E155: Ben Horowitz: "The Classic VC Model Is Done”

In this thought-provoking debut episode of Turpentine VC, Erik sat down with Ben Horowitz, Co-Founder of Andreessen Horowitz, to explore the evolving landscape of venture capital, leadership, and the future of innovation. Ben shares his insights on navigating market cycles, building resilient companies, and the role of culture in long-term success. This conversation, recorded live at a16z’s Menlo Park offices in 2023, is packed with practical wisdom and candid stories from one of Silicon Valley’s most influential investors.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Weisburd?

  Today, we're excited to share an episode of Turpatime VC, a podcast about the art and science of building venture capital firms hosted by Eric Thornburg. Guests on the show include Vinod Khosla, Alfred Lin, Sarah Tavell, Mike Maples, and more top GPs of the world's top venture firms. Unlike other shows in the space, Turpatime VC digs into nuts and bolts of firm building, covering fund construction, governance, talent, strategy, and decision making. Up ahead is Eric's interview with Ben Horowitz, general partner and co-founder of Andreessen Horowitz.

• 0:36Speaker 01

  Ben, we're just talking off camera, there's some firms that are great for 10 years and then struggle. There are some firms that are great for 30 years, multi-decades. What separates the firms who can do that and what enables them to be great?

• 0:49Speaker 02

  Yeah, I think it's a combination of kind of the lasting parts, like the culture, and then the parts that change, like the leadership. And so I think that, you know, if you just have a couple of smart investors, but no culture to speak of, then you're probably not going to do a great generational handoff. And, you know, that's probably 10 years. 10 years is a pretty good run for investors, you know, like maybe you stretch that out. Then, you know, if you can transition it, like, you know, Sequoia transitioned it from Don Valentine to, you know, Mike Moritz and Doug Leoni and Jim Getz, and that worked, you know, that

• 1:34Speaker 02

  transition worked well. So they were able to kind of take the original culture and build on it and kind of grow it, you know, 20 years for the original guys, 20 years for the successors and that kind of thing. So that goes pretty well.

• 1:48Speaker 01

  You guys are no spring chickens, you're almost 15 years.

• 1:50Speaker 02

  Yeah.

• 1:50Speaker 01

  How do you think about it for your firm?

• 1:52Speaker 02

  Yeah, so we're a little different in that we are organized in such a way where it's not, like Mark and I can have like very significant contributions without picking the investments. Because, you know, we have, I would just say, more scale and more job functions at Andreessen Horowitz because we're kind of

• 2:18Speaker 02

  A product first and then a team of investors second, whereas every other firm I think is the opposite. Product, meaning the product to entrepreneurs. So like, what are we offering is where we start. And then the team of investors is kind of goes with that as opposed to we're a team of investors and then like, we'll figure out what our product is as we go. So it's very kind of different orientation.

• 2:45Speaker 01

  I've always thought of Y Combinator as another example of a product firm in the sense that you could replace a lot of the investors and they have over time, and yet it still seems to work to some degree.

• 2:54Speaker 02

  I think that's right. Like, I think they're probably, you know, the closest analog to us kind of spiritually.

• 3:02Speaker 01

  Yeah. So they're spiritually close to you, but they're much earlier and they dominate kind of like a company creation. Whereas you, you know, you do a lot of seed, of course, too, but you've played all, all stages. Have you thought about going after that space like pretty hardcore? Or how have you thought about where you situate in the ecosystem?

• 3:17Speaker 02

  Yeah, you know, it's funny because we, Paul and us started, you know, around the same time. He started a little earlier. And, you know, we talked to him quite a bit during that phase when he was running Y Combinator out of his house with Jessica.

• 3:35Speaker 02

  And, you know, I have to say, we, we never really thought about kind of being Y Combinator. And I think like a lot of it has to do, you know, my philosophy of business is you have to start with, okay, what can you contribute that's going to be important in the world that nobody can do better than you? And, you know, for us, a big thing that we had done is we had scaled companies, built them to very large size. That wasn't really kind of Paul's experience, but he had thought super deeply about like the very initial kind of part of it. So I think that was the right thing for him to do and we did the right thing for us to do.

• 4:15Speaker 02

  And I think the world was better with us doing our thing and him doing his thing, but like, he's got a great business.

• 4:21Speaker 01

  Totally. And so you're, you're a product.

• 4:23Speaker 02

  Like he and his success.

• 4:24Speaker 01

  Yes, totally. The, um, most venture firms are a collection of investors. So you're a collection of venture firms in some way where you have these distinct, you know, American dynamism and bio and crypto and games and these different practices.

