Marc Andreessen, co-founder of a16z & Netscape

Marc Andreessen is the co-founder and general partner of Andreessen Horowitz (a16z), one of the most influential venture capital firms in the world. Before he was an investor, he was a builder. At 22, Andreessen co-created Mosaic, the first widely used graphical web browser, then co-founded Netscape — the company that brought the internet to mainstream America. Netscape's 1995 IPO ignited the first great technology boom. Microsoft's campaign to destroy it became one of the most studied business battles in the history of capitalism. After Netscape, he co-founded Loudcloud, which survived the dot-com collapse through one of the most dramatic corporate pivots on record — eventually reinventing itself as Opsware and selling to Hewlett-Packard for $1.65 billion. In 2009, Andreessen and Ben Horowitz founded a16z on a contrarian thesis: that the best venture firm would be built around genuinely helping founders, not financial engineering. The firm made early bets on Facebook, Airbnb, GitHub, and Coinbase, and expanded aggressively into crypto, bio, defense, and AI. His 2011 essay "Software Is Eating the World" reframed how an entire industry understood the stakes of the moment — and remains one of the most cited pieces of writing in the history of Silicon Valley. Show notes: https://www.davidsenra.com/episode/marc-andreessen Join newsletter: https://www.davidsenra.com/newsletter Made possible by Ramp: ⁠https://ramp.com⁠ Deel: https://deel.com HubSpot: https://hubspot.com Axon by AppLovin: https://axon.ai Chapters (00:00) Caffeine Heart Scare (00:56) Zero Introspection Mindset (03:24) Psychedelics and Founders (04:54) Motivation Beyond Happiness (07:18) Tech as Progress Engine (10:27) Founders Versus Managers (20:01) HP Intel Founder Legacy (21:32) Why Start the Firm (24:14) Venture Barbell Theory (28:57) JP Morgan Boutique Banking (30:02) Religion Split Wall Street (30:41) Barbell of Banking (31:42) Allen & Company Model (33:16) Planning the VC Firm (33:45) CAA Playbook Lessons (36:49) First Principles vs. Status Quo (39:03) Scaling Venture Capital (40:37) Private Equity and Mad Men (42:52) Valley Shifts to Full Stack (45:59) Meeting Jim Clark (48:53) Founder vs. Manager at SGI (54:20) Recruiting Dinner Story (56:58) Starting the Next Company (57:57) Nintendo Online Gamble (58:33) Building Mosaic Browser (59:45) NSFnet Commercial Ban (01:01:28) Eternal September Shift (01:03:11) Spam and Web Controversy (01:04:49) Mosaic Tech Support Flood (01:07:49) Netscape Business Model (01:09:05) Early Internet Skepticism (01:11:15) Moral Panic Pattern (01:13:08) Bicycle Face Story (01:14:48) Music Panic Examples (01:18:12) Lessons from Jim Clark (01:19:36) Clark Versus Barksdale (01:21:22) Tesla Versus Edison (01:23:00) Edison Digression Setup (01:23:13) AI Forecasting Myths (01:23:43) Edison Phonograph Lesson (01:25:11) Netscape Two Jims (01:29:11) Bottling Innovation (01:31:44) Elon Management Code (01:32:24) IBM Big Gray Cloud (01:37:12) Engineer First Truth (01:38:28) Bottlenecks and Speed (01:42:46) Milli Elon Metric (01:47:20) Starlink Side Project (01:49:10) Closing Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:02Speaker 00

  I wasn't expecting to start here. I want to talk about why you were consuming so much caffeine that you noticed that your heart was skipping a beat.

• 0:08Speaker 01

  I love caffeine. So for a very long time, I always said that the ultimate day, like the perfect day, was 12 hours of caffeine followed by four hours of alcohol. That's just like the ultimate. I did, I did, I did cut out, or at least for now, I've cut out the four hours of alcohol. But caffeine is just like one of nature's most marvelous things. But it turns out you can't overdo it. And so, yeah, a while ago, I was drinking so much coffee at work that I was sitting in a meeting a couple of years ago, and I started to feel just a little bit, something felt off, and I just took my pulse and I realized I was skipping about every 10th heartbeat. So I had like an existential crisis because I'm like, all right, I need to call 911. It's just like, am I about to have a heart attack? Am I about to die? And so I got under the table and I Google, and I'm like, is this a problem?

• 0:51Speaker 01

  And before Dr. Google said, no, it's okay, it's fine. You just might want to cut back a little bit on the caffeine.

• 0:56Speaker 00

  You said something that I love and I never hear other entrepreneurs talk about, but I think is super important, that you don't have any levels of introspection.

• 1:03Speaker 01

  Yes, zero, as little as possible.

• 1:05Speaker 00

  Why?

• 1:05Speaker 01

  Move forward, go. Yeah, I don't know, I just find people who dwell in the past get stuck in the past. It's a real problem, and it's a problem at work and it's a problem at home.

• 1:14Speaker 00

  So I've read, obviously, 400, I think now 10, biography of history's greatest entrepreneurs, and that was one of the most surprising things, like, what's the most surprising thing that you've learned from this? Like, oh, they have little or zero introspection? Like, Sam Walton didn't wake up thinking about his internal self. He just woke up, he's like, I like building Walmart, I'm going to keep building Walmart, I'm going to make more Walmarts, and just kept doing it over and over again.

• 1:31Speaker 01

  And you probably know, if you go back, 400 years ago, it never would have occurred to anybody to be introspective. Like, it's the whole idea, I mean, just all of the modern conceptions around introspection and therapy and all the things that kind of result from that are, you know, kind of a manufacturer of the 1910s, 1920s.

• 1:44Speaker 00

  Say more about that.

• 1:45Speaker 01

  Great men of history didn't sit around doing this stuff at any prior point, right? It's all, it's all a new construct. It was, you know, well, so, first Western civilization had to kind of invent the concept of the individual, right, which was like a new concept, you know, several hundred years ago. And then, you know, for a long time, it was, all right, the individual runs, right, and like does all these things and builds things and builds empires and builds companies and builds technology, does all these things. And then, you know, kind of this guilt-based whammy, you know, kind of showed up from Europe, a lot of it from Vienna, you know, 1910s, 1920s, Freud and all that entire movement, and kind of turned all that inward and basically said, okay, now we need to, like, you know, basically second-guess the individual, we need to criticize the individual, the individual needs to self-criticize. Right, the individual needs to feel guilt, needs to look backwards, needs to dwell on

• 2:30Speaker 01

  the past. It never resonated with me.

• 2:32Speaker 00

  Do you find a lot of the greatest founders that you've spent time with and backed and partnered with are of low introspection?

• 2:38Speaker 01

  Generally, although in fairness, the introspection is probably linked to the personality trait of neuroticism, right? So, you know, a lot of the best founders are, I think, at like 0% neuroticism. Like, they just don't get emotionally phased by things that happen, which is a superpower when you're an entrepreneur. But having said that, some of the great entrepreneurs are in fact very neurotic. Like, that's also the case. It's not, maybe it's nice to have to be low neuroticism, but not necessary. And so, you know, there are some that kind of get wrapped around the axle on kind of personal issues. You know, as you know, these days, sometimes that then, you know, kind of turns into use of psychedelics, you know, different kinds, and the hallucinogenic drugs. And, you know, that's like one very interesting kind of trajectory for, you know, kind of the culture

• 3:22Speaker 01

  of the country, culture of the world. And, you know, we'll see where that goes.

• 3:24Speaker 00

  So, we've recorded under like a dozen of these so far, most of them with some of the greatest, you know, founders living for the show. I can't believe how many times on almost every episode psychedelics pops up. And they're like, "You should try them." I'm like, "I'm not doing any drugs."

• 3:36Speaker 01

  To be clear, I'm not. I've never have, never going to. Like, I have four, you know, the problem is I already have like tons of horror stories from people I know or know of that, you know, kind of came out the other side. Like, well, actually, I had a, my deepest conversation was actually with Huberman. And, you know, and I was describing this phenomenon where we see it in Silicon Valley, where, you know, kind of these guys get under pressure and, you know, they kind of feel anxious or whatever, and they decide they, you know, somebody tells them it's psychedelics and they try it. And they kind of come out the other end as a changed person. And they kind of come out like much more at peace, but then they also tend to like quit their companies. They like move to Indonesia and become a surface director. Like, there's just like peace out, right? They're just done. There's been a whole bunch of examples of this. And I was complaining to Huberman about this. And in true Huberman, kind of wise Yoda style, he's like, "Well, you know,

• 4:21Speaker 01

  how do you know they're not happier?"

• 4:24Speaker 01

  Like, maybe that was the positive outcome. Like, maybe the thing that was driving them to be a great entrepreneur was a fundamental level of insecurity, right? And kind of this, you know, this kind of unsatisfied, you know, kind of neurotic impulse. And now they're just, now they're just satisfied. Now they're just, you know, whatever the serotonin levels or whatever have been recalibrated, that they're just kind of satisfied sitting on the beach and being a surf instructor. And, you know, maybe they're better off. And I'm like, yeah, but their company is failing. And so, anyway, yeah, so there's a possibility that there's a better version of you or me on the other side of, you know, ayahuasca, but I'm not willing to find out.

• 4:53Speaker 00

  I'm not either. Daniel Ek has the greatest way to put this, like, he thinks the best entrepreneurs are not optimizing for happiness, they're optimizing for impact.

• 4:59Speaker 01

  I think that's true. I think it's true. I think it's certainly true for Daniel, yeah, who's a, you know, kind of a great case study of that. You know, having said that, you know, I always kind of wonder, is that, well, intrinsic versus extrinsic motivations. Impact strikes me a little bit as an extrinsic motivation. You know, it's like, yeah, impact, money, fame, you know. And by the way, I think extrinsic motivations are fantastic, and I think, you know, they can be very motivating. The people who get, kind of get the great rewards for building great things, you know, deserve them. But at least what I've found is it's the intrinsic motivations that actually get people up in the morning. And there's where you, you know, you're dangerously close to straying into introspection. But, you know, it's like, okay, like, what, you know, what is the thing that causes somebody who's now, you know, extremely materially wealthy, extremely successful, you know, to get up in the morning and continue to, you know, kind of punch away at the world? I think those tend to be interior.

• 5:41Speaker 00

  What's that for you?

• 5:42Speaker 01

  Oh, I mean, that would require introspection. I'll let other people speculate.

• 5:48Speaker 00

  So you have to...

• 5:49Speaker 01

  It's a lot more fun to speculate about other people's, other people's introspection.

• 5:52Speaker 00

  But I am curious about you, because like, you have, you have a series of quotes that I absolutely love. I save on my phone, I reread from time to time. One of them, I'll butcher, but it's just like, you know, the world is way more malleable than you think. And if you just pursue something with a lot of maximum effort, drive, and energy, the world will recalibrate around you easier than you think. And I actually reread that this morning before I came over here. And I was like, what is that for Mark? Like, today, like, what are you waking up trying to change in the world?

• 6:16Speaker 01

  Yeah, there's, there's a lot that we're actually trying to do. I'm suspicious that that's my actual underlying motivation.

• 6:20Speaker 00

  Why?

• 6:21Speaker 01

  Just because, like, I don't think external impact is enough to keep people going. Or at least, I've seen way too many people who had a high level of external impact, and then at some point, they just stop. Well, here's the problem with external impact. It's like, okay, it's four in the morning. You're staring at the ceiling. Like, is that enough? Like, external impact is stuff that's happening to other people, right? But it's like, all right, what is it about you? The story I like to tell myself is that I'm competing with myself, right? The story I like to tell myself is I'm getting up in the morning because I'm trying to become a better version of myself. I'm trying to become smarter and better informed and have reached better conclusions and be better at what I do and continue to expand my skills. But, you know, again, to actually analyze that properly require a level of therapy that I'm willing to engage in.

• 7:07Speaker 01

  So, anyway, so, yes, the much more comfortable conversation is the, yeah, what are you trying to do in the world? Which I would love to talk about.

• 7:13Speaker 00

  I have almost no introspection either, so I understand that. All right, so tell me what you're trying to do in the world now.

• 7:18Speaker 01

  Yeah, I mean, look, we have had this. It's actually fairly amazing that it's become a controversial kind of thing, but we just have this fundamental view of the technology as like unbalanced and enormously powerful force in the world. And basically, the big problem with the world is that there's not enough technology, there's not enough information, there's not enough intelligence. And we have this opportunity, we have these special sets of technologies that let us fundamentally improve things. And then there's this very special kind of personality type of the entrepreneur who's able to build the product and then able to build the company and build a phenomenon and really make an impact on things. And so, when I look at the world, I'm just like, okay, this is just like, the world we live in is just a very primitive and crude place as compared to what it should be and what it could be. And so, the whole thing that we've been trying to do for 17 years at our firm is build kind

• 8:03Speaker 01

  of the ideal partner to the founders that are trying to do that, based on our own experiences of having been founders that were trying to do that. Overall, the world, especially the Western world, it's just stagnant. The overall kind of theme of things, it's just everything is stagnant. And we could talk a lot about that. But every once in a while, you have somebody who comes along. It's just like, all right, no, I actually have an idea of how to make things fundamentally better, and I have a way to build a business around that and build a company, build an empire around that. And those people, include ourselves in this, but those of us that are trying to do that, we're like a movement basically against stagnation. But without us, there's nothing but stagnation. But it's actually really funny, there's always this kind of criticism that you get

• 8:43Speaker 01

  from whatever the corporate press or kind of outside critics, which is like, oh, you VCs are finding the wrong things, or you entrepreneurs are building the wrong things. It's like, well... Nobody licensed us to do any of this. We didn't apply for a permit. Right? Get judged by somebody ahead of time and told, yes, you get to do this, you don't get to do this. Many people could be trying to do this. Anybody can do this. Anybody can start, build a product, start a company, start, even try to be a VC. These are all completely open fields. And it's shocking to me how few people actually give it a shot. And the fate of the world over the next 1,500 years is riding on the people who actually want to give it a shot.

• 9:21David Senra?

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• 10:06David Senra?

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• 10:27Speaker 00

  So when you started the firm 17 years ago, was your thesis exactly the same as it is today?

• 10:32Speaker 01

  I'd say the core thesis is the same. The specifics have changed enormously. We can talk about both parts of that. But yeah, the core thesis was the startup, the entrepreneur, the founder is going to be the core engine of progress in the world. And I think that's more true than ever. In fact, when we started, it was still controversial, the idea that a founder would run their company.

• 10:53Speaker 00

  Even in 2008, 2009?

• 10:54Speaker 01

  Yeah, it was still very controversial. In fact, they were high-profile companies at the time that were getting heavily criticized for basically having these little kids running around, running these companies.

• 11:03Speaker 00

  Okay, so you have this encyclopedic knowledge of the history of Silicon Valley in your head. I've probably read, I don't know, 30 to 40 books on it, so at some level, but not that you do. I remember reading a book on Nolan Bushnell, founder of Atari. He was like 27 at the time, and it was excessively rare. It talks about that in his story. It's like excessively rare for him not to be replaced once Atari started growing with, you know, CEO, like an older CEO.

• 11:25Speaker 01

  Yeah.

• 11:25Speaker 00

  Like, were there other examples before him?

• 11:28Speaker 01

  Well, so Christopher Columbus.

• 11:32Speaker 01

  Alexander the Great, right? So, so throughout history, most of the, you know, Thomas Jefferson. Throughout history, most of the great things that have been built have been built by this kind of super charismatic founder type, you know, wildepower founder type who, you know, basically built and run something to.

• 11:47Speaker 00

  Okay, hold on.

• 11:47Speaker 01

  Henry Ford.

