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What each of the top venture capitalist of all time has in common is each of them missed almost all of the great deals of their generation. Well, we see this a lot.
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We do performance reviews, right?
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We do performance reviews.
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And so it's like, well, they've made 10 investments and, you know, one of them is this this this this huge success and the other nine are like, you know, sucking wind.
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And it's like, okay, is this a good venture capitalist or a bad venture capitalist?
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And it's like, well, in any domain that's not probabilistic, you say this person's terrible, right?
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You know, it's batting average of like a hundred, you know, out of a thousand.
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It's like this person's awful.
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Um and and there's always the temptation to say, well, this one thing that's working is it's like it's a fluke, right?
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And so who knows whether they'll ever get it again.
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And it's at that point where I put my hand up and I say we're in the fluke business.
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The whole point of this is to get the flukes.
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You don't have to score a hundred percent.
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And and not having to score a hundred percent basically means you can take chances.
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Welcome to the Knowledge Project podcast.
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I'm your host, Shane Parrish.
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The goal of this show is to master the best what other people have already figured out so that you can unlock your potential.
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We interview world-class doers and thinkers who can better analyze problems, seize opportunities, and live a more meaningful life.
1:12
Every episode is packed with lessons and insights that never expire.
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Marc Andreessen is here today.
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Marc is co-founder and general partner of the venture capital firm Andreessen Horowitz.
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He's an innovator and creator and one of the few to pioneer an entire software category used by more than a billion people and one of the few to establish multiple multi-billion dollar companies.
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Marc co-created the highly influential Mosaic internet browser and co-founded Netscape, which any of you over 30 will remember.
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I've been wanting to talk to Marc for a long time and this conversation does not disappoint.
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We explore why he studies history to see the future, his optimistic and pessimistic view of the future, how a16z makes decisions, and specifically what Marc knows about decision-making that most people miss.
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Our largely dysfunctional education system, assessing the judgment of founders, and so much more.
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It's time to listen and learn.
2:13
What are you obsessed with right now?
2:16
So, there's a lot going on.
2:16
So, the the full answer to that question would probably take take the entire podcast, but you know, I would say probably two big buckets of things.
2:23
You know, my my day job is, you know, being obsessed by all of the sort of changing, you know, technologies, um and then, you know, the the the sort of impact that all all the all the new technologies are having on on the you know, on on different industries and and on the world broadly.
2:39
Um and then the other thing I've just, you know, really you've gotten just sort of extremely curious about, I would describe by, you know, like a lot of people, um a lot of my assumptions about how, you know, the world worked and about how the US worked and about how politics worked and about how society worked were kind of upended, you know, sometime between 2008 and you know, 2015.
2:56
Um you know, and then for sure heading into the last 5 years.
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Um and and and so I've I've become somewhat obsessed with kind of reading my way back and basically trying to figure out essentially what the hell is going on.
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Um you know, back to my my my kind of day job, which is as society changes and as technologies change society, um and as, you know, frankly also society changes technologies, um how much of what we experience as new is actually new um versus how much is old, right?
3:21
How how many of the sort of behavior patterns or societal changes do we do we kind of experience as brand new that actually turn out to be quite old patterns?
3:29
What what I find generally is if I don't understand something, I I try to read backwards and and and kind of the further back back I read, the more universal things I find.
3:35
And the more things that I think are kind of remarkable and unique to our era actually turn out to be quite universal.
3:41
Um and and and I don't know, at least for me that's a calming experience um cuz it makes me feel less less like the world is sort of spinning, you know, in a in a in a different direction and more just that we're, you know, we're we're we're playing out patterns that are kind of deeply rooted in in in humanity, which is what I mostly believe.
3:54
So, anyway, that's the that's the current thing.
3:56
Can you talk to me a little bit about these patterns?
3:57
What what what comes to mind when you think of an example that you're you're surprised by?
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I mean, take almost anything, but I mean, I'll I'll just give you the the most basic one.
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So, the most basic one is is societal reaction to new technology. Right?
4:12
And so, there are, you know, there are these new technologies of our era, you know, we could go you know, make make you know, whatever list we want.
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You know, you know, everything from, social media and internet to, you know, many other things, automation, robots, and so forth.
4:25
And then there's, you know, there's sort of the societal reaction, there's sort of the, you know, the reaction in the press, there's the reaction from politicians, you know, there's a reaction from different political movements, you know, political candidates, right?
4:34
They're now you know, taking, you know, kind of major stands on these things, you know, both in the US and around the world.
4:40
You hear it a lot like around the kid like what else it does to kids, right?
4:43
It's a sort of the go-to thing, which is, you know, that you know, sort of this technology is going to ruin the new generation of kids.
