--:-- Seth Smith: If a lot of smart people are working on something, it's virtually guaranteed that it's going to happen. It's just a question of when.
--:-- Seth Smith: Hello, everyone. The A16Z podcast is back. And this is your new host, Seth Smith. I'm so excited to explore the world of technology with you through the lens of the builders shaping it. And if you've been listening to the pod for a while, I hope you'll stick with me as I take the reins from Sonal, who, by the way, is doing really wonderful work at our sister podcast, Web3 with A16Z.
--:-- Seth Smith: Okay, on to the content. Today, we have a very special kickoff episode to start our launch series, where we wanted to explore the age-old question: why is building the next generation of technologies still so important? And perhaps even more important, who is going to build this next generation of technology, and what needs to be done to enable those founders and builders?
--:-- Seth Smith: I'm a little biased, but who better to traverse this ground than A16Z's co-founder and general partner, Marc Andreessen? Someone who has not only built, but also invested in the future time and time again, especially when it was not the obvious thing to do.
--:-- Seth Smith: So today, together with Marc, we explore technology through the lens of history, including the three stages of human psychology as we encounter these new technologies. We also talk about how that process often ends in regulation, and we include a couple examples of that. By the way, if you've never heard of red flag laws, you'll want to listen in.
--:-- Seth Smith: We also talk about when to change your mind, the Cambrian explosion of opportunity coming from distributed work, the importance of founder-led companies, and so much more. And of course, we'll end the episode by examining why there's still so much reason for optimism.
--:-- Seth Smith: Hopefully this episode will also get you excited about what's to come with the A16Z podcast, as we do have a lot more coming. That includes coverage of major trends like AI, space, carbon removal, and you'll soon hear from legends like Neal Stephenson, Balaji Srinivasan, and even Steve Wozniak, who shared with us his latest venture, Privateer. By the way, that episode is already live in the feed if you want to give it a listen.
--:-- Seth Smith: All right, let's dive in.
--:-- [Disclaimer: 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. For more details, please see A16Z.com slash disclosures.]
--:-- Seth Smith: So this is the first episode of our launch series. In the launch series, we're going to cover several technologies, and we're going to cover them with their founders and dive really deeply into how these technologies may shape our collective future. But before we do that, we're going to address an important question. It may sound simple, but we need to ask: why do these technologies even matter in the first place? Why is it so essential today that we continue to build?
--:-- Seth Smith: Today we have Marc Andreessen talking to us about this very important topic. Who better than someone who has built the future and invested in the future many times over, especially when it wasn't the easy thing to do? So Marc, why don't we start there? Why don't we start by attacking this question with the lens of history? How do people view the importance of technology today, and how has that changed relative to how they viewed it in the past?
--:-- Marc Andreessen: Yeah, thanks. That's a great way to start. So many of the discussions about today's technologies take place in this ahistorical frame, where it's as if there had never been any new technologies in the past, or that there were new technologies in the past, but those were all the good ones, and today we just have the bad ones or something like that.
--:-- Marc Andreessen: The key question to start out asking on all these topics is: why is there something and not just nothing? By which I mean, what was life like before technology? What was life like in its natural state before we had all these wonderful technologies, before we had steam power, before we had tractors, before we had telephones and so forth?
--:-- Marc Andreessen: A lot of historians have talked about this. The answer is life was what Thomas Hobbes famously said it was: nasty, brutish, and short. You'll read these fantasies from time to time about how people in older periods were living in this state of grace of nature, and everything was wonderful. Those are all just fantasies. In reality, everybody was miserable all the time. Everybody was poor. Everybody was subsistence farming just to harvest enough food to eat that day, or to hunt enough meat to eat that day. For the most part, people died young. They died sick. They never got anywhere. They never did anything.
--:-- Marc Andreessen: All of recorded civilization is only over the course of the last 4,000 years. For the many millions of years of humanity before that, there's basically nothing, because people had no time to do anything other than try to grow enough food to eat.
--:-- Marc Andreessen: So what happened to cause life to no longer be nasty, brutish, and short? What happened to cause the reality of human existence to go from what it used to be to what it is today? It's not perfect today, but it's a lot better than it was. The answer is technology. Technology is the only answer to that question. It's not like people got smarter. Our DNA is the same. Human beings haven't changed. It's only through technology that things have gotten better.
--:-- Marc Andreessen: The way to think about that is: what is technology? Technology is tools. Technology is applied human ingenuity in building tools. Those tools give human beings leverage on the world. That leverage shows up in forms that are bad in some cases, and also in forms that are very good.
--:-- Seth Smith: I agree with you that progress continues. If you look at all the important markers, we are doing better, and that has been true for a very long time. Why is it then that people seem to have this view of where we are today in history in terms of things being so bad?
--:-- Marc Andreessen: That's a complicated question. The technology part of it is very clear, though. Let's start with the story of one of the very original technologies that human beings discovered and mastered: fire. Today you take fire for granted, but fire as a tool, as a technology, was something that early human beings had to figure out how to master and control.
--:-- Marc Andreessen: To give you a sense of how big a deal it was to master the technology of fire, one of the core fundamental myths of human existence is the myth of Prometheus. Prometheus famously delivered fire to humanity. Prometheus was not beloved as a consequence. He was condemned. In the myth, he was chained to a rock for all eternity, and every day a bird comes along and pecks out his liver. He regenerates every night, and the next day the bird tortures him again.
--:-- Marc Andreessen: The fact that there's that myth with that outcome assigned to the introduction of fire is symbolic. It's symbolic of the fact that humanity experienced the rise of fire and said, "Wow, this was a big deal, and maybe not entirely positive." That makes sense if you think about how fire was used as a technology. Fire was used for good: it made it possible to cook meat, to defend the campsite against wolves in the middle of the night, to keep people warm, to keep your baby from freezing to death. Fire is this miracle technology.
--:-- Marc Andreessen: Of course, fire also got used in warfare. Even up to the modern day, what's the state-of-the-art weapon of our times? The nuclear bomb. What does it bring? It brings fire. It's a double-edged sword. Would we want to live in the modern world without fire because it has downsides as well as upsides? We wouldn't. Both are present.
--:-- Marc Andreessen: If you go through the history of new technologies, for every important new technology, there's always this argument. In theory, there are all these things we can do with new technology that are very positive. There are probably things the new technology will make possible that we can't even think of today. That's been a very common pattern: people actually have a very hard time anticipating the upside from new technologies. But the same argument always applies: what about the potential downsides?
--:-- Marc Andreessen: Human beings are psychologically wired to the downside. We're wired to detect and try to evade threats. So there's always this impulse to say, "This is the technology that's going to ruin everything." If you go through the history of every new technology, that argument applied repeatedly.
--:-- Marc Andreessen: I'll give you a couple examples. One is outdoor lighting. Electric lighting was first implemented outdoors because they didn't know how to do it indoors safely. The first electric lighting was rolled out in big cities in Paris and London, about 200 years ago. Outdoor lighting made the city walkable and livable and safer after dark. That's a pretty big deal. The contemporary accounts were one of wonderment that life could now be lit 24 hours. But there were also stories about how this was going to completely destroy civilization. People weren't going to be able to sleep anymore. All kinds of illicit social activities were going to happen at night. In the past, everybody just had to go to bed at night. Now they're going to be out on the streets at three in the morning doing bad things. By the way, in every major city, there are criminals out on the street at three in the morning doing bad things. It's not like the downside was completely wrong. It's just that the trade-off was worth it.
--:-- Marc Andreessen: My favorite story on this is the invention of the bicycle. There's a Netflix documentary called *The Social Dilemma* that condemns social media as a unique threat to civilization. One of the guys in that movie says, "Social media is the first technology like this that's had these negative consequences. Nobody ever complained about the invention of the bicycle." It turns out that's not true. He just didn't do enough reading. People actually complained a lot about the invention of the bicycle.
--:-- Marc Andreessen: The bicycle rolled out as a consumer product about 150 years ago. It got cheap enough that normal people could buy it. The bicycle started to roll out across the American countryside, and there was this immediate moral panic about the bicycle. There's a Twitter account, Pessimist Archive, that goes back and reconstructs the moral panic around the bicycle.