• 11:48Speaker 00

  Hold on. I love that you went here because you don't remember this, but we had dinner in Miami with Jared Kushner like a year ago or something, and me and you would wrestle because I was so excited to talk to you. And I was trying to get out of you like, you know, because I think about history of great entrepreneurs all day. Like, this is what I do seven days a week. Like, who are these entrepreneurs in history that you like? Use our name and country founders.

• 12:08Speaker 01

  Yes, sure. Exactly. There's this like recency bias, right? Which is like, the world that we live in today is the normal state of the world. And like, everything that happened in the past is like weird and different, and those people were like dumber than we are and like all screwed up. And it's like, well, maybe. Or maybe the world worked a certain way for thousands of years and we're in the weird time. Like, maybe we're in a time that's just like really unusual from a historical, you know, from a historical standpoint. And I think this is one of those dimensions in which that's true. It just, it never would have occurred to anybody 100, 200, 300 years ago that if somebody was going to like, you know, start something that they were going to be the person who ran it, like, obviously. It was just obviously the case. The book that I always recommend on this topic is called The Machiavellians, which is this sort of famous book from the 1940s by this guy, James Byrne, who's like one of the great geniuses of the 20th century. And he described, the way he describes it basically is he said, like, there have been two like fundamental modes of like business

• 12:53Speaker 01

  organization over the course of like basically the history of capitalism. There's what he calls bourgeois capitalism, which basically is like founder runs the company, name on the door. The classic archetype for bourgeois capitalism was Henry Ford, you know, in the 1920s, and today it's Elon Musk, right? It's just like, that's you. And by the way, in the old days, it was Ford Motor Company. You know, it's not Musk Motor Company. But, you know, everybody knows Tesla and SpaceX, like, you know, these are Elon. And again, that maps to this historical thing, which is that's also how countries ran, and that's also how, you know, cities ran, and like, all these things. You just, religions, by the way, like, you know, basically everything, founders led the way. That's the historical norm. And then what he basically says in this book is he goes through and he says that there's this new, basically, model that basically is an artifact, again, it's an artifact of kind of this weird period of time between the 1880s and 1920s, where kind of the modern

• 13:38Speaker 01

  world, you know, as we know it today, kind of formed. And he said there was sort of a new philosophy of sort of leadership and management, which is called managerialism. Sort of the rise of the concept of a manager, and specifically, a manager as contrasted to a leader. And so therefore, the manager, therefore, the idea of a management school, right? Therefore, Harvard and Stanford Business Schools, right? Therefore, the idea of the manager who replaces the founder running a company. You know, therefore, the idea of management as a skill set that can be used to run many different kinds of businesses. In the 70s, this then turned into the conglomerate, which was the idea that it doesn't matter what the company does, if you have a good manager, the company should do, you know, 30 different, 30 different things. And so managerialism is this idea that you have this kind of interchangeable management skill, and that that can basically run anything. And actually, what Burnham says is, he says, "Look, people are going to try to draw value judgment on this, and they're going to try to say this is better or worse than the old

• 14:23Speaker 01

  name-on-the-door model." But he said, "The reality of the modern world is, everything is big." Like, you know, for the electrical power grid to get big, or the road network to get big, or the car industry to get big, large-scale systems need to be run by people who are training how to run large-scale systems. And so he said, "You may or may not..." And same thing with countries, large-scale countries are going to need to be run by people who are good at running large-scale things, right? And the founding personality type is not the manager personality type, and those are different. And so there's going to be a handoff when things get big and complicated. And so that's the model that Nolan Bushnell talks about, and that's the model that dominated Silicon Valley for 50 years. The problem with his argument is that assumes the managers are going to do a good job, right? And I think if there's like, one dominant theme that we're seeing in the last, you know, 30 years, you know, in the West, for sure, is like, managers generally, you know, writ large, are not doing a great job.

• 15:08Speaker 01

  Or another way to put it is the managers maybe are good at managing something that's going to be status quo for a long time. Like if it doesn't change, maybe they can run the banks for a long time, or they can run the power company for a long time, or the car company. And as long as the car is the car is the car, or soup is soup is soup, it kind of doesn't matter. But the minute things change, the manager personality type, because it's not the founder personality type, it doesn't know how to deal with change. Not everything is changing, a lot of things aren't changing, but for the things that are changing, they're changing like really, really quickly. I mean SpaceX is like the classic example of this. Imagine being a professionally trained manager, trained at like a top management school, working for a rocket launch company, competing with SpaceX. And the assumption of the entire rocket industry for the last 100 years has been the rockets

• 15:52Speaker 01

  are used once and then that's it. And the economics of launch are dominated by having to build a new rocket every time. And then this like crazy guy in California comes up with this thing where the rockets line in their butt. And you can't replicate it. Okay, what good are your management skills at that point? And I think there's like a whole bunch of interesting areas of human activity where like that shift is happening. And so I think this is where Burnham's thesis collapses, where it's just like, okay, the managers actually can't do it. Yes, there's a need to run things at scale, but no, the managers actually can't do it because they can't adapt.

• 16:20Speaker 00

  And the founder can just learn how to run things to scale.

• 16:22Speaker 01

  Well, that's the theory, and that's a big part of our theories. Yeah, the founders can actually learn how to do this. And look, this is still a controversial topic, this still comes up.

• 16:30Speaker 00

  Is it controversial?

• 16:32Speaker 01

  Well, it is, because founders, especially founders on day one, are not good at doing this. Okay, so in tech, we should talk about tech specifically, like in tech, the founders have to have been in a lab, literally or metaphorically, for 20 years before they start their company. Like they've been probably working by themselves or with a small team. They've been building technology. They haven't been running things, like they haven't been managing large organizations, they haven't been running public companies. And so there is a missing skill set, right? And on day one, they don't know how to do that. And so they do need to be willing to learn how to do that. And then, by the way, they do need to be capable of doing that, because some of them can and some of them can't. But yeah, so this maybe is like the core thesis behind our firm, which is you're much more likely to build something important in the 21st century if you start with the founder

• 17:15Speaker 01

  and train them on management than you are to start with the manager and try to train them on being a founder, on creating new things. And I think that this trend is intensifying. And so you're because what's happening is all the old edifices, all the old incumbent institutions in the last 100 years that are run by managers, they're all in some state of fundamental collapse. Like they're, they're, they're all collapsing in like trust and credibility because, because they can't adapt. And so this issue is becoming more and more acute, which is the system that we thought was necessary and sufficient actually just like does not work. And if anything good is going to happen, it's going to have to be somebody, it's going to have to be Henry Ford, Elon Musk type, who actually does it.

• 17:49Speaker 00

  You think it's in a vast majority of minority of people agree with you.

• 17:52Speaker 01

  Look, it's becoming more common. I mean, when you get an Elon Musk, kind of Steve Jobs, when you get these kind of archetypal examples of it, it's a lot easier to, you know, to, you know, to sell it. You know, Mark Barzuk, we were talking about earlier, like, you know, he's a great case study of this, right? He had, yep. When Mark started Facebook, he has never, he had never had a job before. Okay. Not only had he not managed people, he had not worked for anybody, right? So like he had, he started with zero and his, his learning curve, which by the way was happened fully in the public eye, right? His learning curve was vertical. And by the way, it's still vertical. Like he spends like enormous amount of time learning how to become better at running, running, running these things at large scale. He's still the founder and he's still the innovator and he's still like a fountain of ideas on what to do. So he's, he's, he's that double, you know, he's like the classic example of the double threat.

• 18:35Speaker 01

  And then what happens is other founders look at that and they're like, oh, I could do that.

• 18:39Speaker 00

  Which is exactly what Steve Jobs said when he saw Nolan Bushnell.

• 18:41Speaker 01

  Exactly.

• 18:42Speaker 00

  I can run my company.

• 18:43Speaker 01

  I can do that. Yeah, exactly. And by the way, you know, it's amazing like how fast this stuff shifted because like, you know, Steve famously had this, you know, short period of time where he worked for Hewlett Packard. And I think, I don't know if it's true, the legend is that Jobs pitched his manager at Hewlett Packard.

• 18:55Speaker 00

  No, Wozniak pitched him.

• 18:56Speaker 01

  Was it Wozniak? Okay. Okay. Wozniak pitched. There was some other story where, where Jobs went into some meeting with some manager trying to pitch the thing. And the line for the manager was absolutely not, this is the dumbest study I've ever heard. Get your feet off my desk and get out of here. Right? You can just imagine Steve with his, you know.

• 19:09Speaker 00

  And they had to be bare feet at that time. My favorite Apple lore is that the first sale in Apple, in Apple's history was made barefoot, when he walked into the bite shop. He was barefoot.

• 19:21Speaker 01

  What's amazing about that is, you know, yeah, so Wozniak for sure, we're for Hewlett Packard. Everything I'm describing was Hewlett Packard in the 1950s and 1960s, and 1940s. That was also Dave Packard and Bill Hewlett were that founder type. And Dave Packard and Bill Hewlett ran their company for, between the two of them, for like 50 years. And by the way, Silicon Valley was built in large part on HP. HP was the original Silicon Valley company.

• 19:42Speaker 00

  Okay, that's the next question.

• 19:43Speaker 01

  And it was run by its founders for 50 years, and yet people concluded the founders shouldn't run the companies. And so it's like, it's one of those things where it's like, it's kind of so obvious it was staring everybody in the face. And so people had to construct kind of elaborate, you know, basically, you know, these elaborate kind of lattices of like, you know, theories to basically get around the fundamental fact that you need somebody who knows what to do after running the thing.

• 20:01Speaker 00

  Do you think HP might have been the most influential company in Silicon Valley history?

• 20:05Speaker 01

  It was for sure the most influential company from 1940 to 1980, and then probably after that, Intel.

• 20:12Speaker 00

  Well, you go to the founders of Intel, and you read biographies of them, and they talk about modeling off of HP.

• 20:17Speaker 01

  Yeah, that's right. Yeah, that's right.

• 20:19Speaker 00

  And then how many founders modeled off of Bob Nois and Intel after the fact, including Steve Jobs, who would go to Bob Nois's house for dinner?

• 20:26Speaker 01

  Yeah, that's right. By the way, that's another great example, because Bob Nois, at least, you know, if you look at photos of Bob Nois, you're like, wow, this guy's like a pillar of society. Like, he's very well dressed, and he's kind of very adult, and he's very like, you know, he's famously the leader of the traitorous eight, you know, the group that left Shockley to start Fairchild.

• 20:41Speaker 00

  And they left Fairchild to start Intel.

• 20:43Speaker 01

  And so Bob Nois was 100% the Steve Jobs of his time, just in a short-sleeved white dress shirt and a skinny black tie. But it was, again, it's like the exact same thing. And so I, you know, I never, unfortunately, never met Bob Nois, but I could easily imagine Bob Nois and Steve Jobs sitting down and being able to talk for three hours and completely understanding each other, despite the fact that they, the look and feel is like completely alike.

• 21:03Speaker 00

  He was almost like a disciplinarian to Steve, because Steve was, you know, wild and reckless. Like, I was also wild and reckless, you needed a chair. And I think Bob's wife maybe went to work at Apple early on, too. So it was, he talked about this in his biography, there's a few great biographies of Bob Nois, but he said that the reason he spent so much time after he's really successful spending time with the entrepreneurs, he said it was restocking the stream in which he fished from. He thought it was really important. And he's like, I learned from all the guys before me, I need to take that knowledge I've built up over multiple Decades and push it down the generation. I want to go back to starting the firm, though. This is interesting. What was occurring in your life either at that time or before that, that you had this observation that this had to be done?

• 21:41Speaker 01

  Oh, so we've got all these labored theories. The practical reality of it was Ben, my partner Ben and I had become very active angel investors. And I'd been an angel investor since like the mid 90s. But then Ben and I started doing it kind of as a, you know, as a, as a, as a real thing. Putting significant time into it, probably starting in, you know, 2003. Well, I did it kind of throughout the early 2000s, but 2003, 2004. It's hard to remember now, but if you go back to like 2003, 2004, there weren't like thousands of angel investors. There were like eight. It was like a short, you know, it was like Ryan Conway and a handful of people. And then Ben and I running around doing it. And this was very significant in the evolution of the venture capital industry. Cause this was the point at which the traditional VCs got disintermediated by angels and seed investors, who kind of inserted in before the VCs arrived, which was this fundamental change that, that changed the whole industry. But, you know, we were part of that.

• 22:25Speaker 01

  So, but as a consequence, like we were investing in all these new companies, you know, basically at the point of formation. You know, we were basically playing amateur early stage VC. And we were getting, and we were always like, we're not going on the board, like, you know, you're going to raise money for a real venture firm later. They're going to go on your board and whatever and work with you. And what we just found over and over and over and over again was we ended up getting pulled into these companies. Either because there were issues that just like the other people that they were, you know, working with or they're, you know, they're either, they either hadn't raised venture yet, or the VCs that they'd raised from couldn't, couldn't help them with. And so we just got pulled in and the reason was we had been running companies at that point for, you know, whatever 20 years. And so, you know, we kind of, we at least had some idea of what we were doing. And then the other is we kept getting, we kept getting brought into conflict resolution between the founders and the VCs.

• 23:07Speaker 01

  So that, because you know, it's like, especially, especially because again, much more common at that time. Especially if the VC's fundamental point of view is the founder's not getting around the company. And we need to like replace you with a professional manager as fast as possible. Like the founders are not necessarily going to like that and they might resist that. And by the way, even if they're on board with that idea, they might not like the person who the, who the VC wants to bring in. And so we kept ending up in these kind of basically as arbitrators in this sort of, you know, and in theory, we were kind of trusted intermediaries because we knew the founders, we knew the VCs. And we could kind of help, help bridge between that. But literally what happened was after a while, we were like spending like eight hours a day just, just doing this. And we're like, all right. And it's like weird, it's like you're writing a hundred thousand dollar check and you're like spending all this time doing it. And then to basically arbitrate with somebody who wrote a $10 million check. And it's just like, all right, we should probably just write the $10 million check.

• 23:52Speaker 01

  And that was, that was, that, so it was, it was, I always think like the best, the founders, I always, one of my theories of like the great founders is they tend to be able to operate at kind of a strategic conceptual level and then the practical level at the same time. And so, so we had, we had a whole theory I could take you through for the evolution of the venture business.

• 24:08Speaker 00

  Please do.

• 24:08Speaker 01

  Yeah, but, but underneath that was just this actual, you know, the lived experience of what was actually happening on the ground. The, the big theory of the firm that we, that we had at that time was linked to this idea of, was linked to this idea of founders running the show, but it was also a structural observation of what was happening in, in the venture industry, which was, basically what we did was we, we sort of in line with your philosophy, we went back and we studied a lot of other businesses that are, have similarities to the venture business. And so we study private equity, venture capital, or sorry, private equity hedge funds, investment banks, law firms, management consulting firms, ad agencies, accounting firms, you know, basically anything where the, the product is fundamentally a relationship, you know, a knowledge work, you know, kind of relationship as, as compared to something that gets, that gets manufactured. And what we observed is basically, and, and, and Hollywood talent agencies actually is

• 24:53Speaker 01

  the one we've, we've probably talked publicly about the most. And so that was, that was a great case study.

• 24:57Speaker 00

  The Ovitz.

• 24:58Speaker 01

  The Ovitz story.

• 24:58Speaker 00

  He was in this studio a few months ago.

• 25:00Speaker 01

  Fantastic. And so, and, and he actually, and by the way, he gave us, you know, we make a point of crediting, like he, he gave us a lot, a lot of this theory, so a lot of this comes from him, but, well, I actually, I'll tell it through, through, through, through, through his, through his, his experience. So when he started his agency in, was it 80, whatever, no, 75, 75.

