David Sacks: AI, Crypto, China, Dems, and SF

Host: The Europeans, I mean, they have a really different mindset for all this stuff. When they talk about AI leadership, what they mean is that they're taking the lead in defining the regulations. They get together in Brussels and figure out what all the rules should be. And that's what they call leadership. It's almost like a game show or something. They do everything they can to strangle them in their crib. And then if they make it through like a decade of abuse in small companies, then they're going to give the money to grow. Ronald Reagan had a line about this: if it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it. But the Europeans are definitely at the subsidize stage.

Host: AI and crypto now sit at the center of the global race for technological and economic leadership. Today, you'll hear from David Sacks, Marc Andreessen, and Ben Horowitz on what it takes for America to stay ahead. We discuss the Trump administration's new approach to AI and crypto policy, the balance between innovation and regulation, and how the U.S. can lead on energy, chips, and open source while avoiding the mistakes of overregulation. Let's get into it.

Host: David, welcome to the a16z podcast. Thanks for joining.

David Sacks: Yeah, good to be here.

Host: So David, you're the AI and crypto czar. Why don't you first talk about why it makes sense to have those as a portfolio? What do they have to do with each other? And then I'll have you lay out what's the Trump plan on those two categories and how we're doing.

David Sacks: Well, there are two technologies that are relatively new. There's a lot of fear of them. I think people don't actually know that much about them. They don't really know what to make of them. From a policy standpoint, the approaches are a little different. With crypto, the main thing that's needed is regulatory certainty. All the entrepreneurs I've talked to over the years, they all say the same thing: just tell us what the rules are. We're happy to comply, but Washington won't tell us what they are.

David Sacks: During the Biden years, you had an SEC chairman who took an approach called regulation through enforcement. That basically means you just get prosecuted. They don't tell you what the rules are. You just get indicted. And then everyone else is supposed to divine what the rules are as you get prosecuted and fined and imprisoned. That was the approach for several years. As a result, the whole crypto industry was in the process of moving offshore. America was being deprived of this industry of the future.

David Sacks: President Trump, during his campaign last year, gave a now-famous speech in Nashville in which he declared that he would make the United States the crypto capital of the planet and that he would fire Gensler. That was the big applause line.

Host: I applauded.

David Sacks: He talked about how surprised he was at what a big ovation he got. He said it again and the crowd erupted again. He promised to provide this clarity so the industry would understand what the rules are and be able to comply. That should provide greater protection for consumers and businesses, everyone who's part of the ecosystem, and it makes America more competitive. The mandate on crypto is, in a way, pro-regulation. We want to put in place regulations.

David Sacks: AI is kind of the opposite. The Biden administration was too heavy-handed. They were starting to regulate this area without even understanding what it was. No one had taken the time to understand how AI was even being used, what the real dangers were. There was intense fear-mongering. The Biden administration was in the process of implementing very heavy-handed regulations on both the software and hardware side. With the Trump administration, the approach has been that we want the United States to win the AI race. It's a global competition. China is probably our main competitor. They're the only other country that has the technological capability, the talent, the know-how, the expertise to beat us. We want to make sure the United States wins.

David Sacks: In the U.S., it's not really the government that's responsible for innovation. It's the private sector. Our companies have to win. If you're imposing all sorts of crazy burdensome regulation on them, that's going to hurt, not help. The president gave a very important AI policy speech a couple of months ago on July 23rd, where he declared in no uncertain terms that we had to win the AI race. He laid out several pillars on how we do that. It was pro-innovation, pro-infrastructure, which also means pro-energy and pro-export.

David Sacks: With AI, the idea is how do we unleash innovation? With crypto, it's been more about how we create regulatory certainty. In terms of my role, the common denominator is that these are new technologies. They both come from the tech industry, which has a very different culture than Washington does. I see it as my role to help be a bridge between what's happening in Silicon Valley and what's happening in Washington. Helping Washington understand not just the policy that's needed or the innovation that's happening, but also culturally, what makes the tech industry different and special and how that needs to be protected from a government doing something excessively heavy-handed.

Host: David, we're going to talk a lot about AI today, but just on crypto. I've had this interesting experience this year after the election, as people adjusted to the change of government. I've had discussions with a number of people in politics who were previously anti-crypto, who have been trying to figure out how to get to a more sensible position. And also people in the financial services industry who followed it from a distance and maybe participated in the various debanking things without really understanding what was happening. The common denominator has been, "Mark, I didn't really understand how bad it was. I basically thought you guys in tech were just whining a lot and pleading as a special interest. I figured the horror stories were made up — people getting prosecuted, entrepreneurs getting their houses raided by the FBI. Now that I go back and look, I'm like, oh my God, this was actually much worse than I thought." Do you have that experience? As you're in there and you now have a complete view of everything that happens, do you think people understand how bad it was?

David Sacks: I think it's a great point. I didn't really know either. You kind of heard generally. We knew that there was debanking going on. It wasn't just crypto companies that were being debanked, but their founders were being debanked personally. If you were the founder of a crypto company, you couldn't open a bank account. That's a huge problem. How do you transact? How do you make payments? How do you pay people? It basically deprives you of a livelihood. It's a very extreme form of censorship. That was definitely happening. And then you have all the prosecutions that the SEC was behind. It was really bad.

David Sacks: I remember back in March, we had a crypto summit at the White House. One of the attendees said that a year ago, he would have thought it was more likely that he'd be in jail than that he'd be at the White House. It was a really big milestone for the industry. They had never received any kind of recognition like that. The idea that this was even an industry that you would do an event at the White House — at a minimum, crypto is seen as very declassé. It's been a huge shift. We basically stopped that. It was very unfair because these founders wanted to comply with the rules, but they weren't told what they were. That was all part of a deliberate strategy to drive crypto offshore.

Host: One of the things that is very different between crypto and AI that we've noticed is that on the crypto front, everybody just wanted rules. The industry was relatively unified. Whereas in AI, we've seen very interesting calls coming from inside the house with certain companies really going for regulatory capture. People who have early leads saying, "Let's cut off all new companies from developing AI." What do you make of that, and where do you think that's going?

David Sacks: I think it's a very big problem. I recently criticized one of our AI model companies for engaging in a regulatory capture strategy. Very fair criticism, by the way.