--:-- Marc Andreessen: The argument against the bicycle at the time was that the bicycle was the first transportation technology that young unmarried women in towns and villages across the U.S. could actually afford to buy and use. Cars didn't exist yet. Horses and wagons were too expensive. Walking took too long. All of a sudden, young unmarried women had the bicycle, which meant they could go from one town to the next. That meant they could meet boys and men not just in the current town, but in the other town. To the established social order of the time, this was a profound threat. The assumption was that a young unmarried woman in town would marry one of the men in that town. All of a sudden, her world opened up.
--:-- Marc Andreessen: The media at the time created a new medical condition out of whole cloth called "bicycle face." The idea was that a young woman on a bicycle, pedaling to get to the next town, would have her face contort from the exertion, and that face would freeze into that contorted position. Then she would never be able to get married. Fortunately, bicycle face was not actually a real thing. Civilization survived the introduction of the bicycle. But there's this constant blowback.
--:-- Marc Andreessen: What you find is that the blowback is nominally a response to the dangers of the technology. What the blowback actually is, in almost every case, is a fear, a statement, an assertion, a realization that the introduction of the new technology is going to change society. In particular, it's going to change status and power within society. Who's in charge? Who's in power? Who makes decisions? Who has status? Who gets money? All of a sudden, the ordering of society is up for grabs. That's why you get this spectacular freakout when these things show up.
--:-- Seth Smith: I'm glad you brought up Pessimist Archive. If people are curious, we'll bring it up on the screen. Basically, anything that you can think of as a prior technology, or even things that you take for granted as not technologies but just things embedded in our lives, had this blowback. You mentioned the bicycle, but it's also the radio, trains, teddy bears, jazz music. I don't know if people would view teddy bears as technology, but the point is that anything that becomes embedded in society that can impact society at scale, people start to get afraid of it. They start going through all of these scenarios and thinking, "Who is this going to impact? Is this going to impact my job? Is this going to impact the types of people I can interact with? Is this going to impact the power I have in society?"
--:-- Seth Smith: So, Marc, why don't we dive into that? How do you see technology and its implementation, or really as it's starting to be implemented within society? How do people react? And what specifically about the power within society is being upended?
--:-- Marc Andreessen: There's this incredible book. It's very short, very good. It was written 50 years ago by a professor at MIT named Elting Morison. What's great about this book is it was written before the internet, even before personal computers, so it has this timeless quality. The title is *Men, Machines, and Modern Times*. It's about the process by which a new technology enters society and how society reacts. How do the powers that be, or the status quo of society, react?
--:-- Marc Andreessen: Morison tells this amazing story about a guy named Sims from about 120 or 130 years ago. Sims worked in naval warfare. The world 130 years ago didn't really have military airplanes yet, so naval warfare was warfare. It was how invasions happened and how countries got defended. This was the core aspect of military technology at the time.
--:-- Marc Andreessen: Sims worked on big guns on big military ships, specifically how to aim them. Before Sims, guns were fixed in position on a ship. The gun would stick out the side of the ship, lashed to the deck so it wouldn't roll around. But the sea is moving, so the ship is going back and forth in the water, which means the gun is going back and forth. In naval battles up until Sims, the accuracy rate of guns being fired off these ships was at best 10 percent, often below that. They would miss most of the time. The gunnery officer would get a fix on the position and order to fire, but by that point the ocean had moved, the ship had moved, and he no longer had a lock. The cannonball would miss the other ship.
--:-- Marc Andreessen: Sims said, "There has to be a better way to do this." He designed a mechanical mechanism that automatically worked in opposition to the roll of the ship. If the ship was going down, the mechanism for the gun would automatically correct. The gunnery officer could get a fix, and as long as the ship stayed in the same position as it rolled, the lock on the target would stay intact. All of a sudden, the accuracy rate shoots up to 90 percent.
--:-- Marc Andreessen: This is the most obvious thing in the world. Every country in the world would instantly adopt this. Every military would adopt this. Every ship would instantly be retrofitted. It's a huge advance in warfare. You couldn't imagine living without it. That's what you would assume.
--:-- Marc Andreessen: That's not what happened at all. It took Sims a full 25 years to convince the American and British navies to adopt this technology. It was a full generational shift. The book goes through in detail what happened. Sims ultimately had to appeal directly to President Teddy Roosevelt. The entire military command structure of that era basically told him to go away. They didn't want his newfangled thing. Roosevelt actually ordered the Navy to look at it, and they later ended up adopting it.
--:-- Marc Andreessen: Morison says this is the ultimate example. If they wouldn't adopt even that technology, there must be some very primal counterforce happening. His thesis is that every new technology is a reordering of power and status in society. In the form of this gun, the entire training methods, officer promotion methods, the entire social hierarchy of naval vessels, how gunnery officers were trained, how guns were built and manufactured and crewed and managed, how military doctrine worked, all the different things about how you make decisions about this—it was all based on the old model. That skill set became obsolete when this gun came out. Those people became obsolete, or at least they worried they would. This new breed of more advanced, innovative engineering mentality came in and was a profound threat. That's what happened. You ultimately had a generational turnover of all the staff and officers involved in naval gunnery.
--:-- Marc Andreessen: Morison derives a three-part process that he says applies to any new technology as it is greeted and fought by the status quo. Step one is to completely ignore it. Pretend it doesn't exist. Refuse to acknowledge it. Don't talk about it. Don't even engage in conversations. At some point, these things become too obvious and they have to engage.
--:-- Marc Andreessen: Step two is rational counterargument. "This can't possibly work because it's going to be too expensive. It's not going to be fast enough. It's not going to scale. People don't know how to use it." All the different rational arguments you can come up with to oppose something.
--:-- Marc Andreessen: When those don't work anymore, because people are still watching and thinking, "This still seems like a good idea," then stage three begins. Stage three is when the name-calling begins. It's a full-out power, status, political fight. All of a sudden, the people bringing this technology are bad people. They have bad morals. They have bad intent. They're going to ruin everything.
--:-- Marc Andreessen: It's so funny because the internet followed this exact trajectory. Crypto, cryptocurrency, blockchain, Web3 is following this exact same trajectory. Social networking followed this exact same trajectory. I've now seen this pattern 50 times in the last 30 years. It keeps playing out the same way. Nobody learns anything. This is literally what happens with every new technology.
--:-- Seth Smith: Something that reminded me of is something Balaji said recently. He was reflecting on people's response to social media and how it's impacted society over time. He noted that maybe 10 or 20 years ago, social media was seen as these silly apps being created. "Who wants to focus on this? Why are we directing smart attention into these types of fields?" Now he's noting that people are framing it as a threat to democracy. It's interesting that people go from one angle or one perception, and because technology tends to be a force that's very hard to stop, it then turns into something much different. The same people who framed it as a silly app are now framing it as a threat to democracy. To your point, this isn't new. We had the same dynamics happening with the bicycle.
--:-- Seth Smith: I think it would be fun for us to go into these red flag laws that you told me about quickly. We'll return to the framing that you brought up. Could you speak a little bit more to the red flag laws that were implemented when cars were coming to be?
--:-- Marc Andreessen: I'd like to come back to Balaji's thing on social, by the way. I'll interpret it a little bit differently and put it into the Sims framework. But yes, cars. This is another great one. We all live with cars. We can't live without cars. There are still huge fights about how cars should be used in our society, but cars are everywhere. Our society doesn't function without cars. We take them so for granted that we repeatedly bail out the big car companies. The taxpayers have kept them in business for a long time.
--:-- Marc Andreessen: You would think the car must have been this obvious thing. Of course you want the car. Who could have fought the car for any kind of valid reason? It turns out cars were actually a profound threat to the social order of that era, going back 100 or 120 years. The same kind of process played out with the car.
--:-- Marc Andreessen: At the peak of the anti-car hysteria, the moral panic around cars was that they were a threat to everything: how cities were laid out, modern transportation, modern shipping, the role of local merchants. There was an entire industry of blacksmiths. The horse was central to a lot of economies. A lot of people made their living dealing with horses. There were people who were trained carriage drivers who were suddenly out of jobs. There was this huge backlash.