• 4:39Speaker 01

  Should other firms, are you guys ahead of a curve and other people, other firms will follow you? Or talk about the evolution to that structure and why that made so much sense.

• 4:47Speaker 02

  Yeah, so it's interesting. So when we started the firm, there's a lot of conventional wisdom in venture capital, like you're only 15 deals a year that are ever going to make it to $100 million. You know, it's a cottage industry, you know, done by like you can only learn it through apprenticeship and all the, you know, a lot of concepts, which I think we're probably correct at the time, but the, the thing that we believed then, and Mark kind of encapsulated in a piece he wrote in 2011 called Software is Eating the World, was the software industry was going to grow 100-fold. And so 15 companies

• 5:27Speaker 02

  can be 150 companies and like things were going to change. And so in order to kind of be the preeminent venture capital firm, you were going to have to be a lot bigger. So we kind of saw that from the outset. And so we set ourselves up to be able to kind of organize, reorganize, evolve. And if you look at the firm now, what it is, is it's right, it's a collection of the original Andreessen Horowitz, where every market has a platform that's appropriate to that market and an investing team that is focused on that market. And I think that that's the future of venture capital. Like when we think

• 6:07Speaker 02

  about who's really an interesting competitor, it's the pure crypto firm, the pure games firm, the pure AI firm, more than the generalist firm that's trying to cover all of that with the old structure. I think that's going to be harder for them.

• 6:23Speaker 01

  Speaking of the future of venture, will venture firms consider going public? Or should they consider like a YC or like you guys, or firms that achieve such level of scale?

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• 6:49David Weisburd?

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• 7:07Speaker 02

  Yeah, so there's a real interesting alignment problem with going public if you're a venture capital firm. And it's as follows. So if you look at Apollo or, you know, Blackstone or any of these guys, private equity companies that have gone public. The public markets value them on their fee stream much more than on their investment returns.

• 7:33Speaker 02

  I think that's a safer, you know, kind of alignment between the investors and the firms in private equity than it is in venture capital. I think in venture capital, that can get super dangerous because the, even at 100x, what it used to be, the entire venture capital market is not that big. And it's, you know, like the, the amount of capital versus the amount of great ideas. Like, we already have more capital than great ideas. And as we saw, I think with both SoftBank and Tiger Global, if you try to change that demand, supply imbalance, you just end up creating a mess. And so if you were public, you'd have a strong incentive to create a mess.

• 8:18Speaker 01

  Well, so they went big and created a mess, but you, you guys went as big in some ways, right? Your, your volume was, was very high, your, you know, funds raised is very high. You went big in a much better way. Is, is, would you dispute the

• 8:31Speaker 02

  We didn't go $100 billion. And then I think Tiger was raising 12 billion a year. So they, they were bigger than us just technically. So, yeah, look, we've scaled to basically size our funds to the market opportunities. So the way we look at it is like, in a two to three year timeframe, how many great deals will we see in a category?

• 8:57Speaker 02

  And then try to size the fund to basically cover that time period is is kind of roughly how we do it. And that's certainly increased fund sizes, both fund sizes and the number of funds over the years. But it's still really contained compared to what you do if you were just scaling assets. Like, so we, I think it's still like way smaller than like what Apollo or Vista or somebody would do in that kind of business. So, yeah, so I think that misalignment is pretty tricky for venture capital to overcome. Like, I haven't figured out a way where you would overcome that yet.

• 9:38Speaker 01

  Right. So, a firm like, a firm that stayed diligent, like a USV, diligent on fund size, you know, a benchmark or kind of stays at 500 or 250 respectively, they believe that they can get better multiples on that, you know, much smaller fund size. What do you believe that they don't believe that, in terms of justify, why it goes so much bigger?

• 10:01Speaker 02

  Yes, I think the market's just gotten bigger. So, I think the way to think about it is, if you believe the market was fixed at 15 companies, then that's the exact right strategy.

• 10:09Speaker 01

  Right.