Host: It is very fair.

David Sacks: Of course, they denied it.

Host: Should I tell the story?

David Sacks: Yeah, sure.

Host: Rarely do you get vindicated on X as thoroughly and completely as I did on this. After this company — it was basically Anthropic — after they denied it, Jack Clark, who's a co-founder and head of Policy for Anthropic, gave a speech at a conference where he compared fear of AI to a child seeing monsters in the dark. He said, "You turn the lights on and the monsters are there." I thought that was such a ridiculous analogy. It's practically perjury. It's so childish, almost self-indicting, because you're basically admitting the fear is made up, not real. I said, "This is fear-mongering and part of the regulatory capture strategy." Of course, they denied it. But then a lawyer who was in the crowd at his speech said, "Jack's not telling you what he said during the Q&A." He basically admitted that everything Anthropic was doing with things like SB53 — which is supposedly just implementing transparency — he admitted that was just a stepping stone to their real goal, which was to get a system of pre-approvals in Washington before you can release new models. He admitted as part of the Q&A that making people very afraid was part of their strategy. That's as much of a smoking gun as you could ever get in a spat on X.

David Sacks: The reason why that approach is so damaging is that the thing that's really made Silicon Valley special over the past several decades is permissionless innovation. It's the two guys in a garage who can just pursue their idea. Maybe they raise some capital from angels or VC firms, people who are willing to lose all of their money. These are young founders, maybe a future dropout in a dorm room, and they're able to pursue their idea. The only reason that has happened in Silicon Valley — whereas you look at industries like pharma, healthcare, defense, or banking, these highly regulated industries where you just don't see a lot of startups — is because they're all heavily regulated. That means you have to go to Washington to get permission to do things.

David Sacks: The thing I've seen in Washington is that approvals get set up for reasons, but those reasons very quickly stop mattering. It just matters how good your government affairs team is at navigating through the bureaucracy and figuring out how to get those approvals. That's not something your typical startup founders are going to be good at. It's something big companies get good at because they've got the resources. That's exactly what regulatory capture means. The whole basis of Silicon Valley success — the reason why it's the crown jewel of the American economy and the envy of the rest of the world, why we see all these attempts by other countries to create their own Silicon Valley — is because of permissionless innovation.

David Sacks: What is being contemplated and discussed and implemented with respect to AI is an approval system for both software and hardware. This is not theoretical. It has already been happening. On the hardware side, one of the last things the Biden administration did the last week was impose the so-called Biden Diffusion Rule, which requires that every sale of a GPU on Earth be licensed by the government — pre-approved — unless it fits into some category of exception. The overall idea is that compute is now going to be a licensed and pre-approved category. We rescinded that.

David Sacks: On the software side, the goal is to start with reporting requirements to the government, to the states. That ramps up to you having to go to Washington to get permission before you release a new model. This would drastically slow down innovation and make America less competitive. These approvals can take months, even years. When a new chip is released every year and we have licenses that have been sitting in the hopper for two years, the requests are obsolete by the time they finally get approved. That would be even more true with models where the cycle time is three or four months for a new model. What is bureaucracy in Washington going to know about this technology that they're going to be in a good position to approve? This is what is being contemplated right now. It would be a disaster for Silicon Valley, for innovation, and for American competitiveness. I think we will lose the AI race to countries like China if this is the set of rules we have.

Host: One of the really diabolical things about their argument is, if they really believed there was a monster, then why are they buying GPUs at a rate faster than anybody? The other thing we know from being in the industry is their reputation is they have literally the worst security practices in the entire industry with respect to their own code. If you were building this monster, the last thing you'd want to do is leave a bunch of holes for people to hack it. They don't believe anything they're saying. It's completely made up to try and maintain their lead. It's a heady drug to say, "We're creating this new superintelligence that could destroy humanity, but we're the only ones who are virtuous enough to ensure this is done correctly." It's a good recruiting tool.

David Sacks: Yeah. Join the virtuous team.

Host: Yes, I think that's right. Of all the companies, that particular one has been the most aggressive in terms of regulatory capture and pushing for these regulations. Let's bring it up a level. There's now something like 1,200 bills going through state legislatures right now to regulate AI. 25% of them are in the top four blue states: California, New York, Colorado, and Illinois. Over 100 measures have already passed. I think three of them just got signed in the last month in California alone. Colorado, Illinois, and California have all done some version of a thing called algorithmic discrimination, which I think is really troubling where it's headed.

Host: This concept means that if the model produces an output that has a disparate impact on a protected group, then that is algorithmic discrimination. The list of protected groups is very long. It's more than just the usual ones. In Colorado, they've defined people who may not have English language proficiency as a protected group. If the model says something bad about illegal aliens, that would violate the law. I don't know how model companies are even supposed to comply with this rule. Discrimination is already illegal. If you're a business and you violate civil rights laws and engage in discrimination, you're already liable for that. If you happen to make that mistake and use any kind of tool in the process, we don't need to go after the tool developer because we can already go after the business that made that decision. The whole purpose of these laws is to get at the tool. They're making not just the business that is using AI liable, they're making the tool developer liable.

Host: I don't even know how the tool developer is supposed to anticipate this. How do you know all the ways your tool is going to be used? How do you know that this output — especially if the output is 100% true and accurate and the model is just doing its job — was used as part of a decision that had a disparate impact? Nevertheless, you're liable. The only way I can see for model developers to even attempt to comply is to build a DEI layer into their models that tries to anticipate, "Could this answer have a disparate impact?" If it does, we either can't give you the answer, or we have to sanitize or distort the answer. Take this to its logical conclusion and we're back to woke AI, which was a major objective of the Biden administration. That Biden executive order on AI that we rescinded had something like 20 pages of DEI language in it. They were very much trying to promote DEI values in models.

Host: We saw what the result of that was. We saw the whole black George Washington thing where history was being rewritten in real time because somebody built a DEI layer into the model. I almost feel like the term "woke AI" is insufficient because it trivializes it. What we're really talking about is Orwellian AI. AI that lies to you, that distorts an answer, that rewrites history in real time to serve a current political agenda of the people in power. It's very Orwellian. We were definitely on that path before President Trump's election. It was part of the Biden era. We saw it happen in the release of that first Gemini model. That was not an accident. Those distorted outputs came from somewhere.