--:-- Marc Andreessen: A bunch of state and municipal areas, both in the U.S. around Pennsylvania at the time and also in the U.K., implemented what became known as the red flag laws. The red flag law worked as follows: Mr. Car Owner, you've got your fancy new car. Congratulations. You're very proud of yourself. You're probably a well-off person in the community. People are probably jealous of you. You've got this fancy new automobile. In those days, cars broke down all the time. When you would take your car out for a ride, you'd often bring a mechanic with you to fix the car when it broke. You and your mechanic, or your family, would be out motoring along in your car on whatever dirt road.
--:-- Marc Andreessen: The law was that you had to employ another guy. You had to employ a guy to walk 50 feet in front of the car carrying big red flags.
--:-- Marc Andreessen: Okay. So picture this. You're driving along. You're out for a nice Sunday drive. You've got your kids, whatever. You've got your mechanic. You're going along. Cars in those days didn't go very fast, but they did go faster than you could walk. So you're driving along at whatever, 10, 20 miles an hour. But according to the law, you have to have a guy in front of you on foot, out in advance, and he's got these big red flags. You have to follow this guy because he has to stay in front of you. So you can only motor along at whatever three or four miles an hour that this guy can walk. And this guy's waving the red flags. Why? To warn everybody that a car is coming.
--:-- Marc Andreessen: Why was the explanation that he needs to warn people a car is coming? Because the car might scare the horses. If the car comes along, it's making noise, it scares the horses that are most of us on the road at that time. They freak out, bystanders freak out, people get hurt. That was how the car got rolled out. The most advanced form of this law that I've been able to find went a step further. It said if you're driving along and you actually see a horse coming at you in the other direction, you have to pull over to the side of the road. You have to disassemble the car, take it apart. You and your mechanic would take the car apart and you have to hide the parts of the car so that the horse can't see them, because the horse might get scared by the appearance of the car. Then when the horse goes by, you can reassemble your car and keep going.
--:-- Marc Andreessen: You look back today and it's incredibly comical. How could they ever do this? And then of course you think of the technology today and you realize they're putting in place laws that a hundred years from now are going to look just as silly as red flag laws. But since nobody ever learns anything, history will repeat.
--:-- Seth Smith: Let me just hit real quick the biology point on social networking. This is a really interesting one because you described the overall arc from this harmless, who cares what your cat had for breakfast, these silly trivial things, to this fundamental threat to democracy. It was actually a three-step process. Step one was ignore. Step two in the case of social networking, we went through the whole argument, but there was this other step, maybe call it step two and a half, which basically is, this is the best thing ever for democracy. You may remember around 2012, two things happened. One was Obama got reelected. At the time, this was referred to as the first Facebook election. Facebook had gone really mainstream. There were magazine covers, newspaper stories talking about, literally the story was Facebook saves democracy. Big data saves democracy. Politicians can get out their messages, the correct candidates can get elected. This is the most wonderful thing for democracy ever.
--:-- Seth Smith: By the way, that was also during the Arab Spring. Social networking got a lot of credit for the democratic revolutions of the Arab Spring. There was this overwhelming sensation. When social networking executives 10 years ago would go to Washington or Davos or Aspen, they'd get lavish praise about how wonderful this new technology is for democracy. DiBalji's point, 10 years later, the story has done a complete 180. Now it's the absolute worst fundamental possible threat you could have to democracy because it turns out not just one side can win elections. It turns out the other side can too. And the other side also uses social networking and runs ads on social networking.
--:-- Seth Smith: To your point, the exact same people have held every single position. The exact same experts, professors, pundits, commentators, analysts, think tank people, magazine publishers, political activists have held every single one of these viewpoints all the way through this, with no attempt at any point to reconcile their previous points of view. L.T. Morrison, I think, is no longer with us, but he is smiling out from heaven saying, yep, that's exactly what I predicted would happen.
--:-- Seth Smith: It is fascinating to look at history because you can see these things repeating. I think this three-step process is something that people should apply to technologies of today and ask, where is that technology or the way that people are reacting to it? Where are we in that cycle? Then I think another fascinating thing for people to spend time with is this idea of the way we view red flag laws today. What will people view in 100 years the same way? What are the laws we're applying to social or AI or robotics or space that regulation has its importance? But what laws are we implementing today that will seem just as outlandish as someone literally walking in front of a car to make sure we don't scare horses?
--:-- Seth Smith: Marc, I want to ask you, because you have had a track record of being early and right. That's a combination not many people can say about themselves. Taking this framing of people throughout history being scared, always looking at things from this pessimistic lens, how have you been able to see through that noise? What are you paying attention to when you are introduced to new technology? It's really easy to say, these are all the ways this technology can go wrong. It's not that easy to say, oh, I see this light of how this could go right. How have you been able to mold that more optimistic lens on technology? And how have you maintained that over time? I think that's an equally hard problem to solve.
--:-- Marc Andreessen: I'll start by saying I have the same instincts as everybody else. When I read The Sims book, I was like, yep, that's also describing me. Somebody brings something forward. New technologies in the earliest stages are really half-baked. There's this concept that the same to lab talks about, about tinkering. It's usually somebody in a garage or a metaphorical garage, a dorm room or a computer lab somewhere who's basically working on something. It doesn't quite work. You have to really squint to see why this would ever be something a normal person could ever understand, much less use, much less get value out of. If you're doing early stage investing, like we are, you see these things when they're early and they're just not ready yet. The natural impulse is very clear, which is step one of the sim cycle: just ignore.
--:-- Marc Andreessen: I think what happened to me is this whole cycle kind of got beaten into me. A very large number of times over the last 30 years now, when I have had that reaction, it turns out whatever the new technology was turns out to be a really big deal. If you go through that loop enough times, the 10th time or the 15th time, at some point you realize the cycle is a form of self-harm. If you want to be on the leading edge of new technology, you have to break out of the cycle. You have to stop holding yourself back.
--:-- Marc Andreessen: There are a couple of nuances to that. One is you do have to squint. You have to look at a new unformed thing. This goes to step two of the SIM cycle. Rationally, it has all these problems. In our era, these problems are like, it's too slow, it doesn't scale, it's too expensive, it's too confusing, it doesn't work with existing systems. Or it's a network effect thing but nobody's using it yet, so it's got the cold start problem. You have this list of reasons why these new things can't work. You have to be willing to squint and look through that and say, what if those things all get fixed?
--:-- Marc Andreessen: The way the tech industry works is very helpful in this. If you spend a lot of time with engineers, you notice that list of rational reasons why something can't work is also the same list of all the technology and business opportunities with that technology. I call that the punch list of all the things for founders to do. As a good example, CryptoWeb3 has been going through this for the last 10 years. Bitcoin was greeted early on, Ethereum was greeted early on as, this can't possibly work, all these different reasons. Incredible engineers and entrepreneurs in the CryptoWeb3 space are now fixing all of those things.
--:-- Marc Andreessen: Today's actually a great day to bring that up because today's the day Ethereum merged, what they call the merge took place. Ethereum just today switched from the old method of proof of work to the new method of proof of stake. One of the old arguments against crypto, including Ethereum, was that proof of work burns all this energy unnecessarily. Proof of stake doesn't have that problem. The Ethereum developer community has basically taken one of those rational objections completely off the table. That's a great example of how these things actually do come to work.
--:-- Marc Andreessen: Here's the other thing, and this is also important. You're not always right. Just because every successful new technology is greeted initially as a joke does not mean that every new technology that's created as a joke is going to be successful. Sometimes you bet on an early stage technology and it actually doesn't work. It doesn't happen, it doesn't become real. I'm not even talking about fraud. I'm talking about we thought we had the idea, we thought we had the right people working on it, they just couldn't get the thing to work at the price point the market needed. A lot of the time it was 10 or 20 or 30 years too early.