• 10:10Speaker 02

  And, you know, we don't believe that. And I think that, you know, I'm not allowed to talk about our fund returns because we're in RIA, but, you know, if you look at our funds, I think our larger funds have at times like way outperformed our smaller funds. And that's just kind of a function of, look, if there were 15 companies and now there's 150, then if you had a $400 million fund, then maybe you need a $4 billion fund and to do the same deals. To, if you win the same percentage of them. And, you know, like, that's just a simple math. And I think that, there, look, there are different beliefs. I think Benchmark believes that they believe, we believe what we believe. And again, look, our mission isn't to

• 10:57Speaker 02

  Isn't necessarily fun turns, right? We have a mission to kind of help the best entrepreneurs in the world, build the best companies that they can. And so, you know, we generally come at like the whole structure of what we do from that perspective. I think also like I could, we could all get much higher salaries if we didn't organize the firm the way we did. But, you know, like our mission isn't to maximize the number of money per partner. Our mission is to kind of, kind of be the resource for building great technology companies. So it's just like a different point of view.

• 11:32Speaker 01

  And so, how do you recruit such amazing partners? If at other firms, because they don't have these resources, maybe they can get higher salaries? Or, you know, there's certain perks of being at one of those firms. How do you think about recruiting the best talent at Enjusen?

• 11:45Speaker 02

  Yeah, well, I think that, you know, people here, it's actually helpful that we kind of pay lower salaries to me because we get people who are on mission.

• 11:55Speaker 01

  You're aligned.

• 11:56Speaker 02

  And, you know, like, there's a lot that goes into that. You know, like there's a, for example, there's this kind of thing in venture capital that a lot of venture capitalists will say, well, spend all your time with your winners. Like, we don't believe in that at all. Now, like, if you look at a spreadsheet, that's the exact right thing, right? Like, because the, whatever, three winners are gonna produce all the returns. But the way we look at it is, you know, several, one, we're not so confident that we know who the winners are for a long time. The other thing is that, you know, we kind of have the philosophy is like, we knew the job was dangerous when we took it. If we're gonna, if you're gonna take us as your partner, we're gonna be there till the bitter end.

• 12:36Speaker 02

  And like, that's, you know, having been very close to the bitter end myself from time to time, like, you really do need kind of support or at least somebody to talk to when you're in that situation. And Because our, you know, just from a competitive standpoint, our whole idea is that we sell on reputation.

• 12:55Speaker 01

  Yep.

• 12:56Speaker 02

  And that's fundamentally important to our competitive advantage is to have the best reputation. So all those things kind of cause us to behave differently. And if you're not into that, if you're into the spreadsheet view of venture capital, then like you would hate that idea.

• 13:10Speaker 01

  Totally.

• 13:10Speaker 02

  Uh, so, so it actually works for us in that sense.

• 13:13Speaker 01

  And because you've spent the last, you know, decade plus building this brand reputation, there's lots of other things that you could do. Uh, you can get into things beyond venture, right? Um, different firm, you know, some firms get into, um, sort of more public investing, get into wealth management, they get into other products that serve, you know, kind of adjacent, um, customers or sort of their customers in adjacent ways. How do you think about, um, what makes sense to get into versus what doesn't make sense to get into, given that your brand enables these opportunities?

• 13:43Speaker 02

  Yeah. So our, the, the way to think about like what, well, we've done so far and what we'll do in the future is the customer is the founder for us. So we start with the founder and the, you know, the initial promise is, you know, we're going to help you raise money. We're going to help you develop into a CEO. We're going to build you a network that's as good as Bob Iger's. We're going to like help you, train you into the job. And we're going to support you in every way that we can, you know, through our financial network to help you kind of build this company. And, you know, in our view, we'd like to extend that through the founder's entire life, from the time they found the company to the time they become a philanthropist.

• 14:28Speaker 02

  And so anything in that realm, we feel like is, you know, kind of things that we ought to at least consider doing. Um, and, you know, which ones we do and which order we'll see, you know, depending on, you know, where the gaps in the market are and what makes sense for us.

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• 15:24Speaker 01

  The thing we've talked about off camera is that one thing that enables you to take such big swings or make these changes when the market changes is your unique approach to sort of governance or control. Why don't you talk about that relative to other venture firms?

• 15:39Speaker 02

  Yeah, it's interesting. It's it's kind of a concept that we got from a couple of people. One was Herb Allen, who you know, I think, and then the other was Mark's father-in-law. And they both kind of gave us the same idea, which so traditionally in venture capital, I think it looks a little like a law firm or kind of a lot of these partnership structures where you have shared economics and shared control. And like from a partner's standpoint, there's a lot, you know, that makes a lot of sense in a lot of ways. We have a different structure where we're shared economics, but we've kind of centralized control. And that enables us by not having shared control, we can change the structure of the of the firm very easily.