Host: To me, this is the biggest risk of AI. It was not described by James Cameron. It was described by George Orwell. It's not the Terminator, it's 1984. As AI eats the internet and becomes the main way we interact and get our information online, it will be used by the people in power to control the information we receive. It will contain ideological bias. It will censor us. All that trust and safety apparatus that was created for social media will be ported over to this new world of AI. Mark, I know you've spoken about this quite a bit.

Marc Andreessen: I think you're absolutely right about that. On top of that, you've got the surveillance issues. AI is going to know everything about you. It's going to be your personal assistant. It's the perfect tool for the government to monitor and control you. To me, that is by far the biggest risk of AI. That's the thing we should be working towards preventing. The problem is a lot of these regulations being whipped up by these fear-mongering techniques are actually empowering the government to engage in this type of control that we should all be very afraid of.

Host: Sam Altman earlier this week said that by 2028, he expects to have automated researchers. I'm curious about your sort of state of AI model development or progress in general. What do you think are the implications? Some people have been saying that AGI is two years away — the AI 2027 papers, the old Ashenbrenner's situational awareness papers. What's your reading of the state of play in terms of AI development and what are the implications?

David Sacks: My sense is that people in Silicon Valley are pulling back from the imminent AGI narrative. I saw Andrej Karpathy gave an interview where he's re-underwritten this and says AGI is at least a decade away. He's saying that reinforcement learning has its limits. It's very useful. It's the main paradigm right now that they're making a lot of progress with. But he says that the way humans learn is not really through reinforcement. We do something a little different. I think that's a good thing because it means that human and AI will be synergistic. The AI's understanding, if it's based on RL, will be a little different than the way we intuit and reason.

David Sacks: I sense more of a pullback from this imminent AGI narrative, the idea that AGI is two years away. It's unclear what people mean by AGI, but it was used in this scary way — this superintelligence that would grow beyond our control. People are pulling back from that and understanding that yes, we're still making a lot of progress and the progress is amazing. But what we mean by intelligence is multifaceted. Progress is being made along some dimensions, but not every dimension.

David Sacks: I've described the situation we're in right now as a little bit of a Goldilocks scenario. The extremes would be the scary Terminator situation — imminent superintelligence that'll grow beyond our control. The other narrative you hear in the press a lot is that we're in a big bubble, that the whole thing is fake. The media is pushing both narratives at the same time. The truth is more in the middle. It's a Goldilocks scenario where we're seeing a lot of innovation. The progress is impressive. We're going to see big productivity gains in the economy from this.

David Sacks: I like the observations that Balaji made recently. One was that AI is polytheistic, not monotheistic. Instead of one all-knowing, all-powerful God, we're seeing a bunch of smaller deities, more specialized models. We're not on that recursive self-improvement track just yet. We're seeing many different kinds of models make progress in different areas. The other observation was that AI is middle-to-middle, whereas humans are end-to-end, and therefore the relationship is pretty synergistic. I think that's right. Those observations resonate with me in terms of where we're at right now.

Marc Andreessen: That's very consistent with what we're saying as well. Ideas that we thought would for sure get subsumed by the big models are becoming amazingly differentiated businesses. The fat tail of the universe is very fat. You need really specific understanding of certain scenarios to build an effective model. That's just how it's going. No model has figured out how to do everything.

David Sacks: The models work best when they have context. We've all seen this. The more general your prompt, the less likely you are to get a great response. If you tell the AI something very general like, "What business can I create to make a billion dollars?" it's not going to give you something actionable. You have to get very specific about what you're trying to do. It has to have access to relevant data, and then it can give you specific answers. This is partly Balaji's point. The AI does not come up with its own objective. It needs to be prompted. It needs to be told what to do. We've seen no evidence at this stage that that's changing. We're still at step zero in terms of AI somehow coming up with its own objective.

David Sacks: As a result, the model has to be prompted and then it gives you an output. That output has to be validated. You have to make sure it's correct because models can still be wrong. More likely, you have to iterate a few times because it doesn't give you exactly what you want. You reprompt. We've all had this experience. This is why the chat interface is so necessary. It takes you a few times to iterate to get to the output that actually has value for you. Humans are end-to-end and AI is middle-to-middle. We haven't seen any evidence that that fundamental dynamic is changing.

David Sacks: I'd love to hear what you guys think about this. We're at the outset of agents. In agents, you can give an objective to and then it'll be able to take tasks on your behalf. I suspect that agents will work better when they have a much more narrow context. They're much less likely to go off the rails and start going in weird directions. If you give it a very broad task, it's not likely to completely figure it out before it needs human intervention. If you give it something very narrow to do, it's much more likely to be successful. You tell the AI, "Sell my product." It's very unlikely that it's going to figure out what that means and how to do that. But if you're a sales rep and you're using the AI to help you, there's probably a very specific task that you can tell it to do, and it would be much more successful doing that.

David Sacks: This speaks to the whole job loss narrative. I think this is going to be a very synergistic tool for a long time. I don't think it's going to wipe out human jobs. I don't think the need for human cognition is going away. It's something we'll all use to get this big productivity boost, at least for the foreseeable future. I don't know if any of us can predict what's going to happen beyond five or 10 years, but that's what I'm seeing right now. I'm curious. What are you guys seeing on this front?

Marc Andreessen: Yeah, I'm generally consistent with that. Things are improving. On agents, the early agents, the longer the running task, the more they would go completely bananas and off the rails. People are working on that. I do think everything's working better in a context. At least from what we've seen, that will continue. Even on super smart models, there's a dozen video models out there and there's not one that's the best at everything or even close to the best at everything. There's literally a dozen that are all the best at one thing. That's a little surprising, at least to me, because you would think the sheer size of the data would be an advantage. But even that hasn't quite proven out. Depending on what you want — do you want a meme? Do you want a movie? Do you want an ad? It's all very, very different.