--:-- Marc Andreessen: Virtual reality is a good example. I remember when there was the first VR wave. I actually worked on it a bit when I was in college in the late 80s. There was this big thing around virtual reality at the time. It just turned out you couldn't build VR headsets that worked properly 25 or 30 years ago. The technology wasn't ready yet. Of course, today you can. A lot of the time it's just being early. But being 30 years early is the same as being wrong. It doesn't help you any when everything you're working on fails and you have to wait 30 years. You have to be willing, if you're going to think in these terms, to be open to the idea that you're only going to be right part of the time. And you have to be willing to take the chances anyway.
--:-- Marc Andreessen: The way I think about it for our firm is, for every new technology we're exposed to, does it pass the basic sniff test of, if this worked, would it be a big deal? And then, are there really smart people working on getting it to work? If it passes those two sniff tests, we should probably be betting on it today. We will be wrong some of the time, but we will also be right early some of the time. The way venture capital works, you make more money off the winners than you lose on the things that don't work. You have to be willing to tilt into the risk.
--:-- Marc Andreessen: By the way, some people shouldn't do this. There are people for whom ever being exposed to failure is just too psychologically damaging. Or there are large companies that maybe shouldn't completely reinvent their entire business on the basis of a new and unproven startup technology. This is a time and place thing for some people and not for other people. But for those of us who want to be on the leading edge of new technologies, we have to be very open-minded.
--:-- Seth Smith: It's also a function of venture capital. The business or the industry you're in naturally requires some level of risk so that you get the reward at the end of the table. On that note of timing, I wanted to ask you about this because there are examples of specific companies, like Segway. Segway didn't work out. A bunch of people thought it would. That was truly something we probably won't see in the future. But when we're talking about larger industries, you use VR as an example. Are there really examples of technologies that a bunch of extremely talented people are working on, really foundational technologies like AI or crypto, that eventually doesn't work out? Several of us on the editorial team were trying to think of an example. As someone who has been investing in technology for so long, I was wondering if there has been a case where so many people have been wrong.
--:-- Marc Andreessen: The big probably famous example was alchemy. Alchemy was the technology to transmute lead into gold. There was this concept that you'd be able to build some form of machine or discover some material, what they called the philosopher's stone. All these smart people trying to figure out how to discover the philosopher's stone. Isaac Newton spent 20 years trying to figure this out. Maybe the smartest human being in history spent 20 years on this. At the time, they were serious. The dream was transmuting lead into gold. Lead is plentiful and worthless, gold is scarce and incredibly valuable. They were searching for the magic formula to essentially create wealth, turbocharge the economy, make society better in one step. They never figured it out.
--:-- Marc Andreessen: If you happen to know any material scientists, I don't think there are any active research programs today on literally turning lead into gold. But there is actually an example of this. There are now synthetic diamonds. There's now technology for turning carbon into diamonds. We didn't get gold out the other end, but maybe they got the diamond card to work. I cite that example because that was 300 years ago. You look back now and it wasn't really science as we understand it, even for Newton at that point. There was a lot of religion involved, and they were still figuring some really basic things. This is when Newton was still working on his three laws of how the universe works.
--:-- Marc Andreessen: More recently, there's a lot of things people talk about today that aren't working yet. We could have a very long discussion about those. Obviously, we can't see the future. You mentioned Segway as an example. I would guess that comes back. I would guess there will come a time when people will realize that actually was a really good idea. Let me spend a second on Segway. The theory of Segway was a two-part theory. Part one was the device itself. It got the backlash right up front for a variety of reasons, just like the car did. It became this running joke. If you like the very funny TV show Arrested Development, they take the goofiest, biggest asshole character in the show and put him on a Segway. But the device itself was only part one of the theory.
--:-- Marc Andreessen: Part two of the theory was that cities would get redesigned around the device. Why are cities laid out the way they are? Cities are laid out the way they are because of the car. There are something on the order of two billion parking spots in the United States. If you put all the parking lots together in the US, they would cover the entire state of Connecticut. It's this massive amount of space devoted to roads and parking for cars. Plus there are all the safety issues of cars, the pollution issues, the noise issues. The Segway guys at the time thought cities should get redesigned assuming there are no cars, but you don't just want people walking around. You want people to be able to move faster than that. You probably don't want to bring horses back. If you design a city from scratch, you could design it with sidewalks and paths. You could have lots of different Segway-powered things, including single passenger ones, but also little cards for four people, six people, cargo devices.
--:-- Marc Andreessen: It may be that just what hasn't happened yet is nobody's actually tried to build that city. Maybe there just needs to be a new kind of city. At some point, somebody will do that. All of a sudden, it'll be like, wow, those Segway guys 40 years ago were actually onto the right thing. If a lot of smart people are working on something, it's virtually guaranteed that it's going to happen. It's just a question of when. The when might be 40 years out. It might not be those people who get the benefit or harvest the gains from doing the new thing, but it ultimately will happen.
--:-- Marc Andreessen: If you go back across a lot of historical technologies, it took like 50 years to get the TV to work. There were optical telegraph systems 50 years before the telegraph systems we became familiar with. They had optical telegraph systems working in Paris in the 1820s, 1830s. The fax machine was invented in the 1870s. It wasn't commercialized until the 1970s. It took 100 years. The computer took like 50 years to get into consumer form and another 20 years after that to get into your pocket. The history here is these things often just do take a long amount of time. My conclusion from that is it's all going to happen. It's just this massive question of timing.
--:-- Seth Smith: On this idea of timing, sometimes all it takes is a change in regulation, a change in another technology becoming mass market that allows a follow-on effect. Something I've heard you talk about before are these unlocks that happened throughout history that have follow-on effects. One of them you've mentioned from way back is the ability for people to own land and how those incentives really spurred a wave of innovation because people had the incentive to build on top. Are there other unlocks that you're paying attention to today that you've noticed in the last five or so years? It could be COVID that allowed a bunch of people to work online, the next industrial revolution. Are there things you think are really meaningful from the last couple of years?
--:-- Marc Andreessen: The big one is the post-COVID world. The rise of remote work, virtual work. The reason I say that's the big one is because it seems relatively straightforward. You and I are recording this in different locations across webcams. It seems like just a new way to work. But it's actually deeper than that. The economic role of cities for basically all of recorded human history, going back 4,000 years, is what economists call agglomeration. The role of cities is to get a critical mass of people in a single place where those people are able to come together and do things greater than they could as individuals. That led to the creation of companies, technology, science, and culture. Almost everything today we would consider good about human existence came out of the fact that people gathered in cities. All invention basically takes place in cities.
--:-- Marc Andreessen: The role of the city was to attract the smartest, most ambitious, most innovative, most creative people anywhere in society, no matter where they grow up, and bring them to a city. Economists have this term they call superstar cities. These are the cities that turn out to be round zero for a fundamentally revolutionary thing and become a permanent hub. Historically, the San Francisco Bay Area has been the superstar city of technology. If you're a young, ambitious technologist, you want to go to the San Francisco Bay Area. You want to be a small fish in a big pond because you want to be around all the other smart people because the collective effect is going to be so powerful. Los Angeles is a superstar city for film and television. New York is a superstar city for finance, fashion, and arts. London, Paris, these big cities have played this outsized role in economic history. But they've all been based on this idea that you have to get all the smart people together in one geographic place so they can meet each other, talk to each other, work together, bounce ideas off each other, challenge each other. This is a 4,000-year history of how progress has happened.
--:-- Marc Andreessen: All of a sudden, for the first time in 4 years, we now have both the technology in the form of the internet, Zoom, webcams, remote work, collaboration tools, Slack, and all these amazing technologies. We now have this sudden proof during the very unpleasant, dangerous COVID lockdowns that companies were able to just keep running. Any company with knowledge work was able to just keep running all the way through COVID to a level of success that nobody envisioned was even possible before COVID. Now you've got this massive societal change underway. I think the societal changes from COVID are just starting.
--:-- Marc Andreessen: All of a sudden, people can say, I don't have to be in the San Francisco Bay Area or New York City or Paris to be part of the computer industry, the music industry, the movie industry, or finance. My kids are not going to have to be there. Even if I'm raising kids and I'm worried about their future, they don't necessarily have to be there. The potential to fundamentally disconnect where people live from where people work has basically been opened. If you can separate the where, you can also separate the how. What kind of community would be the best for kids to grow up in? Are the communities we built in the last hundred years, where it's been assumed you have to be part of these specific locations to fully participate in economic life, are these the actual kinds of communities you want to raise kids in? Or is there a completely different kind of community you would build if you didn't have to be in a specific place to have great jobs?
