Marc Andreessen and Charlie Songhurst on the past, present, and future of Silicon Valley

Marc Andreessen, cofounder of Netscape and Andreessen Horowitz, sits down for a Cheeky Pint with John Collison and Charlie Songhurst to discuss the history of Silicon Valley, spotting bubbles in real time, the "Elon method" of management, and why the mistakes that haunt you are the companies you don't invest in. Show notes: Roger Lowenstein: When Genius Failed: The Rise and Fall of Long-Term Capital Management https://www.amazon.co.uk/When-Genius-Failed-Capital-Management/dp/1841155047David Swensen: Pioneering Portfolio Management https://www.amazon.co.uk/Pioneering-Portfolio-Management-Unconventional-Institutional/dp/1416544690Ian M Banks: Consider Phlebas: A Culture Novel https://www.amazon.co.uk/Consider-Phlebas-Iain-M-Banks/dp/1857231384Walter Isaacson: Elon Musk https://www.amazon.co.uk/Elon-Musk-Walter-Isaacson/dp/1398527491Thomas Rid: Rise of the Machines: A Cybernetic History https://www.amazon.co.uk/Rise-Machines-Cybernetic-Thomas-Rid/dp/0393286002George McGovern: A Politician's Dream Is a Businessman's Nightmare https://www.wsj.com/articles/SB10001424052970203406404578070543545022704, WSJSteve Blank: The Secret History of Silicon Valley https://www.youtube.com/watch?v=ZTC_RxWN_xoTracy Kidder: The Soul of a New Machine https://www.amazon.co.uk/Soul-New-Machine-Tracy-Kidder/dp/0316491977John Perry Barlow: A Declaration of the Independence of Cyberspace https://www.eff.org/cyberspace-independenceMartin Gurri: Revolt of the Public https://press.stripe.com/the-revolt-of-the-publicJohn Malone: Born to Be Wired https://www.amazon.co.uk/Born-Wired-Transforming-Television-Discovery/dp/1668051532Full transcript on Substack: https://cheekypint.substack.com/p/marc-andreessen-and-charlie-songhurst Subscribe to Cheeky Pint Spotify: https://open.spotify.com/show/2IHbGJJMpiFoz5YrvRfTFw Apple Podcasts: https://podcasts.apple.com/us/podcast/cheeky-pint/id1821055332 Substack: https://cheekypint.substack.com/ Key moments (00:00) Marc needs to know: what is a cheeky pint? (04:30) Are we in a bubble? (14:55) Do VCs matter? (19:01) The history of Silicon Valley (32:25) How Digital Research almost made it (39:02) A bear case on the internet (59:52) AI productivity (01:12:10) Stripe + AI (01:13:08) Crypto (01:24:08) Should a16z start a hedge fund? (01:29:51) Big companies (01:35:33) Boards (01:40:27) The Elon method (01:52:59) The future of media

• 0:00Speaker 00

  Do you mind if I start with a couple of questions?

• 0:03Speaker 01

  I mean, sure.

• 0:05Speaker 00

  Cheeky means what exactly?

• 0:06Speaker 01

  Okay, in the context of a cheeky pint, it is a pint you're not really meant to be having.

• 0:11Speaker 00

  And when it becomes established, it starts to attract establishment people.

• 0:14Speaker 01

  The social network problem.

• 0:15Speaker 00

  Right, exactly. And in that sense, the downturns, as much of a pain in the butt as they are, are probably helpful.

• 0:21Speaker 02

  You go back to banking, you go back to consulting.

• 0:22Speaker 00

  Yes.

• 0:23Speaker 01

  Sorry, why is there more risk-taking on the West Coast versus the East Coast? Because like...

• 0:26Speaker 00

  Ah, the frontier.

• 0:28Speaker 02

  There's FOMO leads to high trust. That sort of has a cynical truth to it.

• 0:32Speaker 00

  Category 2 errors are much, much worse. By the way, they torture you fucking decades. Because you read about the success cases that you've screwed up all the way up. And so you just learn the hard way, like you have to be extremely open-minded. I have found people willing to tolerate any level of chronic pain in order to avoid acute pain. People would much rather lose slowly over five years than have the conversation that involves a dramatic change to stop losing. All right, I got it. All right, how are you guys?

• 0:58Speaker 01

  Anyone need anything else?

• 0:59Speaker 00

  Finally, a legitimately Irish bartender.

• 1:02Speaker 01

  I have a scheduling issue with these because 5pm, clearly after-work pints, acceptable. 4pm, I don't know, after work if you're a banker or whatever. 3.30pm, like now you're drinking at the office. Mark Andreessen has been around the internet since the very beginning, really. He co-founded Netscape, he invented the image tag, he was there at the beginning. And later, he co-founded the venture capital giant Andreessen Horowitz. So I'll be speaking to him, along with our mutual friend Charlie Songhurst. Cheers.

• 1:27Speaker 00

  Cheers. Good to see you, guys.

• 1:30Speaker 00

  Do you mind if I start with a couple of questions?

• 1:33Speaker 01

  I mean, sure.

• 1:36Speaker 00

  Well, there's just a couple of things. As a Midwestern American boy, there's just a couple of things. This is not my natural habitat.

• 1:42Speaker 01

  Okay.

• 1:42Speaker 00

  Cheeky means what exactly?

• 1:44Speaker 01

  Okay, in the context of a cheeky pint, it is a pint you're not really meant to be having. And so if you were meant to be going home right after work, and instead you stole away with a few coworkers, you know, just off the books, aren't meant to be at the pub right now, that would be a cheeky pint.

• 2:03Speaker 00

  And then pint, the thing about pint that's just really puzzling is that everything else in Europe is like, you know, like it should be the cheeky desolator.

• 2:11Speaker 01

  I see.

• 2:11Speaker 00

  Right? And so why is pint used with reference to alcohol but not with actual measurement?

• 2:17Speaker 01

  Because, I mean, Guinness and alcohol generally is part of a rich tradition. Guinness dates from the 1700s. It's part of why we have the, it's the reason we have the canal system in Ireland. It was, you know, the largest company in Ireland at one point. Often, the longest-tenured institutions are universities and breweries. And, you know, you look at the Belgians and things like that. And so I think tradition survives better in alcohol than it does in roadside.

• 2:43Speaker 00

  Okay, I have several more questions, but I will suspend them for the purpose of this conversation.

• 2:48Speaker 01

  Okay, I like this new format that we're inventing. So where I want to start is we have here various bits of Mark Andreessen memorabilia and a still from one of my favorite pieces of Mark Andreessen content, your Miller Lite commercial.

• 3:00Speaker 00

  Oh, that was awesome.

• 3:01Speaker 01

  It was only in a rewatch that I realized it was with Norm MacDonald.

• 3:04Speaker 00

  Norm MacDonald.

• 3:05Speaker 01

  What was it like meeting him?

• 3:06Speaker 00

  The one and only. My experience, comedians are always a little bit interesting to meet because they're professionally funny, and so their interest in being like interpersonally funny is like not that high.

• 3:15Speaker 01

  Oh.

• 3:16Speaker 00

  Because it's like a lot of stress and pressure, I think.

• 3:19Speaker 01

  I see.

• 3:20Speaker 00

  I mean, he was very naturally funny.

• 3:21Speaker 01

  Yeah, yeah, yeah.

• 3:22Speaker 00

  But...

• 3:23Speaker 01

  But he wasn't always on.

• 3:24Speaker 00

  He was not always on. And I mean, in context, if you will see the commercial, I just say in context, it looks like we were in like the coolest nightclub in the world. I will tell you, it was in the middle of the day in Los, in inner, in inland, what they call the inland empire in LA, some warehouse.

• 3:37Speaker 01

  It was not as cool as it looked.

• 3:39Speaker 00

  It was like 110 degrees outside. It was like 130 degrees inside. There was no air conditioning because it would screw up the sound. And then to create the smoking nightclub effect, they spray vegetable oil.

• 3:51Speaker 01

  Not water, vegetable oil.

• 3:53Speaker 00

  Not water, vegetable oil, because it has to...

• 3:54Speaker 01

  Oh, it has to like actually create a vapor.

• 3:58Speaker 00

  It has to linger. The director was great, and he was tremendously tolerant of me with no actual experience doing anything like that. But I think he did think he was Stanley Kubrick, because we did like 150 takes.

• 4:08Speaker 01

  He was really into his Miller Lite.

• 4:09Speaker 00

  Yeah, and so like hour six of nearly passing out from the heat and choking on vegetable oil was not...

• 4:15Speaker 01

  I see.

• 4:16Speaker 00

  ...the most... Oh, and then the other great, the other kind of great claim to fame is it was a week later, Miller fired their ad agency, which I would like to think that I, you know...

• 4:27Speaker 01

  It was cool.

• 4:28Speaker 00

  I bear some responsibility for it being...

• 4:29Speaker 01

  That's really funny.

• 4:30Speaker 00

  Yes.

• 4:31Speaker 01

  Okay, so the thing I want to get into you guys... About or spent a lot of time on is the history of the valley. One interesting place to start might be, can you tell when you're in a bubble?

• 4:42Speaker 00

  So my experience is no. And the nuance that I would put on that, I'll describe two. The nuance of that, number one is there's an old line with respect to economists that also applies, I think, investors, entrepreneurs, which is economists who predicted nine of the last two bubbles, or nine of the last two crashes. And so it is extremely common. It's a difficult question because it's extremely common for people to call a bubble. When they're correct, they will then go around for years claiming that they're the one who called it. What you find with those people generally is they were calling it continuously for the 20 years earlier.

• 5:13Speaker 01

  Peter Singer.

• 5:14Speaker 00

  Peter, for example, or earlier, there's a famous, Barron's, you know, Barron's, it's still around, but it used to be like, you know, extremely important investment publication. There was a columnist for Barron's, something, Abelson, Ellen Abelson. And literally, he wrote the same, the same column for 40 years. You know, the end is here, it's all going to crash, it's all a giant bubble. And he wrote that, I think, continuously from like, I forget the exact years, but from like, you know, 1975 to like, you know, 2015. And so you have this like kind of Cassandra thing, you know, where they kind of dine out on it. And so I find generally that those kinds of people don't have predictive ability. And then I will tell you, like, look, the most sophisticated hedge fund managers in the world, generally, if you look at their backgrounds, you know, at some point, if they thought they were in the macro business,

• 5:56Speaker 00

  you know, they will have, they will have tried to make the trade based on what they view as obviously a bubble. And there were extremely sophisticated hedge fund investors. They went short tech stocks in the fall of 99 and then, you know, realized they were wrong. And then went long tech stocks in Q1 of 2000.

• 6:08Speaker 01

  Druckhaus, he talks about it publicly.

• 6:10Speaker 00

  He talks about it, but there are many others. Well, there's another, there's another, there's another guy who I won't name, who's very active today, who's very smart. And I was talking to him on the phone about, about stuff. And he just, he's just started laughing and he said, he's like, all I know is whenever I think the stock market is going to go up, it goes down and vice versa. And like, and this is like a guy who's like an investing legend.

• 6:25Speaker 02

  What's it obvious when the bubbles start to burst? When was it obvious in retrospect that that was...

• 6:30Speaker 00

  No, no, no, no.

• 6:31Speaker 02

  Is it 2000, 2001? Is it only like 2004 when you look back? Like when does...

• 6:36Speaker 00

  No, so the sort of cliche, which is correct, is the market climbs a wall of worry. And so what happens is when the market is rising, like every step of the way, there's like some panic attack going on about like it's immediately gonna collapse. And then what happens is there are drawdowns. And I'm sure you guys have seen, like, the drawdown charts are really fascinating to see.

• 6:55Speaker 02

  Yeah, there's a big one in 1998 with the Asian crisis.

• 6:57Speaker 00

  So we all thought that was it. Like, this is exactly where it's headed. So yes, there was a blow up in 98, there was an international crisis, and then there was a collapse of a big hedge fund at the time called...

• 7:07Speaker 02

  LTCM.

• 7:08Speaker 00

  Long Term Capital Management.

• 7:09Speaker 01

  I read that book recently, it was really good.

• 7:10Speaker 00

  It's a fantastic book. It is a great lesson, and do not name your hedge fund long term.

• 7:17Speaker 01

  I thought the lesson was don't run 30 times levered on the one trade.

• 7:20Speaker 00

  Oh, there is that. And also assume that, you know, academic, you know, superstars necessarily have a... So, yes. But yeah, like, a lot of us in like, that was it. Like, that's it for IPOs, it's over. You know, that's it, the whole thing is gonna cave in. So every step of the way, and then conversely, like, we all got so used to it rising that, like, there was a lot of speculation. You know, I would say the median view among smart people, and, you know, when those Nasdaq first cracked in the, sort of around March of 2000, it was just another one of these momentary blips. And then the way I remember it, we'd have to look at the chart, but the way I remember it is fundamentally that from 2000, 2005, there were like five discreet moments where it like fell apart. It kept cascading down, and my favorite version of the story is we took our company Loud Club Public in September 2000. And while we were on the road, we were on the road for three weeks, and while we were on the road, the Nasdaq fell in half. Right? But that was just like one of those things.

• 8:05Speaker 00

  And so the answer to your question is, you know, I'll put it this way, by 2003, 2004, you knew that it was really bad. And then what are the indicators? The indicator that everybody really knows it is the long sell get fired.

• 8:18Speaker 02

  Yep.

• 8:19Speaker 00

  They lose their money, and then they actually get, the PMs actually get terminated. And until that happens, there's still, I would say, tremendous amounts of, you know, either uncertainty, or you could say denial.

• 8:29Speaker 02

  One of the great years for owning internet stocks was 2003, because you get the bottom, and then you get this huge uplift, I think, in eBay, Yahoo, maybe it's 2004.

• 8:37Speaker 00

  Sure.

• 8:38Speaker 02

  But VC wasn't good through that entire period, up to like '07. Why is it that sort of public markets is good in 03 and 04, but VC just has sort of almost like a lost seven years ex-Google between 2000 and 2007?

• 8:50Speaker 00

  I would just say, look, you could maybe say this. You could say the entrepreneurial ecosystem got completely flattened by 03, 04. Like, the idea of starting a company was ludicrous.

• 9:00Speaker 02

  Got it.

• 9:01Speaker 00

  And so...

• 9:01Speaker 02

  So it maybe created too much fear in potential entrepreneurs?

• 9:04Speaker 00

  Yeah, that's right. And then, look, the VCs, you know, the VCs panic. You know, I'd say that's like one of the cardinal sins you can get into a venture is like you're actually paying attention to what they're saying on TV.

• 9:13Speaker 02

  Yeah.

• 9:13Speaker 00

  In particular, on the financial news. And so it's like, when the Nasdaq, you know, cracks, it's very hard to keep yourself out of that psychology and to be like enthusiastic about making investment. But of course, if you're a VC, the rational thing to do if you're a VC is to keep... So Fred Wilson's the guy who kind of really walked me through this originally. And he said, look, his version of this would be, yeah, like bubbles bust, like it's all random and crazy, and we never know what's going on in the whole thing, and you get wrapped up in the psychology. And so his rule of thumb always was you have a disciplined mechanical process for the pace of investment and then also for the pace of exits. And you don't deviate from it. And a lot of that justification would be precisely so that you keep investing at the bottom. Everybody's... It's so funny, and you see this in the stock market. Everybody says, oh, you know, buy low, sell high, you know, and everybody's an expert in bubbles, everybody's read the books, the whole thing.

• 9:58Speaker 00

  But like, when it's down, when the market has caved in, it is just... Well, it's actually really funny, because it's like negativity. It's like, just overwhelmingly, you people are idiots, like this whole thing is stupid, it's never going to recover, there's 18 macro-explanations for it to recover. And then actually, at the real bottom, the other thing I've found is people just completely stop talking about it.

• 10:18Speaker 02

  Yes.

• 10:19Speaker 00

  Like, it just, the idea of like startups...

• 10:21Speaker 02

  Crypto markets are a case study.

• 10:23Speaker 00

  It's just like it never even existed. It's just like, it's like the thing you would never bring up at a dinner party. And maybe to your point, that's what happened with internet startups in 2003, 2004, which is you would not talk about it if you could possibly avoid it.

• 10:34Speaker 02

  So in some ways, the social status of internet startups in 03 is similar to crypto in like 2020.

• 10:39Speaker 00

  Yeah, so the great joke of that time was the two great VC trends, startup trends of the late 90s were so-called internet companies, but B2C, business to consumer, and then B2B business to business. And by 2003, the line was B2B meant back to banking and B2C meant back to consulting, right? And so like, oh, and then this in turn is why, you'll enjoy this a great deal, this in turn is why the employment decisions of graduating Harvard and Stanford Business School students are such a great indicator.

• 11:09Speaker 01

  Yes.

• 11:09Speaker 00

  Possibly the best indicator of all of what's happening in the market because if they go into tech, the market's overblown, and if they go into banking consulting, it's a great time to make VC investments. And that maybe has been the best indicator I've seen the whole time because of the social status aspects.

• 11:24Speaker 01

  Yes, right. I think what you're describing is you don't think you're capable of making macro calls, so you just have to decide what are sensible areas to be investing in over multi-decade time horizons, tech startups generally, crypto, you know, American dynamism, pick your lane, and then you dollar-cost average into them. And then sometimes there'll be bubbles, like there'll be crypto 2021 moments, but that's fine because if you put the same dollars into these areas, I mean, rough numbers, but kind of consistently put dollars into these areas each year, the winners will more than make up for the years where everything was hopelessly undervalued. Is that basically your framework on this?

• 11:56Speaker 00

  I would say that's mostly true. What I would modify that is it's actually not dollar-cost averaging. Like, if you're doing it in the stock market, it's dollar-cost averaging. If you're doing it in venture, it's not dollar-cost averaging. The reason is because if you make the right venture investment, it doesn't matter how much money you put in.

• 12:08Speaker 01

  Yep.

• 12:09Speaker 00

  The upside is so great. And if you make the wrong venture investment, you lose all the money.

• 12:12Speaker 02

  I think Andy Burtleshines 100K, I think, would be 30,000X.

• 12:19Speaker 00

  What's that, sorry?

• 12:19Speaker 02

  Andy Burtleshines, 100K, Burtleshines, 100K into Google would have been 30,000X. That pays for a lot of other investments.

• 12:27Speaker 00

  In venture capital, it just turns out that the amount of money invested has almost nothing to do with anything, and you're not trying, well, here's another thing, you never in venture want a bargain shop, like, ever, ever, ever.

• 12:38Speaker 01

  No, I agree with that.

• 12:39Speaker 00

  What you need to do, so I guess the way I would just modify what you said is it's just, you need to keep investing.

• 12:44Speaker 01

  Yes, yes.

• 12:44Speaker 00

  The danger is not investing too cheap or too dear, the danger is literally stopping.

• 12:49Speaker 01

  When I was saying dollar cost averaging, it was the fixed amount of money that you deploy. Because I think the way people get into trouble is 2021 comes along and they raise some giant funds. And that one has very poor returns. But if you like invest, you know, 100 million each year, then you'll do pretty well.

• 13:04Speaker 00

  And you could also say this, the smartest LPs, so David Swensen, who was considered to be the smartest portfolio manager for liquid portfolios, wrote a book where he goes through the following, and he talked about this a lot, which basically is, for something like venture, you really got to look at it. You cannot rashly evaluate a venture based on a single moment in time, a single fund, a single sector, any of that stuff.

• 13:23Speaker 01

  Yeah.