4:47
And then you just kind of, you know, ask yourself, well, is this the is this the first generation of technology for which they have made those claims? Right?
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Or or in fact, have those claims been made for basically prior generations of technology?
4:57
And then you of course, the the next question is like, okay, were were the claims different in the past?
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Were they actually the same claims? Right?
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And then to the extent that they were the same claims, you could ask like, okay, are you know, how are they playing out differently this time?
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And and are they playing out differently this time?
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There and there's there's actually quite rich literature both in the history of technology and and on the sociology of technology.
5:16
You know, prior generations of sociologists who I think were actually more more kind of interesting than the current generation, you know, actually grappled with these questions a lot, right?
5:25
And I mean, even like Marxism itself is like, you know, heavily based on the impact of technology in society, or at least on Marxist theories on it.
5:31
Um, and so, I found this just like fantastic book that I just really highly recommend.
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It's a great example of this.
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It's a book written by an MIT professor 50 years ago.
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They just did a 50-year reissue of the book.
5:42
So, it's a book that it's very I can say very confidently it's a book written before the internet.
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Before any of the things people, you know, people are mad about today, right?
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And it's it's this great book with this great kind of, you know, title from, you know, kind of the 1950s, 1960s called it's called Men, Machines, and Modernity.
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I have to I have to look it up, but it's Elting Morison is the uh is the title.
6:03
But it's I think it's Men, Machines, and Modernity.
6:04
You know, but it but it's this it's basically it's a short little book and it goes through basically goes through this history of like how do technologies are sort of received in society and it it it just briefly it proposes this three-step process.
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And sort of, you know, step one is basically just like flat out ignore, right?
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New technologies are just like dismissed.
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All all the experts and all the people who are kind of in power, you know, just going to say, "Okay, this thing is not going to matter.
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It's not going to not going to be a thing."
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The step two is rational counter argument, right?
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Which is sort of the status quo assembles all of the different arguments as to why this thing can't possibly work and won't possibly be important.
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But like they really get into the argument step two and they really like try to try to reason it through.
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And then he says step three is he says step three is when the name calling begins.
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Which is to say step three is when the status quo basically goes bananas and gets like super emotional and super irate and and and kind of goes on tilt, right?
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And and and starts name calling and starts accusing the sort of proponents of the new technology of sort of all these evil kind of moral crimes.
7:00
And and basically the the reason he says it goes through this three-step process is because he says what what people think of as technological change is actually societal change and specifically societal change of the form of a reordering of the power and status structure. Right?
7:14
And so all of the people who have achieved positions of power and authority in the world based on prior generations of technology are inherently threatened by new technology because new technology will upend the power and status structures and then a new set of people will, you know, come to the foreground and and take the power.
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And and of course, you know, in in in in human society power and status battles are the core battles.
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Like that, you know, they are they are the most vicious fights.
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And so basically what happens is a lot of technologists kind of start out by assuming that they built a better mouse trap and of course, like, you know, people should appreciate them for it and then they find out that everybody hates them for it and and basically that's the reason why.
7:45
And and and that this is a persistent pattern through history, that this is in fact not new.
7:50
Can you walk me through how you sort of see some of these technological changes and how they'll impact sort of this social hierarchy or how people get into positions of power?
8:00
So so the really big one is is you know, basically hierarchy versus network.
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Um right or you you kind of say institutions versus network.
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Um and so and by the way for people interested in this Neil Ferguson actually wrote he wrote a really interesting book called The Square and the Tower that goes through this in some detail recently that's very you know, kind of historically informed another great source on this.
8:21
Um I should say I agree a lot with like the first two thirds of the book and then I kind of take the polar opposite view of him on the last third of the book. Um it's funny.
8:29
The last third of the book made me very mad.
8:32
Um and of course the reason it made me mad is because he mounts sort of a rousing defense of the old power structure or I'm sorry rousing defense of the old power structure. Right?
8:39
Whereas of course I'm I'm on the side of the new power structure so of course that would make me mad.
8:43
It's kind of the reverse of that right?
8:44
I'm mad by the resistance.
8:46
And so anyway the the big battle is sort of you could call it kind of institutions versus networks.
8:48
You could call it kind of top-down hierarchy versus sort of lateral you know, kind of network building.
8:54
Um and so start by saying top-down institutions.
8:57
So top-down institution building is kind of how the West you know, in you know, it's a certain I'm sure it's some other cultures as well but let's just you know, I'm I'm most familiar with the West I'll just focus on that.
9:05
It's sort of how the West was won was we got really good at building these basically these giant hierarchies.