--:-- Marc Andreessen: We all probably know people like this. A lot of people are fundamentally reexamining what they want to do with their lives. Do they want to work in the industry they were working at before? Do they want to work at the employer they were working at before? Do they want to move to another country? They're completely rethinking how many kids they want to have, whether they want to have kids, whether they want to get reconnected back to the extended families they were forced to move away from. All these fundamental questions are being asked. I think 50 years from now, we'll look back and it'll be like basically the internet and then this were the two big things that happened.
--:-- Seth Smith: I have to agree with you. I've been working remotely for probably seven years now, a little bit before COVID. Something I'm finding fascinating is this idea of remote work, in my opinion, being a technology, or at least there are technologies that enable it. Similar to many other technologies we've talked about throughout this conversation, there is a substantial backlash. I have to give credit to the people who are pushing back on remote work because there are things to be fixed, just like we talked about. Every technology has problems to fix and those are business opportunities. I want to hear from you from the perspective you mentioned before of this power balance being messed with with every new technology. As more people start to work remotely and reconsider all of this, how would you frame the pushback of remote work with this idea of a power shift or society reshuffling?
--:-- Marc Andreessen: This really comes up. There are a whole bunch of angles on this, but the one I hear about all the time right now is when I talk to big company CEOs. You talk to CEOs of big banks, big software companies, big whatever companies. This basically is the conversation. What happened is, if you're the CEO of a big company today, you came up in an environment where everybody was in physical proximity. The whole way you came up, the whole way you played politics, got yourself in position, got yourself exposed to the important people, got promoted, did work with your teams...
--:-- Marc Andreessen: The way that you did deals, the way that you had relationships with other people in the industry, you dealt with customers, it was all based on in-person proximity. And which meant either in the office or, by the way, it meant on the road, business travel. That's true basically of the entire management hierarchy of every existing big company. They're all like that. So all of a sudden, now you have this incredible phase shift happening. Now it's like, okay, a whole bunch of questions open up. How does the company organize? What is the balance between a person and remote? What are the implications of that for the org chart? Job roles change. Geographically, where should companies be located?
--:-- I'll give you an example. I talked to the head of one big company based in Manhattan. They've got about 20% of their employees who are these super advanced knowledge workers, and about 80% are kind of back office, white collar clerical workers. That CEO is like, "Look, the 80% clearly don't need to be in Manhattan anymore. We can put them in South Dakota. We can pay them half as much. Their standard of life will be twice as high. They'll be a lot happier." And we can do that. Now, he says, "I think we still need to keep the 20% of the creatives together." But by the way, the creatives get a vote too. If they decide to leave the in-person job and go remote and work for another company in that industry that's willing to hire remotely, they have the ability to do that.
--:-- So a lot of these companies, I think, are going to really dramatically restructure over the course of the next five years. A lot of these big company CEOs are like, "We could never go full remote. That's impossible. We can't do it." You talk to startup CEOs and they're like, "Well, maybe we can."
--:-- I'll talk our book for a second. I'll get as close as I can to saying that we might have something figured out. Look, it may be that the remote work revolution is just really bad for big companies. It just may be that it takes existing systems and models for how big companies operate and basically breaks them. It may be that remote work is the kind of thing that you need to build a new company to be able to know how to do properly. You need to build a culture from scratch. You need to build systems from scratch. You need to build processes from scratch. Remote companies just need to get built differently. It might actually not be possible to reconstruct a big old company that's done things one way and just restructure it so that they can do things a completely different way.
--:-- This may accelerate the process of turnover where some big companies go away faster and some new companies get much bigger faster. That's a possibility. Or, by the way, maybe I'm full of it. Maybe the opposite is true. Maybe it turns out remote work just isn't good enough. Maybe we don't have the technologies yet. Maybe we need holographs. Maybe we need big teleconferencing rooms.
--:-- I'll give you an example. Maybe every company of a certain size should own its own hotel resort. Maybe what happens is basically every team should be in residence at a really cool hotel resort location for a month in the spring and a month in the fall. The company should be running their teams through that. Unless they do that kind of thing to have critical mass, the bonding, maybe it just won't work. Maybe that's a new kind of real estate development that has to happen, these corporate resorts. You'd be in an attractive enough place where you're willing to be away from home for a month. Maybe you can even bring your family with you. But everybody gets to work together like that. Those don't exist today. I'm just speculating. But maybe there are things like that that we have yet to figure out. I just have a very strong sense that on the other side of this, the world is going to work very differently.
--:-- Seth Smith: I do too. What you're saying reminds me of something that when I had a chat with Neil Stevenson, we talked about when electricity was invented. It was very easy to think, "Okay, electricity can be applied to lighting." People can see that line. But the example he gave was electric guitars. Not many people, when electricity was first being invented, could think, "Oh, okay, we're going to have electric guitars from this." When you have these really foundational shifts like remote work, it's very hard to think about those second and third order effects. But you do know they're going to happen. You just don't always know exactly how they're going to manifest.
--:-- I wanted to ask you quickly, because A16Z has moved to the cloud recently. Was there an "aha" moment, or was there a specific thing that got you to change your mind? Or were you always kind of coming around to this idea? A lot of people say "strong opinions, weakly held," but not many people actually operate that way. It was interesting to see A16Z actually make a shift from previously being in the office to moving to the cloud. Was there something that unlocked that?
--:-- Marc Andreessen: People who know me will confirm I was very anti-remote work basically before COVID. I was probably pretty far on the end of the spectrum of people thinking about this and not being open-minded on it. That was true of us as a firm. We historically ran a single office in Menlo Park. We actually refused to open an office in San Francisco for 10 years because we wanted critical mass in the office. People who worked or visited our office between 2010 and 2020 will tell you it was a high activity, really cool place. There was always amazing stuff happening and amazing people walking around. We wanted that kind of hothouse environment, and we got it. But that meant everybody had to be in the office.
--:-- The other thing I always maintained was, look, there's this theory of remote work, but it hasn't yet worked for any company at any level of scale. The only companies that have made it work are very small. And then I said, look at the data. The data basically says the superstar city thing I mentioned is in full effect. Venture capital, the funding for technology, was actually concentrating more and more into the Bay Area between 2010 and 2020. The money was flowing more and more into the single place, the people were flowing more and more into the single place. The Valley as a place was bursting at the seams, housing became crazily expensive, transit is a disaster, our politicians hate us. There are all these issues. But this hothouse environment, this agglomeration hothouse, was real. It's the thing that traditionally made the Valley so special. It's why this has been the hub for 40 years where almost all the great breakthroughs in technology have been happening. I was very much on that page.
--:-- For me, it was literally going through COVID. We were looking at this on a couple of different levels. How is our firm going to operate under lockdown? How are our companies going to operate under lockdown? How is the industry as a whole going to operate under lockdown? For example, how will new companies get started under conditions of lockdown?
--:-- On a completely involuntary footing, we ran this experiment for two years. One of the things we did is we did surveys the entire time. We did repeated sampling of the different constituencies to try to get a data handle on what was happening. Six months in, people were super nervous. "Are these companies even going to continue working?" Twelve months in, people were like, "Well, actually, it turns out remote work, at least for now, works just as well. If anything, maybe even better because people don't have anything else to do, so they're actually working more." The new problem was burnout. Eighteen months later, it was, "Well, actually, we're going to start hiring remote people. Now that we can do remote work, we can hire people who don't live near the campus. We can hire more broadly." You could see in the data the beliefs moving.
--:-- Basically, what Ben and I decided with our colleagues at the firm is that the firm is built to live in the future. The firm is built to fund the best new companies and work with the best new entrepreneurs building the future. We want to be the leading edge of the industry. This is such a big change for the industry that we have to live it. It doesn't make any sense to try to maintain the old model where we're basically funding the new model. We have to live the new model.