• 13:23Speaker 00

  You have to basically look at it over a long enough period of time where you wash out the specific effects of, you know.

• 13:28Speaker 01

  Yes.

• 13:29Speaker 02

  Well, the proof of that is the inter-vintage volatility in any given VC is incredible.

• 13:35Speaker 00

  Right, that's right.

• 13:35Speaker 02

  Like, which shows that so much of it is just.

• 13:38Speaker 01

  Yeah, a top VC firm will have some 15x funds and some like 2 or 3x.

• 13:44Speaker 02

  Because Google's founded in 99, so at the height of a bubble. Meta's founded 2004 at the bottom.

• 13:50Speaker 00

  Right, that's right.

• 13:51Speaker 02

  There's no pattern that ties to macro. It's just, it appears to be almost stochastic. You just can't predict. You've just got to keep doing it.

• 13:57Speaker 00

  Yeah, that's exactly right. And that's the, I would say, that's sort of the core fundamental kind of truth of venture, which is, really, it's something for people with a 20, 30, 40, 50 year time horizon. You have to get across, you have to get all the way across the cycles. Because what happens otherwise, if you're an LP, what happens otherwise is you, the minute you have a fund that's terrible, you pull out. And that's precisely when you should have been going in. It's the same behavior on the LP side that you see on the VC side. And so the smart LPs, what they all have in common is, when they're making a decision to invest in a venture fund, they're making a decision to invest in that fund for the next five or six funds.

• 14:25Speaker 02

  So how much of an advantage for VC is having good LPs?

• 14:28Speaker 00

  Extremely, extremely, extremely, extremely. And again, this is very predictable. What happens is every time the market is hot, new LPs show up and pile in. And then when the market declines, they back out. And so the firms that have the VCs who understand the Swensen model are able to sustain over time and able to continue to invest in the downturn. The VCs, you know, it's many new VC funds are raised in every bull market from basically tourist LPs. Those tourist LPs are extremely reliably prone to pull out.

• 14:55Speaker 02

  So obviously that leads to the big question, which is how causal are the VCs themselves to the outcomes of the companies? Like, it's the big, big question.

• 15:05Speaker 00

  I have a theory on it, but I have an indirect theory on it, but I'll. I definitely should not let an entrepreneur answer this question, but I just made an incredible incredible strategic mistake. This is where it all went southward recently. I mean, you can see the look on his face already.

• 15:20Speaker 01

  One, presumably VC itself is very impactful because Stripe was just as a practical matter, not profitable for quite a few years, and I think that was the correct way to build Stripe. And so you like so many companies, you build a bunch of tech and Stripe in particular, you build a bunch of tech and businesses start adopting it and they start growing. So you've like two lagged curves. One is you have to build all the stuff and then businesses start using it and then those businesses grow themselves. And, you know, we just had, you know, Toby from Shopify here, like, you know, Shopify is now a massive business on Stripe, but they weren't when they started working with us in 2012. And so it's just the classic R and D thing of you like do work now for economic payoff later. And I think that that tends to work well in tech.

• 16:03Speaker 01

  And then with specific VCs, it feels like the, so I want to talk about kind of the Silicon Valley high trust thing. VCs act as a very efficient matching algorithm between neophyte founders, such as myself, and experienced executives. And so you have this like incredible talent engine. And I think in a weird way, people often miss that it's like, it's not about the money at some level. People miss that it's about putting together a team in a very short order to go do this hard thing. And I think VCs are actually pretty instrumental in that.

• 16:36Speaker 02

  I'll back in from the angel perspective, the single strongest correlation of how a company will perform is which the how high status of VC does the series A is within the stat ranking of VCs. It is far more predictive sadly than, you know, my own selection or any other available I can find. It's almost deterministic.

• 16:56Speaker 00

  And look, some of that is because the top tier VCs can get the best deals, right? And some of that is self fulfilling prophecy. But so here's the my analysis, having been on both sides of the table, you know, John mapping mapping to what you said, my analysis basically is that like, if you think about mechanically what's happening with a startup, a startup needs to basically get into a loop in which it's it's accruing more and more resources as it goes. And those resources are qualified executives, technical employees, future downstream financing, positive, you know, brand momentum, you know, public perception, customers, revenue, you know, throw weight in the government, like, you know, what, all of these resources you need to be able to succeed as a business. And, and so it's this, it's, it's, there's a snowball rolling down the hill phenomenon, which is you're either a snowball rolling down the hill, picking up resources as you go, gaining size and scale and scope and power as you go, or you're not.

• 17:41Speaker 00

  And you're kind of stuck at the top of the hill as a snowflake and you're just not going anywhere. And so the question is kind of, how do you get into this kind of aggregation of resources thing? Economists call this, what's the term for the things that are at the high end of the power law, preferential attachment?

• 17:53Speaker 01

  A sort of baiting of companies.

• 17:55Speaker 00

  It's the Matthew principle, it's a Matthew principle from the Bible, which is, you know, to, he who has a lot will get more and he doesn't. And so when a company gets momentum, you hear about momentum, a company gets momentum, what it means is the next resource that you need is preferentially willing to attach to your thing as opposed to somebody else. That's the mechanical process that drives the power law curve.

• 18:13Speaker 02

  That creates a chicken and egg question, which is, it does the product create the company? Or does the company gather enough resources to create a product?

• 18:20Speaker 00

  Yeah, so that's part of it, but again, to create the product is not just like, you know, it's not, it's often not just a process. It's also like, okay, you got to great engineers, right? And then you got to actually like feel the product and to give an example, you got to like have, got to have like top end security engineers. There are only top, there are only so many top end security engineers. Where do they want to work? They want to work at the top companies. If you're a brand new startup, how do you convince them that you're going to be a top company? You raise money from a top tier VC. So that happens over and over again. The prosaic way that I put it is, you know, is my experience as a founder is a, a top tier VC is a bridge loan of credibility at a point in time when the startup maybe deserves it, but just doesn't have it yet. And that credibility is harvested in the form of primarily personnel, money and brand. And, and those three things turn out to be like really important in the beginning.

• 19:02Speaker 01

  We're talking about the Silicon Valley ecosystem here. And you referenced Andy Bechtelstein and his investment in Google. One thing that I find funny about that story is that's the case where he just wrote a hundred K check to them. Actually wrote a hundred K check to Google Inc., even though they didn't have a company. And I think he like gotten his portion, drove off and is like, here you go. But there was no terms, there was no nothing. And that obviously worked out really well for him, but that's not unusual. I've heard other stories. I think we even got some check like that where again, it was just like, tell me the terms later. And Silicon Valley is very high trust. How did that come about?

• 19:36Speaker 00

  Let me say that, you know, that story is a great story and that is true. I will tell you, there is another part of that story, which is the venture firms that turned down Google in the Series A. Right, which is just a whole, just other side of things that maybe we should talk about, right? Because in retrospect, it all looks obvious, like at the time, it's not so.

• 19:49Speaker 01

  Sure, but it wasn't obvious.

• 19:50Speaker 00

  Not obvious, maybe that reinforces what you're saying, which is it's definitely not obvious. Look, I think it's just, quite frankly, you could have all kinds of theories about this, do all kinds of things, talking about how wonderful everybody is. I think the practical reality is anybody who's been in the valley for a while has had the experience. Typically in the former scar tissue where there was some kid in a t-shirt with some crazy idea. And you were like, okay, that's great.

• 20:08Speaker 01

  The metrics are on it. Oh, the opposite, yeah, yeah, yeah.

• 20:10Speaker 00

  Yeah, you pat them on the head and they go off on their way and then, you know, they turn around five years later, it turns out, oops, you know, that was Mark Zuckerberg. You know, shit, like I had my moment, I had my chance. The problem with missing, right, remember it's category one.

• 20:21Speaker 02

  Okay, that's a true thing, FOMO leads to high trust. That sort of has a cynical truth to it.

• 20:26Speaker 00

  Like, yeah, if you sit around, yeah, like it goes to category one versus category two error. Again, it goes back to the economics, which is Andy's hundred thousand dollars, if he, you know, got stolen, it's all, he only loses a hundred thousand dollars. If he gets it right, he makes the thirty thousand X return. And so there's this thing that what you learn over time is the category two errors are much, much worse. And they torture, by the way, they torture you for fucking decades. Right, because you read about the success cases that you've screwed up all the way up. And so you just learn the hard way, like you have to be extremely open minded for people.

• 20:56Speaker 02

  I have a confession here, which is when I tell entrepreneurs, they'll have to see VC, I say, look, don't try and convince them you're going to be successful. Just try and quit a fear that there's this possibility for the next twenty years, they might regret this.

• 21:08Speaker 00

  It's so painful.

• 21:09Speaker 02

  As their sort of past personal billion that they missed.

• 21:11Speaker 00

  When the, when the company goes bankrupt, at least it is.

• 21:14Speaker 02

  Yep.

• 21:14Speaker 00

  Like it's over, like the pain is over. When you pass the company that succeeds, the pain is forever.

• 21:19Speaker 01

  It's like the asymmetry of shorting, you're going to shorting the entrepreneur.

• 21:21Speaker 00

  Oh, yes, absolutely, a hundred percent. It's just, it's a horrible mistake. And so as a consequence, there's just this thing of like, what it, what it leads to is this incredible sense of possibility, an incredible sense of optimism. Right, in a very positive way, which is like, you just need to be extremely open to the idea that you're, you're going to run into the next big thing at any moment. And you really want to put, and as I say, karmically, you want to really put yourself out there to be part of that.

• 21:40Speaker 01

  I think that's true, but I think that's maybe a different thing. You're describing that kind of success can come from anywhere. There is a big asymmetry in success where companies can, you know, ten thousand X, whereas they can't go down by more than kind of one X from their present position. But. It seems like particularly the business culture and even kind of moving outside, the fact that startups get really big is particularly high trust. So you have all of investing happens based on handshakes and you know, people can just shake hands on this is going to happen and trust that everything happens there. Even when it comes to when we buy companies, we generally agree with the founders at a high level of the terms. And there might be kind of a single page or a two-page term sheet. And obviously lots of due diligence will happen after that. But it won't be the kind of East Coast, you know, process, private equity process after that where everyone's trying to pull a fast one.

• 22:25Speaker 01

  And you can't trust the lawyers as fast as you can throw them. So it seems to me there's a particular kind of high trust relationship in how all the actors work with each other.

• 22:33Speaker 02

  I was gonna, I was gonna ask Mark why the East Coast and why Europe hasn't chenanted to Silicon Valley. Whereas like, you know, you have Detroit, but then Japan copies it. And I think maybe he's actually already answered the question, which is maybe because I haven't had those 10,000 ex returns. They haven't instilled the fear of FOMO. And it's the fear of FOMO that means you've got to sort of take a trusting bet on a new person. And maybe that's the sort of, that's the kernel that creates a high trust ecosystem.

• 23:02Speaker 00

  Yeah, and maybe just add, you know, I think maybe you're right that I was being a little bit too cynical in my answer. It's also that you want your reputation to project into the future, right? And so if you have a reputation, right, it's a fairly close knit community. If you have a reputation for being helpful and being positive and constructive and value add, then you know, that plays well because then that person, you know, the person you've done something nice for is going to introduce you to other people in the future. It's very repeat game. Right, right. It's like, it's the ultimate repeating game. Yeah. And so there's that. And then look, I think the other side of it that you guys kind of alluded to, but I think is very important, which is it's not zero sum. When I talk to my friends in Hollywood, which is, you know, not that far away and was its own and is its own entrepreneurial ecosystem, you know, if you talk to anybody in Hollywood, they're like, oh my God, this is a shark tank. You're getting, you know, you're lucky if your friend knifed you in the chest. You know, generally they just, you know, it's in the back.

• 23:47Speaker 00

  You know, it's this constant thing. And the reason is because there's just a, at least my analysis, there's a fixed amount of money to be spent and made in movies, for example. And if my movie gets greenlit, it means yours doesn't. And so even if we're close friends, like we're going to undermine each other as much as possible. Whereas in tech, at least, you know, historically, you have this multiplicative kind of generative thing where it keeps expanding.

• 24:05Speaker 02

  So why else, why did nowhere else manage to get that ecosystem going? It's, if you look at the history of this sort of last 50 years, one of the stories that will come out is the utter uniqueness that tech almost became a Silicon Valley, or at least a West Coast monopoly.

• 24:18Speaker 00

  Yep.

• 24:18Speaker 02

  Like, there's no precedent for that in any other industry.

• 24:21Speaker 00

  Well, I think we're back to that.

• 24:22Speaker 02

  Yeah, exactly.

• 24:23Speaker 00

  I think, you see this in data, actually, already, is AI is reconsolidating, you know, tech into, basically, two places on earth, and only one in the West.

• 24:30Speaker 02

  You know, no part of the industrial economy had that dynamic. What is it?

• 24:34Speaker 00

  So, there have been a long parade of officials from other cities in the US and from other countries who have come to the Valley in the last 30 years. I've met with many of them. They all asked that question. I answered as follows, which is, there are a set of things that you need all in combination. And then, usually, at that point, they get a strict look on their face, and they say, well, what if we can't do any of those things? And so... How can we build a really linear city? Exactly. Well, actually, you know, it's surprising the number of people, and I, you know, I'm always, I don't want to badmouth people, because I'm always, people should try to make these things work, and I'm proud of them for trying. But like, literally, the number where it's like, wow, if we just built the right buildings, you know, this would happen. Like, that's actually fairly common. Anybody who's been to Silicon Valley knows. Exactly, yeah. Go on Alcuminia Real, it's not the buildings. It is definitely not the buildings. Yeah. So I think it's a formula, and I think it's a list of things. And it's like making

• 25:18Speaker 00

  a cake. They all have to be in the cake. And then, the best way, I think I can describe it, is, it's a set of things that have to do with stability, and maturity, and rule of law. So you need, like, absolute contract law, you need liquid, deep capital markets, you need, like, you know, expert specialists in all these different areas that really have, like, real experience, accounting, and, you know, everything else. And so there's like, a maturity and a depth. And it's that stuff that, like, developing market countries struggle with. But at the same time, you need, like, the Wild West. And you need the spirit of adventure, and the craziness, and the willingness to take risks. And if somebody fails...

• 25:51Speaker 02

  And that's what the East Coast missed.

• 25:52Speaker 00

  And that's what the East Coast missed, and that's what Europe doesn't, right? At least, when I talk to my friends on the East Coast, or my friends in Europe, that's what it is. Like, well, we can't do, I can't take that kind of career risk. Like, that's crazy. And, you know, and look, in a lot of countries, and in a lot of cultures... You know, if you like, take a risk like that and it doesn't work, like, it's a real problem.

• 26:08Speaker 01

  And sorry, why is there more risk-taking on the West Coast versus the East Coast? Because like...

• 26:11Speaker 00

  Ah, the frontier.

• 26:13Speaker 02

  There's no established hierarchy.

• 26:15Speaker 00

  The frontier, the frontier. It's all in, it's all in, what's his name, the frontier guy from like...

• 26:22Speaker 02

  I was gonna say, it's a bonfire of the vanities, too. You would go join, like, Goldman Sachs, you would join McKinsey. You would join existing institutions and go up them on the East Coast. Those just didn't exist on the West Coast. You effectively had a country of 50 to 70 million people.

• 26:34Speaker 01

  There was Wells Fargo, there was, you know, there's lots of institutions, you know, that you could join.

• 26:39Speaker 02

  Yeah, but were they prestigious enough that they sort of, that they trapped young talent? Another way to say this is, why did sort of Stanford do so much better than Harvard and MIT? Because obviously the input qualities are the same. So there has to be something in the place they're sitting that creates a difference.

• 26:55Speaker 00

  I think there's a frontier spirit. I mean, I really do. So like, it's, I think...

• 26:59Speaker 01

  But you're always skeptical of cultural explanations in other places.

• 27:01Speaker 00

  There's clearly a talent aggregation effect. Like, so there's clearly a talent aggregation effect that takes place inside the US. I mean, look, most of the great people in Silicon Valley did not grow up in Silicon Valley. My wife grew up here in Palo Alto, I tease, I call her a townie. Right, like, by the way, she has three more degrees than I do, so it's definitely not a status thing. But most people are imports, they get imported all through the entire rest of the country and around the rest of the world. And so it's definitely a selector, you know, and an attraction point for talent, and that's a big part of it. But look, I think if you just, if you just trace the history, like, every step, like, it's not an accident that both Silicon Valley and Hollywood are the places that they are because the people involved went west as far as they could before they were literally stopped by the Pacific Ocean. Right, like, it was the ultimate selector in the build-out of the country to the people who were the most oriented towards risk

• 27:45Speaker 00

  and, to your point, independents and doing their own thing. And that was true in the gold, you know, gold rush days in 1850, where San Francisco was ground zero for that. It's equally true today. Hollywood is the exact same thing. And in Hollywood's case, it's actually funny because one of the reasons they wanted me to get so far away is they were trying to evade Thomas Edison's patent enforcers. Because Thomas Edison owned the patent for the film cameras and the Hollywood, the original Hollywood entrepreneurs had no desire at all to pay for that. And then Edison would hire the Pinkertons to come bust up the movie sets. Right, and so, but you're saying rogue, renegade, iconoclastic.

• 28:19Speaker 02

  And how about in Texas? Do you think that certain people didn't move because it wasn't a fun... City that had hit the scale of London on

• 28:26Speaker 00

  Oh, 100%. Yeah, yeah, yeah. No, I mean, look, we have, we all have lots of friends in New York and London, and they're, they're, they're all just like, wow, like, you know, my friends in New York, they're like, I don't know if you get like two points of this into them, they don't be like, they, they literally don't understand why anybody doesn't live in New York.

• 28:39Speaker 01

  Oh, I mean, I think they'll tell you the answer at 9:00 AM on the Monday morning, you need to get Adrian.

• 28:44Speaker 00

  That is a very good point.

• 28:45Speaker 01

  It's the New Yorker cover.

• 28:45Speaker 00

  I was trying to, yes, I was trying to be.

• 28:47Speaker 02

  Frontier and a mining camp, you have to be willing to move to the mining camp.

• 28:50Speaker 00

  I think so. And then, and then, you know, you get, and then this gets into the danger, this is like the back to, back to banking, back to consulting thing. The danger is, the danger in a lot of ways is it becomes established. And when it becomes established, it starts to attract establishment people.

• 29:01Speaker 01

  The social network problem.

• 29:02Speaker 00

  Right, exactly. And, and, and in that sense, the downturns, as much of a pain in the butt as they are, are probably, are probably helpful.

• 29:09Speaker 02

  You go back to banking, you go back to consulting.

• 29:10Speaker 00

  Yes, and the only people who are left, and, and by the way, this was Silicon Valley when I arrived in 93, this had happened. And then this was Silicon Valley in 2004, as we discussed, which is, you just, you flush all the status seekers, you flush all the tourists.

• 29:21Speaker 01

  It's like fuel management for fire.

• 29:23Speaker 00

  Correct, exactly, 100%. You're clear, you're clear out the brush. Now, look, how long can this last? I don't know. You know, we're, we're in a country that, you know, has, has, you know, at least certainly over the last six years, has had a strong tendency towards stagnation. The thing that has kept this whole thing going, I think, is just that there are these new, you know, these new platforms, these new paradigm shifts in technology.

• 29:41Speaker 01

  Everyone loves the defense company explanation for Silicon Valley.