• 25:16Speaker 00

  In the 70s.

• 25:17Speaker 01

  In the 70s, like in the mid 70s. It was actually a very similar, it was structurally, it was very similar to when we started A16Z in, in 2009, which was the configuration of the industry at that point was basically a bunch of essentially service firms, a bunch of talent agencies, none of which were at very high scale. And then each of them was basically a tribe of, of basically solo operators and kind of, kind of lone wolves. And so, so, so the concept in Hollywood was you had an agent and that was your guy. And that agent knew whoever that agent knew and had whatever relationships that agent had, but the other agents at your agency were not available to you. And there was no collective benefit to the fact that you were at an agency that had not just your guy, but like a hundred other guys, there was no collective payoff to that. They ran that in that way for a very specific reason, which was this kind of this eat what you kill professional services mentality where everybody should have to go build, build,

• 26:02Speaker 01

  build their own book of business, but. But you end up, you're just dealing with a guy as opposed to a firm. Like, there's no firm, there's no collective thing. And that was basically the condition of venture capital in 2009, which is you have been, at this point, we knew all the VCs really well, and we had raised venture, and we had worked with all these other companies that had raised venture. And basically, all of the sort of legacy venture firms at that point, they were all like that. They were all just like tribes of lone wolves. And then, the thing that we knew that was not publicly known was, generally speaking, inside the firms, they didn't even like each other. Oh, I hear stories like this all the time. Right. And so, it's like, you know, whatever, there's Joe and Mary, you know, who are partners at a venture firm, and you're working with Joe, and Mary has like a key connection that you need access to. And you see, yes, Joe, can Mary introduce me to so and so? And what you don't know is they're having like a brutal fight.

• 26:46Speaker 01

  You know, they're like trying to destroy each other, because they're fundamentally economics, they're going for, you know, a greater slice of the profit pool. And so, they're really going at it. And so, we just, we saw example after example of venture firm that was basically either, two things, actually. One is either melting down due to just internal strife and conflict. Or, by the way, the other was generational succession. The other issue is, a lot of the dominant venture firms in 2009 had been around for 30 or 40 years, and they were now on their third generation of partners, going to their fourth generation of partners. And, you know, and again, it's the same thing. They had been founded by dynamos, and then they were, you know, the later generation people were not like that. So, we basically said, oh, this is where the O V S thing comes in, as we said, look, like, that's not going to last. And so, our theory of it was what we called death of the middle, or we sometimes, the

• 27:28Speaker 01

  negative way to frame it is death of the middle, the positive way is the barbell, which is what's happened in all these other industries, which is basically, the industry gets stretched apart like taffy. And what you get is, you get this barbell thing, and on one side of the barbell, you get early-stage angel, seed investor, who are really like first money in, like, you know, staying very light on their feet, writing a relatively small check, but like being involved in companies extremely early on, and taking a lot of risk. And then, on the other side, you get basically scaled platforms, right? So, you know, you get large-scale enterprises that have like a lot of throwaway, a lot of access, very big networks, and then access to a lot of money. The other comparison we always make is to retail shopping, right? Which is, they used to be department stores, like Sears and JCPenney, which basically, where the brand promise was, pretty good selection of products and pretty good prices, right? And then, now, those are dead.

• 28:13Speaker 01

  And what you You have instead of boutiques like the Gucci store or the Apple store. And then you've got this super scale e-commerce companies like Walmart and Amazon. We were to the point where it's just like, there's no reason ever go to department store because it's got less selection than Walmart and Amazon. And but it doesn't have the quality tier and the special experience of a Gucci or Apple.

• 28:30Speaker 00

  But you had that thought in mind when you started A6.

• 28:32Speaker 01

  Hundred percent. Yeah, exactly. Yeah. It was a conceptual leap for venture capital at the time, but the exact same thing had happened in private equity. The exact same thing had happened in hedge funds. The exact same thing had happened in.

• 28:40Speaker 00

  And you knew that by what, just reading?

• 28:42Speaker 01

  Reading. So like investment or investment banks are the classic example. So if you read about the sort of the original investment banks in the US between like 1880 and 1920, they were all like boutique venture capital firms in the 1970s, 1980s in the US. It was like 20 guys.

• 28:55Speaker 00

  And these are more like merchant bankers.

• 28:57Speaker 01

  Yeah. Well, and so the classic stories, which I love so much. So JP Morgan's one of my kind of favorite historical figures. And JP Morgan was an example of that. The JP Morgan Investment Bank was like this, basically this time. It had, it was very important, but it was like this tiny little operation. It was, you know, fit in a single office. It was, you know, I don't know, probably 20 principals and some office staff or something. It was, you know, it's not, it was not large. And actually, the hidden secret to JP Morgan was he was the son. The father was Junius Morgan.

• 29:25Speaker 00

  Okay. I literally, when you were talking, I was like, wait, you, you, I was shocking that you would say pick him because I actually found his father more formidable individual than him.

• 29:33Speaker 01

  He was. So he was, which is almost always the case of any famous public figure. The father is almost always a more interesting story, which a lot of examples of that. But however, yeah, so Junius Morgan and then JP Morgan filled a specific economic role that's gotten lost in history, which is basically Junius Morgan. The Junius Morgan Bank was in London. The JP Morgan Bank was in New York. And what the Morgan family was doing was they were funneling money from the old slow growth economy of Europe into the new high growth economy of the US. But again, it was exactly your point, like it was this little boutique family operation. The other great thing about that era of history is these were, they were all bifurcated by religion.

• 30:09Speaker 01

  There were the Protestant investment banks and there were the Jewish investment banks and they did not mix.

• 30:14Speaker 00

  No, not at all.

• 30:16Speaker 01

  Completely different worlds and as a consequence JP Morgan was the Protestant banks like JP Morgan are able to find like the railroad which were considered like the real businesses at the time. But then like the all the disreputable stuff like movie companies and like department stores like that those are all the Jewish investment banks. By the way, Jewish founders, almost entirely Jewish founders with like and then Goldman's and JP Morgan is the big survivor of that today in the form of JP Morgan Chase and then and then on the on the Jewish side is Goldman Sachs, you know, is the great survivor. But again, if you go back there.

• 30:42Speaker 00

  So that's you consider that the the barbell in investment banking. You have the JP Morgan kind of like family partnership and then you have the complete scale of like Goldman Sachs.

• 30:50Speaker 01

  And so what happened was both JP both JP Morgan and Goldman Sachs started out a hundred years ago, they were on the one side of the or a hundred, a hundred years ago, they were actually in the middle. They were they were kind of again, this sort of, you know, they were boutiques, but they were like of their time, they were like today, you call them like mid-market, you know, who's sometimes called bulge bracket, you know, kind of thing, as opposed to just like a solo operator or something. Actually, the way JFK's father got started, he literally hung out a shingle in the 1920s, which is Joseph P. Kennedy banker, you know, private banker, and he like just did deals and he was like an angel investor of the time. And so and then you had the big commercial banks, but the big commercial banks had no interest in issuing loans to these speculative crazy, you know, entrepreneurs. And so in that time, JP Morgan and Goldman Sachs and Coen Loeb and Drexel and all these other kind of mid, you know, mid-market banks, Morgan Stanley, the banks that became Morgan Stanley, were kind of these mid things.

• 31:35Speaker 01

  Now, what's happened, you know, sitting here a hundred years later, those are now the the scaled players, the ones who didn't scale are are kind of long forgotten. Having said that, there's one firm that survives in the old model and that's Allen and Company. And there are other boutique investment banks today, but Allen and Company was founded in the 1920s and has, you know, has is uniquely the one that survived in the in the original model of boutique and deliberately being a boutique investment bank. And it stayed that way for a hundred years. And so one way to think about it is that today, that's the barbell in banking, which is Allen and Company on the one side and then JP Morgan Goldman Sachs on the other side.

• 32:05David Senra?

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• 32:49David Senra?

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• 33:16Speaker 00

  So are you reading about this while you're founding the firm? Before you're founding the firm? Like you could both?

• 33:22Speaker 01

  Ben and I spent about a year and a half planning the firm. And part of it was he was in, we call it industrial servitude. He was working for Hewlett Packard after we sold our company to HP. So he was running a big part of HP at the time. And so we couldn't literally start a new full time thing until he got free of that. So we had a year and a half to kind of study and think and work.

• 33:38Speaker 00

  And because you had this period from 2003 or 2002, when you're doing angel investing a lot, till you start your company six, seven years later, you're observing all of the weaknesses in the model. And that's where you have, hey, why don't we take the CAA? I think Ovitz calls it like the phalanx, where it's like, if you have one agent at CAA, you have all of us. And they would like roll deep. I think he says in his book, like, it was like, oh, my agent's coming to the premiere. No, it's like 20 agents are coming. And I think they'd be dressed in like the same kind of suitmaker and like, they were intentionally trying to intimidate like their competition.

• 34:09Speaker 01

  Armani suits, Sulca shirts, was a little shirt maker in Beverly Hills, and sober, all sober colors, white shirts. And then I think he had a bulk purchase deal, I think with the local Jaguar dealer. And the legend at least has it is that the license plates all said CA1, CA2, CA3. And so you'd go to a premiere and there would be like 20 Jags lined up. And then 20 guys in identical suits coming out. And yeah, this is exactly the thing. It's just like, now, that's the Hollywood version. But like, just imagine the psychological impact of that if you're just like an old school agent. This is sort of, you know, Michael's a very dear friend. He became very controversial over the years. And the reason he became so controversial, I think, is just because he smoked his competition so severely. Like, he pounded them so hard, there was no response.

• 34:53Speaker 01

  You're just a guy working for an old agency and you've got your clients in these 20s. These motherfuckers are showing up. And like, it's just, yeah, it's this force. And the clients, if you talk to them, by the way, you know, a lot of his clients are still active today. You know, from the period, if you talk to them, it's just like, yeah, it's just a no brainer. It's like, do you want to work with a guy or do you want to work with a firm? It's just obvious. He has, I don't know if he told you all these stories. Did he tell you about his morning schedule thing?

• 35:15Speaker 00

  The getting on the bike, doing the karate?

• 35:18Speaker 01

  For the firm, for the firm.

• 35:20Speaker 00

  No, no, no.

• 35:20Speaker 01

  So, so this is again, something that's specific to Hollywood, but it's a great example of it. Okay, so the agency business, at the time he started CAA, the agency business is like 90 years old or something, right? It like started out doing vaudeville bookings and like music halls and like it had been around for like decades. And so the people involved in it had had decades to think about like the best way to do it. And they had arrived at a set of practices. And one of the practices, I think I'm getting this right, one of the practices was at every agency, they would have their staff meeting in the morning at 9:00 AM. And they would basically share, you know, whatever information was going to get shared in the agency would get shared at that point. And oh, you know, this studio head wants a script to do, he wants to do a crime thriller and here's the script and whatever. And then, you know, this is like the point where there would be minimal, you know, whatever, minimal handoff existed to the other agency. And so this is where everybody would kind of get updated. And so the staff, the staff meeting would go from like 9:00 AM to 10:00 AM.

• 36:05Speaker 01

  And then at 10:00 AM, they would start calling their clients and they'd be like, oh, you know, we heard there's a, you know, whatever, there's going to be a casting call for, you know, this great new role for this professional thief or whatever. You should consider doing that. And so, of course, Michael's like, all right, well, we'll have our staff meeting at 7:00 AM.

• 36:18Speaker 01

  We'll be done at 8:00.

• 36:19Speaker 00

  Yeah.

• 36:20Speaker 01

  Between 8:00 and 9:00, we'll call all the clients. By the way, we won't just call our clients, we'll call their clients, right? And so imagine you're whatever, Paul Newman, and you've got some agent you've been working with for 20 years. And he calls you at, your agent calls you at 11 o'clock and it's like, I've got this great role. And you say, oh, the guys at CAA called me about that three hours ago. And your agents, like, they don't represent you. And Paul's like, yeah, isn't it great? Isn't that fantastic? And so you just, again, you just like, you rinse and repeat that a thousand times. And it's just, to the client, it's just like completely obvious what to do. And so, yeah, so the more, the reason I go through this, the moral of the story is, again, it's sort of this, this idea, incumbency, you know, incumbency status quo, like, you just end up, you end up, you end up in any business, you just end up with all these embedded assumptions, generally, and then, you know, 90 years later, right?

• 37:04Speaker 01

  So the, so the founders of the agencies were, 90 years ago, they weren't involved anymore. So the people who were running competitive agencies were managers, not, right? Same thing, managers, not founders, right? And so, and the thing a manager never does, unless they're under duress, is reconsider fundamental assumptions, like, they hate that, like, that, like, that's not, the whole point of running something big is you don't have to do that. You get to run the big thing at scale, you don't have to, like, go in and, like, reinvent it from scratch, like, that sounds like a nightmare, right? And so, but, but anyway, as a consequence of that, you end up with, like, all these embedded assumptions that are basically just, like, unspoken, nobody's questioning, it's not happening. And if you take the time, you can kind of go in and go back, you know, first principles, you can kind of go in and you can say, okay, well, how do they arrive at that? And what we found in just industry, I mean, this is what our founders do every day, it's just industry after industry after industry, there's all these embedded assumptions that

• 37:49Speaker 01

  made sense in 1970 or 1930 or 1880, but just don't make sense anymore.

• 37:53Speaker 00

  I love that you did it. I always say it's like, not what you do, it's how you do it. And if, the idea that you could take, I'm like, I'm not running a talent agency, but there's so many of these principles that I could apply to venture capital, and your blog archive, which I absolutely love, and I told you I've read, like, multiple times, I did episodes on it, you would give advice to, like, young people, and it's like, my advice is, like, go work in an industry where that's still, the founders of that industry are still working. When I read Ovitz's book, the way I would summarize his approach, because he is in this big, stodgy, slow-moving, you know, very bureaucratic organization, it's like, oh, mediocrity is always invisible until passion shows up and exposes it.

• 38:28Speaker 01

  Oh, interesting, yes, right.

• 38:29Speaker 00

  And that's what he did.

• 38:30Speaker 01

  Yeah, that's right.

• 38:30Speaker 00

  He's just like, there's so many things that you guys could be doing better here, I can't do it in there. And if I remember correctly, he took some of these ideas to his boss.

• 38:37Speaker 01

  Oh, yeah, yeah, yeah.

• 38:37Speaker 00

  Because that guy was his mentor, I can't remember his name.

• 38:39Speaker 01

  He famously worked for the CEO of William Morris.

• 38:41Speaker 00

  Yeah.

• 38:41Speaker 01

  Yeah, which was the biggest of the talent agencies at the time.

• 38:44Speaker 00

  So were you, were you and Ben essentially just designing what you wish you had when you were founders?

• 38:48Speaker 01

  Yeah, that's right. And again, that may be a cheat code, but yeah, if you've been the customer, obviously, this all becomes a lot more obvious.

• 38:54Speaker 00

  I don't know if you want to answer this question now, but in Warren Buffett's shareholder letter, he has this great line where it's like really important to pick, to play against weak competition. Did you feel that there was going to be like that point in time in venture capital history that you were going to be playing against weak or weaker competition?