--:-- I think it's going very well. Having said that, we're still figuring it out. We put a big premium on having offsites. We take offsites really seriously. We really take getting people together on a regular basis very seriously. We have whole teams inside our firm now devoted just to orchestrating all that. But do we have the right balance of remote versus offsite? Do we need to have more soak time? Do we have the right tools and systems in place? The right management practices? We're certainly still figuring it out, but we're definitely on that path.
--:-- Seth Smith: The reason I asked you how you made that shift, or almost changed your opinion as you got new data, is because I wonder how perhaps we might be able to do that within the framing of how people view innovation and technology. Returning to what we talked about at the very beginning of this conversation, it does feel like there is this perception of technology. Of course, not everyone holds it, but we're in a bad place, or the world's getting worse, or insert negative thing about our current state of affairs. I think it's really inspiring, at least at A16Z, to see that people hold this very optimistic view. I wonder what you think we can do as a collective, as a society, to maybe orient more around this more positive view of technology. From my understanding, and I'd love for you to go into this history, it doesn't sound like this was always the case. Specific technologies were viewed quite negatively, but a sense around innovation, I think, has been different in the past. Is that right?
--:-- Marc Andreessen: Technologies have always gone through this cycle. I would go so far as to say the technology adoption cycle, resistance cycle, I'm not sure it's actually going to change. Douglas Adams, the science fiction author who wrote *The Hitchhiker's Guide to the Galaxy*, had another take on this. It's both very funny and very serious. He said basically any technology that existed before you were 15 years old is just the natural order of things. Any technology invented between the time you're 15 and 35 is new and exciting and cool and cutting edge, and maybe you can make a career in it. Any new technology that arrives after the age of 35 is unholy and against the natural order and is going to bring doom to civilization.
--:-- Another famous quote, I think it's the great physicist Max Planck who once said, "Science advances one funeral at a time." In science, you need the old senior scientists who have one paradigm to literally die off so that the young scientists in the new paradigm can take over. That pessimistic view would be that this is just so deeply baked into the mentality of how people operate psychologically that it's the primitive state of affairs.
--:-- I don't know if that's optimal for society. I will tell you that state of affairs is very good for entrepreneurs. If more people in positions of power were more open to new technologies, the opportunity, especially for the young entrepreneur with a breakthrough idea, would actually diminish because the big old companies would already be doing all the new things. One response to me would be, "Marc, shut up. Stop talking to people about this because we actually want everybody in a position of power to just assume that all new technologies are stupid and evil because we want all the opportunity to be available to all the kids who are starting all the new companies."
--:-- Then there's this broader societal thing happening. Different societies have different ethics and belief systems around the fundamental idea of progress. I won't name names, but there are certain societies in global history that at different points in time have decided, "We're just not going to do new things. We're not going to talk to outside people. We're not going to adopt new technologies." North Korea is a society like that today. Another example, the Amish have an entire religion and belief system around the fact that they don't adopt new technologies. I'm a free markets, free minds guy. I think people should live how they want. If they want to live that way, that's fine. It's a choice. You can choose not to think progress is a good thing. I would argue in the fullness of time, it's hard to have your quality of life be at the same level as if you're more open to new technologies. But societies do decide that they don't want new technologies.
--:-- If you look historically at the US and more broadly the West, you see this pattern where there was a lot of resistance to new ideas from the end of the Roman Empire through to the Renaissance, the so-called Dark Ages. There was a 1,200-year stretch where not much happened. Over the last 500 years in the West, this ethos of progress emerged: the Enlightenment, the Scientific Revolution, the Industrial Revolution, the rise of Protestantism, which was very important because it meant people could seek out the answers to life's mysteries on their own, and the rise of natural philosophy that became science. A system was developed to uncover scientific truths, build new technologies, and build a modern capitalist economy on top of that.
--:-- If you asked people in 1880, 1900, 1920, or even 1960 if they thought that whole set of things was a good idea, most people would have said yes. This is the era known as modernity. This was the era of wanting progress in civilization, higher standards of living, being able to look back and say, "Yes, we advanced civilization compared to what our forefathers had." Books written in those eras take great pride in all the progress that's been made.
--:-- In the West, in the last 50 years, that's kind of gone sideways. An ethos started in the 60s and extends into our era that basically says, "Maybe a lot of this stuff is not so good. Maybe it's bad for the environment. Maybe we've had enough progress. Maybe we've had enough science. Maybe we've had enough technology." The classic example is nuclear power. We invented a way to have unlimited clean energy, and then we just decided we don't want it. If you told people in 1910 that they could have nuclear power, there would be 10,000 nuclear plants in the United States running today. But you tell people in 1975, 1998, or 2022 they can have nuclear power, and they're like, "Yeah, let's not have any of that."
--:-- I think there has been this negative cultural shift. Tyler Cowen calls this complacency. Ross Douthat calls this decadence. There's been this shift to, "Eh, things are good enough. We don't need more of this." Or the more extreme form: "All progress is bad. All these new technologies are flat out bad. It should all stop." The Unabomber kind of argument.
--:-- Seth Smith: People weren't born with that mentality, right? People weren't born with "progress is bad." They've learned that. I do wonder, is it just because things have been so good? We've done so well. You mentioned this mentality within the West where people no longer have something to strive for, even though they certainly do. Is that just a reality that things have gone so well that people have obtained this mentality?
--:-- Marc Andreessen: That's a theory. Some people are calling it the "upper income trap." The theory is that once people hit an upper middle class standard of living, they have a house, a car, college, a hospital nearby, Netflix, good restaurants. At some point, they're just like, "Eh, it's fine. It's good enough. Anything beyond this is probably excessive."
--:-- Some people are joking right now that this explains the Fermi Paradox. The Fermi Paradox is the question of why we don't know of other civilizations in the galaxy. There are billions of planets throughout the universe. We should be able to pick up signals, TV broadcasts, civilizations traveling across space. Why is it still, after all this time with all these radio telescopes, just humanity on planet Earth? This argument basically goes that other species of aliens develop the same level of upper middle-class lifestyle that we have, and then they all just shrugged and said, "Eh."
--:-- Look, mankind went to the moon. We went to the freaking moon. We went to the moon a bunch of times. The last time humanity went to the moon was in 1972. It's been 50 years since we went to the moon. Our answer to that is... Elon comes out and says, "Let's go to Mars," and everybody's like, "Wow, I guess we could." In 1972, it was the obvious next step. Of course you go to Mars. First you go to the moon, then you go to Mars, then you go to Jupiter, then at some point you're going to other solar systems. Of course this is the arc you want to be on. We in our advanced era just decided, "Yeah, let's not do it."
--:-- I think there's something to that. This gets into theories of social change, societal forces, political forces, religious forces. I've got theories for hours on how we got here and what the problem is, but it very rapidly gets political. It's hard to talk about societal structure without getting into politics, so I try not to get too far into what I think on some of these topics. But it is this prevailing ethos.
--:-- One way to think about it is there are three eras in human existence. There was pre-modern, which was basically caves all the way up through kings. Then there was modern, which is science, technology, democracy, capitalism, and progress. Now you could argue we're in this postmodern phase where we're just going to sit around and argue all the time instead of actually doing anything. I would like to believe that Netflix and chill is not the terminal point of humanity.
--:-- Seth Smith: I think this picture you're painting of a bunch of other alien species getting so complacent that they just decided never to venture out, or maybe they discovered VR or just went into their screens the way a lot of people are going today... I want to ask you about what you're excited about, because you are someone, amongst a large cohort of people, who is excited to go to Mars or to take things further than we ever have before. I think that's exciting, and I think many people take inspiration from that. Within that dimension, what are you excited about? We already talked about the next industrial revolution through remote work. Are there other things where you're like, "Wow, this is really game changing, this is really exciting, and I'm glad that we as a society have smart people working on this"?
--:-- Marc Andreessen: There's a bunch of things. The easy ones to bring up off the cuff are AI. It's amazing what's happening with machine learning right now. Biotech, the genomic revolution, is a really big deal. We're seeing mind-blowing concepts now on that front. I won't reveal it, but we saw one the other day where I literally had to stop in my tracks, my jaw hit the floor. I had to spend the next hour just processing what I had just seen. It's one of those "this could change everything" moments. Biotech is going through a lot of really profound change.