• 16:23Speaker 02

  And if you want to grow, like, so, you know, if you want to go, you know, in an integrated way, like you could have, though, that's the Chinese subsidiary or whatever, and that's a whole nother entity, and we talk to them, you know, once every six months. That's that's not what I'm talking about. But if you want to grow in an integrated way with a kind of single culture, a single offering, then you have to be able to change the organizational structure, you know, as you get bigger. So like the structure that you had at 50 people is just not going to work at 500, and that's for any organization. But in order to do that, somebody's got to be able to make that decision. With no politicking, no arguing, no, you know, like there'll be tiers. Because whoever loses power is going to like be upset about it.

• 17:09Speaker 02

  But you have to be able to make those tough decisions to get to the structure that you need to be maximally effective. And that's just really hard to do, I think. I don't know how you would do it with shared control.

• 17:20Speaker 01

  Let's get back to the the future of venture. Let's say we're having this conversation 10 years from now or 15 years from now. Does venture kind of look, is it, does the trends that are happening now continue to happen where there's just this bifurcation? You know, multi-stage firms become even more multi-asset firms that just get bigger and bigger, bigger. And this sort of, you know, solo GP or small specialists on, you know, kind of this barbell. Or do new models come into play, like venture studios really take off? Or do emerging technologies like Web 3 or AI really change the, change how venture works? Or say more about the the future of venture.

• 17:49Speaker 02

  Yeah, no, like all possibilities. I mean, look, I think the kind of classical venture firm that is just like a collection of smart, you know, investors, like I think that's probably run its course. So I think you have to be like a top end, like serious brand that can marshal resources and money and considered smart money and people want to follow.

• 18:21Speaker 02

  You know, I put us in that category, Sequoia.

• 18:25Speaker 02

  You know, there's that class of thing. And then there's people who are very specialized in a very kind of specific part of the market and know that network and have really great specific expertise. And they'd probably be, you know, more early stage, I would think.

• 18:43Speaker 02

  And those two things seem pretty solid, at least for the next five, 10 years. Everything else a little more questionable. I think, you know. With the studio model, the, to me, the big problem with that historically, and you know, I think Bill Gross was probably the, probably the greatest practitioner of that historically, is that it's not idea, it's an idea maze.

• 19:11Speaker 01

  Yeah.

• 19:12Speaker 02

  And so, and it's very hard to run through the idea maze if it's not your idea. And so like, that's a, I, I think that tends to be problematic. That's kind of, it's a little bit of a design for the head of the studio's lifestyle and kind of capabilities as opposed to what's going to make a great company. And so I don't know that that's ever going to work. And I thought Paul's genius was the ideas weren't his.

• 19:39Speaker 01

  Yeah.

• 19:41Speaker 02

  And that was the difference between an incubator and accelerator. And that, I think, you know, just proved to be the right model. And the reason it's the right model is because whoever's building the company, it better be their idea.

• 19:54Speaker 01

  Yeah. When you identify an emerging trend, whether it's web three, whether it's AI, whether it's companies that get big and is really big, really fast in a certain, you know, during the pandemic, let's say, and some people are more prudent about it. Some people are more bullish and I put you guys more in the bullish camp. Smart bullish, but bullish and.

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• 21:32Speaker 01

  Is the logic there that, hey, not everything's going to work out, but the things that work just work so much that it just really makes sense to be extremely bullish? Or I guess when you reflect on the past, you know, few years and things that you went really hard on, if you were to do versions of again, going forward in the future, now this AI wave, of course, how do you think about riding trends and how hard to ride them?

• 21:52Speaker 02

  If you look at the history of technology, almost everything eventually worked. Right? All the stuff, go back to 1999, 2001, all the dot bombs. Oh, that's the dumbest, ha, ha, ha. Pets.com, how stupid. You know, like all that stuff, you know, and then diapers.com sells for $800 million later. It was just a little ahead of its time.

• 22:19Speaker 01

  Yeah.

• 22:21Speaker 02

  And I think the beauty of venture capital is you can make the bet. And if you're too early, you can make the bet again.

• 22:29Speaker 01

  So if a clean energy, if a clean energy craze happened again, you know, if you guys were around during that time, do you think you would have bet big there? And just say, hey, we're 10 years earlier?