• 29:45Speaker 00

  That's my part of it. That's my part of it. So, Steve Blank, yeah, so Steve Blank has done the best reconstruction of this. The typical Silicon Valley history goes back to like the 1950s with HP and the 1960s with the chip companies. But the real history, I, he, I think he makes a very compelling case, the real history was actually defense tech startups in the like 1920s, 1930s. And you still see remnants of that if you like, ever own, you know, Sunnyvale.

• 30:05Speaker 01

  That's a hanger.

• 30:06Speaker 00

  But like, you know, this, this is the place where like, you know, early, I forget the exact, but like early radar and early like, you know, missile guidance systems and all that stuff. Avionics, a lot of that was, was innovated here in the exact same way, and that was like a hundred years ago.

• 30:16Speaker 02

  If you could go back, could you A/B test it? Is there any way you could have made Silicon Glen, or whatever the Boston corridor was called, successful?

• 30:24Speaker 01

  Well, they did.

• 30:25Speaker 02

  And keep it successful versus the valley.

• 30:27Speaker 01

  That's the problem.

• 30:28Speaker 02

  Was there a point where it could have gone the other way? Or was it sort of inevitable for the 50s? Like, in 1970, can it go both ways still?

• 30:36Speaker 00

  So when I arrived in the valley in 93, I think it's fair to say the valley in Boston were probably considered neck and neck.

• 30:41Speaker 02

  Ooh.

• 30:42Speaker 00

  And sort of half and half.

• 30:43Speaker 02

  That late.

• 30:44Speaker 00

  And in Boston, you know, these are kind of forgotten now, but DEC.

• 30:46Speaker 02

  Oh, yeah.

• 30:47Speaker 00

  DEC, Digital.

• 30:48Speaker 02

  Ashton Tate.

• 30:49Speaker 00

  It was like a huge, extremely important company. Ashton Tate, the inventor of the word processor, I think, was there. Lotus was there.

• 30:53Speaker 02

  Lotus was there.

• 30:54Speaker 00

  Lotus was there. And then you had, you know, later years, you know, other great companies, EMC, you know, and others. And then there's a great book called Soul of a New Machine, which is one of the great all-time startup books, which is about a supercomputer company in Boston in the late 80s. It was just extremely excellent, like literary, literary book, and it really tells the story of a startup. But it was, it also tells the story of Boston in that time and place. So a lot of like leading-edge supercomputing stuff was there. By the way, Thinking Machines was there, the original, you know, supercomputer company.

• 31:21Speaker 01

  The original Thinking Machines.

• 31:22Speaker 00

  The original Thinking, exactly, yeah. So Danny Hillis, the massively, sort of the company that's the forerunner of what we think of today as like large-scale AI grid, you know, cloud stuff was there. And so, and look, MIT, you know, MIT was there and was a tremendous, you know, generated huge numbers of smart people. And so it worked really well for a long time, and then basically in the mid 90s, it separated. And then, you know, people in Boston will say that, again, two points in, they'll say that the final blow was probably when Mark Zuckerberg could not raise venture capital for Facebook and had to leave and come, come, come west.

• 31:53Speaker 01

  That was a meaningful signal.

• 31:55Speaker 00

  That was sort of the last, that was sort of the last moment.

• 31:57Speaker 01

  We can call that the chapter marker.

• 31:58Speaker 00

  Yeah, I was just like, okay, if we couldn't do that one. And then, by the way, the, you know, in the counterfactual, had he stayed in Boston, maybe there would be an entirely new, you know, ecosystem there that doesn't exist today. Yeah, so I think basically it just, it worked for a while. And again, this is why I locked in on frontier spirit. So what Boston has is all of the, all of the stability aspects we were talking about.

• 32:17Speaker 02

  Okay, so if that's...

• 32:18Speaker 00

  They just didn't have the same frontier spirit, and it just turned out that...

• 32:20Speaker 01

  Yes.

• 32:21Speaker 00

  Back to preferential attachment. It just turned out on the margin, the smartest people from MIT wanted to come here.

• 32:25Speaker 01

  Uh huh.

• 32:26Speaker 00

  And that was basically it.

• 32:27Speaker 02

  If that's how they move ecosystems, sort of same question, but companies, what's the company that could have been a trillion that didn't? That you would have to change the least to make it a trillion? You know, they get that one exec, they get that one lawsuit, it just goes differently.

• 32:41Speaker 00

  I mean, there's many, many, many, I mean, the all-time story of that is a company called Digital Research, which should have been Microsoft. And there's a famous, I can tell the whole. Oh, oh, yeah. Okay, okay. So the story roughly goes as follows. It's in the books, but it roughly goes as follows, which is. So Bill Gates and Paul Allen had this little software company originally in Albuquerque, down the street from from Better Call Saul, I imagine. Which they moved to Seattle. And they were building very early, they were building programming tools for for for computers. And so when I first used Microsoft as a kid, it was Microsoft Basic. They were compiler company or interpreter company, not a, not a, not an OS company. So, you know, and then there was this PC wave with all these like, you know, basically these sort of, you know, cat and dog kind of early PCs from like 76 to 82.

• 33:23Speaker 00

  And they basically sold the basic interpreter to all those companies. And that's how they they got going. But they weren't in the operating system business. And then IBM decided, you know, famously to enter the PC business. And, you know, and then there was a network connection with Bill Gates's mother and the CEO of IBM. And they were on a board together and it resulted in the IBM team, you know, coming out and going up to Seattle and buying a license to Microsoft Basic, which is what everybody did in those days. And then the IBM team asked Bill Gates, like, what operating system should we use? And he's like, oh, well, the standard operating system for PCs is called CPM. Which at the time was true. It was the standard operating system for early business PCs. And they said, well, who makes that? And he said, well, there's a company called Digital Research down in Santa Cruz in California. There's this guy Gary Kildall, you know, you should go see him. And this is, this was the synergistic relationship that he had with Digital Research at that, at that time.

• 34:05Speaker 00

  So the story goes, the IBM team, which is, you know, like 20 lawyers in blue suits, like, get on a plane, go to Santa Cruz. They show up at the office to meet with Gary Kildall, discuss licensing CPM. And Gary Kildall, being a frontier-like person, decided not to come to the meeting. Decided he'd rather go flying that day, John.

• 34:22Speaker 01

  It's a reasonable thing to want to do.

• 34:25Speaker 00

  And instead had his wife, who was the company's general counsel, negotiate the NDA. IBM was famous for its lawyers and the wife was not about, the lawyer was not about to sign the NDA. And the day ended inconclusively. And the IBM team was like, all right, this is ridiculous. And they went back up to Seattle. And they told Gates, if you can't find us an operating system, the, the, the deal for the interpreter is off. And Bill said, you know, give me a few days. And Bill literally went down the street to an independent developer named Tim Patterson. Licensed what at the time was called a QDOS, Quick and Dirty Operating System, which is the true name of DOS.

• 34:59Speaker 00

  For $50,000 flat fee, turned around and sold it to IBM. That created MS-DOS. The kicker to the story is, you know, 30 years later, Gary Kildall was knifed to death in a bar fight.

• 35:10Speaker 01

  Oh, my God.

• 35:10Speaker 00

  Yes.

• 35:11Speaker 02

  Oh, God.

• 35:11Speaker 00

  Sorry.

• 35:12Speaker 01

  That's not a change time.

• 35:14Speaker 00

  I didn't want to bring the room down. But like, it should have been like, you know, again, counterfactual and who knows, who knows, who knows? But like, you know.

• 35:20Speaker 01

  But I think, no, it seems hard to argue that Digital Research would have become a trillion-dollar company because Bill Gates had such a killer commercial instinct that there were, I mean, obviously, the IBM OS moment was the biggest moment, but there were several other moments in Microsoft's history where they steered things. And it doesn't feel like if they get the IBM OS pick, that then it just, you magically become a giant company.

• 35:44Speaker 00

  Oh, no, no, definitely you don't magically become the giant company. But again, this goes back to preferential attachment. Whoever got that IBM, whoever got that IBM, IBM deals in class. It's impossible to remember how important IBM was at that time.

• 35:53Speaker 01

  Yes.

• 35:54Speaker 00

  IBM in the mid-'80s was 80% of the market capitalization of the entire tech industry.

• 35:57Speaker 01

  Mm-hmm.

• 35:58Speaker 00

  Like, they were the absolute gorilla.

• 36:00Speaker 01

  Yes, yes.

• 36:00Speaker 00

  And by the way, the IBM PC, you know, and then the clones ultimately that came out of it, like, completely standardized the, you know, the industry. But like, all of the PC companies from before that, like, went away.

• 36:12Speaker 01

  Yeah.

• 36:12Speaker 00

  Like, it was an extinction-level event for everybody else. And so whoever got that deal, had he not gotten that deal, it's not even clear Microsoft would have stayed in business. No, no, look, having said that, he gets, obviously, credit for everything.

• 36:21Speaker 02

  There is a trend where, if you go to the absolute cutting edge of tech, they're so, sort of, wilderness people that they identify conscientiousness.

• 36:29Speaker 00

  Correct.

• 36:29Speaker 02

  They go flying instead of turning up to the meetings.

• 36:32Speaker 00

  That's right.

• 36:32Speaker 02

  And it's almost like you get a second generation who go to the frontier but are conscientiousness enough to institution-build, and those become the super-big companies.

• 36:39Speaker 00

  Yeah. By the way, Dell's another classic case, data, from that same time. Dell Computer was founded at the same time. There was, like, 400 IBM clone companies at that time that were actually in the process of going under. Most of them, just like, they've rise, this is like, five years later, right, during the down cycle in the late-'80s. And that was around the time that, you know, Michael Dell and his dorm room decided to get into the PC business. And that's exactly right. He was a version of that. He was a more systematic thinker than the wildcaters who had been in the PC industry before that.

• 37:04Speaker 02

  Is that how Oracle wins in databases? Because there's a ton of database companies back then.

• 37:08Speaker 00

  Yeah, I think Oracle was a somewhat different story. I think it might have been more of a story of just raw aggression. Larry was always very into Japanese Samurai culture and I don't think that was a mistake.

• 37:16Speaker 02

  So moving forward in time, why did none of the pre-Google internet companies survive? Like, X, Excite, Out of Vista, AOL, Yahoo, none of them?

• 37:25Speaker 00

  So I think that you need to really rewind back to the differences between then and now. And I would just say a couple of things on that. One is, like, the whole internet boom bubble, whatever you call it, of that period was basically four years. It was basically four years and a half. Like, for example, the companies you just mentioned, for the most part. My company got going in 94. Those companies really got going in 96. By 2000, like, that, you know, it was nuclear winter. And so it was a four-year period. The business models either didn't exist or were brand-new. And we could spend a lot of time on that, but like, all the business models that you have today that have these big mega-companies, like, those business models didn't exist. Like, it was still mostly just packaged software in those days. And so it was really hard to build the kind of enduring business that you see today. And then I would say the third thing is, the market was so small.

• 38:10Speaker 00

  So the total market size in like 1999 for internet anything was like 50 million people total, max, maybe. Maybe. Half of those people were on dial-up, which, you know, only barely counted. By the way, and that was like mostly AOL, which only barely had internet support, the way we understand it.

• 38:26Speaker 02

  Yep.

• 38:26Speaker 00

  Right. You know, they had a browser, but it wasn't like what you're used to. And then, you know, the PCs were super slow, the motives were slow. And that was still, like, the media and internet experience in those days was you dial in for maybe an hour at night from your desk at home.

• 38:38Speaker 02

  Yep.

• 38:39Speaker 00

  And then businesses, by the way, were just like, even businesses that had internet connectivity were doing everything they could to prevent their employees from using it.

• 38:44Speaker 01

  All right, everyone over here, everyone.

• 38:46Speaker 00

  All right, there you go. All right, very good. Anyone need anything else? Finally, finally a real Irish bartender. Finally a legitimately Irish bartender.

• 38:56Speaker 01

  Need a refill?

• 38:57Speaker 00

  That would be fantastic. Thank you very much. Outstanding. So it was just, it was a very early, crude time as compared to now.

• 39:04Speaker 02

  So there's another question that I need to, which is, normally you get some bull and bear cases on like crypto or defense or enterprise SaaS. AI seems unique in that there's very little in terms of articulate bear cases about why it matters. In fact, most of the bear cases go the other way, that it's going to destroy the world or something like this. Were there articulate bear cases on the internet during the bubble?

• 39:24Speaker 00

  Oh, I mean, yeah, I mean, well, the original bear case was just nobody's ever going to make any money like this. It's ridiculous. And then there was just a huge onslaught of this is just going to be cybercrime and, you know, porn and spam and fraud and abuse.

• 39:34Speaker 01

  So you had the similar sort of equivalent to AI, I think.

• 39:36Speaker 00

  Well, every, every new technology has a moral panic that it's going to ruin society.

• 39:39Speaker 01

  And with consumer technology.

• 39:40Speaker 00

  And then, and then look, it was just like this, you know, then you just use the product and be like, this is a joke. It doesn't really work. Like, you know, look at how long it takes images to load. Is anybody really going to put their credit card in? Like, like, so there was, I don't know if bear case is the right term, but there was massive skepticism.

• 39:53Speaker 01

  Let's, let's do the man the bear case here for a second. I think the smartest bear case was that the internet's clearly a cool thing. You guys are getting way over your skis in terms of valuations here. And in particular, you're getting way over your skis in terms of the build out that's happening of the internet infrastructure, where the demand will take a while to catch up. And of course, that was true where there was a fiber overbuild. And clearly, there isn't an AI bubble in the sense that everyone really likes their tokens, you know, the stuff that we're doing with AI or like my personal chat GPT usage, like, I really like that. You're not going to take that away from me. And so it's not a bubble in that regard. And, you know, it's sensibly priced and everything like that. It's, it's a true tech better, faster, cheaper story. However, there is

• 40:34Speaker 01

  a huge ramp up in AI data center build out. Oracle just had that, you know, Forex RPO beat that caused their stock to go up 40% and Larry Ellison to become the richest man in the world. Basically, they're doing giant data center projects for AI companies. And one can imagine that there will be a data center bubble where people get too excited about the build out and we build capacity ahead of utilization and people finally, it's the last musical chair, people build that data center where actually no one wants to lease it. Do you think that is happening, will happen? Is that a sensible framework?

• 41:10Speaker 00

  I would say actually that is precisely what happened with the internet boom.

• 41:12Speaker 01

  Exactly. You know, that's right. That's my analogy.

• 41:14Speaker 00

  Right, right. That's right. And so for people who don't know this, what happened with internet boom was there was this sort of internet software and services and Netscape and Amazon and these things.

• 41:20Speaker 01

  And by dollars, people confuse the dot com boom. The internet stuff didn't matter. It was a, it was a hell of a structure.

• 41:25Speaker 00

  It was almost entirely telco bubble and it was almost entirely telco crash. And you know that for two reasons. One is the sheer amounts of money involved were so much greater on the telco side. And then the other is telco is where the debt came in. To get a really monumental crash, depression, recession, depression, you need a credit bubble pop. And the credit bubble was 100%, I can tell you, not on the tech companies. It was 100% on the telecom companies. And it was massive and it was like, it was amazing.

• 41:48Speaker 01

  And some of them are dodgy stuff going on like WorldCom.

• 41:50Speaker 00

  Oh, and then there was fraud. Right, exactly. And those stories are truly spectacular. My retrospective kind of explanation of what happened, consistent with what you were saying, basically, was there were a small number of people who were building the software and services. And that was because like, it was just like, they all had to be invented from scratch. And then there were just only a small number of people who even understood like the software and how you could possibly apply it. There just like, weren't that many of us running around who did that. And so John Doerr had famous like, internet, at some point, internet became a cream that you rub on investors to get them excited. And when that happened, what happened was you had a large, much larger number of people who had a lot of knowledge about how to put buildings in the ground and how to fill those buildings with fiber. And the good news with being in the data center business, in those days, it was data centers, right? It was data centers.

• 42:30Speaker 02

  Hold on, hold on, this gets an interesting point, which is

• 42:32Speaker 00

  Yes.

• 42:33Speaker 02

  That when you get a boom, because the new people, there aren't enough people with the new skillset to do it.

• 42:37Speaker 00

  That's great.

• 42:38Speaker 02

  That can never be the epicenter of the bubble.

• 42:39Speaker 00

  That's right.

• 42:39Speaker 02

  It's always where the 50% of the capital are. That's where the epicenter is. So it was telco in the internet bubble and all those telco people, sort of 50. And so now it's data centers.

• 42:50Speaker 00

  Well, and you need to play the way, exactly, and the way I would describe it is, when the thing takes off, whatever the core thing, when the core thing takes off, there's just too much money.

• 42:57Speaker 02

  Yep.

• 42:57Speaker 00

  There's too much money that wants to come in and participate. And it literally cannot participate.

• 43:01Speaker 02

  But also, it comes in the way it knows how.

• 43:02Speaker 00

  It comes in the way it knows how. And so, and this is what you would find at the time, which was you just, you would meet a lot, and I met a lot of these guys, a lot of these, you know, we're telco CEOs or people, telco start, you know, a lot of these, you know, new telco companies, Global Crossing, all these new companies. Global Crossing was one of the great kind of, you know, boom, boom, boom, blow up kind of stories. At the time in the entrepreneur was this guy Gary Winick, and he was actually a Drexel Burnham. He was a buying guy from the 80s, a levered out guy. And he just, he figured out like, oh, we know how to put buildings in the ground, we know how to build fiber. You just, you go to Cisco, you buy the devices, you rig up the fiber, Corning will sell you the fiber. And like, you just, it's a known thing. And his expertise was going to the debt market, convince them to finance that. And then he could go just like Hoover of capital. And in fact, he built like tremendously valuable, tremendously important infrastructure. It's just that like, a bunch of that infrastructure was not actually filled up for 15 years.

• 43:47Speaker 00

  And in the meantime, much like, you know, luxury hotels, you know, traded hands three times. The people who own that infrastructure today are doing very well with it.

• 43:55Speaker 02

  And so it would be

• 43:55Speaker 00

  Many of those companies went under.

• 43:57Speaker 02

  It would be ironic if AI researchers are still underpaid, but there are too many GPUs per AI researcher.

• 44:04Speaker 00

  Yeah, so this is the thing. So and here's where you get into the question of whether you can ever reason by analogy.

• 44:08Speaker 02

  Yeah.

• 44:09Speaker 00

  And whether and whether things are actually the same.

• 44:11Speaker 02

  Yeah.

• 44:11Speaker 00

  Right. And so then it's like, all right, is is is AI the new internet? And it's like, OK, if if AI is the new internet, then, you know, you could maybe plausibly expect, you know, this kind of cycle. And for sure, you do. I mean, I mean, you guys probably meet. I meet people all the time, which is like, I don't know how to invest in the software side of this, but I know how I'm going to do a giant data center build. And, you know, this includes nation states, right, doing this. And so you could say history is repeating itself. The counterargument to that is, I don't know that AI and internet are like even remotely comparable.

• 44:35Speaker 02

  Well, it's another way to say it is if you could have sped up broadband by maybe five years. The internet bubble is in a bubble. It just seamlessly goes into 2007. It's you still had 56 K modems in 2001.

• 44:47Speaker 00

  Correct. People people forget. People you you you remember this, but people forget or don't know this. Home internet broadband was not common until like after 2005. And I was actually at AOL. I I I follow this very closely because I was actually because we sold our company AOL. I was at AOL on the executive staff in the board meetings in 1999. And the big question for AOL at that point was how to get from being the narrowband provider to being the broadband provider. Because we knew it would happen at some point, but, you know, it was unclear when. And ultimately, the company couldn't figure it out. But the the the question those days was very much, and it was literally it was cable modems, or it was was called ISDN. It was sort of proto broadband from the the toll coast. And it just wasn't happening. And in fact, it didn't happen in a scale in 2005. And then mobile broadband didn't really happen until like 2012.