--:-- Crypto, web3, we've talked about at length before as a firm, but I think it's very profound. There's a bunch of other spaces like that. Space. Elon, God bless him, has reinvigorated the whole idea of space. He tweeted the other day that they have not yet discovered an upper limit on how many launches they can do with the same rocket. Rockets went from disposable, one and done, all the way to he's not sure. They go up 50 times, 500 times, 5,000 times. We'll see. Really revolutionary things happening on that front.
--:-- A couple of other big things I would highlight. The long-term implications of the internet, I think, are still in the early stages. One that is in the background but really important and relevant to everything we've been discussing is that most people in most of history have not had access to the leading edge. Most people throughout human history who have been super smart, super curious, super ambitious, and willing to work hard, most of them have never gotten to one of those cities I was talking about. Most of them never worked in an advanced field. Most of them were doing subsistence farming or whatever the local thing was. They never got an opportunity.
--:-- Even with music, most of the people who could have composed great music never got the chance. They never got the training. They never had access to the culture. They never had the ability to produce music. They just couldn't do it. You could say that's true of everything from music to art to books to science to every field of human activity. The internet really is the great equalizer, leveler, opportunity machine for basically anybody on the planet who is curious and has an internet connection to be able to learn, explore, start to create, start to join, and meet like-minded people.
--:-- In my optimistic moments, I think of it as humanity as a sort of group organism, the true global society, just waking up for the first time as a consequence of being all connected online. There are good aspects of that and maybe bad aspects of that. But it is this fundamental thing that's happening. Hopefully we will discover that there are 10, 100, 1,000, 10,000, or a million more people around the world who could be doing really original creative work who just never had the chance in prior generations. All of a sudden, you imagine things progressing much faster as a result of that.
--:-- Seth Smith: I think even another aspect of that is more people coming online are getting access to remote work. Another second order effect is that remote tends to be more asynchronous. Certain people don't always benefit from the nine to five, as an example. I saw this infographic today of the schedules of all these luminaries from back in the day who had created wonderful things, and they were all over the place. As more people get access to this information, as more people have access to different types of schedules or different types of companies or people facilitated through the internet, I think we're going to be really surprised by what comes out of that.
--:-- Marc Andreessen: That's right.
--:-- Seth Smith: One thing I really want to ask you about is how society values certain things. I've heard you talk about this to an extent before. Society will fluctuate throughout time, and different people within that society will value different things. But society as a whole does seem to find virtue in certain things at certain times. For example, you mentioned before that in history, maybe entrepreneurs were valued more. As people built things, society rewarded that type of achievement. How do you view that changing today? What do you think society is valuing today? And perhaps, if you're willing to share, what do you wish society valued more?
--:-- Marc Andreessen: So basically, there's this theory. This guy James Burnham articulated this theory back in the 1940s that I think applies. He called it at the time, he called it the managerial revolution.
--:-- Marc Andreessen: So basically what he said was there are basically two phases to capitalism. There was basically what he called the phase of bourgeois capitalism, which is sort of famously the phase of the robber barons, the phase that the communists hated, the rise of bourgeois culture. The bourgeois capitalism era was the era of Henry Ford and Thomas Edison and Andrew Carnegie and JP Morgan, all these kind of iconic business builders who built the companies, often named the companies after themselves, often ran the companies their entire lives, drove the companies through sheer force and personal animal magnetism.
--:-- Marc Andreessen: And then he said basically there's an evolution that takes place, and it kind of started in the 30s and 40s and extends into our period. He called that the era of managerial capitalism, or more generally, he called it managerialism. The idea is it's the second phase of capitalism. It's the phase at which you can no longer just have a guy like Henry Ford who just orders everybody around. Modern business, modern technology, modern society is too complicated for that.
--:-- Marc Andreessen: The model of capitalism goes from sole proprietorships in the bourgeois era to the modern multinational Delaware C corporation with a board of directors, an executive management team, and a CEO. The CEO is probably not the founder. The CEO was probably trained in business school. Henry Ford never went to business school, but Jim Farley running Ford today, I'm sure he did.
--:-- Marc Andreessen: So you have the rise of the managerial class, the rise of these people who are sort of technocratic experts who would never start their own thing. They would never invent the car or start the car company, but they are necessary to run the large scale industrial organization that is a modern giant car company or a modern giant electrical grid or a modern giant telephone network or a modern giant chip company.
--:-- Marc Andreessen: It's a shift from founder-led companies to professional CEO-led companies. It's top-down dictatorial management versus bottoms-up consensus management. It's the principal running the company with his name on the line and his entire net worth in the company, versus what you refer to as the principal agent problem. These companies are run by people, but are they really going to be with the company for the next 30 years? They get paid annually. Are their incentives more annual as opposed to long term?
--:-- Marc Andreessen: Burnham said this is an inevitable process to go from bourgeois capitalism to managerial capitalism. It's inevitable because of scale and complexity. Henry Ford today could not run Ford Motor Company. It's too big and complicated. You need a different skill set. But he said it is a very big social cultural change. It's a change from valuing individual aggression, individual merit, individual achievement, individual accomplishment, individual force of will, to a much more collective way of operating. Groups operating in consensus collaborative form, people having to come to agreement on things, committees, bureaucracy.
--:-- Marc Andreessen: The way I view what we do in venture capital is we are the throwback. The startups that we fund fit that old model. We're trying to find the next generation of Henry Fords and Andrew Carnegies and Leland Stanfords. We're trying to find those modern bourgeois capitalists who are throwbacks to the old model. Why are we doing that? Because that's the only way to do something new. That was the model for doing new things. All these things used to be new. If you want to do anything new today, you need to bring back this model of bourgeois capitalism.
--:-- Marc Andreessen: Then we work with our companies to try to keep them from turning into this board-like managerial capitalism outcome on the other side, becoming just like every other big company run by professional CEOs.
--:-- Seth Smith: I was going to quickly ask, how do you stop that?
--:-- Marc Andreessen: I don't know that you do.
--:-- Seth Smith: Well, Burnham would say that you don't.
--:-- Marc Andreessen: Burnham would say it's an inevitable process. If he was talking to me, he'd say, "Okay, smart guy, you're just going to keep repeating history. You're going to start these companies, you're going to have a Henry Ford kind of character in charge, but at some point they're going to reach a level of scale and complexity where one guy just can't run everything. You're going to need to bring in the experts, the technically trained managers, the people with business school degrees who have grown up getting trained to run large-scale systems. These companies are naturally going to evolve in that direction."
--:-- Marc Andreessen: And then Burnham made the following point. He said the transition from bourgeois capitalism to managerial capitalism is not just happening in business. It's happening everywhere else in life. It's happening everywhere else in our society. For example, it's also happening in the government. Take the U.S. federal government. There have been three different forms of federal government in the last hundred years. There was the pre-FDR era where the federal government was just small and not very relevant. Then there was the FDR era where he appointed himself king, made himself essentially the Henry Ford of the government, and just told everybody what to do. That was the New Deal and World War II, the model of imperial presidency.
--:-- Marc Andreessen: And then there's the model of the government we have today, which is just bureaucrats as far as the eye can see. That's not structurally how anything is supposed to be running anymore. You're not supposed to just have a guy who tells people what to do. You're supposed to have process. You're supposed to have managers. You're supposed to have experts. You're supposed to have professors. You're supposed to have think tanks. You're supposed to have the press. Everybody's supposed to weigh in. You're supposed to have this big conversation. Everything has to be negotiated.
--:-- Marc Andreessen: Burnham would say the entire society transitioned from individualistic to collectivist, or let's call it bureaucratic, or as he would call it, managerial. That's happened to all of society. This is the experience you have as an individual. Everywhere you go in life now, you're dealing with some bureaucracy. You've got a problem with your cable internet hookup, you talk to the cable company's bureaucracy. You can't call the CEO of the cable company, and if you did, he can't do anything. It's going to be somebody deep in the bowels of the organization that's going to get your internet to work.