• 22:38Speaker 02

  Well, that one is a little different in that that was like a politically motivated market, which is a different kind of a thing. I mean, I think so. We're big believers in software. And if there's like a massive software breakthrough that has new applications or new models or these kinds of things, then we'd certainly be all on that. Anything like AI or crypto or, you know, or like, you know, what's going on in games? Like, we'd bet that every time. I think climate was a little different. It wasn't software, it was material sciences, which has a

• 23:13Speaker 02

  Different market dynamic. So it's kind of like, like there eventually became a small number of auto companies. There never eventually became a small number of software companies, despite what Larry Ellison and all those guys said, that there were only going to be three software companies and all that thing. Because it's kind of like, it'd be like, there's only going to be three novelists. It's a creative art form. It's got a very big design space. And so, you know, we think there, you know, if there is like a big change in how you can write software, which AI is probably the biggest change we've ever had.

• 23:50Speaker 02

  That's gonna, yes, that's going to produce things. And we bet that all day, all the time, every day. And I think like, that's also the kind of value of being able to evolve the firm is,

• 24:03Speaker 02

  look, people who knew smartphone network effects may not be the ones who really get AI, may not be the ones who really get crypto, et cetera.

• 24:13Speaker 01

  I know Mark is spending a bunch of time in AI right now.

• 24:15Speaker 02

  Yeah.

• 24:16Speaker 01

  Talk about the AI strategy, how you're approaching AI in terms of, there's both, how you think about it from an investing perspective, but also, does it change things at the firm more broadly?

• 24:24Speaker 02

  Yeah, well, like, it does change things at the firm broadly. You know, from an investing perspective, it's kind of like, oh, my God, we have non-deterministic computing. Like, holy cow. You know, like, it's, it's a whole, every problem we couldn't solve with deterministic computing is now for grabs.

• 24:42Speaker 01

  Yeah.

• 24:42Speaker 02

  And that's like, you know, we've never seen anything like that. So from, from a firm perspective, I think, you know, we end up needing, okay, different expertise, we need kind of access to different networks, we need.

• 25:03Speaker 02

  Kind of different kind of help for entrepreneurs like it's amazing. So many of the AI entrepreneurs are actually they're not even engineers, they're like researchers.

• 25:15Speaker 01

  Yeah.

• 25:16Speaker 02

  So this is a totally different type of cat to be starting a company. And, you know, what do they need to succeed and that kind of thing? So it's a it's a very big tidal wave kind of running through the firm and running through the industry, but we're we couldn't be more excited about it. I mean, the other thing is like, we're in this phase where it's such a profound change that anything you do like will work at least for a while.

• 25:41Speaker 01

  Yeah.

• 25:42Speaker 02

  And so it's kind of hard to pass on any deal in that way. So it's exciting.

• 25:47David Weisburd?

  Thank you for listening to join our community and to make sure you do not miss any future episodes, please click the follow button above to subscribe.

• 25:53Speaker 01

  Well, and that was true also of of Web three for a moment. When you when you when you think about Web three, do you think, hey, it's just in a momentary lull, partly sponsored by markets and developer activities higher than ever? I've been struck just by how far ahead AI is of Web three, just on terms of use cases and products, and yet I've been ignoring AI up until the last year or so. And I was spending more time with you like, what did I, you know, was the financialization distraction or I guess reflect on that a little bit or what's your perspective on that?

• 26:22Speaker 02

  Yeah, so there's there's a few things. So one is like AI happened overnight, like this AI model started in 1943. So it was a long time coming.

• 26:32Speaker 01

  Yeah, but it was out of the zeitgeist.

• 26:34Speaker 02

  Like working really well. I think with crypto, it started like in earnest in 2008, like that was the 1943 moment. So it's a lot younger than AI. And like, I think, in fact, so and there have been there have been kind of a variety of use cases. Some of them have been so there's like this, what we call Web three and, you know, a new way to build networks that's fair and like doesn't tend towards these like very dangerous monopolies that control all information and all these kinds of things. But there's also kind of like a because you can create money, there's a casino aspect,

• 27:18Speaker 02

  which, you know, needs regulation. And we've been kind of working with the US government to try and get the correct regulation. And so, you know, in its current state, I would say there's two things. One is, we need performance to improve a lot, you know, and kind of gas fees to lower and performance to improve so usability can improve and that kind of thing. And that we're really on the verge of. I mean, like, I think we're going to see 100x improvement of the kind of base infrastructure in the next turn in the next year. So that's awesome. The other thing, though, is the kind of regulatory regime and like, what's possible and can we get clarity and so forth. And we're working on

• 28:00Speaker 02

  that both kind of domestically and internationally. But those are kind of things that, in order to get very broad adoption, that's going to have to overcome. Like, AI is already getting broad adoption because, like, it works. Now, the regulators are now moving in and, you know, very ironically, oddly, bizarrely, talking about trying to ban open source, which is probably the safest thing that could possibly happen in AI because, you know, the last thing, if AI is this all powerful thing, then the last thing you want is it in the hands of one person or one company. Like, that would be horrible and dangerous. Whereas, if it's open source, universities can work on it, we can understand

• 28:45Speaker 02

  it, it can be deployed. I mean, like, I often remind people, like, the last nuclear bomb that was launched was when only we had the nukes. Like, that's a dangerous world with one person having the nukes.