9:10
Like we got really good and in particular right in the you know, kind of in the in the late 19th early 20th century, you know, we with the rise of sort of the second industrial revolution, you know, we we sort of had all these mass scale technologies of that era right?
9:22
And so mass manufacturing, right?
9:23
And then you know, mass transportation and then mass media right and then mass government.
9:27
Um and so we we got really good kind of between call it 1880 and 19 you know, basically you you I don't know 1929 or something.
9:37
We got really good at building, you know, giant industrial companies, right?
9:40
You know, General Motors and General Electric and, you know, all these companies.
9:42
We got really good at building, um, you know, giant government, you know, the sort of, you know, FDR, you know, the New Deal and sort of this massive expansion of state power, you know, that kind of hit, you know, after after, you know, after the 1930s.
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That, you know, that that's only, you know, it's only accelerated since.
9:55
Um, and then we got really good at like mass media, mass communication, right?
9:58
Radio and television and and so forth.
10:00
Um, and then also, right, therefore, you know, mass politics, right?
10:01
So, this kind of absolute dominance of these two, you know, major political parties.
10:06
Um, and then of course, you know, even like to the extent that you consider America, you know, kind of in that era kind of as, you know, great empire, we got really good at kind of building the American empire. Right?
10:13
And and and of course, the American empire kind of, you know, continues to this day as, you know, not as a not as a literal empire in the old sense, but as a as sort of a, you know, a modern empire, right?
10:22
Which is to say, you know, cultural and intellectual, right?
10:25
And and and and and societal empire.
10:27
You know, that somehow, by the way, we still have 800 foreign military bases, but, you know, for the most part, sort of a soft power soft power empire.
10:33
So, so we just we got really good at these giant kind of top-down things.
10:37
And then we we lived in this world for 50 or 60 years in which basically these giant top-down institutions just kind of ruled everything and we just kind of got used to it.
10:45
to it. And, you know, there are these famous books from that era, you know, the the organization man is probably, you know, the the key book kind of of of that era that kind of described There's this great line in The Organization Man
10:54
where he says, um, you know, the the, um, you know, in in sort of this era of all these these mass systems, uh, he said, you know, the route to power he said the route to power leaves, you know, inevitably uh, uh, leads through the conference room, right? It's like, right, the the the the way
11:06
It's like, right, the the the the way that power has been exercised in our society kind of through the through these decades of mass systems has been basically people in conference rooms arguing with each other over control, you know, basically of the of these mass mechanisms, right?
11:17
Over control of what the ad campaign's going to be, over control of what the, you know, the new car model's going to be next year, over control of, you know, which which, you know, which candidate's going to be the, you know, Democratic or Republican presidential nominee or whatever.
11:26
You know, it's these people at the top of a hierarchy kind of battling in conference rooms.
11:31
Um, and and by the way, it's also right you know, as a consequence it's like you know, all these institutions over time kind of end up run by lawyers, right?
11:36
Of one form or another, right?
11:38
They're sort of you know, people who kind of deal in words, right?
11:40
People who deal in kind of symbolic manipulation at the at the word level, uh, you know, at sort of the the sort of non non-quantitative conceptual level.
11:48
Um, and and you know, it looked by the you know, kind of '80s or '90s like that was just going to be how it was.
11:52
Um, and then you know, this this internet thing comes along.
11:57
Um, and you know, the the the core technological foundation of the internet of course is you know, it's a it's a it's it's not that, right?
12:02
It's not a top-down institutional thing.
12:04
It's a by definition it's a lateral peer-to-peer right?
12:09
That you know, the core architecture right famously the internet has survived a nuclear strike therefore there is no central node, right?
12:14
Therefore you're able to route around damage, right?
12:15
Therefore you're able to sort of expand the network laterally, anybody can plug in it anybody can build whatever whatever app they want, anybody can build whatever website they want, they can you know, put online any information they want.
12:24
They can organize any movement they want, right?
12:26
Um, and so you have this introduction of this like fundamentally disruptive lateral network-based technology at sort of the precise time that it looked like we were going to have sort of peak centralization.
12:37
Um, and so I think what we have now is kind of at the at the sort of deepest level what we have is kind of this big fight between people who want to use the internet to basically reinforce top-down power uh, versus people who want to use it to disrupt top-down power.
12:48
My analysis is basically that's what's happened to our politics, right?
12:51
On both the left and the right, right?
12:53
Which is the internet is both the enabler for traditional political movements and parties to try to establish hegemony right?
13:00
A sort of permanent enduring advantage, but it's also the enabling technology for disruptive movements whether you know, on the left in the form of whether it's democratic socialism or you know, these kind of more energetic you know, kind of forms of leftism or you know, on the right the Tea Party and then the Trump movement and you know, mega and and you know, the the new right and all the all the sort of new disruptive movements on the right.