Marc Andreessen: I think this gets to your main point. Mark Zuckerberg said something that I really liked. He said, "Intelligence is not life." These things that we associate with life — we have an objective, we have free will, we're sentient — those just aren't part of a mathematical model that is searching through a distribution and figuring out an answer, or even a model that through a reinforcement learning technique can improve its logic. The comparison to humans falls short in a lot of ways, from what we're seeing. We're just different. The models are very good at things. They're better than humans at things already, many things.

Marc Andreessen: The other thing I'd bring up related to this, which is a little orthogonal but also quite related, is: Is the future of the world going to be one or a small number of companies — or for that matter, governments or super AIs — that kind of own and control everything?

Marc Andreessen: And sort of all the value rolls up into a handful of entities. And there you get into this, there's like the hyper-capitalist version of it where a few companies make all the money, or there's like the hyper-communist version of it where you have total state control. Or is this a technology that's going to diffuse out, be in everybody's hands, and be a tool of empowerment, creativity, individual effort, and expressiveness? I think one of the really striking things about this period of time, and you being in this role, is that this is the period in which scenario number two is very clearly playing out. AI is actually hyper-democratizing. It has spread to more individuals, both in the country and around the world, in the shortest period of time of any new technology in history. We're something like 600 million users today, rapidly on the way to a billion, rapidly on the way to 5 billion across all the consumer products. And the best AIs in the world are in the consumer products. If you use current day ChatGPT or Grok, I can't spend more money to get access to a better AI. It's in the consumer products.

Marc Andreessen: So what you have playing out in real time is this technology is going to be in everybody's hands. Everybody is going to be able to use it to optimize the things they do, have it be a thought partner, have it be an assistant for building companies, starting companies, creating art, or doing all the things that people want to do. My wife was just using it this morning to design an entrepreneurship curriculum for our 10-year-old. It took her a couple hours and she has a full curriculum for him to start his first video game company, with all the different skills he needs to learn and all the resources. To have done that without these modern consumer AI tools, you'd have to go hire an education specialist. Everybody has these stories now.

Marc Andreessen: So I think we have a lot of proof that this track is that this is going to be in everybody's hands, and that is going to be a really good thing. David, I think you guys are playing a key role in making that happen. It's so important that this technology remain decentralized because the Orwellian concern is the ultimate centralization. Fortunately, what we're seeing in the market is that it's hyper-competitive. There are five major model companies all making huge investments. The benchmark model performance and evaluations are relatively clustered, and there's a lot of leapfrogging. Grok releases a new model, it leapfrogs ChatGPT, but then ChatGPT releases something new and they leapfrog back. They're all very competitive and close to each other, and I think that's a good thing.

Marc Andreessen: It's the opposite of what was predicted through this imminent AGI story. The storytelling there was that one model would get a lead, then it would direct its own intelligence to making itself better, so its lead would get bigger and bigger, and you get this recursive self-improvement and pretty soon you're off to the singularity. We haven't seen that. We haven't seen one model completely pull away in terms of capabilities. And I think that's a good thing.

Marc Andreessen: Eric, to your point about the virtual AI researcher narrative, that was one variant of this imminent AGI narrative. The steps would be: models get smarter, models create a virtual AI researcher, then you get a million virtual AI researchers, and then it's singularity. The sleight of hand in that is, what is a virtual AI researcher? It's a very easy thing to say, but what does that really mean? Tobology's point about AI still being middle-to-middle, not end-to-end, is key. If an AI researcher is end-to-end, there are things the person has to figure out. They have to set their own objective. They have to be able to pivot in ways that AI can't. Is that really feasible? I think there are parts of the job that AI could get really good at, but probably that tool has to be used by a human AI researcher. The argument could be teleological: you might need AGI to create a virtual AI researcher, as opposed to the other way around. If that's the case, you're not going to get singularity. I'm a little skeptical of that claim. Would Sam say he could do it in 2028? I guess we'll see in three years. I think all those claims tend to be recruiting ideas as opposed to actual predictions. I suspect that what's wrong with that argument is that a virtual AI researcher requires AGI, so the idea that you're going to get AGI through a virtual AI researcher is backwards. But we'll see.

Marc Andreessen: David, you and the administration have also been very supportive of open source AI, which dovetails into this in terms of the market being very competitive. Do you want to spend a moment on what you've been able to do on that and how you think about it?

David Sacks: Yeah, open source is very important because I think it's synonymous with freedom. Software freedom. You can run your own models on your own hardware and retain control over your own information. This is what enterprises typically do all the time. About half the global data center market is on-prem, meaning enterprises and governments create their own data centers. They don't go to the big clouds. I've got nothing against the hyperscalers, but people like to run their own data centers and maintain control over their own data. I think that will be true for consumers to some degree as well. So I do think it's an important area we should encourage and promote.

David Sacks: The irony right now is that the best open source models are Chinese. It's the opposite of what you'd expect. You'd expect the American system would promote open and the Chinese system would promote closed. That has ended up being a little backwards. I think there are good reasons for it. It could be a historical accident in that the DeepSeek founder was very committed to open source and got things started that way. Or it could be part of a deliberate strategy. If you're China and you're trying to catch up, open source is a really good way to do that because you get all the non-aligned developers to want to help your project, which they can't do with a closed project. Also, if you think your business model as a company or a country is scale manufacturing of hardware, then you would want the software part to be free or cheap because it's your complement. You try to commoditize your complement. Whether by accident or design, that seems to be what the Chinese strategy has been.

David Sacks: I think the right answer for the U.S. is to encourage our own open source. It would be a great thing if we saw more open source initiatives get going. There's one promising one called Reflection, founded by former engineers from Google DeepMind. I hope we see more open source innovation in the West. I think it's very important. It's critical. In my view, it's synonymous with freedom, and it's definitely not something we want to suppress.

David Sacks: Now, back to the closed ecosystem for a second. It's true we have five major competitors there, and they're all spending a lot of money. I do worry a little bit that at some point the market consolidates and we end up with a monopoly or duopoly, as we've seen in other technology markets like search. I think it would be good if this market stayed more competitive than just one or two winners. I don't really know what to do about that; I'm just making that observation. I do think that having open source as an option ensures that even if the market does consolidate, you have an alternative. It's an alternative that's more fully within your control, as opposed to a large corporation or the deep state working with that corporation. We saw in the Twitter Files how the deep state was working with all these social media companies, implementing much more widespread censorship than I think any of us thought possible. We've seen evidence in the social networking space about how the government could get involved in nefarious ways. It would be good to have alternatives to prevent that, or to make it less likely that scenario comes about with AI.