• 39:10Speaker 01

  I would say not exactly. We didn't view them as weak. We viewed them as basically, we viewed them as running on a status quo set of ideas. And so, and to be clear, like part of why we think about this, we had to raise money from at the time, in the time when we're probably the two best venture firms, so Clarence Perkins in the 90s, and I worked with John Dora very closely for five years in Escape. And then we, we raised money from Benchmark when they were like king of the hill, and Andy Rakle, who was one of the founders of the firm and is a legendary brilliant VC. And so, we had worked with, we just had, you know, for accident of history, we had worked with two of the whatever top five or whatever people in the field, you know, for a long time. And they were and are, by the way, brilliant at running on the model that they, that existed. John was brilliant at that. Andy's brilliant at that. They're still brilliant today. It

• 39:55Speaker 01

  was less a competition of, oh, these people are soft, or these people aren't smart, or it was none of that. It was, no, they're really good at executing against this particular playbook. So, and by the way, that's why it's okay. Like, if we're going to do this, we need to be, we need to be playing by a different playbook.

• 40:08Speaker 00

  There was no such thing as like scaled venture capital at the time?

• 40:10Speaker 01

  No, at the time, no, no. Because the firms all hit this, they all hit this limit. They all fundamentally hit this limit. They all hit this limit where they just couldn't, the idea of a partnership of equals, or even a hierarchical partnership, like it just breaks at some point because there's just too much internal dissension. It is too hard to coordinate. And then, and then everybody's fighting for slices of what it was viewed at the time to be a fixed size pie. And so, none of the, none of the other firms could, they, structurally, there was just no way to get to scale.

• 40:37Speaker 00

  Where else did you take ideas from besides the agent business in Hollywood and like the merchant bank, investment banking industry?

• 40:43Speaker 01

  Oh, I mean, it was just very obvious that it happened in private equity. Like, this was, this was the time when like, it was actually really, this was around the time when like KKR and firms like it were hitting their stride with, they're actually building like a lot of operational capabilities in-house. They were actually building their own, actually, investment banks in-house. One of the things we've never done, but has always been on the ideal list, is to actually just have an in-house bank. And KKR had actually done that, just build a captive bank. And so, you know, they had done a bunch of things like that. And so, we saw it happening, which is the mid-tier private equity firms were collapsing. And you either needed a solo, you know, very light on your feet kind of solo operator on the one side doing small deals, or you needed to have a scale platform like KKR. It happened in hedge funds. It happened in, but I mean, it had long, actually, actually, the TV show Mad Men.

• 41:27Speaker 01

  Mad Men tells the structural story of this happening in the advertising field in the 60s and 70s. And I will ruthlessly spoil Mad Men, because it's been, it's been, it's been off the air for like 20 years at this point. But, you know, a big part of the arc of Mad Men is those guys are working, Sterling Cooper is a classic mid-market ad agency. Right? And then, and then, and then, whatever, the third, third season, they sell it to McCann, which was the, the scale player at the time. And they show you all the pros and, they clearly talk to people who had been through this, because they showed you all the pros and cons of working for McCann, because McCann's this giant machine. And so, Don Draper's used to like making all the creative decisions, and now he's just in this conference room arguing with people, until he just like gets up and walks out. But then, Don Draper and Roger Sterling start their own startup. They start Sterling Cooper Draper Price, that's the second one, which starts out as a, as

• 42:11Speaker 01

  a true startup, as a true boutique startup. And then they have this, whatever, year and a half, just, just fucking hell. Like, they can't get anywhere, they can't get clients, like, because, because they're too small, you know, they're, they're subscale. And so, it kind of, and then I think, I think in the end, I forget, it's been too long, but I think in the end, they end up, I think they end up selling it. No, no, no, no, no, no, no, sorry, I got it wrong. They sell the first one to the British ad, ad agency, that just like completely destroys it. And then they sell the second one to McCann. So, so they actually show that process happening twice. And so, that, again, if you go back to history, that, that is what happened in the ad agencies, basically, between the 40s and the 70s. Like, basically, television catalyzed that. Like, when, when television emerged, advertising became a much bigger deal than it had been before, and it just, it had to be professionalized in a different way. The other thing that happened is, of course, the external environment changes, right?

• 42:54Speaker 01

  So, so everything we just talked about just has to do with the internal mechanics of how these things run. But, but the other thing happens is the external environment changes, right? And so, part of what, I think what Michael would say, I think you would agree with this, part of what made CAA possible is, at one point, basically, Hollywood was just movies. And then there was like, whatever, a low kind of TV division. And, and by the 70s and 80s, the, you know, Hollywood was becoming much bigger than just movies, right? It was movies and TV and advertising and music and sports and, you know, politics and culture and like all kinds of things. In fairness to the, kind of, our competitors, You know, Silicon Valley between, call it 1950 to 2010 was primarily just in the tools business, right? Primarily the companies, you know, starting with Hewlett Packard, the companies that we all backed and built were basically just building tools. And you'd build a tool like an operating system or a disk drive or something, and you'd sell it to people and they'd figure out what to do with it.

• 43:39Speaker 01

  It was right around the time we started our firm that the Valley was going from being primarily tools businesses to actually building directly competitive companies in incumbent industries, right? And so Airbnb going directly into the hospitality industry, right? So alternate universe Airbnb is just boutique looking hotel software, right? For running Airbnbs, it's a tiny little boutique business building basically little spreadsheet software. But no, Airbnb, Brian Chesky decided brilliantly, we're just gonna like go into the hospitality business and compete with hotels directly. Uber and Lyft in the old world were just taxi dispatch software. In the new world, they're full transportation providers. Tesla in the old world would have just been software for self-driving cars. Tesla in the new world builds, you know, the entire car. By the way, Facebook, same thing.

• 44:20Speaker 01

  Prior to Facebook, if you built like online ad, you know, software, you were selling it to the media companies. Mark's like, no, we're just gonna be the media company. Like, we're just gonna build the entire thing. And so this was the other thing that happened was, you know, for us, was that that was right around the pivot point when the Valley's ambitions went from just building tools to going directly into incumbent industries. And then this goes back to the scale thing. It's like, okay, why do you need to scale? A venture firm was because the companies need to scale, right? And then, of course, AI now makes that crystal clear, right? Because, right, the winning AI companies are raising, you know, billions, tens of billions, in some cases, hundreds of billions of dollars. Right? The old world of 10 million or 30 million or 50 million dollar checks, you know, where VCs tap out is just not a relevant, a relevant thing anymore.

• 44:58Speaker 00

  But did you know the scale was changing at the time you founded the firm?

• 45:01Speaker 01

  We had a pretty good idea. So I'd been, I'd been involved in Facebook, you know, basically, you know, informally since inception and then formally on the board since 2007. And so I saw the, when that thing hit the knee in the curb, it was just very clear, it was to us, it was just like very clear that, we didn't know how big it was gonna get, but it was gonna get much, much bigger than the internet 1.0 companies had gotten. And so there was that. What else? It was also around the time Apple was directly entering the cellphone market, which was another great example of this. Silicon Valley didn't used to make cellphones. The original cellphones weren't made by Silicon Valley. They were made by these like giant industrial companies like Sony and Nokia and whatever, and Motorola in Illinois or whatever. And then Silicon Valley would make the chips that go into them or the software. And of course, Steve was like, yeah, no, screw that. We're just gonna make a phone, right? There were these signals that it was happening. And then the other thing was just the internet itself was maturing, right?

• 45:46Speaker 01

  And so, you know, at that point, the consumer internet was 15 years in. And we had, you know, seen every part of that. And so, you know, I forget what the number was, but that was probably around the time the global internet penetration was like crossing a billion users on its way to 5 billion.

• 45:59Speaker 00

  Yeah, you have a very interesting lived experience where like you were there at the very beginning of the internet. One thing that I'm fascinated by, and that's actually was gonna be the first question for you, because I've never heard you speak about this, at least on a podcast, but your partnership and relationship with Jim Clark. You were like 20 when you met him? How old were you?

• 46:18Speaker 01

  I was old fashioned. I actually graduated from college and got my degree. Very Stone Age concept these days. So that was in 1994. So I was probably 22, 22.

• 46:28Speaker 00

  So there's this great book. I don't even think you like the book, written by Michael Lewis, Silicon Valley's Story.

• 46:33Speaker 01

  I've skipped it.

• 46:34Speaker 00

  I've read it twice, just because I don't know if anything's in there is true, but the portrait he paints of this very eccentric character is just wildly entertaining to me. But what's shocking to me is when you talk to young founders. I'm like, this guy started three, I think he was the first person in history to found three separate billion-dollar technology companies.

• 46:51Speaker 01

  I think that's right.

• 46:52Speaker 00

  And almost no one knows who he is. Can you just talk about how you met him? What was it like working with him?

• 46:56Speaker 01

  I knew exactly who he was. And the reason was because his company, Silicon Graphics, his first company, they were the company in the valley between like, call it 1989, call it, yeah, 87 to 94 or something. They were like, whatever, Google or OpenAI or whatever, you know, comp you want to make. Like, they were like the company. And by that, I mean like, they were the company where the smartest people in the industry all wanted to work there. They built the products that were like the coolest products you could possibly imagine. They had this incredibly young and vibrant and dynamic culture. And then they hit this like cultural moment that was just incredible. And I think 92, which was the turning point in the movie business when computer graphics really kept in. And the two movies, back to back, were Jurassic Park and Terminator 2.

• 47:33Speaker 00

  Run on the machines they made.

• 47:34Speaker 01

  Build on the machines they made. It was the technology they made, the technology Jim invented. It was the technology that made that possible. And those movies, you know, those are still two of the great all-time, you know, movies. But at the time, I mean, I still remember the chills that you get seeing dinosaurs on screen. It's just like, this is... And then there's this company that builds the machines that do this. By the way, the Silicon Graphics computers are actually in the movie. There's a scene in Jurassic Park where the kids are navigating through Unix.

• 47:57Speaker 00

  Yeah.

• 47:58Speaker 01

  And it was actually the 3D software. Those were actually the Silicon Graphics computers. And so that was like this moment where they were just like, they're just like the absolute it company of all time. But, by the way, their legacy lives on in Nvidia. Nvidia is Silicon Graphics, basically, with one, it's like a trade or a save thing. It had to be a new company for reasons we could describe to do the GPUs instead of the workstations and servers. Nvidia fundamentally is based on Jim's ideas. That's where that stuff all comes from. And so he was already legendary. And again, he was one of these, he was the full deal. He was legendary as an innovator in technology, because he has a PhD in computer science. And he actually, he himself invented the original, I forget what they call it, I think it was the reality engine.

• 48:43Speaker 01

  The original interactive 3D graphics on a chip thing was actually him. I think it was like his PhD thesis. And then, and then he started the company, and then he ran the company. And then, and then, by the way, and then the VCs brought in professional manager. By the way, and the reason we know about Nvidia today and not SGI is because of this founder-manager issue, which we could talk about.

• 49:03Speaker 00

  No, let's talk about that real quick.

• 49:04Speaker 01

  Yeah, yeah, yeah.

• 49:05Speaker 00

  Because I don't remember this part of the story.

• 49:06Speaker 01

  Yeah, yeah, so, now, by the way, there's two sides to the story. And I wasn't there. And so I just reflexively side with Jim Clark, but I'll try to at least represent both sides of the story. So Jim, I don't even remember what's in Lewis, but Jim's like a true, Jim's like an Elon, he's like a true Elon, Steve Jobs level guy. And so incredibly creative, incredibly bright, incredibly charismatic, but like, he's volatile. Like, he's, he's, he's, he's exciting. Like, he's exciting. It's like, being around him is just incredibly exciting. There's always something new. He always has new ideas. And again, that was in that time where it's just like, okay, that's the personality type that clearly can't run the company. And so the VCs brought in a guy out of Hewlett-Packard, who had been trained at Hewlett-Packard.

• 49:50Speaker 01

  Because at the time, what happened is he wanted to hire a professional CEO. He went and hired a general manager out of either Hewlett-Packard or IBM, or the two training grounds. For this guy. So they brought in a really, really sharp guy who by I don't really know. I think I met him once. I don't really know. By all accounts, he was like very, he was like a very good example of this kind of HP general manager type who became became a CEO. He took over. He took over the company. And by the way, like in his defense, under him, the company scaled enormously. Like I forget when he took it over, but it was like 87 or 88 or something. And then, you know, by the time I got to the Valley '94, like this company had become huge. And, you know, whoever's running the company gets at least some credit for that. So but, but anyway, they got in this classic fight. Like they got in this classic fight. And the classic fight was, you know, you can just it's the same story every time. The founders like founders talking CEO and the founders like to the CEO of like,

• 50:35Speaker 01

  we need to do things completely different. And the CEO is like, no, like what we're doing is working. Like, stop fucking with stop fucking with the thing that's working. And the founders like, no, it's working now, but it's not going to work in the future. And the manager and the CEO is like, well, then we'll deal with it in the future. And the founders like, you can't wait to deal with it in the future, because by the time the future arrives, it's going to be too late. And the manager is like, why are you in my pants? I'm like, making you all this money. The company's super successful. Like, get out of my shorts. Right. And you get in this and you see this. And that was exactly the deadlock that they got into. And Jim Clark basically made two predictions as the founder of Silicon Graphics. So Silicon Graphics at the time was selling their computers basically started list price of like $50,000 for a desktop workstation and then scaled up into the millions. And Jim was like, look, two things are going to happen. It's amazing that he and he figured this out by like 1991 or something. He said, two things are going

• 51:20Speaker 01

  to happen. He said, number one, everything that we sell today for $50,000 is going to go on a chip, and that's going to go on a card, and it's going to go into PC, and it's cost 300 bucks. And either we're the company that's going to make that, or we're going to get destroyed. Right. Which, by the way, is what happened. That's Nvidia. Like, that's what actually happened. Right. So he was completely correct about that. The other thing that he had was, he's like, look, these this idea of standalone computers is not going to be the thing. These computers are all going to get networked together, and the network is going to become the important thing. At the time, there were there were different terms. There was people were using terms like information superhighway, or video on demand, or 500 channels. You had all these kind of concepts kind of coalescing around what became the Internet. And even before the internet kind of became a mainstream thing, Jim was just like, look, it's just inevitable that this is all going to become connected. And then the function of a computer is no longer going to be mainly what just the computer does.

• 52:05Speaker 01

  It's going to be the fact that it can talk to all the other computers. And we need to do that. And to do that, he actually, he actually went to Japan. He actually got this incredible deal. Nintendo, you know, then and now is like, you know, this giant video game company. So he actually had this deal with Nintendo where number one is he actually, and Silicon Graphics actually did this, actually built the original 3D graphics chip for a, for a consumer game player, the Nintendo 64. So he did that deal. And then he went to Time Warner, which at the time was, you know, this very important media company, doing all kinds of things. And he struck a deal with them to do what was called interactive TV, which was basically pre-internet. Basically, it was like Netflix before Netflix in like 1991, right? Like, like amazing foresight, right? Just like amazing foresight. But again, he and the CEO got in this conflict.

• 52:49Speaker 01

  And the CEO is like, look, we just can't, we can't, we have to, we have to focus on the thing that we're doing. We're not going to do these things. And so Jim did the classic Fonda thing and he left. And when I met him, basically that was the state that he was in, which was, okay, like, you know, I, Jim, am like in the prime of my life. I know, I have all these ideas. I don't know exactly what to do with my next company, but I know it should be a software company, not a hardware company. I know it needs to be a company that is able to anticipate these changes that are happening in the world. And I know that Silicon, and he was very sad about this. Silicon Graphics is not the company that's going to be able to do these things. And so I have to build the new company that's going to do it.

• 53:21David Senra?

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• 54:05David Senra?

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• 54:20Speaker 00

  I want to hear more about what it was like working with him, but there was a very astute observation you made in your blog archive. Because you were trying to, you know, essentially this post was trying to educate founders, just like recruiting is the most important thing you're doing at the very beginning of a company, maybe forever. And you're underestimating how difficult it is. And you tell the story of Jim Clark in the blog archive. You're like, this guy was a legend.