13:17
And so there again you see the same you know, the same fundamental battle between basically institutions and and networks.
13:21
I think that's fascinating and one of the things that I that I sort of see is it's permissionless.
13:27
I don't need anybody in the boardroom saying that I can go talk to people now.
13:31
I can just put my ideas out there and let other people be the judge of those ideas. Yeah, that's right.
13:37
And there's this huge tension.
13:38
So, there's this thing Well, so let's take mobile, you know, cuz the smartphone is kind of the key revolutionary technology in terms of, you know, sort of access to all this stuff.
13:45
It was not that long ago, as recently as 2006, right, which was only 15 years ago.
13:49
Um uh as recently as 2006, exactly your point, if I wanted to I could actually build smartphone apps in 2006.
13:56
I could build an app that did whatever I wanted on a on a phone.
13:58
But to get it distributed, um uh to get it actually onto the phone for people to use, I literally had to go to the headquarters of Verizon or AT&T, right, or one of the big telecom companies.
14:10
Um and I had to basically apply. Right?
14:11
And literally, I had to go into a conference room.
14:14
Um you know, You had a gatekeeper. Absolutely, 100%.
14:18
And if if it was it was famously determined those days it was called the deck.
14:21
And the deck basically it was basically the home screen or like the UI on the phone.
14:24
And if if if you wanted your app in the deck, um you went in and you started negotiating in a conference room. Right?
14:30
With, you know, men in suits.
14:32
Um and, you know, the opening, you know, the opening, you know, the opening bid was, you know, 40 or 50% of your thing.
14:37
Um and the and then they could basically dictate like if it does this or that, like whatever, whatever.
14:42
And then by the way, you know, to this day like, you know, Apple, you know, opening up the iPhone and and the App Store was a big step forward, but of course even Apple right continues to exercise a fair amount of control.
14:49
I mean, they're far more open than than than Verizon was in those days.
14:52
You know, but even still like, you know, Apple bans entire categories of apps and then of course they extract their 30% economics.
14:57
And so even still like there's still kind of a legacy holdover of that level of control.
15:01
Um right, but in but in stark contrast, right, and and I think this is a good news story, right?
15:06
In stark contrast, you know, the web like the web has never had that property.
15:09
Uh the web didn't have that property on day one.
15:12
The web didn't have that property in 2006.
15:13
And the web in fact doesn't have that property today.
15:16
And, you know, it's like, you know, you there's a compromise like I especially on smartphones.
15:20
Like there's a compromise for building a mobile website versus building a building an app and you know there are issues involved in that but the you know the fact remains like you can still build whatever website you want.
15:28
You can put whatever information you want on it.
15:29
Um and and just from a historical standpoint that's just such a change.
15:34
I mean I the most dramatic the most dramatic way of thinking about how big of a change that is as sort of a global kind of macro level um is that you know the the Soviet Union you know there was this there was this dissident movement inside the Soviet Union in the 1980s right and you know they they didn't know that they were going to win up until I think the very last minute.
15:50
Like they you know they didn't know the USSR would ever fall.
15:54
Um but you know they they tried and there were some very brave people behind the iron curtain in in Russia and the other you know kind of East Bloc countries that you know that that battled for a long time.
16:00
And so they you know they had this concept of samizdat right which was was was basically basic you know it's basically you know information free information right about like you know open criticism of the Soviet regime.
16:12
Um and uh it was necessarily an underground phenomenon cuz if you were caught with it right you would get shot.
16:18
Um and so they had Uh and so then there's this sort of practical question of like how do you produce samizdat?
16:21
And the answer in those days was you produce samizdat by mimeograph machine right which was sort of the you know the for for for kids listening to this this was photocopiers before photocopiers.
16:33
Um you know so these were sort of you know pretty expensive complex kind of you know basically basement you put put one of these in your basement in your office and you could do you make copies of paper you know kind of in volume.
16:42
Um and you know sure enough like there was like a whole thing involving smuggling mimeograph machines into Russia into so into Soviet Union and then if you were caught with a mimeograph machine you were shot.
16:52
Um and so just the level of overhead involved in even getting you know information that contradicted sort of centralized power out you know was still really hard you know even at that point.
17:02
Um and then you know the internet kind of popped you know it's kind of interesting it's like could you ever have another Soviet Union like in the era of the internet?
17:08
Um you know North Korea's doing their damndest to try to maintain that model you know but without going full North Korea like I'm not sure you can.
17:17
I I mean, I guess I'm an optimist on this point.