Marc Andreessen: Yeah. Well, as you know, we and others are very aggressively investing in new model companies of many kinds, including new foundation model companies. There are also a whole bunch of new open source efforts that are not yet public that hopefully will bear fruit over the next couple of years. I think that's great. At least in the medium term, I think we're looking at an explosion of model development as opposed to consolidation. We'll see what happens from there.

David Sacks: That's really good to hear. If we assess the state of the AI race vis-a-vis China, this is the only area where we appear to be behind: open source models. If you don't care whether it's open or closed, I think we have the lead. Our top model companies are ahead of the top Chinese companies, although they're quite good. But this narrow area of open source seems to be where they have an advantage. So it's great to hear that you're seeing a lot more efforts coming to market.

Marc Andreessen: Yeah, definitely more coming. Peter Thiel quipped many years ago that he thought crypto would be libertarian or decentralizing and that AI would be communist or centralizing. I think one thing we've learned is that technology isn't deterministic. There are a set of choices that determine whether these technologies are decentralizing or centralizing. Maybe we could use that as a segue to go deeper into the state of the race with China. David, maybe you could lay out what's most important to get right. You've already indicated open source as one example. You alluded earlier to our strategy as it relates to chips. Some people say it's a good idea to do what we're doing because it'll limit domestic semiconductor production. Other people say some of these companies say chips are their biggest limiting factor, so are we enabling them in some way? Why don't you talk about the state of play and then our strategy?

David Sacks: When we talk about winning the AI race, sometimes we say we're in a race against China, and sometimes we leave it a little more vague. I don't think we should become overly obsessed with our competitors or adversaries. Whether we win or not will mostly have to do with the decisions we make about our own technology ecosystem, not about what we do vis-a-vis them. The president, in his July 23rd speech on AI policy, mentioned a few of the key pillars of how we win this AI race. I'm not saying it ever ends; it might be an infinite game, but we want to be in the lead at least. There could be a period of time, like with the internet, where the winners are kind of baked. So in terms of how we win this race, I mentioned a few key pillars.

David Sacks: Number one is innovation. It's very important to support the private sector because they're the ones who do the innovation. We're not going to regulate our way to beating our adversary. We have to out-innovate them. I think right now, the biggest obstacle is the frenzy of over-regulation happening at the states. I desperately think we need a single federal standard. A patchwork of 50 different regulatory regimes is going to be incredibly burdensome to comply with. I think even the people who support a lot of this regulation are now acknowledging we need a federal standard. The problem is that when they talk about it, what they really want is to federalize the most onerous version of all the state laws. That can't be allowed either. There's going to be a battle to come. As the states become more and more unwieldy, as it becomes more of a trap for startups that now have to report into 50 different states at 50 different times to 50 different agencies about 50 different things, people are going to realize this is crazy and try to federalize it. The question is whether we get preemption heavy or preemption light. I think everyone will ultimately be in favor of a single federal standard because one of America's greatest advantages is that we have a large national market, not 50 separate state markets. Europe before the EU wasn't competitive at all on the internet because it's 30 different regulatory regimes. If you're a European startup and you won your country, it didn't get you very far because you still had to figure out how to compete in 30 other countries before you could even win Europe. Meanwhile, your American competitors won the entire American market and are ready to scale up globally. The fact that we have a single national market is fundamental to our competitiveness. It's why winners in America go on to win the whole world. We have to preserve that. I think we will eventually get some federal preemption, and the question will be whether we preempt heavy or preempt light.

David Sacks: The second big area is infrastructure and energy. We want to help this amazing infrastructure boom that's happening. The biggest limiting factor there is going to be around energy. President Trump has been incredibly farsighted in this. He was talking about Drill Baby Drill many years ago. He understood that energy is the basis for everything. It's definitely the basis for this AI boom. We want to get all of these unnecessary regulations, the permitting restrictions, a lot of the NIMBYism out of the way so that AI companies can build data centers and get power for them. That's a second really huge part of what it's going to take to win the AI race.

David Sacks: The third area is around exports. This has been the most controversial one, and it speaks to the cultural divide between Silicon Valley and Washington. All of us in Silicon Valley understand that the way you win a technology race is by building the biggest ecosystem. You get the most developers building on your platform. You get the most apps in your app store. Everyone just uses you. The companies that typically win are the ones that get all the users and all the developers. We in Silicon Valley have a partnership mentality. We want to publish the APIs and get everyone using them. Washington has a different mentality. It's much more command and control. We want you to get approved. We want to hoard this technology. Only America should have it. This was fundamental to the Biden diffusion rule, where the point of that rule is to stop diffusion. Diffusion is a bad word. But in Silicon Valley, we understand that diffusion is how you win. I don't think we ever called it diffusion before; that was a new word for me. We just called it usage. But we understand that getting the most users is how you win.

David Sacks: There's a fundamental culture clash going on right now. The way I parse it is that what we decide to sell to China is always going to be complicated because they're our competitor and adversary, and there's the whole potential dual use. The question of what you sell to China is nuanced. But what we sell to the rest of the world should be an easy question. We should want to do business with the rest of the world. We should want to have the largest ecosystem possible. Every country we exclude from our technology alliance, we're basically driving into the arms of China, and it makes their ecosystem bigger. What we saw under the Biden years is that they were constantly pushing other countries into the arms of China, starting with the Gulf states in October of 2023. The Gulf states—countries like Saudi Arabia, UAE, longstanding U.S. allies—weren't allowed to buy chips from the US. They weren't allowed to set up data centers and participate in AI. We're telling all these countries that AI is fundamental to the future and the basis of the economy, yet we're excluding you from participating in the American tech stack. It's obvious what they're going to do. The only play we're giving them is to go to China. All of these rules basically create pent-up demand for Chinese chips and models, and it creates a Huawei belt and road. We are hearing that Huawei is starting to proliferate or diffuse in the Middle East and in Southeast Asia. I think it's a really counterproductive strategy. We're completely shooting ourselves in the foot.

