that are right, will be super right. Will be super right. Exactly. And then look, the AI makes things [43:10] new categories. By the way, is your mindset there that you should just bet on? Obviously, incumbents are going to win some percentage and startups are going to win some, but it's basically the dominant strategy as a venture capitalist to just plan to bet that startups are going to win it all and go for the power law? Yeah, that's right. That's right. And again, the reason is to remember two customers, that's the way the LPs think of us. The way the LPs think of us is as complementary to all their other investments. And so our LPs all have major public market stock exposure. They don't need us to bet on incumbent healthcare, whatever company, right?

[43:40] they need us to fit a role in their portfolio, which is, you know, to try to maximize alpha based on, you know, based on disruption. Yeah. And then again, and then just again, the basic math adventure, which is you can only lose one X, you can make a thousand X and you just like slam that forward as hard as you can. So when you have a moment in time worldview like this, do you, you know, as a, [44:01] firm leader, do you give a directive that's basically like, hey, everybody, we need to deploy in this kind of way right now? Or do you just build a system that's always picking birds out of the flock from like the bottoms up and you're just like, well, they're smart. They're going to see that every opportunity is good. Like how much is it like a top down guidance versus, you know, the market's just obviously good all around? Yeah. So we don't do, like I said, we don't do top down investment decision making. So Ben and I aren't sitting saying, you know, we need to invest in category X or we need to invest in this company versus that company. And [44:31] We have a legal investment committee, but we don't run a process where they come to us to get approval. Because you're letting the leader of each group sort of make that. Yeah, and often in those groups, it's actually delegated further as delegated to the individual GP or check writer. And the reason for that is we just think that the knowledge of knowing what's going on and which one's likely to win is going to be focused in the mind of the person who's closest to the specific thing. But do you have like a risk slider? Are you like, hey, guys, let's get a nine right now? So this is the funny thing.

[45:01] risk on a regular basis exactly because right because the the natural orientation towards any kind of anybody who's in an existing business there's a natural organizational incentive to try to reduce risk because you want you just want to like hold on to what you have and not yeah upset the apple cart yeah and so ben and i are generally on the side of like take more risk um one of the one of the one of the applications of this is the old sequoia adage which is they say when in doubt lean in like so so for example so where you see this i'm sure when you do it is it's just like okay there's this thing there's this company that is like potentially very [45:31] issues right and it's just like it's too early and this and that and weird guys got a weird background and this that that and he's in a you know whatever i don't know the issues and you know there's a hair yeah you know there's hair on the deal there's no hair on the gp that's funny that's good but there's hair there's hair on the deal the founders tend to have really good hair they're saying the deal and it's just like all right like what do you what do you how do you calibrate that right and and and the history and again the history of venture is when you see something's very promising and there's a lot of hair on it sometimes when you invest it's going to go to zero yeah because the hair is going to kill it and then sometimes when you invest it's [46:01] It's like something where you're like, I love that. I hate that. It's much better than, yeah, everything's fine. 100%. And this is the way we describe this is invest in strength, not in lack of weakness. Or another way to think about it is it's not good versus great. It's very good versus great. [46:16] Differentiating good from great is very straightforward. [46:19] Differentiating very good from great is actually very hard. And again, the risk-reducing way to try to do that, as you kind of alluded to, would be kind of the checkbox thing, which is like, very good team, very good market, very good this, very good that.

[46:31] it's like they've got six great things and nine horrible things, right? Yeah. Okay. Which is the better bet? Totally. Usually. Yeah. Usually it's the thing with the greater strengths. Statistically, by the way, this shows up in the return data from the LPs, which is the top decile firms have a higher loss rate than everybody else, which is called in baseball called the Babe Ruth effect, which is the home run hitter strikeout more often. Yeah. So the top performing venture firms statistically tend to have a higher loss rate than the mediocre firms. Right. And it's for this reason. [47:01] just looks like completely nuts, but has that magic something. And so when Ben and I think about trying to get the team to take more risk, it's almost always – it's basically either that kind of thing, which is like, look – and what you're doing is you're telling the person closest to it, go with your gut. If your gut tells you there's something magical here, like, go ahead. It's okay because we're going to have some losses. So it's okay to make the bat. If it breaks because of the hair, that's fine. But then the other form of risk we try to do, and I do this a lot, is just I am trying to push the firm constantly. It's like, go earlier. [47:31] Right. Because, again, as we discussed earlier, the natural inclination is to wait. Right. And it's like, no, no, no. Go earlier. Like we do actually want to make these these these, you know, we make some seed bets, but we definitely want to make like a lot of a bets. Yeah. And again, we're going to lose a bunch of those. We're going to screw those up and miss the winner or whatever. But like we we have to do that because we have to get into some of these things early. We have to, you know, get get the level of percentage you get in the A. Yeah. That kind of relationship. And I guess there's risk that's of the flavor of like do things that are more asymmetric where there's hair, but also brilliance.

[48:01] Thank you. [48:01] Well, something I struggle with is the deals where I just barely said yes and just barely passed. I'm like, I don't actually have that much confidence that I can tell the difference between those. There's another flavor of sort of be more aggressive, which would just say like, just do a higher percentage of those ones where you're like right on the line. Do you give that kind of guidance? Like, do you think like that, too, where you're like, it's not just do the more out there things and we're swinging for the fences, but it's also like, let's just do a little bit more right now in general. [48:31] portfolio um and so the shadow portfolio was we used to track this statistically for like the first five years exactly on this point which is every time we do an a every time we do pull the trigger on a round let's put in the shadow portfolio the other company we were looking at at around the same time that we didn't end up pulling the trigger on yeah and then let's build up representative like build up the also you know the earth two portfolio i'm so curious well so and the good news is it turns out generally that the main portfolio did better than the shadow portfolio but the shadow portfolio it was a good book did really well yeah right exactly the point and so [49:01] Like, okay, you're not that smart, but you're just like, okay, obviously, what does that mean? It means do them both, right? And again, this goes to the thesis of like how big should these firms get? It's just like, well, if you had the opportunity to do both the portfolio, the shadow portfolio, you should do them both. What's the constraint on that as we discussed is complex. But generally speaking, you should try to do both. And by the way, this is the – I don't know if it was Josh or the other podcast that they were talking about this. But at least I saw a reference to like a statistical analysis of like win rate or whatever, percentage returns or whatever, or percentage of wins.