• 54:41Speaker 01

  He was, yeah.

• 54:41Speaker 00

  Like, most famous person, best entrepreneur. And he's like, he tried to recruit all these other people. And like, I don't know, there's like 100 people. And you're like, you were one of two or three that actually followed through and took the chance and jumped and started working with him.

• 54:55Speaker 01

  Yeah, and this, again, this is like, I don't know, Zuckerberg or Sergey Brin or Elon or whatever decides to start a company. Like, that was his candlepower wattage in the community at that time. And so, yeah, you would think that the obvious thing people would just like say, you know, Jim Clark wants to start a company with you. You know, just the obvious thing is you just say yes. Like, it was not, it was not happening. And so, I don't know if I told the story, but the crystallized memory is a dinner of 12 of us at this famous Italian restaurant in Palo Alto, called El for Nile. That's where a lot of these companies were formed. It was Jim's favorite restaurant at the time. So Jim had like a dozen of us, us being people who were like in existing companies, who were like basically technical people who he knew. Well, this is the thing, he was constrained, he had a not solicit agreement with Silicon Graphics, and so he couldn't just rip people out. And he didn't want to violate that.

• 55:38Speaker 01

  And so, he needed, he needed to basically reach out to the technical community and find new collaborators. So there were like a dozen of us in there. And I remember that, I remember that dinner very precisely for two reasons. Number one is I was the only one of the dozen to basically to say yes. And then the other was, it's the first time in my life I drank red wine. And I didn't know what to make of it. And so, I kept sipping it, trying to figure out if I liked it or not. And I didn't realize that I was getting completely hammered. Because I had no idea how to calibrate red wine. And so, the true version of the story is, you know, I leave the dinner and I'm like, wow, this is amazing. Like, you know, I'm going to say yes to this, we're going to do this. And I go to my car in the parking garage in Palo Alto across the street. And my brand new car, my first, you know, new car I've ever owned, right? My brand new car.

• 56:21Speaker 01

  And I got it and I pull it out and I rip the entire front end of the car off. It's like this screaming metal sound. So like, the whole front of my car is just like hanging on the ground. And I'm like, oh, fuck, hey. So anyway, I parked the car, got out of the car, walk home.

• 56:37Speaker 00

  No Uber, just that?

• 56:38Speaker 01

  No Uber.

• 56:40Speaker 01

  I'm just like, you know, three mile walk at, you know, whatever, 11 o'clock at night with, you know, six bottles of red wine.

• 56:45Speaker 00

  And you're what, 22?

• 56:46Speaker 01

  No, probably 22, yeah, exactly.

• 56:47Speaker 00

  22.

• 56:48Speaker 01

  And like, I think I probably won't mention this to Jim.

• 56:52Speaker 00

  I don't know, there's some wild stories in that book. He might have admired you even more.

• 56:56Speaker 01

  He might have, yes, yes, yes.

• 56:58Speaker 00

  How many founders of the company? Just you and him?

• 57:00Speaker 01

  And so originally, yeah, originally it was him and me. Yeah, we started the company and we had a long, it was again, one of these things where we had, we had long conversations about like what to do. Well, good, okay. So then the problem, the problem that he had was there was the idea of doing the graphics chip, but like, and again, that's what Nvidia did, but Nvidia was essentially a spinoff of SGI. But like at that time, starting a new chip company from scratch would have been tough. And he didn't want to compete with SGI doing that. And then, and then the interactive, what do you call the interactive, it's lost to history, but this interactive television street, like it wasn't time for that yet. It wasn't actually time for Netflix yet. And so it like the, it was going to be cost prohibitive. Time Warner had rolled out this interactive television thing in Orlando, Florida to 500 people.

• 57:38Speaker 00

  Yeah, and Microsoft was involved.

• 57:39Speaker 01

  They were doing, they were doing a ton at Oracle. At the time, like all the big companies were.

• 57:42Speaker 00

  It's all these Bill Gates virus fees.

• 57:44Speaker 01

  Yeah, exactly. He talks about that a lot. But the capex per, you know, house was like $50,000 or something because you had to have like a silicon graphics workstation in the house. It just, it wasn't going to work. And so you couldn't figure that out. And then we, we cycled through a whole bunch of ideas. We actually went, he actually went back to Nintendo and we almost pulled the trigger on basically building what today you'd call like Xbox Live or was it called PlayStation? It's a PlayStation Network or Xbox Live, like an online gaming service for the Nintendo 64 in 1994, which might've been a good idea. We thought it was too early. We almost did that. And then what happened literally was the internet, you know, I had worked on the internet in college. And then, and then, you know, this is, you know, fortunately only a few months later, but the internet just kept growing, like it just.

• 58:23Speaker 00

  Hold on, hold on, Mark.

• 58:24Speaker 01

  Yes.

• 58:24Speaker 00

  You'd worked on the internet a little bit. That's a little bit modest.

• 58:27Speaker 01

  Yes, well.

• 58:28Speaker 00

  I think a lot of people listening to this will know, but you should probably explain how you're working on the internet.

• 58:32Speaker 01

  So at the time it was not, so this is part of the story. At the time it was not that big of a deal. It's not nearly that much of a big of a deal at the time as it is, as it's viewed now. So. So the internet, I've told this story many times, so I won't go into huge detail. But yeah, so a group of us at Illinois did this thing called Mosaic, which was the first widely-used web browser, the first one with graphics.

• 58:50Speaker 00

  Explain what was different about what you made compared to what existed before.

• 58:53Speaker 01

  Yeah, so like previous web browsers were like text-based. So there was like this nascent concept of the web, but it was like text-based terminals, and then it didn't have graphics. It wasn't point-and-click. It didn't work in the way that you would like this type of software to work. And then, by the way, it didn't also have like, you know, no scripting language, no security, you know, none of the actual capabilities that like make the browser a useful thing. And so there was this like nascent idea, but it needed to get built into a full thing. And so we built the original kind of full thing, full browser at Illinois. And then we also built the first kind of mainstream web server, like the first web server again that kind of had everything that people needed. You know, this had been a project at college, and then this was a project, and again, at the time, the internet was not viewed as a consumer phenomenon.

• 59:37Speaker 00

  Wasn't it illegal to commercialize? Steve Case of AOL tells a story, that he had to like lobby and get a law changed?

• 59:43Speaker 01

  Yeah, that's right.

• 59:44Speaker 00

  What was the details there?

• 59:45Speaker 01

  So the internet as we know it today, in the 1980s, was called the NSF net. NSF stands for National Science Foundation, which was a branch of the US government that funds research. And the National Science Foundation funded the internet. The reason I was able to do the work I was able to do at Illinois is because the NSF had actually dumped a ton of money into four universities around the country to build what were called the supercomputer centers. And then those were also the main hubs for the NSF net. And the function of the NSF net was fundamentally to connect the supercomputers to all the people who were going to use them. And so it was this government, research, academic program. And it was like very exciting in the technical field, but there was no conception that like ordinary people are ever going to use any of this. Like, it was just not, not, nobody ever thought that this was a thing that the normies were going to use.

• 1:00:30Speaker 01

  And so NSF, it's taxpayer funding. So the government, at least, is not supposed to be funding businesses directly, although sometimes they do. But there was, you know, formal legal restrictions on funding things with commercial applications. And so what there was, is there was something called the AUP, the Acceptable Use Policy. And the Acceptable Use Policy said that basically the internet, the NSF net turned internet was for academic and research use, and commercial activities were strictly prohibited. Like, literally not allowed. And again, it's just like, oh, as a taxpayer, that makes total sense. Like, I'm glad my tax money's not going to fund something like that. But like, as a user, you're just like, alright, that's nuts. Like, that's clearly crazy, right? And if you took the conceptual leap to say, no, this is going to escape the lab,

• 1:01:15Speaker 01

  and this is going to be something normal people are going to use, then it just became obvious that it would have to have commercial activities. Yeah, and then AOL was one of the early pre-internet online services that wanted to connect to the internet. I think they famously connected to the internet in 1993. Do you know about the concept of Eternal September? No. Oh, okay. So, there are two internets. There are two internets. There is the internet that existed before 1993, and the internet that existed after 1993. People who were on the internet before 1993 often describe it in utopian terms, because it literally was like you take the whatever, million smartest people in the world, and you put them on a network together with like, no commercial activity, no advertising, no nothing, just the million smartest people in the world, and you just let them talk to each other. And it's just like amazing. It was like amazing. Like, there was this, the old messaging system was called Usenet,

• 1:01:59Speaker 01

  and like, the discussions on Usenet were just like, absolutely spectacular. It was just like this, it was like, it was amazing. It was like, the most pure, clean, intellectual, like, vibrant space since like, I don't know, Athens in 500 B.C. It was just like this amazing phenomenon. And then AOL connected. AOL had, I don't know, whatever, a million or two million people at that point. They connected, they connected all the AOL users, which were just normal people, to the internet in September 1993. And so, it became Eternal September, which is, that's the day that the internet changed. And by the way, I'm pro that. I'm glad that happened. But like, the pro and the con of that is that took the internet from this like ivory tower, you know, kind of thing, to this basically mainstream, consumer, ordinary people thing, which of course is just a fundamentally different thing. It's, you know, obviously, right? The concept of Eternal September literally was,

• 1:02:44Speaker 01

  it was like when every new wave of college graduates graduated and got their first job, and then went online. So September is when, September is when the new crop of like, internet users showed up for a long time. So the September effect didn't just happen once. It like happened over and over and over and over and over. Again, and every cycle of internet user would basically be like, oh, my God, this is great, but like, it's all going to get ruined in September.

• 1:03:05Speaker 00

  Yeah.

• 1:03:05Speaker 01

  Right. And so the internet that we live in today is the result of.

• 1:03:08Speaker 00

  They could only see us now.

• 1:03:09Speaker 01

  Thirty, thirty, thirty Septembers, right. But yeah, by the way, there was controversy, there was controversy at the time about whether the internet, whether the acceptable use policy should be revoked. There was controversy over whether normal people should be on it or not. There was controversy over whether the kind of content normal people wanted to be on it should be allowed to be on it. There was controversy about whether there should be, like, there was controversy, we got quite a bit of flack at the time for putting images into webpages, under the theory that that would fundamentally make everything worse, because you'd have, like, normie content. That would be bad. And then, you know, as I said, but like, e-commerce, by the way, advertising, I remember, I remember when the, there was actually a moment, there was a guy, there was a guy, there was a guy named Sanford Wallace, and he became known as Spamford, Spamford Wallace, and he was literally,

• 1:03:54Speaker 01

  he sent out the first spam message on the internet in, like, 1992. And it was, like, literally, it was like, the first internet ad, and it was like a spam for, I don't know, whatever, legal services or something. And he just dropped it on the Usenet. And it was like a thermonuclear explosion, because it was like, you know, get this commercialized crap out of my, out of my, out of my newsfeed. And so, so like, all of, all of these things were like, hot, like, controversial. I was generally on the other side of all these arguments, because I was like, look, this thing is great. Obviously, everybody should have access to this. Obviously, we need to connect everybody to this. Obviously, to do that, we need, these, these need to be businesses. There needs to be commerce. There needs to be advertising. Like, all these things obviously need to happen.

• 1:04:31Speaker 00

  So is that the discussions you and Jim were having, where you're like, okay, we're going to start an actual company on this?

• 1:04:36Speaker 01

  So, yeah. So, so that's how we got to the conversation Jim and I had, which was basically like, okay, because that was right at the pivot points, it was like, in early 94. So this is like, the AUP had just been revoked, and it was just, and AOL had just done the first September, and it was, the whole thing was just about to tip. And I, and I knew that, I knew that, because I was tech support for the browser, personally.

• 1:04:58Speaker 01

  No, explain that. Just me. Well, so if you did, Mosaic at the time was the browser everybody used. And so if you use Mosaic, there was a, you know, submit a bug report or whatever. You have a question submitted here and that went to an email box and that email box was me. And so I became tech support for the internet. For like, you know, three years. I got all the emails. How many emails were you getting? Well, there are actually two. That was one email box and the other email box was, Mosaic was actually created under by, it was also funded by the National Science Foundation. So it was actually not the original license. You couldn't be used for commercial use. It was for academic and research and individual use. And so we had this thing, we did a deliberately ambiguous license. And we said, if you want to use the browser commercially, you need to email us to arrange terms.

• 1:05:42Speaker 01

  Now, we had no concept at all of what those terms would be, but we just said, we need to, you know, create this incoming flow. So I was getting bombarded with tech support requests. And by the way, tech support for the internet means you're tech support for everything. So it's like, you know, the old PCs had, you know, they had CD-ROM trays. You press the button, the CD-ROM tray comes out, you put the disc in the thing. The problem is a lot of people thought that those were cup holders. So you press the button, the cup holder comes out, you put your cup of coffee down. And then, you know, 10 seconds later, the cup holder retracts back into the PC, fills your coffee all over the place. You're like, how the fuck do I keep the cup holder out? Right. It's like, man. Let me email Mark. Yeah, let me email Mark. You know, it's like, sir, that's a, that's the CD-ROM drive. So there was a lot of that. One of the funnier things you can always do, in politics, they call this focus groups,

• 1:06:27Speaker 01

  but you could use your testing. You see this over and over at tech companies. Take whatever amazing new thing you have and just put it in a, put it in a room with like normal people and let them try to use it. And you just like learn so much about how much of a bubble that you're in, about the kind of things that you're familiar with that like normal people are just like, I don't know what the hell any of this stuff is. So there was a lot of that. But then I had this other email box, which was all the, all the commercial licensing requests. And so, so I saw the consumer take off on the one side and then I basically, I think that, and then the, the commercial requests hit like 400 messages. And people wanted to like pay money for this thing. And so I basically took those to gem and I was like. There's a business. Yeah, this is, this is going to happen. And then we actually went to my underwrite, my old, my old, my old boss, I at, at NCSA

• 1:07:09Speaker 01

  actually had gone to, we actually went to Washington in 93 to try to get NSF funding to staff a support desk so that it wasn't me answering all, answering all the emails. And the National Science Foundation people were very nice and they were like, yes, the National Science Foundation is not in the business of funding customer support desk for your software. And so I still have the denied NSF grant that would have kept the whole thing an academic project. But yeah, so like, at that point, it's like, at least to Jim and me, it was just obvious that that was going to be business. By the way, again, very controversial, the original press coverage on Netscape for the first year was that these people will never make money. Like, this is ridiculous. Like, everybody knows the internet's free. Like, everybody knows that none of this is going to work.

• 1:07:49Speaker 00

  What did you think the business model, though?

• 1:07:52Speaker 01

  Even then, it was controversial.

• 1:07:53Speaker 00

  Was just literally licensing it?

• 1:07:54Speaker 01

  It was a combination of things. So it was definitely software licensing. And when we did this thing up front, where the browser was free, but the server software costs money. And then we, out of the gate, started building all these, we called it applications, server-side applications. So we built like the first publishing system. We built the first publishing system for like running a newspaper or magazine online. We have content management system. We built the first e-commerce system for selling, you know, this is pre-Amazon. So we built the first e-commerce system for selling things online. So we built and sold a lot of that software. And then, and then we own, you know, the main website that the browser had is its default homepage. And so we built the original internet advertising business was basically. So Netscape was the largest internet advertising company until, I think, 97.

• 1:08:31Speaker 00

  That's incredible. I didn't know that.