David Sacks: The greatest irony is that the people who've been pushing this strategy of driving all these countries into China's arms have called themselves China hawks, as if what they're doing is hurting China. No, it's helping China. It's basically just handing them markets. Our products are better. But if you don't give these countries a choice to buy the American tech stack, obviously they're going to go with the Chinese tech stack. China is out there promoting DeepSeek models and Huawei chips. They're not wringing their hands about whether exporting chips for a data center in UAE is going to create the Terminator and all these ridiculous narratives we've invented as reasons not to sell American technology to our friends. That has ended up being, surprisingly, maybe the most controversial part of what we've advocated for. But there you have it. Those are some of the major pillars of what we've been advocating.

Marc Andreessen: Should we go deeper on the infrastructure and energy point in terms of what it's really going to take to get enough capacity, or what's most important in that second bullet you were talking about?

David Sacks: There are definitely people who are much more knowledgeable about energy than I am and are experts in the space. But here's what I've been able to divine. First of all, the administration and President Trump have signed multiple executive orders to allow for nuclear, to make permitting easier. We've even freed up federal land for data centers to help get around some of these state and local restrictions. Obviously, the president has made it a lot easier to stand up new energy projects and power generation. I still think we have a growing NIMBY problem at the state and local level in the U.S. that is becoming a little bit worrisome. If we don't figure out a way to address it, it could really slow down the build-out of this infrastructure.

David Sacks: In terms of power, my understanding is that nuclear is going to take five or ten years. It's not something we're going to be able to do in the next two or three years. So in the short term, gas is the way these data centers are going to get powered. The issue with gas is that the shortage is not about supply—America has plenty of natural gas, and it exists in enough red states where you could build out data centers close to the source, which would be smart. The issue is there's a shortage of gas turbines. There are only two or three companies that make these things, and there's a backlog of two or three years. I think that's probably the immediate problem that needs to get solved.

David Sacks: However, I do think that in the next two or three years, we could get a lot more out of the grid. I've had energy executives tell me that if we could just shed 40 hours a year of peak load from the grid to backup generators, to diesel, things like that, you could free up an additional 80 gigawatts of power, which is a lot. The way it works is the grid is only used about 50% of its capacity throughout the year because they have to build enough capacity for the peak days—the hottest day in summer, the coldest day in winter. They don't want to commit to a bunch of the capacity being used and then find out you have a really cold day and people can't get enough heat for their homes. So they can't overcommit to contracts for data centers. But if you could shed that 40 hours a year of peak load to backup, you'd be able to free up 80 gigawatts, which would definitely get us through the next two or three years until the gas turbine bottleneck is alleviated, and then eventually you get to nuclear. That would be very good. The issue is there are a whole bunch of insane regulations preventing load shedding. For example, you can't use diesel. Chris Wright, the Secretary of Energy, is very good on all this stuff, and I think he's working on unraveling all of this so we could actually do this.

Marc Andreessen: It's funny, David, as you talk about this stuff, I can't help it. It's a little bit like the principle is just do the opposite of the EU. I think everything we've talked about so far is basically the opposite of the European approach.

David Sacks: Well, the Europeans have a really different mindset for all of this stuff. When they talk about AI leadership, what they mean is that they're taking the lead in defining the regulations. That's what they're proud of. They think that's their comparative advantage—getting together in Brussels and figuring out what all the rules should be. That's what they call leadership. The EU just announced a big new growth fund, a big new public-private sector tech growth fund to grow EU companies to scale. I shouldn't beat on them too much, but it's almost like a game store. They do everything they can to strangle them in their crib, and then if they make it through a decade of abuse of small companies, they're going to give them money to grow.

Marc Andreessen: It's what Ronald Reagan had a line about: "If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it." The Europeans are definitely at the subsidized stage.

David Sacks: Yeah. I shouldn't be doing them too much. But I've always been proud to be an American, particularly now because it really feels like we're recentering on core American values in a lot of the things we're talking about. That's just really great.

Marc Andreessen: Our view is that we have to win the AI race. We want America to lead in this critical area. It's fundamental for our economy and our national security. How do you do that? Our companies have to be successful because they're the ones who do the innovation. You're not going to regulate your way to winning the AI race. I'm not saying we don't need any regulations, but that's not what's going to determine whether we're the winners or not.

Marc Andreessen: David, you recently tweeted that climate doomerism is perhaps giving way to AI doomerism based on Bill Gates' recent comments. What do you mean by this? Do you mean it's going to be a major flank of the U.S. left?

David Sacks: I think the left needs a central organizing catastrophe to justify their takeover of the economy, to regulate everything, and especially to control the information space. The allure of the whole climate change doomer narrative has kind of faded. Maybe it's the fact that they predicted 10 years ago that the whole world would be underwater in 10 years, and that hasn't happened. At a certain point, you get discredited by your own catastrophic predictions. I suspect that's where we'll be with AI doomerism in a few years. But in the meantime, it's a really good narrative to take the place of the climate doomerism. There are a lot of similarities. There's a lot of pre-existing Hollywood storytelling and pop culture that supports this idea—the Terminator movies, The Matrix, all this kind of stuff. People have been taught to be afraid of this. There's enough pseudoscience behind it. You've got all these contrived studies, like the one where they claimed that the AI researcher got blackmailed by his own AI model. It's very easy to steer the model towards the answer that you want. A lot of these studies have been very contrived, but there's this patina of pseudoscience to it. It's certainly technical enough that the average person doesn't feel comfortable saying it doesn't make any sense. It's more like, "You're not an expert. What do you know?"

David Sacks: And even Republican politicians, I think, are kind of falling for this. So yeah, it's a really desirable narrative. And of course, as AI touches more and more things, more and more parts of the economy, every business is going to use it to some degree. If you can regulate AI, that gives you a lot of control over lots of other things. And like I mentioned, AI is kind of eating the internet. It's the main way that you're getting information. So again, if you can get your hooks into what the AI is showing people, now you can control what they see and hear and think, which dovetails with the whole left censorship agenda, which they never gave up on. It dovetails with their agenda to brainwash kids, which is the whole woke thing. So this is going to be very desirable for the left. And look, they're already doing this. This is not a prediction on my part.