[49:31] It doesn't matter. It doesn't matter. The thing that matters is were you in the next big thing as early as you could get in and buy as much as you did? Like, that's the only thing that matters, because if you don't do that, you miss out on the thousand X gain. The one X losses don't matter. They wash right out. Yeah. And so this idea that somehow there's some like virtue to being like a, you know, small, you know, we only make a few bets. We have a higher percentage. [50:01] shoot that they should shoot for. It seems like it's very hard to assemble lots of [50:05] very good productive GPs into the same firm. It's just objectively rare. Yeah, that's right. You've done it, but it doesn't happen very often. I guess my first question on this is, do you think of... [50:16] just finding greatness and then you can't really teach it much, you know, so you're basically just going to like hire people and see how it goes? Or do you think that it's about creating the system and conditions in which people do great work and you can actually create good investors? Yeah. So I think it only works if there's a point, like if there's a reason why you would have the aggregation of GPs in the first place. And our answer is power, right? Our pitch to GPs as to why they should join us as opposed to go to a smaller firm or start their own thing is [50:46] of this engine that's just like massively powerful. And so everything that you do, the effects of it are going to just be like blown completely out. Therefore, you're going to have a much higher win rate on the deals you want to do, which is much more satisfying. And you're going to be able to actually help the companies a lot more. And you'll probably see more companies anyway. Yeah. So everything probably gets better. Yeah, that's right. That's right. And by the way, you know, some people want to have colleagues. Some people don't want to have colleagues, but some people do want to have colleagues. And you'll be working with people you like, you know, who care about the same things you do. So, but there has to be a point to it. And of course, it's, you know, it's on us to keep proving that, right? Because, you know, the devil's in

[51:16] I'll actually buy that, but so far a lot of really great people have. And then, yeah, and then the second part of the question is like, okay, who do you put in those roles? Historically, our old model was basically we only hire GPs. We were not developing, and we could go through why that was the case. We changed that like eight years ago. We now develop our own GPs. We've evolved to where I think that's working quite well. I think the answer to your question is it's a two-part question. Is there some level of just objective? You know, are they good at doing the job? [51:46] thing we focus on when we evaluate them, which is, you know, it's fine to invest in a category like five years early or like whatever, something goes wrong. Like, that's fine. What's not fine is you invest in the wrong company and you could have invested in the right company. Yeah. Like at the moment you made the investment, you could you made the wrong decision in that moment of which one you should invest in and you could have known. And so it's like, did you do the work to fully address the market? How do you handle the fact that like you don't know that until like six years later and now you're going back and you're like, hey, you made this mistake six years [52:16] So that is a giant problem. And I would say that when we started, actually, we talked to our friends in the business, what they said basically was they said, number one, you don't know if somebody is a good GP for 10 years because you don't have the return data. And then they said, number two, is nobody ever wants to admit that they made a mistake. And so they never actually fire anybody. So what they do is they just keep them on the masthead and they just kind of gently, like, you know, retire them out. They sit and pollute.

[52:46] industry and you know the lps were very fired up about it and he said he then proceeded to just like nearly ruin the firm over the next 20 years that's crazy because he said he wanted he said all of his investments were bad but then it was even worse that he talked him out of all the other good investments they called it and he said we couldn't get him out you know the reputational damage was too great so so this is a long run and then by the way a lot of these firms are partnerships yeah the problem of the partnership is partnership sounds good yeah the problem is you end up with lots of internal dissension and then you can't make decisions yeah so this is a big issue um i [53:16] It's just like it's not a – what I just described is a process issue, not an outcome issue, which is like are you doing the work? It's an actual job. Are you doing the work? If you're not doing the work, it's relatively clear you're not doing the work, and you're probably not doing the work, not just on one thing. So you do try to really look at the inputs. Oh, yeah, very much so. We evaluate the inputs just as much as the outputs. What do you do with an investor? I'm sure you've had this at some point where the inputs are not particularly good. They hit this one outlier thing. The outputs are objectively now good. [53:46] And so you're looking at that situation or the inverse. So this is the other part of it. The other part of it is I think there's just a subjective criteria for venture, which is just... [53:54] are you good at it? Yeah. And like, do you have taste? Yeah. Which is unquantifiable. This is one of the nice things about your model too, where like you, somebody gets to make a call versus in these partnerships. I think it would be very hard when nobody gets to make calls like this. Cause at some point someone has to just like make a determination on this stuff. Yeah, that's right. And then even, you know, even who even made the call, you know, gets, gets lost. Um, yeah. So, so, so I think there's a taste thing. And then look, I think there's also just like a, there's like a network cohort branding thing, which is the startups come in waves

[54:24] just new technology it's also new people um and they you know they're new these new scenes form and like are you in the scene or not right and if you're not in the scene like yeah i can't fix that for you there's also a ton of path dependence it seems like where like you make an investment that gets you in the scene now other founders want to work with you because you invested in this really cool company right and then it just snowballs and you're like well i can't go back and you know change history and get you into the snowball yeah yeah like and again this is what i gotta call this this is the test for the capital t so there's just different versions of the complaint right so you [54:54] of the founder who's like, well, I could have done this, but I was in a position to do it. All right. That's your own fault. Yeah. There's another version of it, which is this is sort of the anti-VC narrative is VCs are so arrogant. They don't see my unique genius. Right. Right. You know, the VCs are only as a critique. They apply against Paul Graham is, you know, he wrote this post on pattern matching and he always gets attacked. It's like, you know, he pattern matches. He's not looking for quality. He's just looking for pattern matching. And like, you know, it's like, and it does, the founders don't match the pattern. It's like, raising is very important for founders to understand. Raising money from venture capitalists [55:24] startup founder. We are sitting here with checkbooks waiting to write checks. We are dying for the next person to walk in the door and be so great that they convince us to write the check. We don't care where they come from. We don't care what country they're from. We don't care. None of it matters. It's just like, do they know what they're doing? Are they going to be able to do it? We're just dying for that. Everybody else they're ever going to deal with, candidates and customers and downstream investors and everybody else is going to be much harder to deal with than

[55:54] Yeah. Like they're not going to be able to do it. And it's the same thing with the GP. Like, [56:00] If you can't [56:01] network your way in and make good investments. That's the job. Yes, totally. Okay, on that point, because there's going to be, I completely agree with what you just said about how it's, you know, the easiest part of building a company. There's going to be a lot of, you know, frustrated founders hearing that who are like, why can't everybody, you know, what's going on here? One of the things that I'm really, you know, you've done this for enough time now. When founders, you know, get a pass note, it's usually about something that's related to the market or the product or whatever. And a lot of times it's what you just said, [56:31] that like, I just want the founder to be great. Yeah, right. But nobody says that to them. Nobody says that. And so they don't get the actual feedback. And so I guess this whole dynamic of like, people aren't giving yet, because it's, you know, what they're saying is not, you're not great, but it's, I didn't perceive you as great or something like that. Is there some way for there to be a more honest, useful back and forth around this? Or is it just one of the impossible structural things and founders just have to go around frustrated that people are saying the market's too small or it's too big or whatever. [57:01] landing is great. I mean, it's like, yeah, I mean, I know you think your baby's beautiful, but I think he's really ugly, right? Yeah. Yeah. Yeah. You know, this kid's gonna have a really hard time of life, man. He's really, really unattractive. And it's really hard. It's really difficult. And by the way, you embedded two things in there. One is like, you know, one is, do they come across as good, which in theory is fixable, but the other is like, yeah, some people are better than other people at doing this. Definitely. And some people should not be started. Some people should, should actually just like be on a team. Yeah. Sometimes it's a correct assessment. Sometimes it's an incorrect. There are some people who in the