• 1:08:33Speaker 01

  Yahoo passed us, yeah. And so, yeah, so we invented, people at the firm invented, at the company invented, I don't know exactly who gets credit, but like the original ad formats, you know, were right around that time. And a lot of them rolled out on our site, you know, first. And so it was literally, it was advertising pre-Yaho. It was, it was e-commerce pre-Amazon. It was, yeah, content pre, you know, we'd literally sold. I mean, we put the Wall Street Journal online. It was our, you know, that was our software that did that. And a lot of other newspapers, magazines, all that, all that stuff. And so, yeah, it was a lot of that. And then it was the web operation. And again, it was, again, it all looks obvious in retrospect, but like, again, it was like, okay, when we started, it's like, I don't know, the total number wasn't like, so we started the company in April 94. There couldn't have been more than 2 million people total online, right?

• 1:09:18Speaker 01

  And then almost everybody was coming in over dial-up. This is like pre-broadband, right? So everybody's coming in at like 14.4 kilobit modems. And we're like hoping that people are going to upgrade to 56 kilobit modems, like, you know, that that would be like super helpful. Computers at that time did not come with TCP IP installed. So to get your PC actually on the internet, you needed to, you needed to buy a TCP IP stack. Try explaining to a normal human being what a TCP IP stack is, like, it makes no sense at all.

• 1:09:42Speaker 00

  They're gonna ask if they can put it next to their cup holder.

• 1:09:44Speaker 01

  Exactly, yeah. It was just like, it was just like talking to Martians, right? Talking to us was like talking to Martians. And then, you know, monitors were, you know, like 3 feet deep and just like bathing you in radiation. You know, just you're kind of hoping that the radiation stays up here and, you know, everywhere else. In retrospect, it was, it was like super early and it was all very... And then again, it was just like, okay, e-commerce, like, are people gonna buy things online? It's like, I don't know, maybe. But like, the press at that time was just like wall-to-wall, like, if you put your credit card number online, like hackers are gonna steal it.

• 1:10:10Speaker 00

  I was gonna say, if you read any books around this time, they're like, there's no way in hell anybody's ever gonna put their credit card on internet.

• 1:10:15Speaker 01

  But by the way, the other thing you would never, ever, ever, ever do is put your real name online, because it would be immediate identity theft, your life would be ruined. So you would never, ever do that. By the way, the other thing was, right in the beginning, you had all the panic around, you know, kids, you know, this is gonna destroy children, you know, this is a huge risk to children, so you had all that panic. And then there was immediate, you know, there was the beginning of the calls for censorship, you know, there's clearly all this stuff that you have to take down. Your attempts to give running stories talking about how the whole thing was fake anyway, they kept saying that like all the numbers were made up and like there actually wasn't anybody online, it was like a tiny little user base and we were all like inflating the numbers and committing fraud. And so it was just this, it was just this... In retrospect, it's all like quaint and cute and sweet, but it was like, it was the precursor, it was all, all the, all the, all the moral panics throughout technology today.

• 1:10:55Speaker 00

  Okay, but...

• 1:10:56Speaker 01

  You could see nascent versions of them back then.

• 1:10:57Speaker 00

  You pick up on something that, because me and you have read a bunch of the same books, where it's like, humans' reaction to something new is just consistent throughout history? And so I heard a podcast with you, I thought I was the only one that would tell the story in private about Bicycle Face?

• 1:11:09Speaker 01

  Bicycle Face! Do you want to say what bicycle face is? Bicycle face, bicycle face, bicycle face, yes. So it basically turns out every new technology is greeted with what they call a moral panic, right? So a moral panic basically is whatever this new technology is, or this new form of media is, it's going to ruin everything. It's going to ruin everything. It's going to ruin society, it's going to ruin morality, and then especially, it's going to ruin the children. And then back, the bicycle was pre-feminism, so it's also going to ruin the women, very specifically, it's going to ruin the women. Which clearly cannot be, because women clearly in 1880, you know, cannot be trusted to use a bicycle without getting into real trouble. I'll explain, I'll explain why. So this is this persistent theme, and basically, you go all the way back, and this is like, you know, this is like this famous thing where Plato and Socrates thought that like,

• 1:11:52Speaker 01

  you know, basically, they thought that written language was a big mistake, that all information transmission should be oral, and they had this, you know, whole thing back in 500 B.C. And then it was just like every, you just have to like imagine, I always like to hypothesize, like, you know, the first guy brought fire, you know, it's like down from the mountain. They probably killed him. Yeah, they're like, what the fuck is, you know? Right, exactly, like, you know, this thing is horrible, this thing could burn down the village, like, this is awful, this is going to destroy everything. And so it's just been this consistent thing, and there's this great website called Pessimist Archive, where these guys would go back and they find all these newspaper articles that are contemporaneous to these things, but it's everything. And, you know, so when I was a kid, you know, it's like heavy metal music, Dungeons and Dragons, you know, it's like all this stuff was awful. I remember the moral panic around the Walkman, the very first cassette, portable cassette

• 1:12:36Speaker 01

  player with the headphones, because it was going to destroy society, because everybody's going to just be listening to their own, you know, their own music. I remember the moral panic around the calculator was going to destroy education, because kids were not going to learn how to do math anymore. And then you go back, and it's like in the 50s, it was like comic books, and it was, you know, rock and roll music, obviously it was going to ruin everything. In the 20s, by the way, jazz music was going to ruin everything, playing cards were going to ruin everything, what else? Novels, paperback novels, you know, where kids were going to sit around and just read novels all day instead of doing any real work. So it was just over and over and over again, it's this constant story. So the bicycle one is the great one. The bicycle rolls out in like 1870, 1880. And so the US still at that point was like thinly populated from today. And but the West had been settled and so you had all these little towns and villages scattered all over the place.

• 1:13:20Speaker 01

  But to get from one town to the next was like five, 10, 15 miles. And so people didn't generally walk that. And so the bicycle comes out, all of a sudden, it's easy to go five miles into the next town. And then, you know, young people discover the bicycle and they discover that there are young people who they didn't grow up with who are in the next town over. And they're like, you know, they head out to do it. And so the specific-

• 1:13:37Speaker 00

  To do it.

• 1:13:38Speaker 01

  Well, to do it, yes. Do everything, to do whatever it is the young people do. They're gonna head, they're gonna head, yeah. Because, look, look, look, it's just the nature, you know, if you've known the same group of people since you were two, like, you're gonna, yeah.

• 1:13:50Speaker 00

  What's over that hill?

• 1:13:51Speaker 01

  What's over that hill? Yes, exactly, right. I grew up in a small town. I can identify with that. And so, and then specifically at that point, you know, young men, obviously, but specifically young women started to do the bicycle. And so, and this is a big threat. And so like, if you're like a guy in a town and like all the, you know, attractive young women are like heading over the hill to the next hill on this bicycle thing, like, that's a big problem. And so the press at the time created this thing called bicycle face. And the idea of bicycle face was, it was, it was, it was part of the moral lecture that was given to young women in the press at the time, which was basically, young women should not use bicycles, because if you go on a bicycle, you have to exert yourself. And if you exert yourself on the bicycle, you're gonna end up making like, you know, an exertion, you know, exertion face. But the thing was, if you did that too much, your face would freeze into bicycle face.

• 1:14:34Speaker 00

  They literally thought it would stay that way.

• 1:14:37Speaker 01

  It would stay that way permanently, and then you would never find a husband. Right. And so, yeah, so that was that moral panic. Yeah. And so these, these things just like rip through every, I mean, it's just, it's, well, it's incredible. Music is always a great one, because it's like, you know, I don't know, it's over now, but like in the, in the, in the 90s, 2000s, you know, there's all this moral panic around hip hop.

• 1:14:55Speaker 00

  Dude, Jimmy Iovine, who's your neighbor?

• 1:14:57Speaker 01

  Yeah.

• 1:14:58Speaker 00

  He was in here two weeks ago.

• 1:14:59Speaker 01

  Yeah.

• 1:15:00Speaker 00

  And he had a deal. They called him a-

• 1:15:02Speaker 01

  Yes.

• 1:15:03Speaker 00

  Like a chemical gas or mustard gas. Like, they compared him to literally, like, what he's doing is the same as genocide.

• 1:15:08Speaker 01

  Yes.

• 1:15:09Speaker 00

  Because he's funding hip hop music, and white kids are starting to listen to hip hop music.

• 1:15:13Speaker 01

  Hip hop music in the late 80s, early 90s.

• 1:15:14Speaker 00

  In front of, like, congressional hearings on this. Like, the media behind him, he was, he was-

• 1:15:20David Senra?

  Pushed out of a conglomerate. Like this wasn't a joke.

• 1:15:22Speaker 01

  Yes, that's right. That's right. And it's actually funny because like we, I'm not in the music business, but like hip hop has become so normalized that even today, it would just never even occur to you. Like it just like feels like, in fact, hip hop is kind of, you know, it's a cultural phenomenon. He's been, is even kind of fading today. But yeah, no, that was super intense at the time. And then rock and roll, that was like super intense in the 50s and 60s. And then the amazing thing is-

• 1:15:40David Senra?

  Remember Elvis Presley? They would, they wouldn't shoot him.

• 1:15:42Speaker 01

  That's right.

• 1:15:43David Senra?

  Because he would shake his hips. So they're like, no, no, he can't, it's waist up on TV from now on.

• 1:15:47Speaker 01

  That's right. But here's the one, here's the one that I love. Jazz. They said all the same things about jazz in the 1920s and 1930s. It was jazz music is corrupting the, and it was the exact same thing. It's because like kids are going to get together and they're going to dance to jazz and then who knows what happens? And then it was like, there's a jazz musician that's like smoking pot and that means all the kids are going to start smoking. It was just, so it's the same, it's the same story over and over and over and over again. And I also say, by the way, in fairness, like it's not that society doesn't change. Like, you know, many of the technologies that we just described did cause society to change. Like, you know, things are different pre and post the bicycle. They're different pre and post the car. You know, they're different pre and post, you know, the creation of modern, modern culture, rock and roll or whatever. But like this, like the more, again, this idea of the moral panic, this idea of just like outright panic, end of the world

• 1:16:30Speaker 01

  is just like this repeated over and over and over again thing. And then, and then what's, what's happened is like this, this is just, this is the obvious way to sell newspapers, right? Like this is like the meta story of the press, which is just like, whatever's happening is like horrible and awful and it's going to kill everything, you know? You know, be sure, be sure to buy our newspaper tomorrow.

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• 1:18:12Speaker 00

  I want to go back to Jim Clark real quick. Is there anything that you learned? Because Jim Clark was what, like two deck, probably 20 years older than you?

• 1:18:19Speaker 01

  Yes, about that probably.

• 1:18:20Speaker 00

  So like, is there anything that you learned? What a fucking education you had to be able to work with that guy when you're early twenties.

• 1:18:25Speaker 01

  Yeah, that's right.

• 1:18:26Speaker 00

  So is there anything that you learned by working with him back then that you still use today?

• 1:18:33Speaker 01

  I mean, yeah, a lot. You know, as you said, it was very formative for me, so a lot of it. But yeah, I mean, you mentioned that the sort of quote earlier about the world is a malleable place. Like Jim was like the ultra version of that. And so, yeah, he would just like, yeah, when he had an idea, and he was right. Like his ideas were correct almost all the time. And he would just like pound the world into adopting them, into believing them. Like he was, you know, the idea being like a complete force of nature.

• 1:18:55Speaker 00

  One thing that was malleable was himself. He has this great quote in that book where he calls himself a self-described loser at 38 years old. I mean, the guy had like two PhDs. He was a professor, but he just like, I think he'd been in a second or third divorce. And he just snapped one day and he's just like, I had, woke up one day with the undeniable urge to achieve something. And that's when he goes from academic to founder and just rips off company after company for like a few decades. I was like, oh, he's, he realized that he is malleable too. He just reinvented himself over and over and over again.

• 1:19:23Speaker 01

  Yeah. And of course, he does that not just by like starting a company, but like inventing interactive computer graphics and like completely changing the field. You know, indirectly, like completely changing Hollywood.

• 1:19:33Speaker 00

  Was there anything about recruiting or managing or any other way that he ran his company?

• 1:19:36Speaker 01

  No, so my two mentors at that time, actually, they were in some ways polar opposites. They always got along, but they were kind of polar opposites. They were both Jim, so Jim Clark and Jim Barstow. So the Jim Clark side of my personality is like the like will to power, like I'm just going to bludgeon the world into doing what I want.

• 1:19:50Speaker 01

  You know, and then just, and then the idea of just like, you know, try to be a fountain of creativity, like just like there are many, there are many new ideas out there and like you just, you need to go find them.

• 1:20:00Speaker 01

  And then, you know, I would say also, I'm going to put this, like a sense of professional dissatisfaction, like, okay, like whatever, look, this is the other part of the story. Like a lot of founders would have had a success like selling graphics and that would have been it and they would have spent the next, whatever, whether they were totally happy with how it turned out or not, like they would have spent 30 years just coasting on that, right? And having a great time and taking credit for it and the whole thing. But Jim, you know, was always, you know, at least in that part of his life, you know, dissatisfied in the productive positive sense of like, okay, no, there's something better, there's something bigger, you know, there's something new that we should do. So, you know, there's that side of it. And then Jim Barstow was the other, was the, who I just literally was with yesterday in Jackson, Mississippi. Jim Barstow's the other side, which was, Jim Barstow's like the manager of managers. So Clark is like the ultimate example of that bourgeois capitalist thing I mentioned.

• 1:20:45Speaker 01

  So the Henry Ford, Elon Musk type. And then Jim Barstow's like the ultimate example of like the super, the super manager. And Jim had run, you know, big parts of IBM and AT&T and Federal Express and, you know, came in to run, you know, came in to run Netscape. And what was interesting was like, that's kind of where I got a lot of this from and a lot of my skills from is I got trained by both of those guys and then kind of both of those guys at the same time and then was able to like very clearly observe, one is just the difference between those mentalities, but then the other is of course, how, how those concepts converge, right? Because just the fountain of creativity, you can't, you can't build, you can't build anything big just with that. Just the management, you don't, you don't, you do it in new things.

• 1:21:22Speaker 00

  Who's a great example of that from history? So like, would it be like Nikola Tesla? Found a creativity.

• 1:21:26Speaker 01

  Oh, that's right.

• 1:21:26Speaker 00

  He needed somebody, he needed like a George Westinghouse to commercialize his ideas.

• 1:21:29Speaker 01

  Well, it's a Tesla versus Edison. Yeah, so Tesla versus Edison. So I'm an Edison guy. Elon's a Tesla guy, obviously. But Elon, of course, himself has now become like a really outstanding, I mean, obviously, become an outstanding manager like in his own, you know, in his own way. In fact, to the point where I think he's actually inventing an entirely new school of management, which we could talk about.

• 1:21:49Speaker 00

  But let's go there next.

• 1:21:50Speaker 01

  Yeah, he's maybe the greatest manager of our era, despite the fact that nobody thinks of him that way. But, um, but, so I actually think Elon's more like Edison than he is like Tesla. And there was a big war, and it was kind of this thing, because it's, it's, everything kind of turns into these little morality plays. And so kind of the, the basic story of Tesla and Edison was Tesla had all these ideas, but couldn't, couldn't commercialize them, couldn't turn them into companies ultimately, you know, couldn't, couldn't figure out how to make money on them, couldn't build like big, big, big companies, you know, kind of based on them. And then Edison, you know, basically, at least the way the legend goes, is he was more this grinder. He was less incandescently brilliant, and he was more of a grinder, and he's just like, we're just gonna try a thousand things. You know, it's like when they invented the filament for the light bulb, they just tried like a thousand different combinations of things to get to the filament and, you know, sort of this brute force approach. But then he built General Electric.

• 1:22:34Speaker 01

  Like, he built the, like, national electric grid, you know, and built these giant companies. And then he, you know.