• 45:26Speaker 02

  Yeah.

• 45:27Speaker 00

  Right. It was really bad. And people people actually forget the original iPhone from 2007 did not have mobile broadband.

• 45:31Speaker 02

  Or apps.

• 45:32Speaker 00

  Or or apps.

• 45:33Speaker 02

  Yeah.

• 45:33Speaker 00

  Right. But it also it was on the AT&T old app. It was on an old.

• 45:36Speaker 02

  It was useless. Yeah.

• 45:37Speaker 00

  It was useless.

• 45:37Speaker 02

  2G.

• 45:38Speaker 00

  Yeah. So there was this like just incredible lag for when an ordinary person could have the kind of experience that you can have today. And so, yeah, so one one theory for why quote AI is different is like, actually, no, the experience that you're having today just in chat GPT is just like so monumentally amazing. Like, it's like fully there. And, yeah, you know, you have to watch it like type the thing out, but like, you know, the answer is like spectacular.

• 45:57Speaker 02

  Yeah.

• 45:57Speaker 00

  And so there's that. And then there's the other thing, which is just the metaphor, you know, the the problem with metaphors, which is, and one of the one of the theories you could say on this is the internet was an interconnecting, it was a network technology, whereas AI is a computing technology.

• 46:09Speaker 02

  Yeah.

• 46:09Speaker 00

  And maybe the only comp comp for AI that you can have is actually the creation of the computer. Right. Because it's it's literally, it's the first major reinvention of the fundamental model of what is a computer in 80 years. Going from the von Neumann architecture to the neural network. And you know, and if you trace the history back, they knew in the 1940s that these were the two paths. They already, they knew what the neural network was in 1943. There was a big argument at the time of whether the computer should be based on fundamentally adding machines, on cache registers, or whether it should be based on brain architectures. And it's just, we had to wait 80 years for it to work, but now we have the computer industry V2, right, which is much more valuable and important because of all of the obvious things it can do that the sort of hyper literal von Neumann machines can't do. And so we've successfully unlocked computer industry V2.

• 46:53Speaker 00

  It's 10 or 100 or 1,000 or a million times more important and valuable. And all of your petty comparisons to bubbles in the 1990s just wash out because my God, look at what the thing could do.

• 47:04Speaker 01

  AI is funny because it is always the case that the hype cycle for technologies predates the technology being ready for that hype. And so, you know, Charlie and I often talk about the like mobile internet hype. Yeah, you know, people were excited about, you know, you'll buy cinema tickets on your mobile phone in like the 2000s on a Nokia 3310, which is not actually how the mobile internet played out. And you know, even the crypto excitement, the kinds of things people talk about with crypto of like, oh, you'll be able to make payments, whatever. We're finally getting to it in 2025 in any kind of meaningful volumes. But it's, you know, took a good 15 years from when people started being excited about it. AI is maybe the longest time lag from those things where like, when was 2001 A Space Odyssey released? Like the books that it was based on were the 1950s and then, you know, 2001 A Space Odyssey was the 60s?

• 47:50Speaker 01

  Yeah, yeah, exactly. And, you know, that was voice mode with tool use, you know, like how 2000s and. And so I find it funny that we had such a specific vision that was pretty much right. But it took a long time for the tech to be, and you know, there was various waves, you know, dragon systems, like, you know, the tech wasn't that good, but people were excited about it.

• 48:09Speaker 00

  Apparently, there's a book called Rise of the Machines that has the prehistory of AI. And I believe, I believe if I remember correctly, there were actually debates about this in the 1930s. It actually predated even the sort of invention of the neural network.

• 48:20Speaker 01

  Okay, so roughly 100 years later, we're getting around to it.

• 48:22Speaker 00

  They knew in the 30s, like, and I think Alan Turing, it looks like that were involved in that at that time. There's a famous moment in the history of this, so Alan Turing, Claude Shannon. Claude Shannon, the inventor of information theory, two very important guys. During World War II, they're building the computer originally in World War II to beat the Nazis, crack the codes. And so Alan Turing and Claude Shannon are having lunch at the AT&T Executive Dining Room in Basking Ridge, New Jersey, like 1943. And they're getting, they're talking about exactly this topic. And Alan Turing starts to like raise his voice, raise his voice. And finally, he gets up in the middle of the AT&T dining room and says, "I'm not talking about building a genius computer brain. I'm talking about building a mediocre computer brain like the president of AT&T."

• 48:59Speaker 00

  And so they knew, like, I think he knew that the path that they were on, right? The von Neumann machine path. Yeah. What he was building is this hyper literal, you know, you can almost say like hyper autistic math savant in a box. Yeah. Which obviously was not going to be the thing that was going to be English language and write everything, everything else that you were going to want to do. And like, so he knew like this is the wrong path. Yes. But he just didn't live in the time in which the technology was available to do what he wanted to do. It just happens that we do.

• 49:25Speaker 02

  What do you think is emerging sort of holistics of how the market works? So let me give an example from software. There's no inferior goods market for software. There's no like cheap version of Excel or, you know, there's sort of one.

• 49:35Speaker 00

  There was at one point.

• 49:36Speaker 02

  There was at one point, stops, and it didn't succeed, which is the point.

• 49:38Speaker 00

  Those are all gone.

• 49:39Speaker 02

  But in general, software's gone to one company, some horizontal, some vertical, being the best.

• 49:44Speaker 00

  Because they're such a great deal.

• 49:44Speaker 02

  Because it's such a great deal, because the percent of productivity is the same. Is it the same in AI? Do we go with horizontal intelligence? Do we go, is there an inferior goods market where, you know, you end up with AI and device that's intelligent but not super intelligent, but you don't need it?

• 49:58Speaker 00

  People use worse models. The way I would think about it is, if you think about, let's say this is a computer industry V2.

• 50:04Speaker 02

  Yeah.

• 50:04Speaker 00

  What did you experience in computer industry V2?

• 50:06Speaker 02

  Yes.

• 50:06Speaker 00

  You had many different sizes and shapes of computers.

• 50:09Speaker 02

  Yeah.

• 50:09Speaker 00

  And actually, what happened at the time was the big ones got built first. And then it literally was mainframe, and then it was mini-computer, and then it was, you know, sort of server, and then it was.

• 50:18Speaker 02

  And then it goes down to PC.

• 50:19Speaker 00

  Personal computer, and then mobile phone, and then embedded devices.

• 50:22Speaker 02

  Yeah.

• 50:22Speaker 00

  Right? And then, by the way, and then it sort of multiplies out where cars and light bulbs and doorknobs and, you know, everything else. As you know, what you have as a consequence is the computer industry, and specifically the chip industry, is therefore in the form of a giant pyramid. Where at the top, you have a small number of supercomputers and mainframes, and at the bottom, you have, you know, billions and billions of embedded devices, and then you have everything else in the middle. And the reason you have that is because it's, you have custom, you know, you have cost and performance and fit implications for the specific devices. You don't want your, you know, light bulb, you know, to have to do a round trip, you know, to an IBM mainframe or something, you know, like, it doesn't make any sense. You want it to have the embedded device so that it senses whatever you want. You know, senses whether there's a light in the room like that, you know, that's just, that's like a specific chip. And so I think the scenario in which you only have a few big AI models is a scenario in which not only are those models the smartest,

• 51:06Speaker 00

  but they're also the cheapest and the most power efficient and the fastest and easiest to adopt and use for every scenario. And I think that's highly unlikely, just because if this is the breakthrough that we believe it to be, and it's the computer industry V2, you're going to want models in everything. You're going to want, as I say, you're going to want AI infused into everything. And then for a lot of those infusion, like you don't need your doorknob to teach you quantum physics, but you do need it to be really good at knowing that it's you and not somebody else. Yep. Right? And so you're going to have like all of these kind of hyper optimized use cases. And so my guess and the way we're betting is Everywhere. You're going to have that pyramid approach? Yeah. And then, look, the economics are going to be a big part of that, just because, you know, I mean, if only because the doorknob gets to run a local power.

• 51:50Speaker 00

  Right? And then the process in the doorknob needs to do is a tiny fraction of what you need to do when you ask GPT-5 a query. And so I think this is computer industry V2 in that way.

• 51:59Speaker 01

  And how do the markets play out? Where is it just a normal battle price performance with proprietary players? How big are players open source here? Like, can we, you know, Charlie mentioned Oracle earlier. I feel like people today forget that the proprietary databases used to be the best databases.

• 52:15Speaker 00

  Yes.

• 52:15Speaker 01

  All the way through the 90s and you had to like, step one of founding an internet company was, you know, write a check to Oracle. And then you can do stuff after that. And then the open source databases, MySQL and Postgres became competitive in the 2000s. Like, you don't like me reasoning by analogy too much here, but like, can you reason by analogy to database worlds? Just how does the market structure play out?

• 52:34Speaker 00

  Yeah, no, I think that's right. I think that's right. I think that's a good, that's actually a good comp. Another one is operating systems. So when I, when I, when I was a kid, you know, the world's best operating systems were specifically, I mean, Windows is its own trajectory and iOS. But for, for like, what we used to describe as proper computing, on real computers, like Unix computers, including supercomputers and workstations and advanced, you know, scientific applications, things like that. You know, the best, the best versions of Unix were proprietary for a very long time. These really big companies like DEC and HP and others that have, yeah, IBM. They had their own versions of Unix and they made a lot of money on those. And then Linux, you know, it's the same story. Linux came along, looked like a toy. And then, you know, 10 years later, it was better than all the proprietary ones and all the proprietary ones died.

• 53:19Speaker 00

  That's my guess is that something like that.

• 53:22Speaker 00

  I definitely think we'll live in a world of like a small number of big models. It'll be incredibly valuable and incredibly widely used for many things. My guess is we are going to live in a world in which most aggregate AI is going to be executed probably on smaller, smaller form factors. And probably most of that is going to be open source.

• 53:37Speaker 02

  So where is ground zero where the later change would be highest? Software development, somewhere else?

• 53:42Speaker 00

  I mean, software development is a very good candidate for that just because you have people building for themselves, I think. And you kind of have, you know, this incredibly tight iterative loop. And, you know, you see that with these, you know, with these new software and these AI tool companies. So that's, you know, that's claiming. And then, by the way, the other advantage of software development is this is a really underrated thing with respect to AI adoption that a lot of the people in the field are missing is software development is not regulated.

• 54:02Speaker 02

  Yep.

• 54:03Speaker 00

  And so it's like impossible. Well, there is that. They are trying. The enemies of progress and freedom are trying and we are fighting them very hard. But, you know, it's like AI in medicine actually can't move that fast because it's regulated. An AI can't be a doctor, right? You can't get licensed. An AI can't be a lawyer. It can't go make an argument at a court and so forth and so on. And so I think it's like, yeah, it's like, it's like the unregulated fields populated by the same kinds of people who are building AI.

• 54:29Speaker 01

  Charlie had the interesting question of are we overestimating the broad impact and underestimating the specific impact? Or what if, at least for the next five years, as you say, AI in medicine or AI in law doesn't make that much progress because of some of the challenges? But software engineering is totally transformed.

• 54:46Speaker 00

  I mean, so the counter argument, I mean, I think there's a big argument in that direction. And by the way, I actually wrote a whole, I wrote a big Substack piece, maybe we can link to, talking about how the employment shifts everybody's worried about are actually not going to happen at anywhere near the velocity people think. It's like, you know, a significant, significant percentage of jobs in the US literally are, you know, licensed or unionized or civil service in a way where they literally cannot be replaced. And so I do think there is part of that. Having said that, I think it's gonna, things are gonna pop in really interesting ways. And so, for example, you know, ChatGPT is in fact a better doctor than your doctor today with like almost 100% certainty. And just the fact that it can't literally be your doctor doesn't mean you're not gonna ask all the doctor questions. And then you already have people online who are taking surreptitious, you know, camera phone footage of their own doctor asking ChatGPT during, you know, during the appointment.

• 55:27Speaker 01

  I think the medicine use case is an interesting one because it turns out it was a space where most people were actually intelligence bottlenecked, by which I mean it's like test time commute, you know. They were getting a very small fraction of their doctor's headspace. And if you put just more thought on the problems, you can get really good outcomes.

• 55:44Speaker 00

  And then, and then medicine, by the way, medicine and law are also, you know, you could also, you could also look at the self-driving car thing, which is there's always this test for like, you know, self-driving car. There's always been this question of is, is the requirement perfection? Or is there, is the requirement better than the median human driver? And if you apply that same question into law or medicine, like, it's just overwhelmingly clear that you're better off today with Dr. ChatGPT. Now, you, like, in one sense, you can't live your life that way because it can't be your doctor. On the other hand, you can sit there all day long talking to it about your health.

• 56:09Speaker 01

  Yep.

• 56:10Speaker 00

  And by the way, I think there's gonna be like a lot of tension and like a lot of drama, like in these different fields as that happens. But here's another argument that comes back around on this, which is the argument of like, oh, AI is horrible because it's gonna lead to five companies controlling everything. And it's gonna be like, that's it, right? And the monopoly cartel fear. And there's a bunch of reasons to be suspicious of that, including things like open source. But the other reason to be suspicious is, at least with downstream impact, is AI is already maybe the most democratically distributed technology in history. You know, so whatever, 600 million people or whatever it is, number now is on ChatGPT in like two years. And again, you compare that to internet adoption, it's like far faster.

• 56:46Speaker 01

  Yeah.

• 56:46Speaker 00

  Right. And of course, the reason is because the internet exists today.

• 56:48Speaker 01

  Yes.

• 56:49Speaker 00

  To be able to distribute it. But, but the world's most advanced AI is in an app that 600 million people have. It's not in the one that I have or that you have. It's the one that 600 million people have. And so this technology has already, already been hyper, it's been hyper-democratized.

• 57:04Speaker 01

  Yes.

• 57:04Speaker 00

  Right? And so it's going to be in everybody's hands. And, and people get confused about this because they're like, well, why would big companies do that? And the reason is because the mass market's always the biggest market. Right, like you want to get to everybody, right, if you're trying to build the most successful company and to be the company that is the most important. And look, for sure, there are always concerns about aggregation of power and centralization of power, for sure. But there's this other thing, which is, what if this is just like the philosopher Stone, the alchemy of, you know, sand into thought in literally everybody's hand, right out of the gate.

• 57:33Speaker 02

  So there's a, do you look back at the old companies, you know, you look at the S and P 500 of some 1980, there's not that much change in the success based on tech, i.e. it's not like some bank gets better at tech than all the others and just, you know, goes past all the competitors. If what they're saying is true, you would say that old companies are going to adapt less well to this.

• 57:53Speaker 00

  Oh, 100%.

• 57:54Speaker 02

  And the level of change is going to be unprecedented.

• 57:56Speaker 00

  Yeah, I believe that to be the case. Well, so again, let's go back to the computer industry on this. This, I think, is a very interesting, interesting idea. So we just got to discuss the computer industry. Started out by building the big thing. Started by building the mainframe. Thomas Watson, Sr., who ran IBM in the 1950s, said he thought there was a world market for five computers. And it was literally like three, one, one mainframe each for the three big insurance companies and then two for the Department of Defense. And that was it. And by the way, at that time, it was true. That was the world market.

• 58:19Speaker 01

  For those computers.

• 58:20Speaker 00

  For those computers at that time. And then, basically, over 40 years, you went from mainframe to mini-computer to client server to, as you said, to PC and to phone. And so what happened is, over 40 years, the technology cascaded down into the, into the, into the mass market. And then today, you know, it's, that culminated in the $10 Android smartphone in, you know, in India, right? And so, and so that was that. AI, at least so far, and by the way, many other categories of new technology in the last 30 years, because smartphone is another example of this, or have been the reverse, which is, no, the, the individual gets it first.

• 58:50Speaker 01

  Yep.

• 58:50Speaker 00

  The, the, the companies are deciding to go for the individual market first because that's the largest market and those are, those are the people who are the easiest to adopt.

• 58:57Speaker 01

  It's Andy Warhol, the president drinks the same Coke as you and I, yeah.

• 59:00Speaker 00

  Exactly. And then what happens is, over time, what happens is, the, and this is what I think hap, this is what happened with smartphones, and this is what happened with, and this is what I believe is happening with AI, which is, the individuals get it first, adopt it first, the small businesses get it second, adopt it second, the, the big businesses get it third, and the government gets it fourth. Not because the governments and the big companies couldn't get it faster if they wanted to, but they can't because they, right, they can't absorb it. Like, they have all their rules. And then they have all their bureaucracy and they just simply can't absorb it. And so I think there's, and again, it's like at the level of like politics, you know, sort of just structure of society. You could say this is like a fight between the power of the individual versus the power of the state. You know, obviously there's fears of like AI surveillance and all these things, you know, on the state. But the other side is every individual citizen being super empowered and being a PhD in everything, including how to deal with the state.

• 59:45Speaker 00

  Right? Like, so everybody all of a sudden is a super lawyer.

• 59:47Speaker 02

  Yep.

• 59:47Speaker 00

  Okay. And then, and then within business, it's the balance of power between small companies and big companies. And if you're just looking at speed of adoption, there's no question, small companies are adopting faster.

• 59:56Speaker 01

  I was gonna ask about that, because like, you know, Robert Solow said, the computer age shows up everywhere except the productivity statistics. AI productivity is showing up everywhere except the hiring plans of your portfolio companies, which still seem to be hiring a lot of humans. What does the realization of significant AI productivity gains look like? Because presumably like, stodgy large companies, you believe, will fight the gains at some level. Like, they won't take as much AI productivity as they should.

• 1:00:20Speaker 00

  So I think the most basic question is the sort of fundamental question of, is this a centralizing power? Or is this a democratization of power?

• 1:00:27Speaker 01

  So you think it will make small companies more powerful in the battle against large companies?

• 1:00:30Speaker 00

  I think there's a really good chance of that. I don't know for sure, and we'll see.

• 1:00:33Speaker 02

  But it seems certain that it will make younger companies more successful against older companies.

• 1:00:37Speaker 00

  I would, I would assume so, you know, or, you know, or the kinds of

• 1:00:40Speaker 02

  Or less bureaucratic.

• 1:00:41Speaker 00

  Companies that have the kinds of, right, exactly, less bureaucratic. But you're like, you have this, let's take the like employment, the jobs thing, just because that's the one that gets all the headlines, which is just like, oh, all the jobs are gonna go away, because AI is gonna do everything. And so, so one version of it is like, okay, that's, that is gonna be the thing. And then, this is the least of the meme of like, five companies are gonna own the world, and you have whatever, three years to get out from the permanent underclass. You know, whatever, right, that's least of that. The more conventional economic argument is the opposite argument, which is, this is going to deliver massive productivity improvements. Not just to companies, but also to individuals. When you put a technology in the hands of an individual that massively increases their productivity, and the way I think about that is AI just makes every individual a super PhD in every topic. That's like the most dramatic increase in what economists call marginal productivity of the worker that has ever existed.

• 1:01:27Speaker 00

  And so as a consequence, every single one of those people is now capable of doing so much more than they were ever capable of doing before, whether they're doing that as like a solo entrepreneur, or whether they're doing that as somebody who works in an organization. And so in that version of the world, you don't get the aggregating effects. You get some, but they're swamped by the democratization and the superpowers that every individual gets. And then 10 years from now, we'll do, you know, part two of this, probably with the same glass of beer, at the same room temperature. And we will be shocked by how much AI drove both employment growth and drove incomes. Because again, the conventional economic view is marginal productivity improvements, like you want to hire more people at higher levels of productivity because they can do more, and then you pay them a lot more because they can command higher wages.