[57:31] who now we all know are really great, but they couldn't raise a lot of money, so they must have shown up in 60 VC meetings as not great or whatever. Yeah, look, VCs make – and again, yeah, exactly. It's like we don't know. Yeah. We make lots of mistakes of omission. So we – and like I said, most – even the great VCs most of the time are screwing up. And so that's all true. The thing I always tell founders is the – Steve Martin was asked this question about becoming a great stand-up comic, and he wrote this whole book, a great book called Standing Up, which he talks about this. And he says the secret of being a great – he said the secret is be so great they can't ignore you. Yeah. [58:01] If your business gets good enough and you prove that you're really good, you don't have to show up in the one hour with a VC. It's really impressive. You just proved it on the field. We're dying for people to come in and just be like, wow. Yeah. Right. And just be like, I cannot believe how good this is. I can't believe how good this product is. I can't believe how much the customers love it. I can't believe how much this person has gotten done in a very small amount of money. So it's just the exact same thing. If I'm a talent, I'm just dying for the young community to get up on stage and make me laugh. I also think the founders who like really struggled to like raise a round or two and then the business got working. I think there's like a there's a real strength that comes out of that. So it's not the worst thing that ever happened. [58:31] No, no, no. Like having said that, like there's breakage along the way. Like there, there are. Yeah. And also it sucks. It's like really unpleasant. Yeah. I had to have it. It sucks. Yes. Yeah. So, but look, you know, look, I just say like, I, you know, having been a founder, like it's an, it's an incredible privilege to be in a, in a, in a, in an industry and in a world and in a country at a time when you can actually do this. Yeah. Like, so, you know, in most of history, in most places, you just, this kind of thing can't happen. And then, you know, we are genuinely trying to find the anomalies, right? Like our business is defined by anomalies.

[59:01] that wants to laugh. It's totally true. So desperate. Yeah. I can't wait for somebody to finally tell a good joke. So on AI, I want to talk about not just the startup side, but maybe like a... [59:10] Just some of your takes on like the broader lens of AI. I guess my first question is around AI going wrong. And I know this is like a very hard thing, but I'm just sort of for fun, really curious what you think. You know, the downside case that people are very afraid of would be something like AI embodies humanoid robots. And now we have a Terminator situation on our hand. It gets agency. We have a big problem. Right. [59:31] You know, that's one end of the spectrum. The happy path is that it's just like the sickest software that anybody's ever seen. And like, it's a tool that humans use and everything's great. Do you think about this? If so, do you have any opinion on it? Or are you just like, it's going to be what it's going to be? [1:00:01] can take you on a most marvelous vacation with your new spouse it can also bomb you know dresden um right and so it's just a time i mean atomic power was the big one because atomic power could be unlimited clean energy for the entire world or it could be nuclear bombs right um as it turns out there we just got the bombs we didn't get the [1:00:17] Unlimited clean energy. And so that's just generally true. These things are double-edged swords. The question is like, all right, what are you going to do about that? And are you going to somehow put it back in the box? Are you going to somehow try to constrain it and control it?

[1:00:47] which is now there which which the same kinds of people are not trying to apply to ai which basically says unless you can prove that any technology is definitely going to be harmless you should not deploy it and of course that literally rules out everything right that's just like no fire no shovels no cars no planes no nothing no electricity and so and that is what happened to civilian nuclear power which is they just they killed it the story i tell on that is president nixon in 1971 the year i was born he declared he saw the oil crisis coming the middle east [1:01:17] civilian nuclear power plants by the year 2000, go completely clean, carbon zero, completely electric, cut the entire, you know, they had electric cars 100 years ago. So it's just obvious you just cut over to electric cars at some point. And basically, we need to do that. And then we're not entangled in the Middle East and we don't need to go do all the stuff there. He then created the EPA and the Nuclear Regulatory Commission, which then prevented that from happening. Absolutely killed the nuclear industry in the U.S. [1:01:47] Europe ex-France keeps shutting down their nuclear plants, which just makes them more dependent on Russian oil. And so they end up funding the Russian war machine, which invades Ukraine. And then they're worried now it's going to invade Russia. And so the social engineering, I would say the moral panic and then the social engineering that comes out of this, the history of it has been quite bad in terms of its thinking and then in terms of its practical results. I think it would be a very, very, very big mistake to do that in AI. To regulate early. Yeah, absolutely. 100%.

[1:02:17] to try to offset the risks in order to like, and then cut up the benefits. So let's start with that as number one. Number two, I just say, look, we're not alone in the world. And we knew that before, but especially after Deep Seek, we really know that. And so there is a two horse race. This is shaping up to be the equivalent of what the Cold War was against the Soviet Union. In the last century, it is shaping up to be like that. China does have ambitions to basically imprint the world on their ideas of how society should be organized, [1:02:47] to fully proliferate their technology, which they're doing in many areas. And the world, you know, 50 years from now is going to be running on, you know, 20 years from now is going to be running on Chinese AI or American AI. Like those are your choices. You think that's how it'll basically play out? Yeah. Yeah. It's going to run on one or the other. How will that play out? [1:03:02] Let's say it's one or the other. So AI is going to be the control layer for everything. So my view is AI is going to be how you interface with the education system, with the healthcare system, with transportation, with employment, with the government, with law. It's going to be AI lawyers, AI doctors, AI teachers. Okay, do you want your AI teacher – you want your kids to be taught by Chinese AI? Yeah. [1:03:22] Really? Yeah. [1:03:23] Like, they're really good at teaching you Marxism and Xi Jinping thought. Like, you know, like the culture is another way to put it is the cultures and the weights. Yeah. Right. And so like how these things are trained and like they're trained by, like, really, really deeply matters. And so and by the way, this is already an issue in lots of countries because they're like, number one, they may not want Chinese AI. But number two, do they want, you know, super woke Northern California AI? It's another open question. Right. So there are big questions on this. And so I just think like there's no question.