• 1:22:39Speaker 00

  Funded by?

• 1:22:40Speaker 01

  Funded by, funded by J. P. Morgan.

• 1:22:42Speaker 00

  There you go.

• 1:22:42Speaker 01

  As a, as a, as a venture capitalist in his spare time. Yes, exactly, 100%. Um, and so, uh, and then, you know, Edison also invented the movie projector, and then, and then literally spent years trying to enforce this patent, right?

• 1:22:55Speaker 00

  And phonograph.

• 1:22:56Speaker 01

  And the phonograph, and the phonograph.

• 1:22:58Speaker 00

  You tell the story, and I knew because I read the book too.

• 1:23:00Speaker 01

  Yeah.

• 1:23:00Speaker 00

  We should tell people what he thought the phonograph was gonna be used for.

• 1:23:04Speaker 01

  So this, this is a bit of a digression, but it gets to the personality thing. So one of the things that people look for is just like, oh, what are the consequences of a new technology gonna be? Oh, let's go ask the people who invent them, because obviously they know. And so this is what happens when like these, when the AI got, for example, the AI guys get, you know, the, uh, the pioneers of AI get interviewed in the press. It's like, well, tell us the future of AI. And it's like, you get the, like, the one I'll pick on is Geoffrey Hinton, who's like an actual self-deprecated socialist. Like he's an actual capitalist socialist and people ask him, what's the future of AI? And of course, he says it's going to be rampant unemployment and we need to give UBI to everybody. It's like, what a coincidence. The answer from the socialist is communism. Like, what an amazing coincidence. But people think because he's one of the inventors of AI, that he must be the guy who knows. And so the story I always tell is the Edison story.

• 1:23:45Speaker 01

  Thomas Edison was like a very proper wasp. He was like a waspy personality type of that era. Extremely proper gentleman and always impeccably dressed, very ethical, upstanding citizen of that time. And very religious, very religiously devout. And so for him, it's just obvious that the application of the record player was that everybody would buy a record player and then everybody would buy a library of discs that would be the great sermons, religious sermons for all the great preachers of the time. And then you get home at night after a long day of work and you turn on the record player and you would listen to a sermon with your adoring wife and kids gathered around you. And of course, the record player drops and immediately, of course, it's music. It's just like obviously music. And it's like ragtime and swam and it's jazz. And Edison's just like completely horrified.

• 1:24:30Speaker 00

  He didn't know that if you put the phonograph in the window and you play good music, then you have all these girls on bicycles coming over there.

• 1:24:36Speaker 01

  With bicycle fists. Exactly, exactly. And so this is always my thing. It's like if Edison didn't know what the phonograph was going to get used for, the idea that, I don't know, whatever, Joe AI entrepreneur is going to be able to forecast the economic implications. Like, no, that's not going to happen. And in fact, the people who invent the technology are often like the least qualified people to understand the long-term implications because they're too buried in the specifics of the here and now. And then all these other questions, these are all big cultural, social, economic questions. And by the way, I don't know if there's anybody that can predict big cultural or economic or social trends, but it's certainly not somebody who's been in the lab for 20 years, including myself.

• 1:25:11Speaker 00

  So how this started, you think you greatly benefited from the two gyms, essentially like being polar opposites.

• 1:25:16Speaker 01

  Basically.

• 1:25:17Speaker 00

  And showing you.

• 1:25:17Speaker 01

  But also working very closely together. Did they get along? I don't know if I've told this story publicly, so I should tell this story. So they got along great, became very good friends. They both did great and they're both, you know, very responsible for certainly everything that Netscape did and everything that I've done. But, you know, it's a, it's a, it's a different disciplines, different worldviews. You know, so there's an oil and a water kind of aspect to that. And so, so, you know, Clark ran, Clark ran the company for the first like nine months, which at the time felt like, you know, just like this is internet time. It felt like much longer, but it was, it was like this highly compressed nine month period. And, you know, and it was like, we were like doing, we were all these new things. We were doing all these new things. The company was just doing like a hundred new things. It was amazing. But like we, nothing was being systematized, right? It was not, it was not gonna, by default, it was not gonna turn into like a large, a large company without the management part.

• 1:26:00Speaker 01

  And so Barstool comes in and he basically is like, wow, this investiveness is great, but we need to like actually start to have systems and like schedules and processes and, and actually like run this thing, run this thing like a business. And, and, you know, as founders do, Clark, you know, originally, you know, found that a little bit frustrating because it's like, you know, whatever is the latest idea is not the thing that we're just gonna turn the entire company, you know, to, you know, to pursue. And this is when Clark was still coming to Jim Barstool's staff meetings. And so Clark got up, got, got, uh, he had a negative reaction to Barstool saying, no, we're not gonna do this new thing. We're gonna, we're gonna keep doing the thing that's already working. You know, it's one of those moments and Barstool's like, you know, can I talk to you outside? And so, you know, they went back and, and, and I heard the story from both of them later. And, you know, Clark's like, you know, look, this is the whole reason we're here is because we do these new things. And, you know, if we don't do these new things, we're gonna destroy the company.

• 1:26:45Speaker 01

  And then Barstool looks right at him and says, Jim, I hear you. This is as serious as dick cancer.

• 1:26:53Speaker 01

  What?

• 1:26:56Speaker 01

  It was the deep Mississippi draw, right? And Clark stares him right in the face and bursts out laughing.

• 1:27:04Speaker 01

  And they got along great ever since. Like, like, like they just, they loved each other ever since. First up basically saying, look, we can't, we, we're not gonna make these decisions in a state of kind of superheated passion. Like, we're not gonna do that. We need to have the full version of this conversation, but we're, we're gonna have it in kind of this, this, this longer and maybe more dispassionate way. But it was, it was to, it was to puncture the stress of the moment. And so I will say I have used that one a few times.

• 1:27:27Speaker 00

  But I could see Clark.

• 1:27:29Speaker 01

  And Clark thought it was hysterical. And nobody had ever talked to him that way before, so.

• 1:27:33Speaker 00

  But I could see Clark like, oh, no, here we go. This is a replay of what happened at Silicon Graphics, though.

• 1:27:38Speaker 01

  I think probably he was probably afraid of that to a certain extent. But, um, yeah, yeah. But, but I would say, yeah, I don't want to say anything negative about the SGI guy. But, um, yeah, I mean, Clark, like I said, Clark was just like, Barstool was just like, was the manager of managers. He was like so advanced on this. That story notwithstanding, Barstool never took the position of like, no, it's time for the new ideas to stop. Like, but it was always like, okay, we need to thread the new ideas into a business, which is kind of the hybrid of the two.

• 1:28:04Speaker 00

  So I just had this thought while sitting here listening to you speak. Is there something about your partnership with Ben?

• 1:28:10Speaker 01

  Yeah.

• 1:28:10Speaker 00

  Where like you, like, he's more Barstool, you're more Clark?

• 1:28:13Speaker 01

  Yeah. Although we do mix it up a little bit more, um, because he does have, he does have his own edge. But, um, yeah, there is some of that. Yeah. So like, for example, he runs the firm. Um, and then I, yeah, I will, I tend to come up with, you know, he comes up with lots of new ideas, but I do tend to come up with new ideas. And then we do, we do have this kind of discussion, you know, frequently.

• 1:28:32Speaker 00

  So if I was to follow you around without you knowing with a camera, what would your day look like then? Are you just like a fountain of ideas? Are you like this uncontrolled energy like a Jim Clark back in the day?

• 1:28:41Speaker 01

  But I've got both. This is the thing, because they both trained me, I've got both parts of it.

• 1:28:45Speaker 00

  Okay. So you're not as uncontrollable or unmanageable as?

• 1:28:48Speaker 01

  Yeah, like I think, I believe Ben would tell you, oh, I mean, look, Ben's been working with me now for 30 years. And so I think if this was a real issue, I think, you know, that our partnership would not have lasted. But I think he would say that I have a pretty strong internal edit function.

• 1:28:59Speaker 00

  I want to see unedited.

• 1:29:00Speaker 01

  Well, unedited is really fun. Um, unedited is very enjoyable. Um, it is very disruptive. And so, yeah, it has to be, yeah, it has to be calibrated.

• 1:29:11Speaker 00

  When do you show the unedited side?

• 1:29:14Speaker 01

  I don't tend to do it in the spur of the moment. Again, this is the thing, and I, you know, Elon shows this incredibly well, just incredibly well, as does Zuckerberg. It's like, it is this thing. And again, this goes back to like the Edison Tesla thing. When you're responsible for, when you're responsible for an organization, when you're responsible for a team of people that's more than five or 10. If you're gonna have an organization that's like 100 or 1,000 or 10,000 or 100,000 people, like you can't change the plan every day. Like you just can't. You'll just, you'll destroy, you'll burn everybody out. You'll destroy everybody. There'll just be mass confusion. People will quit. It's just gonna be, like, you can't do that. There has to be some calibrated middle ground. There are a handful of examples of like great business successes where it's like one or two or three people, right?

• 1:29:58Speaker 01

  And so maybe it's like Bitcoin and Minecraft and WhatsApp and Instagram. And then I start running out of examples. But like AI, there will probably be more. There'll probably be more like single person companies from here on out. Or by the way, artists, you know, an artist, a novelist. This is the difference between like a novelist and a movie maker. A novelist, it's like you put whatever the fuck you want in your novel. But like if you're a director of a movie, you can't like change the entire plot like on Tuesday while you're shooting the movie. Or you're like, there's 300 people who are relying on you to like complete a movie. Like, so, so anyway, so the point being is like in tech, if you're, if you're gonna have an organization, or by the way, in anything, in any field of activity, if you're gonna have an organization, you do need to have some calibration, titration process. Like, change does need to happen, but it needs to happen in a measured way.

• 1:30:42Speaker 01

  And so, and so you can't just like blow it up every day. And so, yeah, so either what you need in that case to, to, to get kind of the holy grail of the large scale organization that's still innovating, either you need two people involved who are able to balance each other. And by the way, you could say this is like Steve Jobs and Tim Cook, you know, would be a canonical example. Or by the way, early on Zuckerberg and Sheryl Sandberg, or early on Bill Gates and, you know, Steve Ballmer. So you can have that kind of configuration. Or every once in a while, you can get that in a single person, right? Which is very rare, but like Jensen Wang would be a single person example of that. So, you know, every now and then you get that. And so I would say Ben and I have like a version of the yin and yang kind of aspect to it. But like I said, he's very creative on his own. And I have this, because I have the Barstool training, I have this additional level of

• 1:31:24Speaker 01

  sort of, most of the time, you know, sort of self governance. Like I kind of, I get it. Like I'm not. So my big thing is just like, look, if I'm gonna walk in and I'm gonna like throw a fit and I'm gonna like, we have to change everything tomorrow and Ben's gonna be like, fuck you, like, this fucking sucks, I'm like, that leaves nowhere good, right? So that can't, that can't be the thing. And so I do, I, yeah, I do do a lot of self editing.

• 1:31:44Speaker 00

  You just said something, I think you said you believe Elon is inventing a new way to manage.

• 1:31:49Speaker 01

  I think he may have figured out the best way to reconcile the two. The fountain of ideas with the systematic builder, I think he might have figured out a fundamental, I don't know if it's a new way to do it, but I think he might have cracked the code on like how to do that for the next hundred years or something.

• 1:31:59Speaker 00

  So break down what you've observed with the way that Elon's managing.

• 1:32:02Speaker 01

  Yeah, should I just start by saying, look, Elon's method has been described by people, you know, before, and I should say like, I work with him, but from the outside. So I'm not working in one of his companies, so I, you know, have one layer of indirection, but I, you know, I work with him quite a bit now and I study him, you know, very, very carefully. It's this extreme focus on substance, it's this extreme focus on getting to the truth. So one of the things you notice in any organization of multiple layers is that basically they're compounding lies. And I got this lesson early because I worked for IBM at the, at the point of their kind of maximum size and importance in the world.

• 1:32:30Speaker 00

  Can you explain, I don't think people understand

• 1:32:32Speaker 01

  Yeah.

• 1:32:33Speaker 00

  just how big and powerful and almost monopolistic IBM was.

• 1:32:37Speaker 01

  Yeah, so I worked for IBM at the very height of their power, right before they fell. It was my first job and, uh, when I was in college and, um, they were in the mid eighties, they were 80% of the market capitalization of the entire tech industry, right?

• 1:32:51Speaker 00

  There's nothing even close to that.

• 1:32:52Speaker 01

  It's not even close, right? So this is like Google times 10 or something, it's just like, or Apple times 10, it's just like, it's a level of scale and importance that just nobody had. And by the way, the TV show actually that does a great job of this is, uh, Halt and Catch Fire, um, in the first season has this thing, this point where these guys are basically inventing the PC effectively, and it's the point where IBM shows up. And it gives you a sense of like, it's like the CIA story you told earlier, it's like the, the phalanx, it's like 20 people in like blue suits who are just here to like completely crush you, like it was just this overpowering, you know, kind of thing. And, and you know, they invented like all kinds of stuff and the industry wouldn't exist today without them and they were an incredible company for a very long time. And, and the whole thing, and by the way, run by their founder for 30 years, run by their founder's son for 30 years, um, you know, this incredible company, but then, you know, they're still, you know, they're, they're, they're not, they're not that anymore, but

• 1:33:35Speaker 01

  they're still a big and important company today, you know, whatever, 1940, 80 years later. It's like how many companies survive in tech, you know, 80 years. My favorite, my favorite IBM stories, Thomas Watson, Sr. had been convicted of antitrust crimes before he started IBM.

• 1:33:49Speaker 00

  Is this the cash register?

• 1:33:50Speaker 01

  The cash register.

• 1:33:54Speaker 01

  So he had previously run a company called NCR, National Cash Register. And he had been convicted by the federal government of monopolizing the cash register business before he even started IBM. And then at IBM, he monopolized the mainframe business, and then they convicted him again. He's a double-dipper. He got very used to being an antitrust court. So he was incredible. By the way, Kevin Maney, an old-school tech reporter, wrote a book, a biography of Thomas Watson, Sr., which you've seen.

• 1:34:22Speaker 00

  The machine and the man, or the man and the machine, right?