• 1:02:08Speaker 02

  A huge part of that is when people think about this, it's intelligence but not imagination. If you go back to 1950, there's some movie there where basically a single person is a cell in Excel. They're all sitting in a big room effectively, you know, doing accounting. If you described the sort of computing revolution, they would all say, I'm going to use my job. But the jobs that emerge, you know, video gaming, you couldn't imagine, you couldn't describe. So it's very hard, I think, for people to overcome the sort of, the jobs they can see existing disappearing, but they can't see the emergence of new categories. But we've always had the emergence of those new categories. And if you take things like sport, which I think is like 34% of GDP, you could imagine that extending to 20% of GDP, and, you know, whole new sports emerging. There's vast, if you get more GDP...

• 1:02:52Speaker 01

  We have whole new sports emerging with esports. And I mean, you can argue many of the existing, like, all sports have gotten way bigger over the past five years. Like, basketball is way bigger, F1 is obviously way bigger, just, they've all gotten much bigger.

• 1:03:03Speaker 00

  We're even bringing soccer to the US.

• 1:03:05Speaker 01

  Exactly.

• 1:03:06Speaker 00

  It's inconceivable. No, that's exactly right. And yeah, and then the corollary to that, by the way, this is very difficult to talk about because people get very upset. But the corollary to that is those old jobs, after the fact, you're just like, I can't believe human beings were required to do that. Because literally, like, as you're alluding to, what happened?

• 1:03:21Speaker 01

  Backbreaking Excel work.

• 1:03:23Speaker 00

  The original computer was a person sitting at a desk doing manual math all day long. Like, imagine if I showed up today and told you, like, that's what your kids are going to be doing as a profession, you'd be like, sounds like torture.

• 1:03:32Speaker 02

  Have you read that E. N. M. Banks, the science fiction author?

• 1:03:35Speaker 00

  No, I've actually never read that, no.

• 1:03:38Speaker 02

  Okay. He tries hard to sort of contemplate what a super advanced society with AI is like. And what's interesting is, everyone has stuff that is sort of... Looks like a job, but is actually leisure.

• 1:03:49Speaker 00

  Right. Well, the best jobs in the world have that characteristic, right?

• 1:03:51Speaker 02

  Yeah. And then you have very complex status hierarchies as people aspire. And if you look at sort of Gmymen, Schafftic societies like Formula One or something like that, you have a very clear sort of motivation and status hierarchy for people within it that seems to like fulfill a lot of human needs.

• 1:04:06Speaker 01

  Aren't you describing being a VC? I've seen the activities at the conferences of VCs go to.

• 1:04:10Speaker 00

  Exactly. As we like to say, it's an I three four professor.

• 1:04:14Speaker 00

  It's a country club kind of thing. The other, by the way, great economic fallacy that I just see everywhere right now is this idea that AI is somehow going to be this like hyper, you know, this hyper successful thing, hyper acceleration of productivity and, you know, dramatically change everything, destroy all the jobs. And yet somehow that's going to lead to people being immiserated and being poor and not having anything. And the, the, the missing element there is that even if that scenario plays out, which I think, as I said, I don't think it's a centralization scenario, but even if it played out, the result would be hyper deflation of prices, which is the thing that people miss. And so the price in that, in that environment with that level of productivity growth, the price of goods and services will collapse. And things that today cost a lot of money will all of a sudden all be cheap or free.

• 1:04:50Speaker 02

  This is sort of the.

• 1:04:51Speaker 00

  Everything becomes oversupplied.

• 1:04:52Speaker 02

  In Star Trek, there's no GDP would be zero.

• 1:04:56Speaker 00

  Right.

• 1:04:56Speaker 02

  Because you just.

• 1:04:57Speaker 00

  The replicator does everything.

• 1:04:58Speaker 02

  The replicator does everything.

• 1:04:58Speaker 00

  Right. And so things that cost, you know, a hundred dollars cost a penny, right? In that world, like even a real GDP looks like it's shrunk and everybody is much, much, much, much better off. And by the way, this is not the first time this has happened. There have been periods of like sustained deflation in the past.

• 1:05:13Speaker 02

  You see it within categories. Look at the spend on CDs, music CDs versus music stuff.

• 1:05:18Speaker 00

  A lot of, so I always talk a lot of the so-called second industrial revolution. So the, the most sort of, the time in which like our entire modern world was built with everything from airplanes to freeways and everything else, 1880 to like 1930. It's like that 50 year, 50 year stretch. And for a lot of that period, they were in essentially a protracted deflationary depression. Because what happened was the technology for acquiring and processing raw materials was advancing so fast that there were gluts in all, all the different raw materials. And so it felt like the economy was caving in because prices were collapsing. Economic activity was down, GDP was down. In reality, what happened was a massive surge of productivity growth, a massive surge of material prosperity. And over that period, both productivity growth and economic growth advanced something like 3X of our time.

• 1:06:01Speaker 00

  And, and, but if you read the books at the time, like they're obsessed with this problem of like, oh my God, there's this oversupply of iron. What are we ever possibly going to do with it? And it's destroying the economics of the iron production business.

• 1:06:11Speaker 01

  You not have. Low productivity segments of the economy find ways to

• 1:06:21Speaker 01

  avoid the prices collapsing too much.

• 1:06:25Speaker 00

  Yes.

• 1:06:25Speaker 01

  Such that you don't get this effect.

• 1:06:27Speaker 00

  Almost cost disease.

• 1:06:29Speaker 01

  Yeah, like we've gotten much better at healthcare over the past, you know, 50 years. And yet.

• 1:06:34Speaker 00

  Yes, yes, so almost cost disease, but also just simply government. You see this today. So, so basically it's like today, what happens if you chart, you know, it's the famous chart. If you chart like basically the prices of products across all these, all these sectors.

• 1:06:45Speaker 01

  The deflationary economy and the inflationary economy.

• 1:06:46Speaker 00

  Yeah, there's two different economies. And the deflationary economy is like everything electronic, everything software, everything media. By the way, basically everything, all light manufacturing, clothes and everything, well, not housing. So the price of clothes collapses, the price of housing hyper rises.

• 1:07:00Speaker 01

  Oh, sorry. Yeah, I was going to say.

• 1:07:02Speaker 00

  On the other side, on the, on the non-productive side, you've got, you've got housing, education and healthcare. And so, and that, and that, that sort of, I think, explains a lot of the politics and sort of feeling of our, of our society right now, which is just like everything we, everything that's like optional and fun is getting super cheap and everything that's actually necessary to like raise a family is like getting hyper expensive. And, and exactly to your point, it's because these are like two different economies. And then you look at, and this gets complicated, but if you look at housing and healthcare and education, what they all have in common is heavy government interference, specifically of the form of restricting supply. In, in all cases, the government basically restricts how much, you know, how many houses can get built. They restrict how many doctors can get licensed. They restrict how many education, you know, universities can get, you know, accredited. And then because restricted supply leads to prices skyrocketing, the voters get mad.

• 1:07:47Speaker 00

  And so then the politicians subsidize. And all three of those markets, there's massive government subsidies, federal student loan programs, federal mortgage programs, federal healthcare programs. And if you insert, you know, basic economics, if you, if you constrain supply, you cause prices to rise. And if you subsidize demand, you cause prices to rise. And so the, I think this is basically the state of the Western democracies over the last 50 years is every step of the way. As the price of the American dream, housing, education and healthcare, as the prices rise, the pressure from the government to subsidize increases, which just drives the prices higher. And so you're in this ever escalating spiral.

• 1:08:25Speaker 01

  I'm presuming you're concerned about more of that, like everyone is making fun of the Boston City Council, you know, objecting to Wemo and, you know, maybe voting to preserve driving jobs and everything like that. And so we find more categories to turn into healthcare, education.

• 1:08:38Speaker 00

  Yeah, so sci-ncure is fundamental. And then almost cause disease kicks in because now you have this, you have this different, then you have the hyper incomes being earned by people in the, in the deflating sectors, where there's massive productivity growth and then people in the, you know, in healthcare get to get to command those wages and then the whole, the whole thing compounds and gets worse. By default, this is what the governments are going to do. I mean, by default, that's what they're exactly doing today. And then there's a really tricky political economy thing to this, which is like the voters, it's very hard to tell the voters, like, don't vote for the guy who says he's going to subsidize housing more, right?

• 1:09:09Speaker 01

  Right. So are you, are you worried about this as a political future?

• 1:09:12Speaker 00

  Yes, 100%. Well, I think it's our, so I, this, I think this is our political present.

• 1:09:15Speaker 01

  Sure, sure. I'm seeing an expanded version.

• 1:09:18Speaker 00

  Yeah, an expanded version, 100%. I'll give you the, well, the latest example of this, latest example. So remember the dock workers, remember the dock workers' strike?

• 1:09:24Speaker 01

  Yeah, I do.

• 1:09:25Speaker 00

  Okay, remember the guy, the guy with the gold chain, like the whole thing? And we found out about, you know, the dock workers and you dig into it and you're like, oh, the dock workers' union, you know.

• 1:09:31Speaker 01

  And this is where European ports are way more productive than the US.

• 1:09:35Speaker 00

  Of course, it turns out, because you have these, you have these unions and they have a tremendous amount of political stroke. One of the things that we, that was discovered during that process that I didn't know is that in prior union agreements of the dock workers, they already had a one-to-one ratio of people sitting at home doing nothing to every productive dock worker as a consequence of the last, you know, whatever, 60 years of these things. So basically, there's a long history here that just never became visible in public, which is every time any kind of new automation shows up at the docks, the dock workers renegotiate the contract to preserve the jobs, which literally means people sitting at home. And that was before the most recent agreements. And so, and that's, that's just a micro example that's easy to pick on. The much larger example is the civil service, public sector unions, you know, and obviously, right, and here we're into, you know, teachers' unions and nursing unions and

• 1:10:16Speaker 01

  Yes, yes.

• 1:10:17Speaker 00

  Like all of these things. And then, you know, here we're into this, like, you know, fairly amazing, bizarre world we've been in for the last, you know, 50 years, where you have, you know, especially around government, you have both civil service protections and union protections. Right, so exactly. So by default, the political economy makes all of this worse and worse. By the way, this is why I think inflation, inflation doesn't mean what it used to. Inflation 50 or 100 years ago used to mean like the price of raw materials was so important in the economy that, you know, you felt it like very directly. Now, as you say, you've got this, you've got this-

• 1:10:45Speaker 01

  It's hard to talk about a single bundle.

• 1:10:47Speaker 00

  Yeah, because it's not the same thing. And this is the thing where you can't, you know, you can't build a family off the price of the iPhone. Like, you know, just because everybody has like infinite media on their iPhone for free does not mean that they feel good if they can't buy a house.

• 1:10:58Speaker 01

  I liked your, what was your inflation stat of if there's a hole in your drywall, it's cheaper to put a flat screen TV over it than it is to repair the drywall.

• 1:11:09Speaker 00

  100%, exactly.

• 1:11:10Speaker 02

  Let me drag us back to AI a second. You used to have, you know, the 10x engineer. You're going to have the 1000x engineer with AI?

• 1:11:17Speaker 00

  Yeah, for sure. I think you already do in practice. And of course, we have, we have had for a long time. I mean, we've had the 1000x engineer for a long time. It's just, it's becoming-

• 1:11:25Speaker 02

  Are we going to add another one?

• 1:11:26Speaker 00

  Yeah, yeah, yeah. It's becoming more visible. It's going to apply in more areas of software. And then, look, the other thing is just the payoff to software has been rising. The markets are so much larger now. You know, this goes back to the, you know, why would this time be different with AI versus the internet? Which is just like, okay, this is the first time in human history that you've had 5 billion people connected on an interactive network. And if you were a provider of products and services that go into that market, like if it worked, it may or not work, but if it works, it can get sort of infinitely large. And actually really fast now. And so, like, you know, what is the upside? You know, how many people are, how many people are there in the world who are going to pay whatever it is, 20 bucks a month for the world's best AI? It's not all 5 billion, but it's some, you know, it's a much larger number than, you know, you would have had, you know, 10 or 20 or 30 years ago. And maybe it's just, maybe it's just simply market size.

• 1:12:13Speaker 01

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• 1:12:55Speaker 01

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• 1:13:12Speaker 02

  You've been super early to crypto with A16Z. It's probably the area where there's been the most concentration of VC performance, new paradigm, not that many others. Two questions. Why did so VCs focus on crypto? And then how important is stablecoin going to be?

• 1:13:29Speaker 00

  So the first question is why did they or why didn't they?

• 1:13:31Speaker 02

  Why didn't they?

• 1:13:32Speaker 00

  Didn't they? So what I've

• 1:13:34Speaker 02

  Status or?

• 1:13:35Speaker 00

  What I've observed, I mean, so one is, you know, you could always just say the easy explanation is just they didn't understand it or they were focused on other things. What I've observed is that as technology has become more important, people's belief systems have a lot more to do with technology. So like your worldview, like the part of your brain that thinks about things, like a larger and larger percentage of that is devoted to technology. And of course, if you're a VC, that's like 100%. And then like whatever you're spending your time on, like you form whatever myths, legends, religion, cults, like it's the same question of like, why is the press so much more focused on technology than they were 15 years ago?

• 1:14:07Speaker 02

  Essentially, it was harder to be politicized about AOL and eBay than it is today.

• 1:14:13Speaker 00

  Yeah, exactly. I think what we observed is a lot of VCs who were very logical and as passionate on topics like SaaS, for which there's no religion.

• 1:14:21Speaker 02

  It's hard to get politically motivated about SaaS.

• 1:14:24Speaker 00

  For some reason, there was something about crypto where they just got like locked in on, yeah, the politics or the whatever. And it's just, it was just like, oh, so my theory of it after a while, because I just met so many people who were just like, and it wasn't even that they were like, I don't think it's going to be valuable. They were to be like, it was evil. Like it's like fully, it's full on evil. It's a scam. It's a fraud. It's a this, it's a that. If it works, it's evil. If it doesn't work, it's evil. One of my tentative conclusions was just like money pisses people off. And so like, you know, making money through tech is usually an indirect process. In this case, there was a more direct aspect. People get just really, people have always built up all kinds of weird religious and political views around money. And yeah, it's literally what we experienced was people just got like really upset. And we can never understand it because it's like, what's the point of being a venture capitalist of all things?

• 1:15:08Speaker 00

  What's the point about being negatively upset about a new technology?

• 1:15:10Speaker 01

  And in particular, it feels like it requires high openness where there's something about early crypto where it attracted folks like Balaji, where there was all these grand pronouncements of like, oh, Bitcoin will supersede the nation state, you know, just like it led to a lot of that kind of slightly cultish, very cyberpunk. It really reminds me of the, what's the John Perry Barlow, you know, letter?

• 1:15:35Speaker 00

  Declaration of Independence of Cyberspace.

• 1:15:37Speaker 01

  Exactly, exactly. John Perry Barlow is the Declaration of Independence of Cyberspace. There's a lot of that kind of vibe about crypto. And so it required one to be open minded enough to think there could be something here. I think most people are not that high openness.

• 1:15:50Speaker 00

  High openness. And then it also got-

• 1:15:52Speaker 01

  You're not that high openness.

• 1:15:53Speaker 00

  Building on that. Well, I'm, I don't know. But I'm not introspective, so I don't have to think about that. It also got right coded. I think it got right wing coded because it got libertarian coded early, especially in the, you know, 2010s when everything got politicized. Anything coded right libertarian was bad. And then quite honestly, and I, you know, maybe this will piss people off if I say it, but like, quite honestly, if you actually want to understand it, how it works, it actually is quite difficult. Like, it is a complex technical thing. And I think maybe-

• 1:16:20Speaker 01

  Because I don't understand the tech.

• 1:16:21Speaker 00

  Maybe people literally don't understand. I dealt with this a lot when I would deal with people who were causing us trouble in public and I would, and I literally would try to explain it to them and I just fundamentally couldn't, like, you know, it's like, by the time you're using the phrase Byzantine general problem, like-

• 1:16:34Speaker 01

  Yeah, yeah.

• 1:16:35Speaker 00

  You're done. It's never going to work.

• 1:16:37Speaker 01

  My observation is we have a friend who, you know, talks about how crypto contains multitudes and that's the important thing you have to internalize because the criticism you will hear- Is sometimes something like, oh, there's a lot of scams in crypto.

• 1:16:50Speaker 00

  That's right.

• 1:16:50Speaker 01

  And it's like, okay, crypto is this big box. And within this big box are, there's a lot of scams happening. There's like, you know, Vitalik types who are really interested in developing new protocols. There is people using it as a store of wealth, especially in emerging market countries. There's people who are just interested in like speculative number go up games. There is people who are passionate about developing new payment systems and they're working on Bitcoin Lightning or something like that. It's this big box that contains so much different stuff. And there are strengths and there are weaknesses or there are kind of, you know, things that we might not like. Like, again, I don't like some of the like rug pulling kind of scam aspects, but it's just a big box with a whole lot of different stuff in it.

• 1:17:30Speaker 00

  Right.

• 1:17:31Speaker 01

  And people seem incapable of reasoning that way.

• 1:17:34Speaker 00

  They see what they want to see.

• 1:17:35Speaker 01

  Yeah.

• 1:17:35Speaker 00

  Plus, it was also like you want to see the tech guys taken down a notch. And like, this is some way that tech guys are manufacturing magic money.

• 1:17:40Speaker 01

  Yeah.

• 1:17:41Speaker 00

  And then maybe the other, another more focused way of what you're saying is every new, every new form of financial technology associated has been historically associated with some form of bubble and crashed and sort of scams along with that. And the classic example of that, that I think is illustrative for crypto, the invention of paper money.

• 1:17:58Speaker 01

  John Law.

• 1:17:59Speaker 00

  John Law invented paper money in France about 360 years ago. And it immediately sparked what became the South Sea Bubble.

• 1:18:04Speaker 01

  Yep.

• 1:18:05Speaker 00

  And actually, he ended up basically like his, his life did not go well after that.

• 1:18:08Speaker 01

  He fled to Venice.

• 1:18:10Speaker 00

  Fled to Venice and basically died, died, died poor.

• 1:18:12Speaker 01

  High yield finance, maybe another example.

• 1:18:14Speaker 00

  What's that?

• 1:18:14Speaker 01

  High yield finance, like Mike Milken.

• 1:18:16Speaker 00

  Oh, yeah, yeah, yeah. Junk bonds, junk bonds, junk bonds were completely discredited by the time Mike Milken was sent to jail. Yeah, junk bonds had been completely discredited because everybody, again, the moral story. Everybody knew that it led to like this massive bubble of all these, you know, these, you know, I mean, you know, deliberately high, you know, low, high, high risk, you know, bonds. Who would ever do that? You know, a decade later, that, that market was like much larger than it ever had been in the eighties and was extremely well respected and it played a huge role in the build out of everything since. And so new kinds of money lead to new kinds of scams, lead to new bubbles.

• 1:18:44Speaker 01

  Speaking of new kinds of money, how do you think about stable coins?

• 1:18:48Speaker 00

  Yeah, yeah. So, so the stable coins, I would say, the way I think, primarily why I think it's been super helpful to have stable coins succeed because it's just an obvious, you know, incredible use case. It's worked incredibly well, you know, they're, they're, they're being used all over the world, you know, for many different reasons. The numbers, you know, are now extremely large. I think it's great. It was, you know, originally, you guys probably know, it was originally part of Vitalik's early work. He had a very unfortunate, do you remember the original name for stable coins?