[1:03:53] It's just crystal clear where you'd want to go. Yeah. By the way, there's also going to be direct military. There's a direct military version, national security version of this, which is, okay, do you want to live in a world of all CCP-controlled robots and drones and airplanes and cars? I mean, is that really what you want? Warfare and defense, I guess, just is going to fully go AI over the next 20 years. I think that's very much true. And I think this – Robots plus AI, basically. There's this signal. You probably saw the Ukrainian attack on the Russian airplanes. So those are autonomous drones. [1:04:23] the right structural points to be able to attack the planes and destroy the planes. And so, yeah, 100% that's happening. This is a major issue with our defense doctrine with respect, for example, to potential invasion of Taiwan. [1:04:38] Ukraine has been fielding AI piloted jet skis. So they take a jet ski, take a jet ski, put an autonomous pilot on it, and they strap it with explosives. And you could send out 10,000 of those against an aircraft carrier. And you could just keep sending them, right? [1:04:53] them until you get through. And so, yeah, so the entire, I think the entire supply chain, the entire defense industrial base, all the doctrine of warfare all changes. You know, the idea of human beings in planes or on submarines just doesn't make any sense. It's all going to change. And then the symmetry or asymmetry between defense and attack is going to change. You use the word dual use. And obviously with like previous technologies, you know, they got used. At some point, I'm wondering, does it blend from getting used to [1:05:23] being the user. Like if like a business, a benign business example would be if you could tell an AI, hey, I want you to, you know, hey, prompt, I want you to build me a software company, you know, make it roughly do this, serve these users and run that for the next five years and just wire me the money to this bank account.

[1:05:42] go. And if, you know, if that worked at some point, you know, in the middle of those five years, like, you know, what's, how is it doing its own thing? Are you telling them what to do? Does that also happen, you know, in like a warfare scale? And I guess that's maybe like the thrust of, to me, where, you know, where it turns into something scary or particular when you get into, you know, the embodied version in warfare, where it's just like, you know, the prompt is like, hey, just, you know, fight this, fight this war for the next year. Yeah, that's [1:06:12] I think, which is we have, you know, U.S. law, Western law has a concept of responsibility, accountability. If you use a machine to do something illegally, it's your fault. It's your that's your problem. But by the way, if the machine goes wrong for reasons having to do with not with you, then it's a manufacturing. It's a product liability issue. The manufacturer is liable. But if you use it, you know, if I buy a shovel and I bash you over the head with it, right, it's my, you know, yeah, the shovel killed you. But like I'm to blame. And so I think that your example of the autonomous corporation, I think legally the legal system is perfectly prepared to deal with that. [1:06:42] which is, yeah, that was your bot. You set the whole thing up. It's your fault. And so there's a natural constraint. I think there's a natural constraint on that. The most obvious version of the military version of the question is autonomous targeting and trigger pulling, right? And this has been an issue in drone warfare for the last, like, 15 years, which is, is there a human in the loop on pulling the trigger, right? So predators flying overhead, da-da-da-da-da, sees a bad guy. Okay, how is the decision made for the predator to launch the missile on the bad guy?

[1:07:12] a very long time was it actually had to be an air force uh combat pilot who would actually pull the trigger on the drone um very specifically even if he wasn't otherwise responsible for like operations of the drone you'd still get somebody whose job it was to make those decisions in the loop there are a lot of people in the defense field who are like it's absolutely mandatory that in all cases it is required for the human being to make the kill decision yeah and and and that and maybe that is the maybe that is the correct answer there's a very powerful argument as to why that should be [1:07:42] if you don't believe in like the Skynet scenarios, just the idea of a human being not being responsible for that decision. Yeah. Sounds ethically, morally very scary. There is a counter argument, which is human beings are really, really bad at making those decisions. Yeah. Right. And so self-driving cars thing, if it's safer than a human driver, then like who's, you know, yeah, there will be accidents, but there's fewer. Correct. And so every post analysis of any combat situation that you read or any war later on, you discover all these shocking things. So one is [1:08:12] at their own troops. They're confused. Number two is, you know, fog of war is just like, it turns out the commanders have very little idea what's going on. They had some battle plan and immediately go sideways. They don't know what's, they literally don't know what's going on. They're not making this, they don't have the information to be able to make decisions. Everything's confusing. Number three, the physiological impact of stress, adrenaline. It's like, it's one thing to be on a shooting range, making these decisions. It's another thing to be like, you know, have like a severe leg wound coupled with, you know, adrenaline, you know, overload, coupled with two hours of [1:08:42] Is even the highly trained person making the decision right? Yeah.

[1:08:44] And then there's just like a more basic thing, which I think this is like a World War II retrospective. It's something like in a lot of combat situations, it was estimated only like 25 percent of the soldiers even fired their rifles. Wow. Like just generally a lot of people just like don't act. Right. Anyway, so the more you look at this, you're just like, wow, the human being is actually really bad at this. Yeah. And then all these other issues around collateral damage, you know, and they should actually shoot the civilian. And so, yeah, you're back in the self-driving car situation, which is like, all right, if you knew you could get better outcomes by having the machine make the decision, [1:09:14] also life less collateral damage. And so I, and I would say, I don't believe I have an answer to this, but I think that is a very fundamental question. I guess this kind of actually feeds into the, the next topic, which to me is, I think like, [1:09:26] Tech has now gotten to a place where with the government and politics, like it's sort of now undeniable. It used to kind of be an underdog. But now for reasons like this and a bunch of others, it's just like too important to like not be in the mix at like the national stage now, which I think has really like changed the dynamic even insularly for Silicon Valley. Because now, you know, people are looking at what people are doing, not just like in tech, but pretty broadly now. Yeah, that's right. Yeah. So I deeply agree with that. I believe it is mostly our fault. [1:09:56] But the current situation is mostly our fault in tech, which is there's an old Russian, a little Soviet joke, which is you may not be interested in politics, but politics is interested in you. And so I think we we we and I would include myself in this. I think we all got complacent or a lot of us got complacent between like 1960 and 2010 that basically just said we could just sit out here. We can do our thing. We can talk about how important it all is. But like it's never going to you know, these are never going to be big social or, you know, cultural or political issues. Yeah. And we can just kind of get away with not being engaged.

[1:10:26] You're saying then once it was undeniable, we weren't prepared. Then we weren't prepared. We weren't even, I would say, remotely prepared. And then they're using the metaphor of the dog that caught the bus and the dog is being dragged behind the bus, tailpipe in his mouth. He doesn't know what to do with the bus. And look, you know, geography, I think, has a lot to do with this. We're 3,000 miles away. You know, it's just hard to get there. They don't come here very often. And yeah, so I guess I would say like it worked. Like we actually we always wanted to build important things. We actually are building important things. There are obvious political, cultural, social consequences to them. [1:10:56] If we don't engage, nobody's going to. Yeah. And then, by the way, the other thing I'll say is, you know, it's not like there's unanimity even in the industry on a lot of these issues. Right. And so there's, you know, I would say two giant divisions right now, big companies versus small companies. Yeah. You know, there's often do not have aligned incentives right now and aligned agendas. And then the other is, you know, like just on AI, obviously there's a big dispersion of views even in the industry. I guess this probably goes to why it's important for consumers. [1:11:22] to some extent, at least some VCs to have relationships with the government because big tech has the resources to do it themselves. Small tech can't. And so if this is the state of the world, we actually, as an industry, need somebody to be doing it on behalf of little tech. Yeah, that's exactly right. That's why we're doing what we're doing. [1:11:39] On media in particular, I thought it was really interesting. I can't remember how many years ago, but biology many years ago started talking about like some fracturing about, you know, the sort of relationship between tech and the media was going downhill. I think this was mostly talking about media and technology.