• 1:34:24Speaker 01

  It's one of those. I think it might be that one, yeah. And he actually went back, and this is like, you know, this is, we're talking about 1940s, 1950s, 1960s. And he went back and he got them. At the time, they had a secretary transcribing in real time all of the executive staff meetings every Monday morning. And he went back and he actually got the archives of the transcripts of the executive staff meetings. And it's just, literally, Thomas Watson's just like cursing everybody out and just like, just like a complete tyrannical psychopath, just like screaming at people. And it's all in the records. And so it's like, you know, so how much of this stuff ever changes? You know, it's like, you know, whatever, I don't know, whatever Elon gets accused of, or whatever, Steve Jobs, it's like, oh, no, that guy was, whatever it is, it's a pale version of what that guy was doing. But anyway, the point being is like IBM. So by the time I got involved in IBM,

• 1:35:08Speaker 01

  it was like six years later, you know, yeah, 50 years later after that. And so they were kind of peaking in their power. But what happened was, I remember this because I was their intern, and I was trying to figure out whether I should work there after college. And they had a, their Intranet was a mainframe, mainframe app. And one of the functions was a, was the org chart. And it calculated there were 12 layers of management between me and the CEO, which meant the following. It meant that my boss's boss's boss's boss's boss had a boss boss boss boss boss before it got to the CEO. And then, really, what happened, the story of the thing, really, what happened was, and I saw that, I saw this happen, I saw this happen up close. What I saw this happen was each layer of management was lying to the one above it, right? Because each layer wants to look good and wants to, you know, whatever,

• 1:35:53Speaker 01

  put a little spin on the ball. And like, if one layer lies to the next layer above it, I mean, maybe that's okay. But when that happens two or three times, the lies compound. And that happens six times, the lies really compound. If that happens 12 times, the CEO has no idea what's happening, like absolutely no clue what's going on in the company, which was the state of play that IBM had. They actually had a term, there was actually a term, they had a whole vocabulary. I mean, this company was like a nation-state at the time. You could like live your whole life like in Austin, Texas and never meet anybody who didn't work for IBM. Like it was just like this incredible, this incredible thing. They had this concept they called the big gray cloud. And it was literally the cloud of men in gray business suits who followed the CEO around and prevented him from ever talking to anybody who was ever actually doing the work. And so when he would come to visit, it was like a state visit. It was like a visit from the king. And it was like the king and the traveling court. And so it was a completely impervious level to get information

• 1:36:38Speaker 01

  through. And so, but I tell that story because that's the polar opposite of the Elon approach, right? So, and by the way, being the CEO of IBM in 1989 was a great way to live, right? Because it's just like, wow, everybody's bringing me good news all the time. Like, I wake up in the morning and like, everything is great. And I'm like famous and I am like rich and I am successful and like, I've got a chauffeur and I've got a jet and I've got these 80 guys in gray suits who are like taking care of everything for me. And I don't have to ever talk to engineers. And like, this is great. You know, until, you know, it's like the turkey on Thanksgiving, you know, until things change and there's a problem and then you have no idea what to do about it, which is what happened to them. The Elon approach is the polar opposite of that. And the polar opposite of the approach is literally like, I'm only going to talk to engineers. Right? And so when there's an issue, I am going to go straight to the source of truth. And the source of truth is the engineer who

• 1:37:22Speaker 01

  actually knows what's going on. And so what do you learn? And I've seen him do this. So he literally does. He goes to whatever, when there's an issue with one of his companies, he goes to whatever is the engineer who's working on that problem. And he sits down with the engineer and they solve that problem. And like, and I can just tell you, like, the number of CEOs in tech, even the great ones who do that, like, I mean, almost nobody ever does that. Why does nobody ever do that? Well, first of all, it's just like a giant pain in the ass. Because like, your life consists of like, having to actually solve all these problems. Like, the whole point of being like, big and powerful and successful is you pay people to do that. And now you're doing it. And you're in there at like, 2:00 in the morning doing it, right? Well, like, it just, this sucks, right? And so like, most people won't do it. And then the other is, you have to, it means the CEO of the company has to have the skill set to be able to do that. So the CEO has to not just be a great CEO, they also have to be like, a great technical technologist, not just that they

• 1:38:07Speaker 01

  have memories of having been a programmer at one point or whatever, a chip designer, or where they can actually sit down with a chip designer, right, on Thursday night at 2:00 AM in Austin, and they can actually figure out like, what's wrong with the chip. And Elon has that ability. And he's like encyclopedic on like, every area of technology and is able to go hands on with rocket designers and AI designers and everything in between. And almost no CEO has that. And so, but that's literally what he does. And then, and then the way that he thinks, the way that he thinks about it, I think, is basically, you know, he runs whatever six companies he wants or something. And it's like, basically, any given week, in any given week, he thinks about everything as a production, basically production line, you know, sort of production process. It's like, he's actually like an old school industrialist. So everything's like the production process. And then any given week, there's, in any production process, there's always a bottleneck.

• 1:38:49Speaker 01

  So there's always, there's always the thing that is slowing down the process the most. And that's always one thing. So what he does for each of his companies is he identifies what, he charts, he literally maps out the production process. He literally has these like monitors where he like has the whole thing laid out. And then he, he basically says, okay, this is the issue that's holding up production this week. And then he goes and he works, and that's the thing that he goes to work with the engineer on, is he goes to fix that bottleneck. And he does that every week for every company. Right? And so, think about what that, this is why Tesla is smoking, is like, has been so much dramatically outperforming the rest of the auto industry is because Tesla, he's, he's fixing the critical production bottleneck at Tesla 52 times a year. Himself. Yeah. I can tell you what the CEO of the legacy automakers are doing.

• 1:39:34Speaker 01

  Like, they're not doing that. That is not what's happening. Right? And so, in a contrast, like a normal company, it might take six months to solve these problems. And he wants like fixing it like right now, tomorrow. Like, let's go fix it right now. And so, he just like runs this, he runs this loop over and over again. He's just, he's absolutely indefatigable. I offered, he famously, for a while, he had sold all of his houses. And he was literally cop surfing. You know, he's one of the most successful people on the planet. Yeah. And so, I have a vacation house and I offered him, I said, if you want to take a week and use the vacation house, whatever, take the kids, feel free. And he'd send back five minutes later, it's like, you know, whatever, 11 o'clock at night. They have forward response, I don't take vacations. Right? Like, which again, it's like, there's no CEO like this. Yeah. The whole point of being a CEO is you get to, you get to go jet around. And so, so anyway, so he's doing that.

• 1:40:19Speaker 01

  And then, and then, you know, he, and then he, he turns this into a routine. And so, you know, when he does like, he'll, he'll, he does like a day a week at each of his companies. And he'll basically do like all day, he'll do like a 12, 14 hour stretch where he'll do design reviews with, with, but the way that he does it, he does with five minutes per engineer. Right? And so, he does five, six divided by five. It's been way too long in this podcast, how much is that? Twelve, twelve, he can do twelve design reviews an hour. Yeah. And then he does ten hours a day. So Elon will do one hundred and twenty designer reviews in the course of a day. Are these one on one? I have not actually said on these. I suspect there are other people around. Okay. Including people, you know, work for him and probably some of the leaders of the companies are involved in different ways.

• 1:41:01Speaker 01

  But it literally is, the thing I know is it's literally a rotating cat. It's the point engineer on each of the important things coming in and presenting for five minutes. And then the question is like, if it's going great, that's great. If it's not going, what's the problem? And then how does that problem rank? Right? Is that the, is that the production bottleneck? And if it is the production bottleneck, then that's the thing that he then fixes. And then that's when he's there from whatever eight o'clock till two AM. Working with that engineer to fix that problem. You know, one way to think about this is the velocity, like in military affairs, it's called maneuver warfare, right? So just the, the, the, the speed at which he operates is just, the, the cycle time is just so much faster than anybody running in a traditional method. It's just, it's hard to even compare the difference. It's like four hours versus six months. Like it's, it's just this incredible gap.

• 1:41:44Speaker 01

  And then, and then the other part of it is somebody I know once went, went for SpaceX and they asked what it was like and he said, it's, it's like being dropped into a, into a zone of shocking competence. Like, it's like everybody is like ultra competent. And the reason everybody's ultra competent is because, number one, if, if they're not, Elon sniffs it out. Fires them. But he knows, because he's, he's talking to the people actually doing the work. So he, and he, you know, at this point in his, you know, having done this for whatever twenty five years, he, he can, he can sniff this out really quickly now. And then the other is the best engineers in the world want to work for him because he's, he's the one CEO like this who's able to work with them as a peer on whatever the technology is. And as an engineer, you're just like, this is like, what would be better as an engineer than being able to design a rocket engine with Elon Musk as your engineering partner?

• 1:42:28Speaker 01

  Right? And so he just has this like incredible positive selection where like the smartest people in the world want to work for him and then anybody who can't cut it gets fired. The world sees this as like raw aggression, but it's beyond that, right? It's a very systematic way of optimizing these companies to be able to take on these like profound challenges. And then being able to actually solve all the problems and do these things and at a speed that is just like completely unmatched. The challenge of all of this is like, okay, that all works great if you've got Elon. Right? And so, so one of my, one of my concepts is, I think we need a metric for founders in Silicon Valley called the Milli Elon. Right. And so are you, how many million Elons are you, right? Are you 10 million Elons? That would be great. Are you 100 million Elons? You know, that's 10% of an Elon. Well, that'd be fantastic. You know, 500 million Elons, like, I'm gonna give you all the money. Right?

• 1:43:11Speaker 01

  Most people are like 1 million Elon or .1 million Elon. The question that falls out of this, which is a question that bedevils us, is like, okay, like, you know, you can't clone him. You can't bottle the essence. So what out of that can be transplanted to like normal human beings?

• 1:43:28Speaker 00

  And how much of it is predictable or knowable when he's much younger? Because like the famous example of this is Michael Moore's passing. Made all his money in PayPal with Elon. Obviously, there was contention there. He got kicked out and everything else. But then Elon pitched him Tesla and he passed. Because he's like, there's no way that you're ever gonna surpass Toyota. And then Moore, to his credit, was just like, I drastically underestimated the guy's determination and pain tolerance, I think is the term he used.

• 1:43:57Speaker 01

  Well, I wasn't there for that, so I don't know about that. But I will say, the idea of, the idea of having been a software entrepreneur, building your car company. Okay, building a, when Tesla started, there had been no new successful car companies in the United States.

• 1:44:09Speaker 00

  For like 100 years, right?

• 1:44:10Speaker 01

  For like 100 years.

• 1:44:11Speaker 00

  There was like 2,000 of them in 1900, founded from like 1900 to 1910, and three that survived.

• 1:44:17Speaker 01

  That's right. And the previous real attempt to start a car company in the US before Tesla in the preceding decades was?

• 1:44:24Speaker 00

  Tucker or something?

• 1:44:25Speaker 01

  Tucker Automotive.

• 1:44:25Speaker 00

  Yeah, Tucker.

• 1:44:26Speaker 01

  Which was such a disaster that they made a movie called Tucker, which is about what a disaster it was. And so like, obviously you don't do that. Obviously, this is insane. And for a software guy to do this is insane. And oh, by the way, this is only one of the things he's doing. He also has the rocket company.

• 1:44:41Speaker 00

  Yeah.

• 1:44:42Speaker 01

  Which is also insane, right? And so, yeah, so it's like, and I wouldn't, like, by the way, I didn't see it. And I didn't, I was, you know, I'm a software guy and I just, I was, I don't know, whatever. He's gonna go, I guess he's gonna go do cars. I don't know anything about cars. So it's not like I saw it. But I'm just saying, like, the level of incredulity that he was greeted with at the time was, I think, almost uniform. And you know, there's that famous photo, the most famous Elon photo, I think, or the most, the most powerful one is the one where he's young Elon, probably 2005 or whatever.

• 1:45:06Speaker 00

  He's in the shorts and the polo and all, and he's like crouched down and there's nothing but the explosion remains of the third rocket, the second or third rocket, the one he had been funding personally, like.

• 1:45:17Speaker 01

  Yes.

• 1:45:18Speaker 00

  Did you ever read Eric Berger's book Liftoff?

• 1:45:20Speaker 01

  No, I didn't.

• 1:45:20Speaker 00

  Oh, you gotta read it. I'm surprised you haven't. It's the, it's only, only focuses, I like these company histories that focus on like the first like six years.

• 1:45:27Speaker 01

  Yep.

• 1:45:27Speaker 00

  It just stops.

• 1:45:28Speaker 01

  Yep.

• 1:45:29Speaker 00

  It's the first six years history of SpaceX.

• 1:45:31Speaker 01

  Yep.

• 1:45:32Speaker 00

  And it's just nothing good in the book. It's just reading one failure after another, after another, and one catastrophe after another, after another. It's a good read.

• 1:45:39Speaker 01

  When my kid was five, he loved rockets. And so his favorite rocket video was the compilation of all the SpaceX rocket explosions.

• 1:45:45Speaker 00

  Do you know, well, Elon talks about this, that before his friends, when, after he sold them to, he had, I think he had like 180, I think the story tells you like 180 million after taxes. He's like, I'm gonna do this rocket company. One of his, I think, a deo Rossi or I forgot the friend sat him down and they made him watch all the rocket, there was a compilation, this is probably pre YouTube, of just rockets blowing up over and over again. Like, no, you're literally going to light your fortune on fire. It's going to explode in the sky.

• 1:46:11Speaker 01

  Yep, exactly, exactly. So, I mean, obviously it's working, right? So, so, so his method, obviously it's working and it's obviously working a lot far better than, I mean, certainly working far better than anybody else's method in cars and certainly working better than everybody else's method in rockets. And then in a bunch of other areas also. So like, it's clearly working. And so it's like, okay, there, you know, and then he, he just draws, because, because of just who he is and what he's doing and how he does it, you know, he just, he draws so much heat, you know, there's just so much, the environment is just full of criticism and attacks, you know, just nonstop. And, you know, we all, we all kind of get sucked into these, these narratives. But I think, I think the key thing is just the, for me, it's just like, okay, like, there is a method there that he has been working on and refining for, you know, coming out 30 years that has worked better than anybody's method. Like, I don't know, like I said, I don't know how many people can do it. And maybe there's just like a fundamental limitation, which

• 1:46:56Speaker 01

  is you can do it if you're Elon and you can't do it if you're somebody else. Or maybe you need to be above 30 million Elons but not below or something like that, right? There may be, there's some threshold where you break through on this. But it is clearly the best method. Like, it clearly is generating the best results. And then again, conceptually, I like it because again, it's this bridging of the founder mentality with the manager mentality. Because he's not just doing, these are not just one-offs. He's scaling everything. Everything is scaling. What is it? Starlink just hit, what was the number? Starlink just hit 10, was it 10 million subscribers? I'm one of them. Something like, yeah, exactly. Right. You probably have read about Iridium and Teledesic. No. Oh, okay, okay. So Elon's not the first guy who said, we're going to do satellite-based internet access. There was, there was, there was Bill Gates, Craig McCaw.

• 1:47:40Speaker 01

  So with Microsoft's on top of the world and Craig McCaw basically built, celluloid left in the US, built what's now AT&T Mobile.

• 1:47:48Speaker 01

  Those guys teamed up in the early 90s and did this thing called Teledesic, where they put up satellite-based voice and then it was going to be internet access. Complete catastrophe, total bankruptcy, complete disaster. And then Motorola, which used to make all the cell phones in the US, had another one, a system that's actually still up called Iridium. And again, it's just this classic business school case study of just complete disaster, capital destruction. And so Elon's like, I know, I'm going to do number three of those. With Starlink, as a side project at the rocket ship company, right? Because he's like, I, in retrospect, is total genius. Because he's like, we're going to be putting up, if the rockets are reusable, we're going to be launching them all the time. And then the question becomes, what's going to go in the rockets? And he's like, I could wait for the customers to come to me with more stuff to put in the rockets, or I could just put up my own satellites. What would be the satellite to put up? Oh, it would be consumer-grade, you know, consumer-priced internet access.

• 1:48:33Speaker 01

  And it's just like, okay, anybody who knew anything about the history of satellites knew that that's like the great, you know, that's the new craziest idea in the world. And of course, it's like this, like, you know, giant success. It's like the side, it's like the side project. There's clearly method, it clearly incorporates investment, it clearly incorporates scale. It does a brilliant job, both of those. It's clearly, in part, the Henry Ford, whatever, Alexander the Great method, clearly. But there's also like real scale and heft to it. SpaceX now is building, you know, they got their own city, like, you know, down in Texas, right? And so it's a formula that captures both sides of it. And it may be like the least studied and understood thing I know of in the world right now.

• 1:49:10David Senra?

  It's incredible. Mark, we're running out of time. When I started this show, you were at the top of my list for one of the guests I want to talk to you. Thank you so much for doing this. I hope you come back in a few months because there's a million other things we need to talk about.

• 1:49:19Speaker 01

  Good. Awesome. Fantastic. Thank you.

• 1:49:21David Senra?

  I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast, Founders. For almost a decade, I have obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.