17:19
Like I tend to think open access information basically makes a lot of these historical things, you know, fundamentally impossible.
17:24
But, not you know, not necessarily you know, not not all centralized institutions get get torn down on day one, but like over time um if people are able to actually like debate things, people are actually able to see, you know, alternative uh viewpoints, people are actually able to point out flaws, you know, kind of in the systems that are ruling them.
17:38
Like over time, you know, I don't think people will put up with the kind of draconian kind of top-down control that that that that you know, that that we used to have to put up with, you know, before these technologies existed.
17:49
Can you give me both sides of the next 10 years?
17:51
I'm interested in hearing your most optimistic scenario and your most pessimistic scenario.
17:55
Look, optimism is just like it's basically the Morrison book, right?
17:59
It It's basically you have you have all these kids.
18:02
So, so you have this kind of the world as it is, you have the status quo, you have the power structures, you have the hierarchies and whatever they they work as well as they do and so forth.
18:10
And then you basically have all these kids um and and this is kind of one of the things in my day job that's just just always so interesting is like as these kids like walk in the door and they're just they're they walk in the door from all over the world. Right?
18:21
From every walk of life, from every possible background.
18:22
Um and they walk in with, you know, an idea and a skill set.
18:27
And, you know, I would say the ideas are getting to be kind of increasingly I think profound and the skill sets are getting increasingly advanced.
18:33
And part of it is, you know, kids now are growing up on on the internet in some fundamental way and so, you know, we we see kids now from all over the world who walk in and they're they are like far more educated, right?
18:40
And and skilled already to be able to do, you know, a startup or or, you know, create new software or do any of these things.
18:47
Um you know, than I was at their age uh because they've they've learned on the internet.
18:50
Like they've gone online, they've read, you know, they've read everything, they've they've watched everything, they they you know, it's just kind of their their depth of sort of technological knowledge and business knowledge and finance knowledge and cultural knowledge is just like incredibly broad.
19:01
And so, these kids walk in and they and they, you know, like like kids, you know, like like like any you know, generation of kids, they're they're idealists and they've got all these new ideas and they kind of have an intuitive sense of how new technologies can be harnessed to, you know, improve the world in some way.
19:12
And they actually have the power to do it and then, you know, and then, you know, brag a little bit on us, you know, we're we're in a position to be able to support them and help them do that.
19:18
So, there's you know, there's a system kind of waiting for them.
19:22
You know, basically, it's that we're just going to see this sort And you see it now, but you were just going to see this sort of continuous kind of movement um of all of these new ideas and all these new ways of doing things.
19:30
And you know, and you know, look, you know, they're not all going to work.
19:33
It's a Rebel Alliance versus an Empire. It's asymmetric, right?
19:36
The the the Empire has to win 100% of the time. Right?
19:39
They have to defend against all attackers, right?
19:42
Whereas, you know, the attack you know, so you can have many different attackers who kind of keep coming.
19:46
Um and so, we're just going to see in sector after sector just better and better ways of doing things, better ways of organizing, better ways of of, you know, better ways of organizing the economy and, you know, productive activity and creating, you know, job opportunities for people and education and and you know, how the, you know, how, you know, just all aspects of how people live and work.
20:04
You know, just like more and more choice, more and more options, more and more better ways of doing things.
20:08
Um and you know, the incumbents will, you know, they'll they'll go through the three stages, right? Every time.
20:12
And you you see it, you know, it's like I said, it's either denial, it's sort of rational, you know, counterargument, or it's name-calling.
20:18
I- I- Is that inherent to even the winners today?
20:20
Like Google is now an incumbent, right?
20:22
So, so this is one of the funny things I talk a lot to our founders about.
20:26
And this is not a, you know, what's what's so useful I think of this view is this is not a criticism of any individual person, right?
20:31
Or any criticism of any individual company.
20:33
This This is why I try to get to the broader trends, right?
20:34
Cuz like the the broader trends like are impersonal in the sense of, okay, if if you see this pattern over and over again, then it's not just you.
20:41
Like when I you know, when I tell somebody you're doing X, it's not like a criticism of you're doing X.
20:44
It's more an observation of, you know, you're doing X just like everybody else who's ever been in your situation. And it's not X.
20:51
And, you know, at the very least, be aware of it, if not, you know, decide to make a conscious choice not to be like that, you know, if if you don't like that.
20:57
Um but one of the things I talk to our founders about all the time is it's actually funny, a successful company has about five years A successful startup has about five years until they become a new incumbent.
21:07
Um and and they actually start to behave like an incumbent. That's rational.
21:09
Like of course that's rational.
21:10
Like they've now built something worth defending. Right?