[1:11:56] Inside tech, I think probably also with the major publications and sort of a larger scale from my read as often. I think this was right. And from where I said, it seems like it did kind of continue to degrade the relationship. What's interesting to me recently is I've seen a little bit of life. [1:12:14] in the sort of tech publication stuff, but it's actually been from the inside. And so Eric, who you just brought on as a GP, is awesome, and he's been really good at doing this. TBPN is really cool, and I don't think I've seen something like that pop up maybe ever inside tech. What's your read, I guess, within our bubble of the sort of tech-media relationship and where it's been? So my background in this is I have a weird kind of history because of what happened in the 90s. But I started dealing with the national press and the tech press, business press in 1993. [1:12:44] 1994. And I did an annual press tour to the East Coast, you know, probably a week out of each year, usually in the spring. And, you know, what that means is you kind of go around and you meet with all the publishers, editors and reporters, you know, go up for everything. And I would say the, basically the stretch from 94 to 2016 was generally like, I thought it was like a quite healthy, normal, productive relationship. You know, like they would run, you know, they would do investigative reporting and they would run stories they don't like, but generally they, you know, the major publications in each of those categories were trying to understand what was [1:13:14] and were trying to kind of be honest brokers and trying to represent what was happening. So those meetings were super interesting. They always wanted to learn. They always had tons of questions. They were super curious about everything that was happening. That was great until 2016. It was the spring of 2017. I went on the press tour, and it was like somebody had flipped a light switch. And they were, like, across the board, like, unbelievably hostile. Like, unbelievably, like, completely. And across the board, like, 100% sweep. Do you know why? Absolute hostility.

[1:13:44] Trump got nominated and then got elected, and then they blamed tech for both of those. By the way, there are a bunch of other factors, including that was when the – actually, there's a business side to it, which is there was the fear that the internet was going to eat the news business in the 90s. It actually didn't happen. And actually 2015, I think, was the best year in history for revenues to newspapers. And then it was really after 2015. Social networking went big, and then their businesses started to collapse, and they started having lots of layoffs, and so that didn't help. [1:14:14] Look, they would say, look, that was also, you know, they would say, hey, smart guy. That's also when you started doing all these things that actually matter more. Right. And so, you know, everything we've been discussing, like the tech industry changed. And so, you know, you're going to get a different level of scrutiny because you deserve it. You're doing different things now. The political thing was just a giant swamping factor. And, you know, this is a big, you know, I don't want to get into the politics per se, but if you just, you know, this whole thing ran in parallel with everything that's like in Jake Tapper's book about, you know, like, so it's just like they just they got locked in on a mode of interaction. [1:14:44] that just became very polarized. Yeah. And very polarized, very lockstep. And, you know, from the outside, you just, you read it and you're just like, wow, these people, they're all like really wrapping themselves around an axle. I think one of the other hard things is as, [1:14:56] the truth has become more accessible by... [1:14:59] other people, you more often see something in the news that you know about. And you're like, wait, that's super backwards. And then somebody posts about how backwards it is. And now, you know, you see a clip of, you know, some major publication and, you know, here's the truth and everybody can tell. And it's like, okay, so should we just believe the rest of it or not? I think the truth fact checking went way up to a social media. That's right. And I would say there, you know, the cliche has been, and there's some truth to the cliche that social media is where lies spread. And there is some truth to that. Yeah. There's a lot of lies spread on social media. But the other side of it is what you're saying,

[1:15:29] the truth spreads on social media. And so the way I describe it is social media is an x-ray machine. And exactly to your point, like anytime there's, and you see this in any domain of activity right now, is anytime there's a thing and there's just like evidence that it's just not the way it's being portrayed, it is going to show up. People are going to see it. And that is, there was this guy, Martin Curry, who wrote this book called Revolt to the Public in 2015. And he was a CIA analyst who did what's called open source analysis for 30 years, which was studying basically what was in newspapers and magazines for the purpose of political forecasting. And his prediction in [1:15:59] was that basically social media was going to completely destroy the authority of all incumbent institutions. And the way that it was going to do that was it was going to reveal through this x-ray effect that basically none of them deserve the credibility. Do you think that's kind of happened? I think that's exactly what's happening. Yeah. And I think there's statistical evidence that's happening. Gallup polls, they do an annual poll now for 50 years on trust in institutions of every different kind of major institution, including the press. And all the numbers are collapsing. [1:16:29] function or role of like journalism? I mean, look, I'm a believer in like the original. I like the original idea, right? Like, I don't know. I'm a romantic. I like I like what I like what journalism says that it is. I would like it to be like that. I like what the universities say that they are. I would like it to be like that. I like what the government says that it is. I would like it to be like that. Which should be just to like name it. Yeah. Well, for journalism, it's just like, all right, number one, like tell us correctly and accurately what's happening. Actually, there's a there's a conflict at the heart of the journalism question, which is that

[1:16:59] right and then the other thing they say is they say like hold power to account or they'll sometimes say they have this phrase they'll say uh uh uh comfort the afflicted and afflict the comfortable and like there's there's an inherent like are are you are you a are you an objective truth well yeah it's because that has nothing to do with the truth it's just unrelated to the truth exactly so there was already a conflict at the heart of the industry and there's a there's a selection process or the people who go into journalism tend to be critical by nature right they tend to want to be on the outside looking in to be critical because they didn't they wouldn't [1:17:29] Look, like, do we need people to tell us the truth? Yes, we do. Do we need people to hold a powerful account? Yes, we do. Like, I would like them to do that. Do you think they can be like for profit corporations? And it works because, I mean, I think another problem is they're getting all their distribution on social media. Eyeballs are what drives the revenue. People want to, you know, stay in, you know, so that also is unrelated to the truth. In fact, it's antithetical to the truth a lot of times. Yeah. So there's two mentalities come out of that. [1:17:59] So it could be true to itself. The other argument is if you don't like for profits, you're really not going to like nonprofits. Yeah. Because at least for profits have like at least for profits have like a market test. Yeah. At least there's like some discipline. Nonprofit just becomes somebody's sort of like, this is my agenda. I'm going to do what I feel like. Arbitrarily crazy. Yeah. Arbitrarily nuts. It does sound worse. Yes. And they're completely unaccountable. They're completely unaccountable. Right. In fact, in fact, it's the opposite. It's the opposite of accountability because of the tax because of the tax break.