• 1:19:12Speaker 01

  No.

• 1:19:13Speaker 00

  Colored coins.

• 1:19:14Speaker 01

  Oh, yes.

• 1:19:16Speaker 00

  Only an ESL speaker would pick that name, but the idea was a crypto token wrapping a real world asset. So that was one of the part of the original thinking on all this stuff. It's worked incredibly well for dollars. I believe that will work incredibly well for many other kinds of assets. It's great. Now, having said that, the crypto purist natives are like, well, that's not the main thing because it's a bridge technology of the old world. I think it's great and I think it's fantastic that you have such a successful use case.

• 1:19:42Speaker 02

  So fintech has generally not produced great companies or giant companies because it's been country by country demacated.

• 1:19:48Speaker 00

  It's your iPhone.

• 1:19:49Speaker 02

  In fact.

• 1:19:50Speaker 00

  He's really upset about the way that.

• 1:19:53Speaker 02

  You end up with these very mediocre companies like Stripe, but they're fantastically managed. It seems like stablecoins could lead to the global scalability in fintech that has been the prerequisite to making super valuable tech companies.

• 1:20:08Speaker 00

  I mean, we've had some fintech ones that we're very proud of, including Stripe. It's just the level of, one is regulation and then.

• 1:20:17Speaker 02

  And payments is different because they did go global. Not many companies.

• 1:20:21Speaker 00

  There's regulatory constraints there as well. And then the last decade in particular, like a lot of the Western countries, they've been depending on a crusade against any kind of financial innovation, just on general principle. And so there's been these like real regulatory government headwinds. And then just like look like dealing with the banks, right? Like, you know, dealing with the credit card companies, like, you know, dealing with these, they're not psyched at the idea of some kid with some new idea. They're just not. And so even if you have regulatory clearance, like can you actually implement the thing? You know, is an open question. And so I just think there's a lot of glue, you know, a lot of stickiness. And then, I mean, look, you could also say, to be fair, you could also say, look, it's a high hurdle to go to a consumer and to say you should trust your money, you know, with some new companies. So there's like a whole issue there.

• 1:21:06Speaker 00

  So yeah, so yeah, so optimistic. Yeah, I agree with your optimistic point of view. Like, yeah, this was always, this was all, I mean, this was always part of the crypto philosophy, which was programmable money. If you had programmable money, then all of a sudden, you could have financial services work a lot more like software. You could have a much higher rate of innovation. And you're right, maybe we're starting to get there.

• 1:21:22Speaker 01

  Was there someone who really got you into crypto?

• 1:21:24Speaker 00

  I would say the main person was my partner, Chris Dixon. It was very early and he figured it out. And then, you know, we were involved in Coinbase early on. And so Brian and Fred at Coinbase were super helpful in helping us understand it.

• 1:21:34Speaker 01

  And how do you think?

• 1:21:35Speaker 00

  Oh, and I'm sorry, and then biology, actually biology is at the head of that list.

• 1:21:39Speaker 01

  And how do you think Chris cracked it too early?

• 1:21:42Speaker 00

  So Chris is just, Chris always, Chris's entire life has been this pursuit of, it's just how he thinks. He's just born to do this. And it's been, you know, it's in pursuit. He uses these terms. He uses one term. He says, what nerds do on nights and weekends?

• 1:21:55Speaker 00

  It is one way to look at it. The second way to look at it is, good ideas look like bad ideas. And then his third most recent version of that is like internet cults. It's like, if it has like a thriving subreddit, then like something's going on. It's the other side of the, of the people's negative emotion on this is the things that become movements early. Like, the internet enables movements.

• 1:22:16Speaker 01

  Is there something that's, yeah, this is the homebrew computer club, you know, thing?

• 1:22:20Speaker 00

  That's right.

• 1:22:21Speaker 01

  John, how do you think about stable coins for you? It's funny. When you're saying crypto is an internet cult, we find that it's very vibes based in a funny way, where, you know, there was always a thing of like, you know, Stripe is, you know, pro crypto, we're super excited. Stripe is anti crypto, you know, not going to make it. You know, Stripe is pro crypto again. We've never been, that's never how we've conceived of it. We just want to build things that people find useful. And, you know, the Bitcoin white paper dropped in 2008, and I want to say, and Stripe was founded in 2009. And so we've kind of been watching all along stuff. Wasn't it February 2009? It might have been 2009. You're right. Anyway, it was just before Stripe. And so we've just been trying various things. Like, we founded Stellar in the early days. We tried Bitcoin support. Original Bitcoin was a horrible payment method, you know what

• 1:23:04Speaker 01

  I mean? And the thing we have really noticed, that's really striking, is there's a level of consumer adoption and familiarity that allows for a mainstreaming. Like, we just worked with Shopify to, like, they now offer a stablecoin. Payments on all of their checkouts or they're rolling that out on all their checkouts. That's just not a thing that would have made sense even three or four years ago. And so it's like, you know, we're talking about the internet stuff. Just at a certain point, Google and Facebook and all these companies start to work. And if you try to launch Facebook in 1998, it doesn't work because there aren't enough, you know, internet connections. I think there weren't enough wallets for a lot of things to work even. And you look at the stablecoin supply charts, like we're growing at 40, 50% year over year. Like you don't, you know, it's the grains of rice on the chessboard.

• 1:23:48Speaker 01

  You don't need that many years of 40 to 50% year over year growth before it really works. But it's been really striking for us over the past 18 to 24 months where we've been trying to make different things work for at various points. And again, we shut off products that don't work. But now all of the products are really working all at once. Okay, I had some questions on the Andreessen Horowitz business. Why aren't you a hedge fund in that you are like, why don't you do public investing? You don't have to like be a hedge fund. You can just do long only. But aren't you in the business of predicting tech trends and evaluating companies?

• 1:24:19Speaker 02

  After having done this conversation, we think you might be quite good at it.

• 1:24:21Speaker 01

  Exactly.

• 1:24:24Speaker 00

  We've considered it and it's just if you guys spend time, if you spend time with public market investors, like they just have a very different motion than what we do. And so they just, they're.

• 1:24:33Speaker 02

  But is that tradition or is that fundamentally intrinsic to the ontology of the job?

• 1:24:38Speaker 00

  I think there would be a different way to run public money in a way that, for example, would have caught a lot of the mega seven. Like I think that possibility exists and literally you could just say it's as simple as apply the venture mindset to the, you know, to the mega caps and the way you go. And obviously there are, obviously we now know, you know, venture scale returns when you, when you get that right. I would just tell you like, I would tell you, one of the, one of the things that saves venture is that we're locked up and our, and our investors are locked up.

• 1:25:01Speaker 02

  Feature, not a bug.

• 1:25:02Speaker 00

  It's an incredible feature. And in traditional finance theory, they always tell you like illiquidity is a right, is illiquidity is a deficit. And it turns out.

• 1:25:08Speaker 02

  Which is true, but human nature is a bigger one.

• 1:25:10Speaker 00

  Human nature is.

• 1:25:12Speaker 02

  Liquidity would be a feature if we were.

• 1:25:14Speaker 00

  Correct.

• 1:25:14Speaker 02

  Less messed up.

• 1:25:15Speaker 00

  It is so incredibly hard and that gets sucked into the psychology of the moment. And I spent a lot of time at our firm trying to get people to not be sucked up in the psychology of the moment. Like, so for example, it's just like an absolute ban on television news in the office. Like, no, if it's on CNBC today, it does not matter to us. If it does matter to us, we made some horrible mistake eight years ago that we can't fix now anyway. And if it's anything else, we shouldn't be paying attention to it. Because the whole point of this is, you know, things that are going to take five or 10 years in the future to develop and people just need to get back to work. And I bring that up just as like, okay, if you're, this is why, okay, so here's a very pragmatic challenge. You're running public money with a venture strategy. All right, what's your lockup? Okay, now you got a quarterly lockup. You know, congratulations, big guy. You know, the market, you know, rips your face off. All your investors redeem, you know, so much for your strategy. Right. And so like, that's just really hard. And then you, people who have gone out to try

• 1:25:59Speaker 00

  to raise money on longer lockups are like, well, why would I do that? Illiquidity is a problem. Like, why would I lock up an Apple position? That's insane. And again, you can say they exist, like, nobody did. The fact that nobody did that is illustrative of how difficult it is. Now, I don't know, maybe at some point we should. And then the other is just flat out opportunity cost, which is, are you really going to spend the time dealing with that, that you could be spending meeting the next Mark Zuckerberg?

• 1:26:19Speaker 01

  You invest in companies that succeed and then go public.

• 1:26:25Speaker 00

  Can I tell the actual story? We almost did this. We almost started the thing and we're like, all right, we have the venture mentality, we have the thing, but like, because of how the public markets work, we need a public market. I mean, somebody with some public markets background to even be able to raise the money. So we ran a long recruiting process and we got down to the final candidate and we met with him in, during COVID in, I'm gonna say, September 21, something around that time. And we said, look, just bring it in or bring, do the work of and bring your best idea, like, the one company that you would like to commit the portfolio to. Would you, would you like to take a guess for what it was? Peloton.

• 1:26:58Speaker 01

  Oh, my God.

• 1:27:00Speaker 00

  Which then proceeded to fall 99.9%.

• 1:27:02Speaker 01

  So you were, yeah, Miss Bullitt.

• 1:27:05Speaker 00

  Right. And by the way, at the time, Peloton, and you remember at the time, you remember that we used to talk about this at the time, remember Peloton was like, oh, this is a permanent, like, this is, this isn't just a bike company, you know, this is a movement, right? This is a cult and this is a brand and this is a media. And everybody had their theories, subscriptions and recurring revenue and, you know.

• 1:27:18Speaker 01

  But during COVID, where people overestimate the permanence of the behavior changes.

• 1:27:22Speaker 00

  Yes, exactly. Well, there was that, but there was also just the, you know, these hardware companies do, that kind of company, you know, fitness, fitness is a trend, fad-driven business historically. And so anyway, it was just like, that just felt like a message from God.

• 1:27:37Speaker 01

  Go back to public market investing. So you invest in companies that then go off and succeed and go public, like Coinbase or Airbnb or all these sorts of companies. You then, because they're public, you get to distribute the stock. And so you distribute it to all the LPs, they get, you know, their shares, you get your shares. Do you hold the companies? Do you make a decision? Is it formulaic? Is it not formulaic? Are you secretly a public markets investor? Because you have to make these decisions.

• 1:28:01Speaker 00

  Yeah, so, you know, to be clear, there's two parts to that. You know, the part each of us as individuals does, do whatever we do with this stock.

• 1:28:07Speaker 01

  Yes, but what do you do?

• 1:28:08Speaker 00

  What do I do? I mean, you know.

• 1:28:09Speaker 01

  Not in specific, but I'm basically saying, do you make active decisions? Or is it like totally formulaic?

• 1:28:13Speaker 00

  Well, let me tell you how we do it as a firm. And then, you know, the good individual, how we do it as firms, we try to, we try to make it as mechanical as possible. We're trying to get out of the psychology of whatever's happening at that moment. So you try to, you try to define a process upfront. But, but you do want to be, you do want to be discriminating. And so we have a magic box formula of things, of things like, you know, the quality of, you know, are the founders still running the company? Quality of the founders, you know, are, you know, are they, are they beating their numbers? You know, what's the growth rate? What's the second derivative?

• 1:28:40Speaker 01

  What's the service like in the pub?

• 1:28:40Speaker 00

  Exactly. Do they tolerate low performing, low performing bartenders? Yeah, and then, yeah, and we have some schedule against that. You know, there, there is a theory afoot, and Sequoia is pursuing it, that basically the venture, venture firms and their LPs have left enormous amounts of money on the table by distributing too, too soon. And that, you know, the best strategy over, if you back test over 50 years, the best strategy, at least for the top firms, probably would have been to hold everything in perpetuity. And so, you know, Sequoia notably is trying a strategy where they're trying to do more of that. I will tell you, the LPs don't like that. The LPs, the LPs, you know.

• 1:29:14Speaker 01

  The LPs want their shares.

• 1:29:15Speaker 00

  Of money in and out. And they, and they, and they do have a plausible argument that says, look, we're not paying you to manage public money.

• 1:29:21Speaker 01

  Yeah.

• 1:29:22Speaker 00

  And by the way, they have their own needs. And by the way, they have their own needs, not more than ever. You know, they're under real pressure in a lot of cases. And so, you know, if, like, if you ask an LP, if you ask an LP, they will tell you, yeah, we want, we want you to try to shoot the lights out on as long dated a horizon as possible. Having said that, like.

• 1:29:37Speaker 01

  As soon, as humanly possible.

• 1:29:39Speaker 00

  Get us some money, please, right? And so, and where this comes up is, you know, it's just the thing of, well, should we hold it for another three years and go for another doubling? Or should we, you know, burden hand on that? Anyway, so we try to run that mechanically on the individual side. I mean, it really varies by the individual, just based on idiosyncratic life circumstances.

• 1:29:56Speaker 02

  Off to big company world for a couple of questions. How much should big companies focus on their competitors?

• 1:30:02Speaker 00

  I mean, so this is a real double edged sword. So the easiest thing in the world is to focus on your competitors, right? Because you've got somebody to benchmark against and index against. And it's just been amazing how many other big companies start or stop their VR and AR programs based on whatever they're doing at that moment. Like, they seem to have outsourced their thinking entirely to Meta. And so there is this dysfunctional version where you're kind of outsourcing your thought to the competitor. And then there's the Peter critique of like, you're getting into these Girardian spirals. And I think there's something to that. Having said that, I mean, I see the other side of that all the time, which is the anti-growth side, which is only the paranoid survive. And isn't it great if you have an intellectual framework to be able to not think about your competition? Because that's a lot more fun. If your competition's good, thinking about them is actually really painful.

• 1:30:47Speaker 02

  Yep.

• 1:30:47Speaker 00

  If you have this enlightened point of view that says you don't ever have to think about them, like you're letting yourself off the hook. And so I think there's-

• 1:30:54Speaker 02

  Maybe the answer is whatever's most painful, thinking about them or not thinking about them, is best.

• 1:30:59Speaker 00

  Well, and this gets to what I've experienced with big companies. By the way, this includes, in a lot of cases, fast-growing startups. Like, they think a lot about their competitors for the purpose of trying to basically, essentially, ultimately copycat with their competitors. If your competitor is decent, you assume that, for whatever it is they do, you assume they must have some analytical reason they're doing it. And so there's this natural tendency to try to build an analytical case to do the same thing. And so there's an over-focus in that way. Having said that, I can count the number of true competitive teardowns.

• 1:31:30Speaker 02

  Yep.

• 1:31:31Speaker 00

  I don't know, maybe on one hand, that I've ever really seen. Because, again, your pain point, the most painful thing in the world is to talk honestly about somebody beating you.

• 1:31:39Speaker 01

  Yeah, I always find the Jeff Bezos, "We're not competitor-focused, we're customer-focused", kind of a clever bit of misdirection. Because, again, at Désert Stripe, we think that our customers are very smart. And so if they're picking something else, that is some signal of revealed preference that a well-informed person trying to do the best thing for them says, "This is better than Stripe." And so we do a lot of secret shopping, we do a lot of tearing down, we want to understand what's out there. Again, as you say, that shouldn't define the roadmap, you should be able to come up with your own products. But if you're not coming at it from an informed place, something is horribly wrong.

• 1:32:11Speaker 00

  I think, yeah, it's some combination of you need to be brutally honest with respect to what your actual issues are. And those actual issues include you're losing for reason X, Y, Z.

• 1:32:19Speaker 02

  I mean, in some ways, what they're saying is biocci is avoid pain.

• 1:32:22Speaker 00

  Yes.

• 1:32:22Speaker 02

  And so you need to steer them into pain.

• 1:32:23Speaker 00

  I would say it slightly differently, which is I have found people willing to tolerate any level of chronic pain in order to avoid.

• 1:32:28Speaker 02

  Avoid acute pain.

• 1:32:29Speaker 00

  In order to avoid acute pain. And so people would much rather lose slowly over five years.

• 1:32:34Speaker 02

  Yep.

• 1:32:34Speaker 00

  Than have the conversation that involves a dramatic change to stop losing.

• 1:32:38Speaker 02

  Wow.

• 1:32:39Speaker 00

  And I've seen that over and over again. It's almost impossible to get people to do that. They just, it's a level of aversion is like incredibly high. What founders or companies do you respect? People seem fine just bleeding out. I mean, it's just incredible. I mean, I mean, you see in other areas of, you know, you see in politics, you know, I don't want to name names, but there are political parties, let's say, in various places around the world where you just look at it and you're just like, like, I can't believe that you're willing to inflict the strategy on yourself with these results that are clearly not working.

• 1:33:06Speaker 02

  Actually, that would.

• 1:33:07Speaker 00

  And yet they will not revisit their core assumptions.

• 1:33:10Speaker 02

  If you look at companies that have died over the last 20 years, they do seem to have these very long sort of operatic deaths.

• 1:33:16Speaker 00

  Yes.

• 1:33:17Speaker 02

  And they change less than you would think.

• 1:33:19Speaker 00

  Yes.

• 1:33:19Speaker 02

  Do you think that's because of people that are prescient and see it just exit?

• 1:33:23Speaker 00

  Yeah.

• 1:33:24Speaker 02

  And so the people, you've sort of got a selection effect and the people that remain, or is it just that it's, it's too socially awkward of a conversation that says we've, like.

• 1:33:32Speaker 00

  Most people, most people would rather just put one foot in front of the other.

• 1:33:35Speaker 02

  Yeah.

• 1:33:35Speaker 00

  Most people don't want to rock the boat. Most people don't want to be the skunk at the garden party.

• 1:33:38Speaker 02

  Yeah.

• 1:33:40Speaker 00

  Most people don't want to call their own baby ugly. Most people don't want to, yeah, I mean, it's, most people don't want, they don't want the reputation of being a troublemaker. They don't want the, it's, it's like this thing of, you know, leadership is a very interesting signal. You have to decide whether you want to send as a leader, which is, do you want people to bring you bad news?

• 1:33:54Speaker 02

  Oh.

• 1:33:54Speaker 00

  Because it's like, if all people are doing every day is bringing you bad news, number one, you're going to like slit your own wrists because that fucking sucks. And then number two, you don't want people to just be complainers.

• 1:34:02Speaker 02

  Yeah.

• 1:34:02Speaker 00

  Right? And so do you want, you know, so it's maybe the most more advanced version is only bring me a problem if you're also bringing me the solution. But like, okay, now your life is, it was better, but like, what if there really is a problem?

• 1:34:12Speaker 02

  And they don't have a solution.

• 1:34:13Speaker 00

  And they don't have the solution.

• 1:34:14Speaker 02

  Because it's beyond them.

• 1:34:14Speaker 00

  And it's beyond them. And then they're the one that you're going to give a negative performance review to. So. By the way, the other twist on the big company failing thing, which I think is really underrated, is the big companies that fail, the way the story gets written is they never figured it out. And the easy example of this is always Kodak. For example, they never figured out digital photography. What you often find in the backstory is, no, they actually figured it out, they did it too soon. Kodak had actually a very active digital camera program before.

• 1:34:38Speaker 02

  Then they got burnt, and then once burnt, twice shy.