• 28:57Speaker 01

  And now everyone has nukes and a bunch of people have nukes and we haven't had...

• 28:59Speaker 02

  Yeah, we haven't had any nuclear activity. And there's a very, very specific reason for that, because everybody's got nukes. And nobody wants to get nuked. And I think that AI is, you know, to the extent that AI is a super weapon... That will also be true there. And so if you believe that, then I think what you want is open source. And I think if you want regulatory capture or monopoly for yourself, you want to shut that down.

• 29:22Speaker 01

  You mentioned earlier that you consider your peers as the best kind of specialist firms and you compete with those firms. Do you also see your peers or competitors, firms, other multi-asset firms that are not even in venture? Like as you get bigger and bigger AUM, you know, are there firms that you see yourself as veering into their space or?

• 29:40Speaker 02

  Uh, no. So like, you know, it's funny because I I've spent some time with both kind of the folks at like BlackRock and the and at Apollo, just trying to understand their structure and why they're public and these kinds of things. And I would say they are culturally, philosophically, operationally, the opposite of us. So like they're very, very price focused.

• 30:07Speaker 01

  Yeah.

• 30:07Speaker 02

  They're optimizers, they're, you know, efficiency experts.

• 30:14Speaker 02

  Like we don't care about any of that. What we care about is like, is it a real breakthrough? And how big can we help make it?

• 30:21Speaker 01

  Yeah.

• 30:21Speaker 02

  Can it win the market? Like, those are the things that drive us. So there, there's nothing about what they do that would make them good at what we do. And there's nothing about what we do that would make us good at what they do. So like, I think, you know, we'll never get into that realm.

• 30:34Speaker 01

  Yeah. And when people focus so much on returns, it also, it's important to think about just the LP product. Like my understanding of the SoftBank thesis was that this is a place that LP could plow a ton of capital and get some like consistent, you know, return. And there's not that many places where you could just plow all that capital into into one place and get that kind of diversification.

• 30:55Speaker 02

  Yeah.

• 30:55Speaker 01

  Is that how you think? Like, how do you think about the LP product that you're offering?

• 30:58Speaker 02

  We think about LPs differently. So we think about LPs, or the way we like to think about them is the same way a company would think about its VC. So.

• 31:09Speaker 02

  One, so we're not building a product for them. We're building a product for founders.

• 31:14Speaker 01

  Right.

• 31:14Speaker 02

  And, you know, they can invest in that product. And then there's a couple of things we think about there. One is we want to have the kind of investors that we want to be in business with for a very long time, so we choose them very carefully. And two, we want to treat them like investors.

• 31:32Speaker 01

  Yeah.

• 31:32Speaker 02

  And I think, you know, sometimes venture capitalists make the mistake of not doing that, which, you know, what does that mean? It means, well, like, you shouldn't have them invest if you don't respect their opinion, aren't interested in what they have to say, don't want to keep them up to date on what you're doing. Like, then, then you're not treating them like investors if you don't do that. And I think what we're going to find out in this kind of particular interest rate change environment is that, like, the VCs who didn't treat their LPs like investors are going to be in for what that means in bad times.

• 32:10Speaker 01

  Does macro inform your, your, your, your firm's strategy?

• 32:13Speaker 02

  No, no, like, I think we got to be very careful about that, in fact. So, one, macro, in our view, is highly unpredictable.

• 32:22Speaker 01

  Right.

• 32:23Speaker 02

  So that's the first thing. And so we don't try to predict it.

• 32:27Speaker 01

  Yep.

• 32:27Speaker 02

  And then, secondly, we have a 10-year horizon on exits. So if we invest in a company today, we're expecting it to come out in the environment in 2033. And so in 2033, the idea that we could predict that macroeconomic environment is, like, pretty absurd to me. Like, even to talk about it sounds weird. So, like, getting caught up in that, I think, is really dangerous. And we saw a lot of, so there were a lot of hedge funds that, you know, attempted to do venture capital in 2021. And I think all of them had massive reactions to the macroeconomic environment. I think that's really, really dangerous.