[1:18:29] invest in the things that are the most unaccountable. Interesting. Right. And so and then they can spin into like crazy land. Yeah. And they and they and they don't come back. They don't come back. Yeah. There's a history here. Yeah. They don't come back. And so it's weird because like the citizen journalism thing is like a helpful fact check. It's like good to have. And sometimes it does feel like it's not quite sufficient to tell the full story on [1:18:49] everything all the time. So I do think that there's an important role. I just feel like it's, it still feels like it's very in limbo right now. So here is a theory that would be a reason for optimism, which is the last eight years were basically, it was basically the human animal adapting to the existence of social media. It was basically the assembly of the brain and you slam 8 billion people in a chat room together. And like, it's just like, we're not used to it. We weren't wired for it. We're not evolved for it. And just like, oh my God, everything goes bananas. Yeah. Marshall McLuhan, actually the great media theorist, he talked about this. He had this term [1:19:19] village is what happens when everybody gets networked together. And actually what people miss about it is he didn't mean in a good way is because the nature of a village is basically gossip and innuendo and infighting and reputational destruction and civil war. Like that's what happens in a village. Yeah. Right. And so which actually functions at a certain size. Yeah. Like up to 150 people, you can kind of deal with that. Yeah. You know, at the size of like New York City, it actually gets quite complicated at the scale of the world. It's like a disaster. It's a disaster. Right. Yeah. But you could say, look, like we went through this eight year period

[1:19:49] everybody went nuts everybody went nuts in like a thousand different ways and then but maybe that was just we had to get used to it right maybe we just had to adapt to it and like if you talk to i don't know if you talk to like young zoomers now you know a lot of the time i'm gonna tell you yeah we don't take any of that stuff seriously yeah like i just of course you don't believe what you see on you know whatever tiktok yeah which is wild it's just all off so like of course it's all off like whatever right and they just have like they're they're i'm glad people know it's just like that's a crazy state of the world yeah yeah yeah exactly so probably how people feel about like the news too well so this is the thing on the news so then this is the other thing on the news which is was [1:20:19] And so my favorite example of this is people always cite Walter Cronkite as being the great truth teller. And the thing that they cite for you young people, he used to be on TV. I've heard of him. I have not. He was this guy where he would show up on TV. Everybody would say, oh, my God, he's going to tell you the truth. He was like he was like the voice of the truth. And the way that he built that reputation is because he went negative on the Vietnam War in 1968. In 1968, he came out and he said the Vietnam War is unwinnable and we need to pull out of this. And they aired all these reports that showed that that was happening.

[1:20:49] truth. Well, it's just like the problem with that is he went negative. The fact that he went negative on the war in 1968, he was positive on it before that. Right. Exactly. So what did he know the day before he said that, that he wasn't sharing? Yeah. And then by the way, what else happened in 1968? Which is the White House went from a Democrat to a Republican. So the Vietnam War was created by Kennedy and Johnson and then it was inherited by Nixon in 1968. And isn't it convenient and interesting that he went negative on it when it became Nixon's war as opposed to being Kennedy's and Johnson's war? And so then it's like, all right, what was [1:21:19] five years and was he actually on his side the whole time and then there's just the reality of it which is i grew up in rural wisconsin we always thought the press was out to get us yeah like we always thought the press was like the coast basically passing sneering judgment on the center of the country like we never believed like the stuff to start with um and we were always like where i grew up people are like super resentful of the stuff in the media and how it portrays them and so i think there's also like a more fundamental underlying issue here which is you know objective truth is a hot [1:21:44] Like objective truth is a high bar. Yes. People have agendas. Yes. Like maybe we just need to get all this out on the table. Particularly in politics, objective truth is not really how a lot of like people like, oh, that's a lie. I'm like, well, it's not a lie. It's just like an interpretation of a situation that like I wouldn't characterize. But like, sure. It's like that. And these are complicated topics. You know, the ordering of society is a complicated topic. Right. And the functioning economy is a complicated topic. And it's just not so easy to understand.

[1:22:14] in the global village is basically just taking on a little bit of a more humble attitude, basically saying, all right, look, there's not going to be, we're not going to have a lot of objective truth-tellers running around. We're not going to, but also at the same time, we don't want to be in a complete panic about everything all the time. And we need to kind of be able to, you know, take a deep breath, touch grass, be a little bit more skeptical, be a little bit more open, be a little bit more understanding. Right. And so maybe we're starting. And by the way, I think that's happening. I mentioned that Jake Tapper, without getting into partisan politics, but the Jake Tapper book, I would have to know, went to an event that he did this weekend out here. [1:22:44] Like that book and the reaction to the book. And if you watch the interviews on YouTube and the crowd response to that book, like it feels like people are just like, oh, like if we just take a step back for a moment from like all the intense partisanship of it all, like there's actually some. Yeah. Like maybe we can get back a little bit more. I thought it was that book is a very positive step forward. It's just a little bit of a calmer approach on these things. [1:23:14] the most positive, you know, kind of manifesto that's come out, uh, basically saying, you know, like we need, we need, you know, whether you're on the right or the left, like we need to actually build things. And I think that's also a healthy moment. So sort of related to this topic, a little bit adjacent, but I saw you talking about preference falsification recently. And I think this is like a super interesting topic in general, but particularly in the last, I don't know, five ish years, I think a lot of preference falsification became made apparent. Um, so I'd be curious first to hear a little bit about what you think happened over the last

[1:23:44] these changes happened. Maybe we can start there and then I've got a follow up on it. Yeah. So preference falsification, just a sketch and outline. It's when people, it's actually, there's two different definite, there's two different elements of it. It's when people are required to say something in public that they don't actually believe, or they are prohibited from saying something in public that they do believe. Right. So again, so commission omission issues. And then the theory of it, there's this great book by Timur Quran on it. The theory of it basically is it's easy to think about what this happens in the case [1:24:14] Are you telling the truth or is there your public statements mirroring what you actually think or not? The thing that gets complicated is when that happens across a group or across a society. And the thing that happens is if there's widespread preference, falsification of society, you not only have people lying about what they actually think or hiding it, but you also everybody loses the ability to actually know what the distribution of use are. Yeah. Right. And he says, basically, if you look at the history of political revolutions, a political revolution happens when a majority of the country realizes that a majority of the country actually agrees with them and they didn't realize it. [1:24:44] system they were in had convinced them that they were in a very small minority and then you get a at some point there's you know the boy who's like a catalyst there's a catalyst catalytic moment and then and then basically there's a what's called a preference cascade right um and then um and then all of a sudden it's like the correct prisoner still in this box to live in all of a sudden flips everybody realizes that at once yes exactly and and he said you can see this in um you can see this like in a crowd with like a speaker controversial speaker where basically like you'll have a controversial speaker and then there'll be silence in the crowd and then one