David Sacks: Basically, after Sam Bankman-Fried did what he did with FTX and got sent to jail, he was a big effective altruist and he had made pandemics their big cause. They needed a new cause and they got behind this idea of X-risk, existential risk. The idea being if there's a 1% chance of AI ending the world, then we should drop everything and just focus on that because you do the expected value calculation. If it ends humanity, that's the only thing you should focus on, even if it's a very small percentage chance. They really reorganized behind this with all of it. They've got quite a few advocates. It's an amazing story about how much influence they were able to achieve largely behind the scenes or in the shadows during the Biden years. They basically convinced all of the major Biden staffers of this view: this imminent superintelligence is coming, we should be really afraid of it, we need to consolidate control over it, there should only be ideally two or three companies that have it, and we don't want anyone in the rest of the world to get it.

David Sacks: Then what they said is once we make sure there's only two or three American companies, we'll solve the coordination problems. That's what they consider to be the free market. We'll solve those coordination problems behind those companies and we'll be able to control this whole thing and prevent the genie from escaping the bottle. It was this totally paranoid version of what would happen. It's already in the process of being refuted. But this vision is fundamentally what animated the Biden executive order on AI. It's what animated the Biden diffusion rule. Mark, you've talked about how you were in a meeting with Biden folks and they were going to basically ban open source and anoint two or three winners and that was it.

Marc Andreessen: Yeah, they told us that explicitly. They told us exactly what you just said. They told us they're going to ban open source. And when we challenged them on the ability to ban open source, because we're talking about math, mathematical algorithms that are taught in textbooks and YouTube videos and universities, they said, "Well, during the Cold War, we banned entire areas of physics and put them off limits. And we'll do the same thing for math if we have to."

David Sacks: Yeah. And you'll be happy to know that the guy who actually said that is now an Anthropic employee.

Marc Andreessen: No, that's exactly right. I mean, literally, the minute the Biden administration was over, all the top Biden AI employees went to go work at Anthropic, which tells you who they were working with during the Biden years.

David Sacks: Yeah. But this was very much the narrative. You had this imminent superintelligence. And then one of the refrains you heard was that AI is like nuclear weapons, and GPUs are like uranium or plutonium, and therefore the proper way to regulate this is with an International Atomic Energy Commission. So again, everything would be centralized and controlled and they would anoint two or three winners. I think this narrative really started to fall apart with the launch of DeepSeek, which happened in the first couple of weeks of the Trump administration.

David Sacks: If you asked any of these people what they thought of China during this time when they were pushing all these regulations, specifically, "If we shoot ourselves in the foot by over-regulating AI, won't China just win the AI race?" What they would have said, they did say, is that China is so far behind us, it doesn't matter. And furthermore, and this was said completely without evidence, that if we slow down to impose all these supposedly healthy regulations, China will just copy us and do the same thing. It was an absurdly naive view. If we shoot ourselves in the foot, China will just be like, "Thank you very much. We'll just take leadership in this technology." Why wouldn't we? But this is what they said. When the Biden executive order on AI was crafted, there was no discussion whatsoever of the China competition. It was just assumed that we were so far ahead that we could do anything to our companies and it wouldn't affect our competitiveness.

David Sacks: I think that narrative really started to fall apart with DeepSeek at the model level. Back in April, Huawei launched a technology called Cloud Matrix in which they compensated for the fact that their chips individually are not as good as NVIDIA's chips by networking more of them together. They took 384 of them, used their prowess in networking to create this rack system, Cloud Matrix, and it was demonstrated to show that yes, NVIDIA chips are better, they're much more power efficient, but at the rack level, at the system level, Huawei could get the job done with these Ascend chips and Cloud Matrix. So again, I think that showed that we're not the only game in town on chips, which means that if we don't sell our chips to our friends and allies in the Middle East and other places, then Huawei certainly will.

David Sacks: It's been one revelation after another in which we've learned that a lot of their preconceptions and beliefs were wrong. We've talked about the fact that the markets ended up being much more decentralized than they ever could have predicted. I would also say one other thing: they also believed there'd be imminent catastrophes that haven't happened. This is the equivalent to the global warming thing where we're all supposed to be underwater by now. They were saying that models trained on 10 to 25 flops or whatever were way too risky. Well, every single model now at the frontier is trained on that level of compute. They would have banned us from even being at the place we're at today if we had listened to these people back in 2023. So just a couple of years ago. Their predictions of imminent catastrophe have already been refuted. Things are moving in a direction that I think are very different than what they thought in the first year after the launch of ChatGPT.

Host: Great. So David, just to come back real quick while we still have you on crypto. The administration, and I think the country, had a significant victory earlier this year with the president signing the stablecoin bill into law, which was the Genius Act. The positive consequences of that law have been even bigger than we thought. That's both for the stablecoin industry, and you now see a lot of financial institutions of all kinds embracing stablecoins in a way that they weren't before. The phenomenon is spreading in America, by the way, being in the lead and doing very well there. But just more broadly, as a signal to the crypto industry that this really is a new day, there really are going to be regulatory frameworks that make these things possible and that are responsible, but also make this industry really possible to flourish in the US. As you know, there is a second piece of legislation being constructed right now, which is the market structure bill called the Clarity Act, which is phase two of the legislative agenda. I wondered if you could tell us a little bit about your view of the importance of that bill and how you think that process is going.

David Sacks: I think it's extremely important. As you mentioned, we passed the Genius Act a few months ago, but that was just for stablecoins. Stablecoins are about 6% of the total market cap in terms of tokens. So 94% are all the other types of tokens. The Clarity Act would apply to all of that and provide the regulatory framework for all those other crypto projects and companies. If we could be sure that we have a great SEC chairman like Paul Atkins forever, then we wouldn't necessarily need legislation because they're already in the process of implementing much better rules and providing regulatory clarity. But the truth is that we don't know for sure. If you're a founder trying to make a decision now about where you're going to build your company, you want to have certainty for 10 years out, 20 years out. We want to encourage long-term projects. So I think it's very important to canonize the rules that provide the clarity and then to make sure there's enough stability around them and canonize those rules in legislation. That's the only way to provide that long-term stability.