21:13
And they they've like they've now established power in the world, right?
21:16
They've established a position for themselves.
21:17
Um you know, they built something of value.
21:19
Um and now they have something worth protecting.
21:21
And of course the next you know, the next thing comes along very quickly.
21:23
You know, the next kid comes along 5 years later.
21:25
You know, and a lot of times it's really funny cuz it's like you know, the new incumbents run by like a 26-year-old, right?
21:30
And then and then the new disruptor is like a 21-year-old.
21:34
So it's like you know, it's sort of like one kid really mad about the other one.
21:36
And it's like yeah, well you know, that was you 5 years ago, right?
21:40
Like so you know, this is the way of the world.
21:42
And so yeah, so yeah, no look so this is actually a really big question.
21:45
Actually Peter, you know, my my friend Peter Thiel has talked talked a lot about this in public.
21:48
And he he's much more I would say kind of hardcore on this than I am, but Peter sort of characterizes uh Google as as no longer a tech company.
21:55
Peter and I just flat out calls them their anti-tech company.
21:58
In his view it's their enemy of enemy of innovation.
22:00
Like they're a blockade of innovation.
22:02
They're they're no longer doing anything sort of you know, disruptive.
22:05
Um instead what they've done is they've established you know, a new monopoly in search and they're using that monopoly in search to try to basically prevent new you know, new new technologies from coming to market.
22:12
From from from you know, including new competitors, but also just more generally, you know, a lot of a lot of new technologies.
22:17
And you know, they've become very you know, draconian and heavy-handed in terms of what goes in the search engine and they've become very censorious and they ban a lot of things and you know, a lot of people get kicked off YouTube every day and so forth.
22:26
So so they've become kind of anti-change.
22:28
Now, I would say that that's Peter's view.
22:29
It's a it's a very you know, strong view.
22:31
I I would I would not say that about Google.
22:33
I would just say that more generally like that is the incumbent temptation.
22:38
Um it is is basically is basically go from attack mode to defend mode, right?
22:42
Go from being the pirate to being the navy.
22:43
Go from being the you know, rebel the rebel the rebel to being the empire.
22:47
Um and so it yeah, it it is a it is a thing that happens.
22:49
I I think you know, there you could probably just fairly say companies like that are caught in some sort of intermediate state, you know, where they still have elements of both.
22:57
Um and you know, it's kind of probably their lot in life to kind of figure out which side of that they want to fall on.
23:01
And what sort of the most pessimistic scenario you can come up with with how technology plays out?
23:05
Do the incumbents start using it to squash free speech?
23:09
Like how do how do you think about this?
23:11
Yeah, I think you could paint Yeah, you could paint maybe maybe two two pessimistic scenarios.
23:13
So, pessimistic scenario number one would be the one you just alluded to and it basically is like, "Okay, um this technology had the potential uh to be to be revolutionary and to kind of disrupt all these hierarchies and institutions.
23:24
Um but in fact it turned out that it was, you know, fundamentally enabling technology for top-down control.
23:30
There's 1984 which basically is the pessimistic view, which is like technology is used by the state, you know, kind of the full the full kind of, you know, I don't know what the Hegelian like, you know, world state dominant like totalitarian regime, Soviet Union kind of thing.
23:43
Um you know, technology is used to basically control the populace in sort of this very overt kind of top-down way.
23:49
Um there's this other really wonderful book um called uh Orwell's Revenge written by this guy Peter Huber.
23:55
Um and in Orwell's Revenge he actually does a rewrite of 1984 um and he does a rewrite of 1984 through the optimistic lens.
24:03
The you know, sort of your optimistic scenario.
24:05
And and and the optimistic lens the the twist that he puts in the plot in 1984 is he basically just makes the telescreens, you know, the sort of technology in 1984 these telescreens interactive.
24:12
So, the interactive TV thing.
24:14
Um he basically he makes the telescreens two-way.
24:18
You know, like like the internet.
24:18
Of course then he he elaborates out kind of the implication of that in the story.
24:22
And of course in in Orwell's Revenge, right, the the the rebels win, right, and the the totalitarian system is overturned because, you know, because people are able to organize and and and and and and and hear the truth and so forth through through the two-way system.
24:32
And and so anyway, yeah, the the pessimistic view would be the 1984 model.
24:37
Contra the the the Orwell's Revenge model that we kind of talked about earlier.
24:40
Um and then look, there there is another pessimistic view and this is the Martin Gurri view.
24:44
Uh if you've read uh so, his book the you know, I was at the um was it the Revolt of the Public?
24:50
The Martin Gurri thesis basically is, yes, um and I can hear him, by the way, talking to me about this right now uh, his in his in his uh, wonderful Cuban accent.