[1:25:14] at severe peril because if they're the only asshole standing up clapping yeah that's it they might get killed yeah but then if if it cascades then a second person starts clapping and then a third and a fourth and a fifth and then you get the snowballing effect and then the entire auditorium is clapping and then and then that's everybody realizing that they actually are on the side of the majority which they didn't realize yeah before by the way this is what comedy this is actually why comedy is what comedy does well because people can't control the involuntary response right after yeah exactly so when you get an entire group of people in a room laughing out loud it's something [1:25:44] they can't help it. That's a great point. And then the stress relief from that, because they all know that they're part of it. They've rebonded the community, right? You're actually back in being a part of the community. It's just such an incredibly powerful feeling. Yeah. Okay. [1:25:56] So, so it's very easy to apply this theory to like the Soviet Union, right? Or like the, you know, the, you know, the Eastern Europe, you know, in the Cold War, or whatever, you know, Maoist China, it's a lot, you know, trickier to apply this theory to, you know, your current society. [1:26:26] 60s, if not like the 1920s or something to find an analogous period. I think this period is characterized both by people who were saying things they didn't believe, but critically not saying things they didn't believe. Yeah, I think there are many reasons this happened. And look, this has happened many times in history. And so a lot of people want to say this is caused by social media. Right. Well, when you phrase it the way that you said, it actually makes a lot of sense when it's just if people are going to be in a.

[1:26:48] Part of this prisoner's dilemma matrix, it actually just gets caused by nothing other than itself. Like it doesn't really need an outside catalyst for people to get into the wrong box. That's true. Although there needs to be some kind of oppression. Does there need to be some kind of motivation for the for the cascade to have started where people end up in that box? It's a social pressure. So, yeah. [1:27:09] specifically i think the thing that happened the last five years was i guess it needs to be a high stakes enough issue for it to matter otherwise it's just like who cares whether you think like the clouds are pretty or not yeah that's right so at least has to be that yeah and the way i think he came to describe it is it needs to have like political social cultural salience yeah like it needs to get to something fundamental about how the community is organized you know we call we call that politics but you know this this predates even the concept of politics right and so um and by the way look like you don't even necessarily want to say that all preference falsification is bad because [1:27:39] everybody out telling the truth about everything. I don't think you do. I think at least in like a like social like a lot of social graces come from people saying it's great to meet you when I didn't feel like saying it was great. Your baby, I believe your baby is very effective. Exactly. So some of it. Right. Yeah. So yeah, but but but yeah, you as your point, you get wedged in this box. And so I think the specific thing that happened. So the good news is preference falsification in a lot of totalitarian societies was administered at the point of a gun. You say the wrong thing, they shoot you. Yes. That for the most part is not what happens in our society. What happens in our [1:28:09] the sort of nonviolent version, which is ostracized, canceled, ostracized, reputation is ruined, fired, become unhirable, lose all your friends, lose all your family, can't ever work again. Still really bad. Still really bad. That's what you said. It sounds pretty bad. Very bad. And so, and it just turned out, I think part of, you know, the optimistic view would be part of adapting to the existence of social media was social media just turned out to be, among other things, a very effective channel to destroy people reputationally, right? And this is the social media mobbing effect, right? We're not all familiar with it.

[1:28:39] basically more false preferences. Yeah, big time. Do you think it also unwound them? Well, so this is the thing. This is maybe the thing that happened in the 2024 election, which is just like, oh, okay, we don't have to live this way anymore. Certain views become safer to say out loud. Also, the censorship regime. We live under a very specific censorship regime. Even in tech for 2024 election versus 2016, regardless of what you think and who you wanted, at least everybody can agree that it was taboo to support Trump in 16 and it was not taboo to support Trump in [1:29:09] foreign tech. And so something changed there. Something changed. Peter had this great line in 2016. He said, because he was one of the only people, you know, maybe the only person in tech who was actually pro-Trump in 2016. And he said, this is so strange. He says, this is the least controversial contrarian thing I've ever done. He's like, half the country agrees with me. He's like, I've never had a point of view on anything else in my entire life where half the country agrees with me. And yet somehow this is such a heresy that I'm like the only one. And so, yeah, so there was that. That definitely changed. And then I just think in general, like I said, [1:29:39] where it's just like, all right, we're just like, if we all just decide that we're just not going to live life by mobbing and scapegoating and personal destruction, and just because somebody's offended by something doesn't mean it's going to destroy, you know, if somebody says one thing, it's going to destroy their lives. Like, we don't, you know, you don't have to do that. Do you think it's basically been unwound now? Or do you think there are still a lot of falsified preferences? I would say it's radically different than it was two years ago. I would say there's still a lot of falsified

[1:30:09] Probably in any healthy society, there's lots of falsified preferences. Do you have any guesses for something that is currently falsified that will become unfalsified or is too hard to call it? Sure. Yeah. Sure. Okay, great. But it's far too dangerous to say. We'll move on. Yeah. Dang. Gosh. But again, when you ask that, that is a very key question. Here's what I encourage. Break the fourth wall. Yeah. Here's what I would encourage people to do. Here's the thought experiment to do. Just write down two leaves in the middle of the night with nobody around, doors locked. Write it down on a piece of paper and let's pull it out in 10 years. Well, write down a piece of paper, two lists. [1:30:39] what are the things that I believe that I can't say? And then what are the things that I don't believe that I must say? [1:30:46] And just write it down. And I bet, you know, if you're a reasonably introspective person, you know, the quote-unquote NPCs can't do this. But like if you're a reasonably introspective person, you know, most of us probably have 10, 20, 30 things on both sides of that ledger. Right? And again, most of those are things where you've got to, you know, I don't know, like don't want anybody to ever see that piece of paper. Maybe five or ten years from now we'll be back and everybody can reopen their papers and we'll see. And it'll be safe to say whatever people wrote down at that point. Exactly. Exactly. [1:31:10] Okay, a few final topics I wanted to ask you about.

[1:31:16] You're probably in a spot to be giving just sort of life or career advice to young people a lot now, both in general, but also maybe specifically with like. [1:31:26] ai and like the current set of tech you know changes right now what do you most often find yourself repeating to a really smart you know recent grad about you know if they're like what should i be doing with my career if they get the chance to ask you that to start with i never took any advice so advices yeah there's something there but a lot of people do so maybe okay fair enough that's like that was like you know if you could have built facebook thing maybe yeah maybe maybe maybe the best people probably shouldn't take any okay well the rest of us but um i would just say [1:31:56] again i say this like people are very different like i i believe very deeply some people some people are very happy being in the middle of chaos some people are very unhappy i'll say some people are very unhappy being middle of chaos and they will actually get themselves out of a chaotic situation as fast as they can other people love chaos so much that if they don't have any they will create it right and so like you have to you know that's true there's a level of understanding here you know like not everybody should be in like a high growth high risk tech company because it might just be too nuts yeah so i don't think there's a one one size fits all you know kind of