--:-- Marc Andreessen: You need to get your driver's license renewed, you go to the DMV. You go out to eat, and the place is one of 3,000 restaurants that that company manages, all identical. Everything you do, mass manufacturing. Everything you buy has been manufactured by a company that's manufactured for scale. All of your entertainment, you watch a movie, it's the same movie 100 million other people are watching. The actors don't come to your house anymore and act out a play. You're watching a mass produced production built by this giant bureaucracy in Hollywood.
--:-- Marc Andreessen: And then you're like, "Wow, this movie seems like I've seen it 80 times before. Why aren't they making more creative movies?" Well, it's because movie making is a machine now. Movies cost $300 million and there's a whole process and a whole bureaucracy for making these things.
--:-- Marc Andreessen: Burnham would say the whole country, the whole society has evolved into this kind of bureaucratic managerialism. Another word for that is just stagnation. The whole system is on autopilot. The whole society is on autopilot. The government's on autopilot. It's all on autopilot.
--:-- Marc Andreessen: And then every once in a while you get an Elon Musk, or you get the kinds of founders that we deal with, and they step forward and say, "Actually, I have a different idea." And then they have the temerity to build a new piece of software or start a new kind of company or propose some other creative idea. You see these perturbations in the force where these creative individuals pop up. And then society freaks out and everybody's got an opinion on the whole thing.
--:-- Marc Andreessen: But if there is to be progress, if there are to be new ideas in the world, new concepts, new forms of art, new forms of culture, new ideas, new forms of politics, new ways to think about how you raise kids, basically anything new, it's going to come from some unusual individual stepping up and saying, "I think that this system is wrong." That's the fundamental battle that we'll probably spend the rest of our civilization trying to balance.
--:-- Seth Smith: Yeah, I can see the example with a company. These companies stagnate, and then new startups come and replace them. That's something we've seen over and over. It also happens at the individual level. You see celebrities become popular, and then they just go and do the same movie over and over because they're trying to retain their following. Then people move on to the next new thing.
--:-- Seth Smith: Something that we talked to Balaji about, because he came on to talk about the network state, is the need for this kind of revolution or innovation at the government level or the state level. I'm just interested in your perspective on that because we have seen it at the individual level, the company level, but we are seeing stagnation at that higher government level. Are you also thinking that we're going to see some of these smaller nations or completely new nations come up as we see the stagnation in the Western world?
--:-- Marc Andreessen: Yeah. There's this great word that gets used, "reform." But reform is one of those words where my ears always perk up because I kind of know the game is being played. I'll give you an example. I have all these friends who are very into this thing they call education reform. They're philanthropists. They've been successful, they've got money, they've got a foundation, and they want to make the world better. They look around at the big problems in the world, and inevitably they end up looking at public education.
--:-- Marc Andreessen: They're like, "Wow, public education is this huge force in our society. All these kids, legally you have to send your kid to a public school. The outcomes seem really bad. We keep injecting more money into these schools and the results don't get better. There's all these problems, child abuse, teacher sex scandals, controversies over the curriculum. This thing seems like a giant mess. Therefore, we need education reform."
--:-- Marc Andreessen: They go into the bureaucracy and they try to retool it, improve it, make it better, re-engineer it. The story is always the same. They go in, they do all this work, they spend all this money, and nothing changes. There have been many famous cases of this. I won't pick on people, but I will say the Gates Foundation has done a lot of work in this area. To their credit, they actually came out with a public report about four years ago where they did a retrospective of the last 50 years of education reform efforts. They did this big report, and basically the result was nothing has worked. Nothing has worked for 50 years. There has not been a new idea in 50 years that has been tried in large-scale education that's had any impact at all. The whole effort has been a complete zero.
--:-- Marc Andreessen: I've become convinced that's basically universally true. Things don't get reformed. If you have a problem with an existing institution or existing system, for the reasons we discussed earlier, it's not going to get better. It's not going to get reformed. You can spend an arbitrary amount of time and money trying to reform it and improve it. It's not going to happen.
--:-- Marc Andreessen: Why is it not going to happen? Because it doesn't have to happen. The people running it don't want it to happen. This is the principal agent problem. The people in charge aren't actually responsible for it. There's the incentives problem, especially when you deal with large bureaucracies. People are much more focused on not getting fired than they are on improving anything.
--:-- Marc Andreessen: A lot of presidents encounter this. A lot of presidents come into the White House for the first time and they're like, "Wow, I have all these ideas on how to make the government better." They issue all these orders, and then the bureaucracy just ignores them. The federal government employees know the president's come and go. The president's going to be gone in four years or worst case, eight years. Nobody's even going to remember what that guy tried to do. They just wait out the politicians, and nothing changes.
--:-- Marc Andreessen: By default, it's stagnation as far as the eye can see. I've reached the conclusion, this is kind of how I spend my time, and this is why I continue to do what I do, and I think I'll basically do it forever. I no longer believe in the concept of institutional reform. I think fundamentally it doesn't happen, or it's so rare as to be something you can't ever count on.
--:-- Marc Andreessen: I think progress happens by starting new things. If you want to reform the school system, the thing you need to do is build new schools from scratch, built the correct way. If you want to have a new car company, if you're Elon Musk and you want to have a car company, you don't spend your time trying to get whatever existing car company to build a better car. You just start the car company.
--:-- Marc Andreessen: And then our friend Balaji extends it one step further. He says, "Okay, you don't try to reform the country. You just start a new country." The obvious challenge is there was an era of human history where people were starting new countries. All the countries that we have today are countries that at some point somebody started. Unfortunately, in the modern era, the real estate on the planet has kind of been divided up. The world's not really that amenable to changing which country controls which territory through conquest. That's kind of frowned upon these days.
--:-- Marc Andreessen: Starting a new country in the modern era is probably not a process of going and staking out a bunch of land and declaring yourself a new kingdom and implementing your own legal system. It's probably something else. Balaji's book explores the something else with this idea of the network state. As usual, Balaji pushes it to a level probably beyond where I would. But I think everything he says, his situational analysis, is 100% correct.
--:-- Marc Andreessen: Overall, you could say this is a very depressing analysis of the state of affairs. This basically means the world is going to stagnate. There's a lot to that. But there is always this concept of arbitrage. If most of the world is not doing new things, then the person who can do something new has an outsized opportunity. This is the thing that gets me up every morning. Because most of the world will not change. Most existing companies won't change. Most existing bureaucracies won't change. Systems won't change. People won't change.
--:-- Marc Andreessen: Because of that, the person who has the genuinely new idea, who's willing to put themselves on the line and try to build something new, has a really big outsized opportunity. If they succeed, they'll get all the benefit. They'll get all the gains. They'll all of a sudden be the person who's building and running everything, because it's not going to be the status quo that adapts. All opportunity in the world is still available to these disruptive new entrants.
--:-- Marc Andreessen: The more the older world stagnates, the bigger the opportunity on the entrepreneurial side. Honestly, I think that's what keeps us in business in perpetuity. The model of entrepreneurial capitalism, or more generally just entrepreneurialism, having new ideas and putting them in the world, that model is the only source of progress.
--:-- Seth Smith: Yeah, I love the way you put it of not counting on the status quo to innovate. I think that by nature allows the really intelligent, the really creative, the really innovative people to have an opportunity. If we use companies as an example, if smart companies that became big stayed smart, then we wouldn't have opportunity for new smart people to innovate. There wouldn't be room.
--:-- Seth Smith: I think that's a wonderful place to end because I think throughout this conversation, you've highlighted so many opportunities for people to get involved and for new businesses to be built. And I think most importantly, as we started off this conversation, you've really highlighted why it's still important. As silly as that sounds, it's still so important for us to build because things do stagnate and there is so much more to be built.
--:-- Seth Smith: So thanks, Marc. Thank you so much for talking to us today.
--:-- Marc Andreessen: Thank you, Seth.
--:-- [Outro music begins]
--:-- Host: Thanks for listening to the a16z Podcast. If you like this episode, don't forget to subscribe, leave a review, or tell a friend. We also recently launched on YouTube at youtube.com slash a16z underscore video, where you'll find exclusive video content. We'll see you next time.