• 1:34:40Speaker 00

  Twice shy. Yahoo, by the way, Yahoo had mobile early. Yahoo was all over mobile between 2002 and 2006. And then they got burned so hard on it that by the time the iPhone appeared, like, it was too late.

• 1:34:53Speaker 02

  Yeah, I think that if you did WAP, you are unlikely to succeed in the post-iPhone world.

• 1:34:57Speaker 00

  Yeah, and quite frankly, I think a lot of the tech companies, a lot of you mentioned the big tech companies. A lot of the big tech companies, like, they had internet fully deployed internally. They had DCP IP products, like, they, you know, they actually knew it quite well. They were running it. It just was something that they were very used to, that they didn't really think about in any way. And so, yeah, there's the status quo bias thing.

• 1:35:15Speaker 02

  So this is a good segue.

• 1:35:16Speaker 01

  Even very intelligent sounding reasons as to why it won't work from a recent document and a recent attempt.

• 1:35:20Speaker 00

  People are really good. People are really good at the analytical explanation, right? Either as to why something won't work, or conversely, why something is going to work when it's clearly failing.

• 1:35:29Speaker 01

  But again, you just get to sound very convincing, where it's like, that's a great point. We actually tried that 18 months ago.

• 1:35:34Speaker 02

  Yeah.

• 1:35:34Speaker 01

  You did. You know, no man steps in the same river twice.

• 1:35:39Speaker 02

  That's a good segue into, you've been on many boards. What makes a good one? Or maybe what makes a bad one?

• 1:35:45Speaker 00

  I mean, yeah, I mean, step one is if it's a successful company. Step two is...

• 1:35:50Speaker 02

  But which way does it cause an effect?

• 1:35:51Speaker 00

  Step two is if it's a good CEO. I mean, the boards just can't do that. Just privately speaking, the boards just can't do that much. And even that, you know, even the old cliche is the higher the fire the CEO. And even that is like really fraught with peril. Like, it's very easy for a board to like blow that up. But, by the way, again, it's often...

• 1:36:05Speaker 02

  I do remember your blog had a, "How do I hire a professional CEO?" And the answer was one sentence, "You expect this long article?" And it's like, don't. If you need to do that, sell your company.

• 1:36:13Speaker 00

  Sell your company. And, you know, that's probably an overstatement. And there have been some very successful, you know, professional CEOs over the years. John Chambers and Frank Slutman and others, but... Yeah, look, it's just really hard. It's just like, is the company going to succeed or not? Is the CEO great or not? Is the company on the right side of history or not? Like, that's honestly most of it.

• 1:36:30Speaker 01

  But do you think boards matter, then?

• 1:36:32Speaker 00

  It's one of those things, like, you can't not have one. Which is, like, you don't want to run, like, if you run, like, if you run another board, then you're, like, as a CEO, legally liable for, like, every screwed up thing that happens. You're much more likely to go to jail. You're much more likely for things to spin out of control. There are real requirements, you know, governance needs to be taken seriously. You know, you're representing a lot of other people's money. So there's that, and then, you know, you do want to have absolute dictatorships with, like, no examinerate or whatever, and then, and then aspirationally, obviously, the hope would be to be able to positively contribute.

• 1:37:02Speaker 01

  Yeah, like, you're giving the governance explanation, and you're saying that, you know, it's where the founders are actually removed, or CEOs are actually removed, and then, you know, even the cases where they are, maybe things are too far gone and everything. And sure, maybe that's true, but I feel like I would make a cultural pitch, where, let me try this on, you can react to it. Like, we found the stripe board very useful because it's important to have to organize your thinking and have some accountability mechanism where you go on a quarterly basis and talk about things. And then, like, we're doing this for the first time, and so there's lots of people on the stripe boards who have a different set of experience and come to us and can advise us on various things, and we've gone and tried to pick the Hall of Fame of various industries who can then go up on things.

• 1:37:44Speaker 01

  And I actually notice, when I talk to way earlier stage founders, I think they underrate the value of a good board, where they are worried about the governance thing you say, where they, like, don't want to give up a whole bunch of board seats and then have to do kind of management of VC personalities and everything, which is true, but they don't seem to take seriously, again, maybe they just get this from investors, but they don't seem to take seriously the idea that you can put together a group who will meaningfully increase the odds of success of the company. I don't know, is that just a particular thing to us? We needed more help than others? Or would you agree with that broadly as a cultural explanation, where they're pretty useful culturally for management?

• 1:38:26Speaker 00

  Yeah, so what you just said is what we aspire to. So, and what we aspire to is that the boards that we're on are like that, and that the CEOs that we work with want to have a board like that, and that we're able to be a contributor to it, and so we aspire to that. I think there are many examples of that being, being true. And I, you know, hopefully on that, I've been an example of that myself. I think that's all true. Having said that, I guess, a board cannot rescue a failing company. Well, yeah, but there are a lot of people on a lot of boards of a lot of companies that are failing that are spending an enormous amount of time trying to rescue those companies. And so, both in and outside of tech. And so, it's just, the higher order bit is still succeeding or failing. And it's still like quality of people versus not, like it.

• 1:39:02Speaker 02

  It ties into your, someone else.

• 1:39:03Speaker 00

  The easiest thing in the world is to go on the board of a company that is going to succeed wildly, no matter, you know, no matter what you do, and then to take credit for it after the fact.

• 1:39:10Speaker 01

  But presumably you believe, I mean, that sounds fun, but.

• 1:39:13Speaker 00

  The hardest thing, having been through it, the hardest thing in the world is to be on a team, on a board where you're struggling valiantly to keep the ship from going down. And the ship is going down.

• 1:39:20Speaker 02

  So that goes back to, can you hire?

• 1:39:22Speaker 00

  I've been on those too.

• 1:39:23Speaker 02

  Can you hire great CEOs? Or are those great CEOs, someone wants to describe it to me, this, the people that have a reputation for great professional CEOs are actually great stock pickers.

• 1:39:32Speaker 00

  Yeah.

• 1:39:32Speaker 02

  They understand tech deeply enough that they pick the company that's in a great position.

• 1:39:36Speaker 00

  Same thing for VCs, same thing.

• 1:39:38Speaker 02

  You can't hire them to turn around a failing company because they self suck out of it.

• 1:39:42Speaker 00

  You know, every once, I don't know, every once, there's exceptions to everything. Every once in a while you get something.

• 1:39:46Speaker 02

  Actually, that is also great, but which is, there's a world full of holistics in VC, right? Single founders, multiple founders.

• 1:39:52Speaker 00

  Yeah.

• 1:39:53Speaker 02

  But, you know, there's so many exceptions to each role.

• 1:39:55Speaker 00

  Well, you know, the thing is you never back a married couple, then you didn't back Cisco, right?

• 1:39:58Speaker 01

  Do you think people understudy the Elon method for running companies?

• 1:40:03Speaker 00

  A hundred percent, yes.

• 1:40:05Speaker 01

  Maybe just briefly describe that method and then why everyone is so incurious about it?

• 1:40:12Speaker 00

  Yeah, and there's two reasons they're incurious about it. There was the original reason they're incurious about it, and now there's the new reason they're incurious about it, which is Elon also generates emotion in people. Yeah, so look, you guys know that, you know, so how do you run a company? Well, there's been, you know, a hundred years of management books, starting with, you know, Alfred Sloan's book. Alfred Sloan built General Motors. And so Alfred Sloan built, Alfred Sloan famously wrote a book that people like Andy Grove learned from, that basically said, here's how you build a large multinational, multiproduct line industrial company. And so there's this system and it involves, you know, somebody at the top of the company that's sort of overseeing this like, you know, machine and they're getting, you know, fundamentally they're getting reports and then. Respond to the reports and then there's all these rules. Both rules inflicted from the outside and rules generated internally. And then there's Elon, who just doesn't do any of that. He just doesn't do any of that.

• 1:40:57Speaker 00

  And has a completely different playbook. And the Elon playbook, in a nutshell, as far as I can tell, I haven't worked for him directly, but from observing him and working with him, as far as I can tell, it's basically, number one, it's only engineers. You only have your company, people who matter in your company are the engineers, the people who understand the technical content of what you're doing for a technology companies. And then you only ever talk to the engineers. You never, ever talk to mid-level management. If you have it, fine, if they need it for whatever, to do their whatever vacation policy or whatever, it's fine. But if you are the CEO to get the truth, you only talk to the line engineer. And so you just ruthlessly violate the chain of command at all times. And then your job as the CEO is every week to fix whatever is the most important bottleneck to the company's progress. And the way that you do that is you parachute in and you find the engineers that are working

• 1:41:39Speaker 00

  on that problem and you basically stay up with them all night until they fix the problem. And then if you don't, if there's no current major bottleneck, you spend your time instead doing engineering reviews, specifically engineering reviews, not product reviews, engineering reviews. And you get all the engineers together and you have them each present what they're doing for five minutes. And the result of that is you know every single engineer in the company, you know exactly what they're working on. If somebody's not good, you fire them on the spot. If somebody's great, you go all out to get them.

• 1:42:09Speaker 02

  Well, what's the inverse of that? Because for 10 years after Steve Jobs, we had people wearing, doing sort of mimetic bad version, wearing turtlenecks, trying to sort of... Being asshole. The social style, exactly. I was trying to say that more diplomatically, but yes, being an asshole. The people were being, that's the misinterpretation. What is the danger for entrepreneurs of sort of, what's the bad version of copying Elon?

• 1:42:32Speaker 00

  Oh, the bad version is, this is the critique, actually, my partner Ben Levy's this critique. He's like, Mark, the thing you don't get is as follows, which is that, which is that assumes you have somebody like Elon who can hold the entirety of every engineering topic and every business topic in their head all at the same time. And so when you're sitting there with the 23-year-old engineer and you're working with them to redesign the database architecture or whatever, you actually are qualified to do that. And you're qualified to do that, not just that one time, but every time. And so, and then again, this goes right back to the last topic we just talked about, which is like, okay, how many of those people exist who can possibly do that? And we know the answer is one.

• 1:43:12Speaker 00

  I believe the answer is 10 or 100 or, you know, 1,000. I don't know if it's a million. I tend to think we have more of those people than we think we do. I see a lot of founders who struggle with this because, so my observation for how founders kind of try to figure this out is in the beginning, they sort of run everything. You just do everything. You just do everything, run everything because you have to and you have to have a unified vision and you don't have this army of people anyway and so you just do it. And then at some point, your high value board comes to you and says, "You idiot, you're micromanaging. You need to bring in all these executives." And then, and then what happens is then you go the other way, you over delegate and then your, your, your high function board says, "You idiot, you're not involved enough in the details." And then, and then you correct. And then what most of the successful founders I work with do is they end up with a hybrid model where they're like deep in the details of some things, but they have a traditional system on, on, on the other hand.

• 1:43:57Speaker 01

  And you think that works pretty well?

• 1:43:58Speaker 00

  I, I think for mo, for most of the founders we work with that have very successful outcomes, I think that generally is, is what they do. I think it works well. But, but it's not the Elon method.

• 1:44:07Speaker 01

  Sure.

• 1:44:08Speaker 00

  It's not the Elon method. By the way, the Elon, there's other aspects of the Elon.

• 1:44:10Speaker 01

  I was going to say, I feel like there's more.

• 1:44:11Speaker 00

  There's other aspects, right? So another aspect of it is the function and purpose of the legal department is to file lawsuits.

• 1:44:16Speaker 01

  Oof.

• 1:44:17Speaker 00

  And like, "I am not interested in all the rest of this stuff. You can go deal with it if you want to, whatever, whatever, whatever." But like, let's talk, we are going, anybody who goes up against us, we are going to terrorize. Like, we are going to declare war and then of course, as a consequence of declaring war, like, we're not always going to win all the wars, but we're going to establish like massive deterrents and so nobody will screw around with us. By the way, let me give you number three, which is becoming more and more salient, I think, and something we're trying to get our founders to do a lot more of. Number three is, it's going to be a cult of personality and it's going to be a cult of personality, not just inside the company, but outside the company. And we're not going to, you know, we're not going to spend any money on marketing, we're not going to put any time in IR. What we're going to do is we're going to put on the show of all time and the company and the stock, you know, and the books and the videos and the products and the jobs are all a function of the cult of personality.

• 1:45:02Speaker 01

  I would add three things to that list, too, and you can tell me if you think you agree with these. One is a focus on, and by the way, I thought the Walter Isaacson book, we've got kind of a mixed reception, but I thought if you want to study the Elon method a bit, it was actually pretty useful for that. And so the, the recent biography. One is picking sensible metrics for the business at any one moment in time. And so, you know, with SpaceX and, you know, as they were kind of building up the launch business, you know, dollars per kilo to orbit being the metric that we're going to optimize for. And that's how totally obvious that it falls out, even kind of. Tesla, as they're wrapping up production, it's like deliveries per week.

• 1:45:44Speaker 01

  You could have focused on revenue, you could have focused on profitability, you could have focused on deliveries per year. Like the number of deliveries per week rolling off the factory line is itself an interesting choice of like high level metric. So a big focus, and I think there's a lot of this in Twitter as well when he took it over. Focus on kind of what are the right metrics that we should be. And like some of the criticism that's been levied at X is their focus on engagement minutes on the site. Has led to things like the ban on URLs, which I think a lot of people think is. The deboosting of URLs, which a lot of people think is pretty silly. Okay, so one is choosing the right metrics. The second is creating a sense of urgency. And you know, people talk about this as like inventing crises. But I would say, you know, the generous version is shortening the time horizons.

• 1:46:24Speaker 01

  And so it's funny, like, you know, Elon was going around talking about when he was sleeping on the floor of the factory in Nevada for Tesla. That, you know, Tesla will go bankrupt if we don't do this. And if we don't figure out Model 3 production. Tesla was a $200 billion company by market cap at that time. So it's like Tesla will go bankrupt or do a very, very non-dilutive equity raise. But creating a lot of urgency around this idea of fixing production and sleeping on the factory floor, which clearly shortens the timeline. And then the third is actually, the businesses are really capital efficient. So I'm curious if you see this with hardware companies. I think sometimes hardware companies can be really indulgent with capital. Where they say venture capitalists will fund my vision of exploration for five or 10 years. And this is like the risk now is people get into robotics and stuff like this, that you get the self indulgence.

• 1:47:07Speaker 01

  And it's like, I will do my science project for ages and then I'll maybe figure out a product and figure out how to commercialize this.

• 1:47:11Speaker 02

  The other thing hardware founders do is they fall in love with the hardware and the product.

• 1:47:15Speaker 01

  Yes.

• 1:47:15Speaker 02

  And they can almost get in, sort of redefine themselves as like producers of science or beauty or product. And sort of forget they're running a business or even worse, start to think of running the business as slightly.

• 1:47:27Speaker 01

  An annoyance, exactly, yeah.

• 1:47:28Speaker 02

  And maybe even not sort of intellectual enough.

• 1:47:31Speaker 01

  Right, and so Elon's companies have always been very capital efficient and like build a bad one and then build a good one. And so the Boring Company bought a commercial tunnel boring machine before they started developing their own. Tesla had the master plan where they built the low volume roadster before they get to the high volume stuff. SpaceX, just for what they do, has never actually burnt that much capital lifetime and got grant money. They got, you know, they were selling to the DOD, all this kind of stuff. And so, yeah, would you agree with those three? And do you think people can pick and choose? Because we can take some of those things without maybe, you know, the lawsuit department or something.

• 1:48:02Speaker 00

  Yeah, so I think that's all right. I would maybe add one more thing or kind of distill it out of a bunch of these, which is basically like truth-seeking at all costs.

• 1:48:09Speaker 01

  Yeah.

• 1:48:10Speaker 00

  At least, I find this to be the case with him, and I think this is really not... People, especially people who are mad at him, really don't understand this. He really, really genuinely wants to know ground truth, and he really genuinely does not want to know anything that's not ground truth. And again, it goes back to our thing of like how to confront bad news, like, or bets, like, he's absolutely ruthless and relentless in making sure that he actually understands what's going on, and I... You would think that that's common, and like, I have not found that to be common at all among people in business. And, or you mentioned another, related to another thing, which is, you mentioned the thing where, you know, we're all, like, literally with Elon, it's we're all gonna die, you know, if we don't get this, we're all gonna die. Like, every other, typical startup founder, me, when I was doing it, it's always like, you're always trying to come across, you get from a company, you're trying to...

• 1:48:49Speaker 01

  Yeah, for that brave face.

• 1:48:50Speaker 00

  Optimistic, brave face, it's gonna be great, like, you know, really have faith, you should have faith, like, you shouldn't, you know, quit and go to another company, like, please, you know, stay with us, it's gonna be great, and like...

• 1:48:57Speaker 01

  Are you trying to weed out the non-believers or something?

• 1:48:59Speaker 00

  Apparently, and I, and I, and I, yeah, I think it's urgency, but, it's just, yeah, literally, it is just, to be the guy who can show up there and just be like, yeah, if this doesn't happen, or it's going bankrupt. I mean, the number of other companies where that would happen, that would just, okay, the talent would just bleed out.

• 1:49:13Speaker 01

  Yes.

• 1:49:14Speaker 00

  And then, you know, maybe I could add one more thing to this, which is, he has what's, you mentioned Steve, he has what Steve had, which is, the people who work for Elon and the people who work for Steve, they often report after the fact that they did the best work of their lives.

• 1:49:25Speaker 01

  Uh huh.

• 1:49:26Speaker 00

  And they often report that, you know, it could have been, they could have had difficult, you know, interactions along the way, or they could have had, you know, whatever, whatever, or may, by the way, maybe it didn't even end well.

• 1:49:33Speaker 01

  Yeah.

• 1:49:34Speaker 00

  And, and...

• 1:49:35Speaker 01

  Their approach, doesn't it?

• 1:49:37Speaker 00

  Yeah, and, and, but literally, they'll say like, wow, like, you know, I got to work on the iPhone.

• 1:49:41Speaker 02

  There's a lot of very good ex-Space-X founders.

• 1:49:43Speaker 00

  Yeah.

• 1:49:44Speaker 02

  And they imbibe a sort of, a work ethic, that sort of reminds me of, I don't know, Goldman Sachs in the 1990s or something, where like, they work incredibly hard, and they work fame, they think from first principles, and they're truth-seeking.

• 1:49:56Speaker 00

  Yeah, that's right.

• 1:49:57Speaker 02

  And they're risk-taking. Both technically, and, they're risk-seeking technically and risk-avoiding in business.

• 1:50:02Speaker 00

  Yeah. So then, my version of your question is, I call this the question of like, the milla-Elons, like, it's like, okay, if Elon is like a thou, if a full Elon is a thousand milla-Elons, right, um, right?

• 1:50:13Speaker 01

  You can microdose.

• 1:50:15Speaker 00

  Yeah, can you microdose, right? So can you operate at the level of a hundred milla-Elons, or at 10, or at 1, right? And...

• 1:50:22Speaker 00

  You know, a huge number of observers of Elon, you know, swear, you know, it's like, it's a classic thing. He gets a classic feedback. Steve used to get this feedback. Lots of people get the feedback. Just, wow, you're great. If you could just only like, just do 80%. If we could just get the 800-million Elon version and you could just not do the other 200 Elon's like, just, you know, it's just like, you'd be so much better. And like, literally, like, that's like the... What I found with these guys is like, they've heard that a thousand times and it's a completely no-up of a statement because there is no, there is no, for them, there's no reduced version. And so if there's no reduced version of it for them, like, is a normal person gonna be able to construct like, an optimally titrated dosage of million Elon's?