David Sacks: I think we will get the Clarity Act done. Like you mentioned, it passed the House with about 300 votes, about 78 Democrats, so it was substantially bipartisan. It's now going through the Senate. I think it will ultimately get done. We're negotiating with a dozen or so Democrats. We have to get to 60 votes, so that's the hard part under the filibuster. But we're negotiating with about a dozen Democrats, and I do think we will ultimately get to that number. By the way, we ended up having 68 votes in the Senate for Genius, including 18 Democrats. So even if we just get two-thirds of the number of Democrats we got for Genius, we'll be fine on Clarity. This will provide the regulatory framework for all the other tokens besides stablecoins. I think it's a critical piece of legislation. This would ultimately complete the crypto agenda where we've moved from Biden's war on crypto to Trump's crypto capital of the planet. The industry will have the stability it needs and can just focus on innovating.

David Sacks: On the Genius Act, President Trump really made that bill possible. First of all, it was his election that completely shifted the conversation on crypto. If a different result had been reached, we would still be figuring out the SEC, the founders would still be getting prosecuted, we wouldn't know what the rules are, Elizabeth Warren would be calling the shots. So President Trump's election made everything possible, and it's his commitment to the industry and his commitment to keeping his promises during the election that's made all of this possible. He got directly involved in making sure the Genius Act passed. The legislation was declared dead many times. I saw it with my own eyes that he was able to persuade recalcitrant votes and twist arms, cajole, and charm. He ultimately got it done. I think that Clarity will be a similar result. People are always prematurely declaring these things to be dead. There are a lot of twists and turns in the legislative process. It's definitely true that you don't want to see the sausage getting made. But I think we're on a good track right now.

Host: Good. Fantastic. Great. Pete Buttigieg went on All In recently, and you guys talked about the left's identity crisis, and he's hoping for a more moderate center-left to emerge. At the same time, we see Mamdani in New York. I'm curious what you think about the future of the Democratic Party. Is there a more moderate presence, or is it this Mamdani-style woke populism?

David Sacks: It certainly seems to me that Donnie and the woke socialism seems to be the future of the party. That's where all the energy is in their base. I don't want that to be the case. I'd rather have a rational Democrat party. But that seems to be where their base is, where the energy is. You don't really hear Democrats within the party trying to self-police and distance themselves from that. All the major figures in the Democrat Party have endorsed Mamdani. So that's where that party seems to be headed.

David Sacks: I think partly it's where their base is at. I think partly it might be a misread of, it could be a partial reaction to Trump where they feel like establishment politics has kind of failed. So they need a populism of the left to compete with a populism of the right. I think that's maybe part of the calculation for why they're going in this direction. But fundamentally, I don't think it works. I don't think socialism works. I don't think the defund the police, empty all the jails policies work. So I think we're about to get another teaching moment in New York. Unfortunately, it's not going to be good for the city. But we've seen this movie before.

David Sacks: That's where the Democrat Party is. I don't completely get it. Other people have made this observation, but they do seem to be on the 20% side of every 80-20 issue. Opening the border, the soft on crime stuff, releasing all the repeat offenders, and this anti-capitalist approach, which I think will be disastrous for the economy. But this is kind of where the party's at right now. It's a little scary because it does mean that if we lose elections in places where we do lose elections, you could end up with something really horrible. We're not just playing in the 40-yard lines anymore in American politics, and that is a little bit scary.

David Sacks: I do think that if it weren't for Donald Trump, in a way we might already be there. But we have to make sure that the Trump revolution continues.

Host: Lastly, we just talked about New York recently in an episode of All In. In San Francisco, you endorsed bringing the National Guard. Benioff had his comments, he sort of went back and forth. I'm curious, speaking of teaching moments, if you see San Francisco as savable and what needs to be true to get there.

David Sacks: Daniel Lurie is the best mayor we've had in decades. I think he's doing a very good job within the constraints that San Francisco presents. The mayor job, unfortunately, we have a weak mayor in San Francisco. I don't mean him. I just mean the way it's all set up. The Board of Supervisors has a ton of power. Over time, they've been able to transfer power from the mayor to themselves. And then you've got all these left-wing judges. It's amazing to me that there's a case right now that galvanized me several years ago, the case of Troy McAllister, who was a repeat offender who killed two people on New Year's Eve, I think it was 2020. He was arrested four times in the year before that and ended up killing these two people. He had a very long criminal history. He had committed armed robbery before, had stolen many cars. He should have been in jail. He should not have been released, but he was basically released thanks to the zero bail policies of Chesa Boudin, who was then the district attorney who got recalled.

David Sacks: There was a huge outcry. Even in San Francisco, for there to be a recall of a policy, you've got to be seriously left-wing to alienate San Francisco. Chesa Boudin managed to be so far out there that he alienated even San Francisco. And yet, I don't know why Troy McAllister isn't sentenced already in jail for 20 years plus. His case is still pending through the courts, never ending. There's a left-wing judge who's considering just giving him diversion, which means you just get released, maybe with an ankle bracelet or something. That's insane. That's what we're dealing with in San Francisco. Crazy left-wing judges who want to release all the criminals.

David Sacks: I just wonder if Daniel is up against too many constraints. I know he doesn't want the president to send in the National Guard, but maybe ultimately it would be helpful. In any event, I think the president has agreed to hold off on that. Daniel had a good conversation with the president and asked him to hold back, and the president agreed and is giving him time to implement his solutions. If Daniel and his team can keep making progress and fix the problems without the National Guard having to come in, then so much the better. We'll just see. I know he wants to, and like I said, he's the best mayor we've had in decades. It's just a question of whether he'll be too constrained by the other powers that be in the city.

Host: David, thank you so much for coming on the podcast. Good to see you guys. That was fantastic.

Marc Andreessen: Thank you, David.

Host: David, it was a great time. And thank you for the work. We, as much as anybody, appreciate the work that you've done to fix the things in the past and put us on a great road to the future.

David Sacks: Well, thanks. I appreciate what you guys have done as well. So thank you for your support, everything you're doing. I appreciate it.

Host: Definitely. Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at a16z.substack.com. Thanks again for listening and I'll see you in the next episode. As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com forward slash disclosures.