• 33:07Speaker 02

  Particularly for the early stage stuff that they did where they're now, you know, like now they're not doing the follow-ons. Like they won't even return the call. And so you get into that kind of situation. It's like, that's not even smart for you. Like, you know, it's kind of like you're a bad person for not calling back somebody you invested in, but like, that's not even smart for you. Like, what are you doing? Like, you don't know what's gonna happen in 2033.

• 33:30Speaker 01

  Right. Makes sense. When you started the firm, people like Michael Ovitz and others gave you advice on how to think about the firm in a different way based on the market at the time. I'm curious for the next Ben Horowitz and Mark Andreessen out there who are 20 years or 30 years younger, whatever, just starting out, but want to build the next A16Z, but they're identifying, you know, thinking of the market at, looking at the market at 2023. And let's say they're coming to you guys for advice and you wanted to give them advice. How would you think about creating next A16Z, you know, starting in 2023, given where the market is today?

• 34:02Speaker 02

  There already is A16Z.

• 34:04Speaker 01

  That's the Uber for X is Uber.

• 34:06Speaker 02

  They wanted to create a Hollywood talent agency, then I would have plenty of advice for them maybe.

• 34:13Speaker 01

  Fair enough. You've coined the term, you know, wartime CEO, peacetime CEO. I'm curious if we could think about, you know, wartime VC. Because right now it's a tough time in markets, tough time to get a firm off the ground. You know, people are more skeptical about venture. People are skeptical of tech more broadly. It's anti-time of anti-tech. What it's like to be wartime VC or to be techno-optimist in a world that is increasingly pessimistic?

• 34:37Speaker 02

  Yeah, so like I think the biggest kind of war kind of issue that we have is actually probably with,

• 34:46Speaker 02

  you know, the regulatory environment and some of the ideas of the kind of current administration where they have become anti-innovation. And look, we've already seen like a pretty large percentage of the crypto venture capital go overseas. So like the idea that the United States would forfeit the internet of property rights and money at such an early stage in its life, it just feels so absurd, you know, it doesn't even feel like America in that way. Um, and like the, the like literally fake things that they're blaming it on like, oh, crypto's funding Fentanyl. I read that today. I was like, what the hell are you talking about?

• 35:27Speaker 02

  It's like literally the most transparent form of payment that there is in the world. Like more than Visa, more than dollars, more than anything. And like for somebody, you know, Senator to come out and say some just completely something that she no doubt knows isn't true. You know, to kind of push innovation overseas is like, that's a real wartime kind of situation for us in innovation land. And I think we're seeing the same thing in AI. We certainly have, you know, struggles for a different reason in, in bio and, uh, you know, that kind of technology. But like, so just give you the on, on bio though, the FTC recently, you know, sued to break up a deal between a

• 36:11Speaker 02

  bio startup and a kind of big pharma company. Like it's pretty impossible to do drug to fund drug development if there's no M and A market. So it's a literally like outlaw, new science for health.

• 36:27Speaker 02

  New financial technology, new kind of property rights in the virtual world is like a really hard stance for us to understand. So we're, we are, you know, working with policymakers and trying to understand, okay. Yeah. Cause it, it's not all like, you know, bananas, like some of it is, uh, you know, certainly makes sense. But to kind of shape that for like a, a future that's prosperous for America is Right. Like a big effort from, from the firm and we're working hard on that. But that's, that feels like wartime. That feels like, okay, now we have an actual threat, uh, existential threat to innovation in America.

• 37:10Speaker 02

  You know, in terms of being a tech optimist, I, I always like to go back to a quote from Andy Grove, which I absolutely love. Which he said in the nineties, um, and somebody asked him, they said, Andy, is the microprocessor good or bad? And he said, well, that's a not even the right question. That's like asking is steel a good or bad? It is. And so it's our job to make it good. And that's, you know, a lot how I feel about kind of all these technologies is they are going to exist. Like you cannot, you can't get rid of the wheel now. Like it's over, like it's here. You can't get rid of AI now. It's over, it's here. Like you can't outlaw math. You can't like, like that paper is already out there. Like you're not going to stop it.