• 1:51:00Speaker 00

  And like, I aspirationally believe that you should be able to learn things and replicate, but it is a system. You know, it's, it's, it's, it's, it's not just a set of like, practices. It's a, it's an entire worldview.

• 1:51:14Speaker 01

  I'm not sure it's a whole system where if you don't have one thing, the whole thing falls apart. I feel like you can...

• 1:51:21Speaker 00

  Well, the, the other part of that, though, that, that would be one. The other way of looking at that, though, is, is the person, is the person capable of doing the partial version?

• 1:51:28Speaker 01

  No, that I believe, I...

• 1:51:30Speaker 00

  You see what I'm saying?

• 1:51:30Speaker 01

  That I can buy.

• 1:51:31Speaker 00

  Like, are there people?

• 1:51:32Speaker 01

  Yes.

• 1:51:33Speaker 00

  Who can do the 300-million Elon version of it?

• 1:51:35Speaker 01

  Yes, yes.

• 1:51:36Speaker 00

  Maybe.

• 1:51:37Speaker 01

  Yeah.

• 1:51:38Speaker 00

  I wish I had met more of them by now. And then the other side of that is, why is it understudied? And literally, I think this goes, this goes back to the same thing as why, why do people get mad about cryptocurrency? Is, I think, this...

• 1:51:48Speaker 01

  It's tribalism.

• 1:51:48Speaker 00

  Yeah, it's just, there's something about, there was always something about him and how he operated that caused people to have an emotional response. And then that is now magnified a thousand X or a million X, and people are just not having it. And, you know, and, you know, and he's got, he's got like, his hyper, you know, it's a part of it, you know, he's polar, you know, he's polarized the market very deliberately, you know, in the same way that I think a lot of great entrepreneurs do, which is, you know, people tend to either love him or hate him. They either love the product, hate the products. That's very helpful from a business standpoint, recruiting standpoint, because it does create this like, cult-like thing.

• 1:52:18Speaker 01

  Yeah.

• 1:52:19Speaker 00

  You know, the, the thing you don't want in any market is elective differentiation. He 100% always has that. But as a consequence, I, I, I believe there are a lot of people who should be learning a lot more from him who cannot bring themselves to do it, and to their own detriment.

• 1:52:31Speaker 01

  That's with the media. So... I feel like my framework is that there are often these new technologies that then cause an explosion in interesting media activity and new companies and things like that. And so there was the cable boom, and I'm excited for John Malone's new book, but I saw an interview with him recently and he was talking about they just like thought up a lot of new channels, you know, when they had this pipe going to people's homes that could support a lot of programming and they had to kind of invent new programming for it. He was talking about, you know, creating Fox News because they were like, well, the existing, you know, channels seem a little bit to the left and like conservative talk radio is, you know, really popular, so it seems like conservative news channels should work really well, and you know, it did. So there was cable. And the internet came along and famously really worked from a media perspective.

• 1:53:16Speaker 01

  And in particular, that was the big nail in the coffin for, you know, local newspapers where they were the main distribution outlet to people's, to people previously for information and the internet went over the top. I feel like plausibly X is a big enough change to be a new media platform. Like a slightly trivial example, but TPBN is kind of a CNBC competitor where, you know, I saw Matty from Eleven Labs, a great A16Z company, and they did a fundraiser and he went on TPBN to talk about it, but like previously that would have been CNBC, but now TPBN is where he chose to go. And that's one example. There's lots of others. Is X that big a deal from a media perspective as to be kind of cable, the internet, then X, or am I missing something?

• 1:53:59Speaker 00

  I think it is. Maybe the twist I would put on like the TPBN or the cable thing is, you know, one of the things, actually, this is also what I'm about to say, a big deal in sports. There's also now the clip. And clips used to be like weird and esoteric and now clips are the main way that people can, you know, consume content.

• 1:54:15Speaker 01

  I see. So X and short form generally?

• 1:54:17Speaker 00

  Exactly, yeah. Yeah. And so for example, a TPBN episode, or for that matter, a sports game now generates five or six or eight clips, or an interview, or, you know, hopefully this, you know, this discussion. And then those clips go hyper viral, you know, if you're doing it right. But it's very common when you look at the analytics that the clips get like a thousand times the distribution of the actual program itself. And so there is this, I think there's this art form, it was one of the reasons why like a lot of historical television shows never figured out what to do with the internet because they didn't really understand the internet native artifact was the clip. But the new, the new media properties, the new media entrepreneurs, I think tend to really understand that. So yeah, I think that's true. You know, having said that, the impact of the internet is still mostly what it's been this whole time, which is a disintermediation, you know, mechanism. It's a, you know, in the, in the cable era, there were only 200

• 1:55:01Speaker 00

  channels, or whatever it was. On the internet, there's a billion.

• 1:55:04Speaker 01

  Yeah.

• 1:55:04Speaker 00

  So the overwhelming trend is still disintermediation, disaggregation.

• 1:55:08Speaker 01

  Yeah. And Substack obviously is the other big trend to me in media right now.

• 1:55:13Speaker 00

  And Substack's a great example because of course, Substack as a thing is a central, Substack is a centralizing phenomenon. It's a singular platform and we have growth charts and we're proud to make up.

• 1:55:22Speaker 01

  Everything's unbundling and bundling.

• 1:55:23Speaker 00

  Exactly. And so, but, but it's not a rebundling in the form of like a new magazine, right? And specifically, the way that Substack thinks about it is they're, they're not a publisher, they're a platform. And the distinction is they do not have editorial judgment, they are not trying to create bundles.

• 1:55:35Speaker 01

  And the economics are different for the publishers. It's land reform for journalists.

• 1:55:39Speaker 00

  Yes, exactly. Exactly right. But again, there, you would still say, notwithstanding the success of Substack as like a centralized platform, its overall effect is still disintermediation because it, and specifically, what it's doing is it's bleeding off many of the talented individual contributors at legacy media.

• 1:55:53Speaker 01

  Yes.

• 1:55:53Speaker 00

  To have their own Substacks.

• 1:55:55Speaker 01

  It somehow feels to me like we're not done with the media changes.

• 1:55:59Speaker 00

  Yeah.

• 1:55:59Speaker 01

  Like.

• 1:56:01Speaker 00

  I think that's true for sure, yes.

• 1:56:02Speaker 01

  Oh, sorry. The media changes wrought by just this latest platform change of X and Clips.

• 1:56:08Speaker 00

  Yeah, yeah.

• 1:56:09Speaker 01

  The fact that, again, TPBM, which I mentioned just because it's in our corner of the tech world, is from this year, last year? Like, it's a very new thing. And, yeah, we haven't seen all the last changes. Do you have any predictions?

• 1:56:20Speaker 00

  For sure, I'd expect to see more of those. I, again, I was just saying, look, what is the macro thing, the big macro thing happening? And I love what those guys are doing and I love what, what Substack's doing, but like the big macro thing, if you just think about the world change, the big macro thing is TikTok, Instagram, and then, and then, you know, sure, from video on X, and a handful of other platforms, like that just swamps, like, that's the macro thing. And so where the... Where the future of the macro culture goes. I mean, look, I read substacks. But like, you know, a thousand or 10,000 or 100,000 times more activity is happening on TikTok. And so the macro culture is going to be shaped, I think, much more by short form video, at least for the foreseeable future. And then, you know, as I'm sure is obvious now, but like, you know, the role of AI production,

• 1:57:05Speaker 00

  you know, is about to really, you know, change things.

• 1:57:08Speaker 01

  And there also may be a fact that there's a single global feeds now, like the fact that there's much less personalization in a way because so many things go to the top. And in a way, I really actually don't like the number of videos in my X feed these days. Like, I'm sure they perform in the metrics or something like that. But if I wanted to scroll TikTok, I'd open TikTok, you know, and I don't want like all the TikTok videos that get crammed in. Do you and I guys can get these in your feeds where you get just like random TikTok videos from random accounts in your Twitter feed and like, no, I'm reading a newspaper here. I'm not trying to watch TV.

• 1:57:42Speaker 00

  Yeah, no, this was a big, I think, I think the people who run these things have talked about this publicly, but yeah, all the old algorithms of like, you know, things that your friends like, like those are not as effective as just the macro.

• 1:57:52Speaker 01

  Yes.

• 1:57:53Speaker 00

  As the macro.

• 1:57:54Speaker 02

  We are almost similar than we think.

• 1:57:55Speaker 00

  Yeah, that, but also like the nuances and interconnections are more subtle, like, you know.

• 1:58:01Speaker 02

  It's not the people you know, it's the people you don't know that you have connections with.

• 1:58:05Speaker 00

  Yeah, exactly. Right. You're probably more like a lot of other people you've never met than you are like the people you know. Yeah, for example, there's that. By the way, having said that, I think the big, I believe the biggest, I think everything we just talked about is very important. I think the biggest, biggest, biggest thing that's happening is just like, we really, I think, for the first time are entering the true era of free speech. And, you know, I think that we started to get at that in the 90s and 2000s, and then there was a big reversion in the 2010s with the sort of censorship industrial complex that formed up and all the policies and all the government interference and so forth. And of course, a lot of that, a lot of that, you know, continues on the part of the governments in particular. But, you know, that, like in the US at least, that project has failed and the platforms themselves are, you know, really liberalizing out.

• 1:58:45Speaker 00

  And then just the sheer volume and scope and variety of content and the number of ways that people have to get messages out in like all kinds of ways and the like hyper acceleration of culture where the censors don't even know what to ban because they don't even know what half the stuff means. We probably are living in the only true, like mass era of free speech in, you know, in human history, you know, and you're, you know, you're seeing things now. You know, I mean, you know, this is all the point in real time, but you know, you just see things now as just a normal user that you never would have seen 10 or 20 or 30 or 50 years ago, like there's not even a chance. So does this lead to a political realignment? I believe it, I believe it does, yeah. So I think this is the big thing. I think Martin Gurri is the guy who has, you know, you guys published his book, I think

• 1:59:26Speaker 00

  he really nailed it, and I think his thesis in his book came out in 2015, and I think a lot of people said either, wow, he predicted Trump, which, you know, is true to some extent, but like, that's not the big thing that he predicted. And then I think his prediction is in some ways so fundamental that it's easy to just kind of take it for granted and say, oh, of course, that's what's going to happen. But it's like, it's actually so fundamentally important, I can't stop thinking about it, which is basically true transparency, true transparency, true free speech. It's just, it's a fundamental solvent, basically dissolving all centralized institutional authority. And the reason for that is centralized institutional authority is never perfect, and it often has problems, and in fact, it often has very deep and severe problems, as we were just discussing. And the kind of show that a government agency or a big company could put on to claim that

• 2:00:11Speaker 00

  they're better than they are, that would have worked under centralized media, just simply collapses under conditions of true free peer-to-peer communication. Like, it just, there are just too many examples of too many things that go wrong for any institution for them to retain their credibility. And then Martin and I have this big debate about this, and I've talked about it, we've had this big debate, which is, I'm like, wow, that's fantastic. And he's like, no, Mark, I didn't mean this was good, I never said this was good. He said to me the following, he said, look, it is true that every major institution is much, much more broken than they have been put on. He said, however, it is also true that we do not know how to run a society without large centralized institutions. And so, he said, those of you like me who cheerlead the collapse of centralized institutions have not yet come up with an answer for what exists on the other side. But, anyway, the point being like, I think now we're really going to go through that. Like, now we're really going to find out.

• 2:00:56Speaker 02

  The business version of this is, you used to be able to push a bad product to a strong channel with strong marketing and sales. You just can't do that anymore. Like, the product quality will out. You know, it's deterministic.

• 2:01:09Speaker 00

  Yeah, that's right. And by the way, you get this phenomenon, you see this all over the place, but, and you see this in Gallup does this great poll of trust of, trust in institutions, and the numbers are just all cratering. And the cratering is, the declines are accelerating.

• 2:01:23Speaker 00

  You also see, and again, not to pick on specifics, but you also see this in these political parties, and you have a lot of this, you know, happening in Europe right now, where these parties come in and they have like, whatever, 60% approval or whatever, and then like, six months later, they have like, 15% approval. It's like, what the, what the, like, what the hell? Right? Or, I mean, I, I mean, I'll give an American example, Eric Adams in New York, is the incumbent has 9% approval. And it's just like, what, like, how can you possibly have a system in which the ruler has a 9% approval rating? Well, it's like, well, how did that happen? Well, it's just, it's all, it's all too transparent. Like, everything that's going wrong is too transparent. You, you, you can't, it can't be, it can't be finessed.

• 2:01:57Speaker 02

  The extreme version of this, for good or ill, is that the centralized state is an outcome of centralized media.

• 2:02:03Speaker 00

  Right.

• 2:02:04Speaker 02

  The nation state is downstream from the newspaper.

• 2:02:06Speaker 00

  Right. Yeah, that's right. Right, exactly right. And so, yeah, you just, you don't have a, yeah, you, you can't hold it together. You know, my, my, another of my counter, counter arguments to Martin was, you know, basically, like, if you look at what the media landscape was like in, like, colonial America, it was actually much more like what it's like now than it was like it was in, like, 1950s.

• 2:02:25Speaker 02

  150 years.

• 2:02:26Speaker 00

  pamphleteers. And you'd have, like, 15 small newspapers in a city like Philadelphia, and you'd have, like, just enormous amounts of, of, you know, contention and, you know, name-calling and, you know, all kinds of things.

• 2:02:34Speaker 02

  Anonymous bloggers.

• 2:02:35Speaker 00

  Anonymous bloggers, yeah. Like, they had all that stuff. You know, Benjamin Franklin, I literally wrote under, like, 15 different pseudonyms, and he would, like, set them to be fighting.

• 2:02:41Speaker 02

  Full-tod.

• 2:02:42Speaker 00

  Fighting with each other, right, all this, all these things. And, you know, it's like, I was, you know, it looked like we've lived this before, and he's like, yes, and it was a time of revolution. Right? Like, you know, correct. And so, to me, that's the, and, and to me, it's so fascinating, like, we're really in that now. Like, I feel like we, I feel like that was still being held back, like, last year, as late as last year, by the censorship apparatus, and now, it's just like, okay, now it's all coming out. And maybe another way to think about this is, the, the narrative for the last decade has been the internet is, is a fountain of misinformation. And, and there is some truth to that, there's a lot of misinformation online. But the other thing is, according to the Martin Gray thesis, the internet is an X-ray machine, because every actually correct thing that all of these institutions are doing

• 2:03:24Speaker 00

  wrong is now being fully ventilated for the first time ever, and they, they cannot survive that, and, and that may, that may ultimately include the governments themselves.

• 2:03:33Speaker 01

  We're describing one trend here, which is the move along the decentralization, centralization spectrum. And I think I'm not quite as enthusiastic as, or like, it seems pretty complex, that whole spectrum. But the other change to me, again, seems to be the single global feed that's emerging. So, take an example, the astronomer CEO and that whole thing with, you know, CEO with his HR lady being caught on video, that was just the front page of the internet for that day, or those one or two days. I was talking to someone who was saying they were talking to someone in China, and they're like joking about it, but it was just like, you know, prominent in China as well, in the news there. And that didn't happen as much 10 or 20 years ago. And I don't even think it happened,

• 2:04:16Speaker 01

  again, even when we had the internet and cable media, because we didn't have the clip and the ability for things to go as big.

• 2:04:21Speaker 02

  Yeah, I guess text is much more language barrier.

• 2:04:24Speaker 01

  There's less virality.

• 2:04:25Speaker 02

  But it's also language barriers prevent text from crossing borders, clips can cross borders.

• 2:04:31Speaker 01

  And just recommender algorithms where things rise to the top, I think. So, all these factors. Do you just have thoughts on the implications of having a single global feed?

• 2:04:39Speaker 00

  Yeah, so this is kind of the, right, this is kind of the monoculture, like global monoculture.

• 2:04:43Speaker 01

  Well, maybe, I mean...

• 2:04:44Speaker 00

  Well, Marshall McLuhan, so Marshall McLuhan had this concept he called the global village. And this is another one of these things where he said, you know, people think I meant it positively, and I actually didn't. So he said, you know, electronic media formed the entire world into a global village. And, you know, his, he was talking about TV, but, you know, TV, you could say TV had a certain amount of that, too.

• 2:05:00Speaker 01

  It's an early version of that.

• 2:05:01Speaker 00

  It's an early version of that, because it just spread a single, right, a single video feed much, much more broadly. And what he said is like, look, he said, like, it used to be that every, it used to be that every village was its own village. And so the things that happened in that village, if the wrong man kissed the wrong woman, it was like a really big deal in that village, but it wasn't a big deal in the next village, you didn't even know about it. Now, all of a sudden, it's like the entire world is becoming a single global village. And he said, here's the problem with that, is that villages are like... Fucked up. Like, they're like really dysfunctionally fucked up a lot of the time, right? Because they're like, they're panopticons, right? Everybody sees everybody else. They're tremendously judgmental. There's tremendous, you know, the social relations have carried tremendous weight. If you end up getting sideways with the social relations of the village, you're in serious trouble. You might get exiled, you might die. You know, they're prone to manias and panics, you know, witch trials, right? You know, they

• 2:05:46Speaker 00

  tend to go crazy. You know, they're hot house environments, they tend to go crazy. And then, and then specifically, I think the next version of that, I don't know if he said this, but other people said this, is like, you know, like cosmopolitan societies have, are like written, they're written, they're written in nature, and they become kind of, they have the ability to have like dispassionate communication discussion. Like villages are all about morality, right? It's all, it's all oral. It's all spoken. And it's this, so it's this, again, it's this social hot house of spoken and therefore highly emotionalized, de-intellectualized, highly emotionalized content.

• 2:06:23Speaker 01

  So Marshall McLean told you he was writing about TV culture, but he was actually pressing on the culture?

• 2:06:27Speaker 00

  He was actually writing about it. I believe, I believe that's, that's right. And then, and then I think what he would say if he were here today, I think he would say, yes, congratulations, guys, you got the global village. He would say, you know, the Bible has the parable of the Tower of Babel being a disaster, you know, for a very specific reason. If you centralize all, everybody into a single giant village, you're, you're gonna have all the dysfunctionality. You're gonna have all, you're gonna have the crazed panics and freakouts of the village basically happening all the time, which is, you know, which is kind of, you know, which is in fact what we see. You know, I, you know, there's a, there's a, you know, I think our friend Tyler Cullen, you know, at this point, you know, thinks this is all very bad. McLuhan definitely thought it was bad. You know, on the other hand, like, I don't know, like, I grew up in a small town, it wasn't that great, you know, like a disconnected small town wasn't

• 2:07:10Speaker 00

  that great either. Like, do you really, like, do you really, should we, is it really better to live in a world where there's only like a few places where like, there's like, access to like, advanced thinking and cosmopolitanism? Or is it actually like, the fact that everybody on the planet can now be a full part of society and culture?

• 2:07:25Speaker 01

  I feel like there's a Marc Andreessen worldview that you've talked about enough, that it's now kind of a thing that exists beyond you, that's maybe just being dispositionally optimistic on technology.

• 2:07:35Speaker 01

  Generally, and refusing to brick any false nostalgia about the past. Like, you know, I was there in rural, small town Wisconsin. It wasn't good, you know?

• 2:07:45Speaker 00

  Right, yeah, exactly. Yes, exactly. That's right. That's right. I agree.

• 2:07:48Speaker 01

  Great. Thank you guys.

• 2:07:49Speaker 00

  To cheeky points.

• 2:07:50Speaker 01

  Exactly, there you go.