24:58
Um, you know, yes, smart guy.
25:01
Um, you know, the internet is very good at tearing down um, uh, you know, at at tearing down these hierarchies.
25:06
Um, but the internet has not yet proven its ability to build governance systems, right?
25:10
And so, um, it it has not it yes, you can build these new peer-to-peer networks, but can these peer-to-peer networks actually take power um, and actually serve the productive roles that the hierarchies used to serve, right?
25:23
And so, can you actually have, for example, a functioning democracy, right?
25:26
If what you have basically is basically people arguing with each other in this peer-to-peer network like all the time, right?
25:34
And never basically forming a strong basis of state power, um, you know, or if you have, you know, this you know, if if if all of your finance goes peer-to-peer and you don't have any banks anymore and there's nobody to call when your money goes away, right?
25:42
Or, you know, what whatever the version of that might be, right?
25:45
That they're that they're basically these networks are not in fact basically, um, sufficient substitutes for for for the institutions that they're displacing.
25:54
Um, and he describes this as the scenario sort of nihilism, um, which is basically that the peer-to-peer networks are good at destroying, um, but they're not necessarily good at building.
26:04
Um, and so, he's he's fairly pessimistic.
26:06
And and then I think this is why this is what Niall Ferguson also is reacting to in his book, which is I I think this is also kind of his latent fear.
26:12
He kind of describes it differently, but also he has he has kind of latent fear that if the institutions are torn down that that that there's no guarantee that productive things will be built on the other side.
26:21
Um, so, that's probably that that would be the other the other kind of really pessimistic scenario.
26:25
A lot of people get scar tissue.
26:25
They're still sort of like fighting the last war.
26:29
You've been around the first internet uh, big wave in the late 1990s and the failures that happened there.
26:34
How does that affect your thinking?
26:34
Like Webvan, for example, failed, but the same thing today might be a resounding success.
26:41
How do you switch your mind to, um, not getting burned?
26:46
Yeah, so, this is really yeah, so, this is really fun this This one of these things again I've just which I've I've realized is actually really fundamental to human nature.
26:52
Um and by the way, why I think they're why I think you have to ask questions about whether life extension technologies are actually going to be a good idea.
27:01
I think they are, but I think there's a real question about that from a from a broader kind of cultural, societal standpoint, which is right?
27:06
It's the most It's the to your point, it's the most natural thing in the world to try to learn from experience, right?
27:11
And so, I, you know, you we all go through this, right?
27:16
You you touch the hot stove, it burns, we don't touch the hot stove again, right?
27:18
And that happens to you at like age three or whatever.
27:20
And then like from from then on, basically, like one way of just viewing like your trajectory through life is it's just touching hot stove after hot stove after hot stove and learning don't do that, don't do that, don't do that.
27:28
You know, it's a it's or it's like, you know, don't act out at work, you know, you know, you you learn all these things.
27:33
And then one of the things you learn is like, okay, like, you know, what actually what a lot of people learn is what a lot of what a lot of people learn is they they they they work at a startup, the startup doesn't work.
27:40
You know, the one that they're at doesn't work.
27:43
And so, the lesson is don't work at startups, right? Um right?
27:44
Or by the way, the other lesson, right?
27:46
The other lesson is a lot of people went through in the last 50 years is that where they thought they had lifetime employment, right?
27:52
At some big company and then they got laid off at some point.
27:53
And then they're and then they and then sort of the lesson is, well, don't work at big companies cuz you can't trust them and they don't care about you and they'll, you know, they'll lay you off.
27:58
And so, anyway, it's like it's like the most natural thing in the world to like sort of sort of learn from these mistakes.
28:03
And so, what happens is it's it's absolutely like scar tissue.
28:05
What happens is you just as you age, you just naturally build up all of this all of this sort of psychic scar tissue and you have all these cautionary lessons in your in your head all the time.
28:12
And you just you and and therefore as a consequence, right?
28:15
Your your aperture of what you're willing to explore as you get older just shrinks.
28:20
Um and it's just it's just an incredibly natural thing to have happen.
28:25
Um and so, I So, I would say the the the the the the the good news with the, you know, kind of the escape hatch for that is is being in my day job.
28:31
My My day job is an incredible teacher that that's a bad idea. Uh right?
28:37
Cuz what happens in my day job, right?
28:38
Is, you know, basically, you know, I've now been, you know, kind of doing startups first as an entrepreneur for 15 years now as a VC coming up 15 years.
28:46
You know, coming up 15 years.