[1:32:26] Let's narrow it. So the young person who wants to kind of be in tech, I think a big part of it is, I think it's like run to the heat, like, or the seed thing we were talking about, like, where are the interesting things happening? And that's a conceptual question. And it's also like a place question and the community question, network question. And so, you know, run to that as fast as you can. And it doesn't mean running to the fads, but it means trying to identify. [1:32:56] We all kind of wish it wasn't the case, but there really is. And AI, I think, has very successfully unwound the geographic dispersion of what was happening in tech. In a huge way, yeah. In a huge way. It's kind of slammed everything back into Northern California. I don't think that's good, really, for a lot of reasons, but I think it just is the case. And so I would say, like, you know, if you're going to, like, do AI, get here. Yeah, and then look, and then the other thing is, it's the Steve Martin thing. Be so good, they can't ignore you. Like, time spent on the margin getting better at what you do is almost certainly better than most of the other uses of time. [1:33:26] The old adage of you are the average of the five people you spend the most time with is also true. You want to do that. So you want to pick that carefully. And then I guess what I would say is when I talk to people about what kind of company to go to, there are certain people who should only be in a raw startup. And there are certain people who should only be in a big company. I think the general advice is it's the high growth companies. It's the companies that we would describe as being between like Series C and Series E probably or something. Yes. Where it's like they've hit product market fit. They've hit the knee in the curve and they're on the way up.

[1:33:56] because you're not going to have the downside risk of a complete wipeout usually. And then people who get into that position, like at those high growth companies, if you're talented, you can pick up new responsibility very quickly. Okay, next is your Andrew Huberman thing that I see on Twitter. I actually can't completely parse what it is. What's going on with that? So we have a completely fake beef. We're good friends. We're very good friends. And our actually neighbors in Malibu. And I've been on his podcast and we're very good friends. But you don't follow his protocol? I don't do anything that he says. [1:34:26] thing that he says um i with one one exception we'll talk about but yeah i don't i don't do any of it you know he says maintain a regular sleep schedule i there's no way you're all over the place he says always get up you know get up you know see sunlight as you can i'm like no i don't want that's the last thing i want to do when i wake up to see sunlight you don't drink caffeine for the first two hours of the day it's like nfw it sounds like torch it sounds like being in a north korea that sounds bad like i can't even imagine you drink a lot of coffee a lot of coffee hot plunge cold plunge thing i'm not the cold plunge is miserable i'm not doing any of that shit yeah [1:34:56] Oh, I'm sure it's good for you. I'm not going to do any of it. It all sounds just completely miserable. That's good. The one thing that he says that I do is stop drinking alcohol. And I would say I am physically much better off as a result, but I'm very bitter and resentful. It is. For him specifically. Why did you do that one? Because it's much better for you physically. Yeah. It really is. It fixes sleep and energy problems. So is the most tolerable of all of these, and you're like, final, do one? Well, no, that's completely intolerable. It's horrible. Okay. I don't recommend it. I think it's a horrible way to live. Yeah.

[1:35:26] much rather be drinking alcohol does he think even like a glass of wine at night's bad he does yeah just all of it he did one of the great he's actually had a i think big influence on the culture and this is very in seriousness this is very positive yeah i think um at least for health um as he did this big big thing there's all these so what happened is there's all these alcohols there's all these fake alcohol studies basically um you know this is like red wine and then it's like all you know heart protective and all this stuff and it basically it basically turned out that really sick people either drink a lot or nothing and then and then healthy people tend [1:35:56] people tend to be very well disliked. Right. And then I guess is that correlation or causation? It is. It's all in the sample set. So it turns out there's no health benefits to alcohol. That was all completely fake. In other words, just because I see healthier people drink a moderate amount of alcohol does not mean that drinking a moderate amount of alcohol makes you healthy. I see. Michael Crichton called this wet streets cause rain. Okay. Wet streets rain. Yes. Right. So for some reason, unhealthy people stop drinking. Unhealthy people stop drinking because they're like in the hospital. They're like, I can't handle this. Yeah. Their doctor says, [1:36:26] By the way, they drink a lot, right? Because they're right. And then there's this there's this fundamental thing, which is healthy people tend to be very disciplined. But but discipline is not discipline. There's like a big inherent component to it. Yeah. Right. And so people who are people who are disciplined to drink moderate amounts of alcohol also do moderate amounts of exercise, also experience moderate amounts of stress. Also, you know, you go to the doctor on a regular basis. They take the medication they're prescribed. They live all aspects of their health in it. I guess it'll take a while to see, but it feels like it should be a good thing that Andrew and other people have gotten so many more people interested in health.

[1:36:56] It's good physically. Right. Yeah. Might not think of mentally. No, I'll be funny again. It's catastrophic emotionally. Yeah. It's made me a much less happy person. Do you think, actually, you think that? Well, so I really, it's the, alcohol is a time, thousands of years, people have been using it, number one, to fundamentally relax. Yeah. And then there's a very important social lubricant component to it. You know, it's like. And the de-stressing could be healthy. [1:37:26] I don't think Andrew would argue you should not live your life purely maximizing for just physical health. That'd be a miserable way to live. I mean, it's like, what are you going to do? Just like never leave the house, never take the risk across the street. And so, you know, he certainly doesn't judge people for drinking modern amounts of alcohol. He just says, look, scientifically, you have to understand it is a poison. Now, having said that, as you know, speaking of scenes, as you know, that the displacement thing that's happening is people are like our world. They're not drinking alcohol. Instead, they're like doing hallucinogens. Why? [1:37:56] necessarily improvement. As you, Jack, know very well. Yes, tell us about your latest ayahuasca trip. You're so much different than you were last time I saw it. Your personality is clearly completely changed. I do feel different. So the other theory would be there's a law of conservation of drug use, which is every society is going to pick some drug and abuse it. And apparently in our case, it's going to be like LSD and mushrooms. It's like a good one. Okay. My last question. When I tweeted out [1:38:24] a request for questions. I got almost ratioed by one question, so I'm going to ask this one nearly verbatim. It was by an Anon named Signal. If you were frozen for 100 years and you woke back up and you looked around, what would...

[1:38:37] be the piece of data that you'd want to know that would tell you whether or not your dominant worldview turned out to be correct in the fullness of time. Yeah. So I will pick a very unfashionable answer to this. And I would say United States GDP, just like straight out US GDP, because I would say embedded in that is the question of technological progress, which is if you have rapid technological progress, you'll have rapid productivity growth, which means you'll have very rapid GDP growth. If you don't, you won't have rapid GDP growth. [1:39:07] Two is, you know, well, number two would be just like our markets are a great way to organize. And the U.S. is the best market. And so, you know, is that going to keep working? And then third is, is the U.S. going to be a great country? And you are long all of this? I am very long all three of those. I am very convicted on all three of those. But, you know, if I'm wrong about something big, it's going to be something in there and it will show up in that number. Mark, this is amazing. Thank you so much again. Awesome. Thank you, Jack.