• 37:54Speaker 02

  Like the whole idea that you're going to stop people from doing it is just so crazy. So then the real question is like, okay, what do we have to do to make it good and positive for society and so forth? And by the way, without new technologies, like how are we going to deal with pandemics or climate change or any of the real, you know, issues facing the world? Like it's not even possible without technology. Like it's like, like lockdowns didn't work. Now the policy stuff worked. You know, it works, PaxLOVID. That works. You have COVID, you take that like you're good. That works. So we need technological solutions to these very, very daunting problems that we have with, you know, more and more populous earth and all these kinds of things.

• 38:37Speaker 02

  So, um, you know, that's how we remained optimistic.

• 38:40Speaker 01

  Yeah. And maybe gearing towards closing here. As I mentioned to you, you guys have been very helpful to us. You know, we're seeking to create this new kind of tech media company. It's more driven by insiders. It has more of a pro tech approach. What advice would you have for us? Or when you look at the kind of media ecosystem, what, uh, what, what more do you want to see?

• 39:01Speaker 02

  Yeah, well, I think you're on like a really good track, which is, you know, what I want to see is, okay, I'm a young person and I want to understand where the world is going and what's happening and how I can get involved and make my contribution. What do I need to know? And I think that's, you know, like, how does AI work? What is this new computational model of the universe? How can I learn about it? How can I kind of push things forward? Which is like largely absent. I would say, I mean, I think you're walking into a vacuum is the good news. But you know, that when I was a kid, there used to be like Dr. Dobbs, you know, and Wired Magazine was that way for a long time.

• 39:44Speaker 02

  But, you know, now it's just like these weird politically charged, you know?

• 39:51Speaker 02

  Yeah, whatever criticisms of how things are run or how things are built or what they're going to do or every negative consequence of everything. You know, the internet had so many negative consequences, but like, I don't think, you know, if we got rid of it, then like, if you're in Bangladesh, like, you now have no access to any of the information that people in the rich world have. It's it's done amazingly great things. But like, yes, there's cybercrime. Yes, there's porn. Yes, there's a lot of things that, you know, probably are not a general positive for a society.

• 40:22Speaker 01

  I think people over abstracted from the Elizabeth Holmes or Theranos situation. Identified, hey, I could make a career. There's, or, you know, finding more of these and there's got to be more of these. Thinking that over abstraction and then other over, you know, abstraction was around sort of defending democracy, you know, because Facebook somehow people's minds contributed to Trump.

• 40:45Speaker 02

  Well, the funny thing was like, if you go back to 2008, all the stories on how Obama got elected were Facebook. Like, he mastered Facebook. He got elected on Facebook. Facebook's the greatest thing. It's making the world more democratic. Arab Spring. Wow, this is so awesome. And then Trump gets elected and it's like, this is a threat to democracy. We're all screwed. Got to shut down the social network. So, you know, like, it's it's interesting. You know, when things get political, they get very weird very fast, I think.

• 41:18Speaker 01

  And what's funny now, well, you're too close, is AI is, it's now coming from within the house in terms of some of the people who are most active are like, are within tech in terms of, and maybe it's regulatory capture, maybe it's something else.

• 41:28Speaker 02

  I think it's regulatory capture. I mean,

• 41:30Speaker 01

  Some people are true believers. It's the Google guy or like, some people.

• 41:32Speaker 02

  Really, really. Look, there are people who are genuinely worried about how powerful the technology is. And I think, like, those are good worries. But the idea that the way you deal with a powerful technology is you put it in the hands of a few is the most craziest idea. Well, like, look, power in the hands of the few has never turned out well, right? Like, with the best intentions, right? People love Karl Marx's intentions, but Stalin, Pol Pot, you know, Mao, like, everybody died. That's what happened. Everybody died. And like, all those guys didn't start out to be like singularly, uniquely evil people, but they had too much power. Because you

• 42:16Speaker 02

  take all the power of the private sector and put it in the hands of a few guys in the government, doesn't matter what the political philosophy is, that's bad. And similarly, if you take all the power of the industry and you put it with two companies, that's going to be bad. I can guarantee you that. Like, I don't know what else is going to be bad, but I know that's bad.

• 42:33Speaker 01

  I think it's a great place to wrap on the uplifting note of power to the people and decentralizing power. Ben, thanks so much for coming on the podcast.

• 42:39Speaker 02

  Yeah, no, great, Eric. This is good. And then great luck and best of luck. We're all excited about about what you're doing and its impact on the world.

• 42:48David Weisburd?

  Hey, everyone. Hope you enjoyed the Turpentine VC episode with Ben Horowitz. Make sure to subscribe to Turpentine VC at the link in the show notes, or search for Turpentine VC on Apple, Spotify, YouTube, or wherever you get your podcasts.