28:46
So, and basically, what you see if you kind of swim in in in, you know, in kind of this this pond for long enough is basically you see, you know, your your Webvan example, you see example after example of startups that tried something and failed.
28:57
And then you basically, you know, you draw the experience from that.
29:00
Okay, well, we know that's never going to work, right? Cuz it failed.
29:04
Um and you see kind of a lot of people around you kind of going through the same process.
29:08
Um and then you just see example after example of basically what happens next, which is some kid shows up with that same idea 5 or 10 or 14 or 20 years later, and they take another swing at it, and it becomes a gigantic success, right?
29:20
Um and so, you know, you got your point.
29:24
Like what Webvan doesn't work, and now with now today you've got these just giant successful companies in food delivery, right?
29:28
Um that are like huge successes.
29:30
And so like that idea absolutely works.
29:32
Let let's hone in on that just a little bit more in the sense that the the wrong lesson to extract from that experience is this idea will never work.
29:40
How is it that we extract the right lesson from an experience?
29:45
Yeah, so let's let's say I I think this goes to I think you want to really understand the domain in which you're operating, right?
29:52
So, So, the the domain that I'm talking about, like the domain of startups is representative of sort of a domain that you might call sort of probabilistic.
30:03
Um uh it's a it's a probabilistic domain, right?
30:05
So, so, you know, it's it's sort of inherent to the venture capital startup process, which is, you know, basically I'll just give you the numbers.
30:10
Like for top-end venture, right, for top-end venture-backed startups, um about half the companies in any given period work and sort of generate positive returns, and about half of them don't. Right?
30:21
And so, so, we we start out like every new fund knowing that half the companies that we invest in are probably going to fail. Right?
30:26
And and by the way, they're going to fail for a bunch of reasons.
30:29
Like a lot of the failures idiosyncratic, right?
30:30
That, you know, the team, you know, breaks up or whatever, you know, something you know, specific to the startup.
30:34
But like in a lot of cases, it literally is like they're going to fail cuz they're just like flat-out too early. Right?
30:39
It's it's be, you know, it's going to be Webvan of its time, not, you know, whatever what you know whatever the the new companies.
30:44
Um and so a lot of us just like you simply flat out timing.
30:47
And so but but you can see what I'm saying is like you're thinking probabilistically. Like you're right.
30:52
We're not trying to score 100 on the exam, right?
30:54
And this is maybe a thing that is like a big difference right between the education system and the real world, right?
30:58
Is you know, in the education system is like we're supposed to get 100 on every test, right?
31:03
It says it's sort of this deterministic realm, right?
31:04
In which we're you know, there is a way to kind of achieve perfection and we're kind of going for the 4.
31:08
0 grade average or whatever.
31:09
Um you know, in quote-unquote real life, right?
31:12
Which is starting businesses or you know, writing books, right?
31:16
Or composing music or playing basketball or playing poker, right?
31:19
Or basically doing anything interesting we're in a probabilistic domain, right?
31:25
And in in a probabilistic domain it's just like we're not going to we're not going to score 100%.
31:27
We're going to score, you know, most of the probabilistic domains we're going to score, you know, if world-class is like 60%, right?
31:34
I don't know what the numbers are for basketball, but it's like if you look at I don't know whatever it was like Kobe Bryant's or LeBron's like lifetime record and it's like they've scored all these baskets.
31:42
And then the other fascinating thing thing to look at is just, you know, the the ranking of the basketball players who have missed the most baskets, right?
31:49
And it turns out like it's the same it's the same people. Yeah. Right?
31:52
Like Kobe's Kobe's I Kobe might be number one on the list of like total missed baskets.
31:55
That is what it is, right?
31:58
As in Annie Duke has this great great term.
32:00
She she has brought it for the world of poker in her book Thinking in Bets and she she calls this she says what a lot of people do is is they basically what when some when they're in a probabilistic What's that?
32:08
If they're in a deterministic domain and they get less than 100% then there's then they can self-critique and they can say, "Why didn't I get 100%?
32:14
I should have got 100% and I did something wrong." Right?
32:17
And that is a correct analysis.
32:19
Like you could have gotten 100% of that test.
32:20
You probably didn't you know, you didn't study hard enough, you didn't read all the material or whatever. Right.
32:24
In a probabilistic domain, I it didn't work. Okay.
32:28
It's again this cognitive dissonance.
32:29
Now now I do what she calls resulting, right?
32:31
Which is basically now I need now I need an explanation for the result. Right?
32:35
And the explanation for the result is, you know, I don't know.
32:36
I should have done this or that, or I should have bluffed or not bluffed, or done this or done that, or not started this company, or waited 5 years, or you know, whatever, whatever.
32:42
Um, and and she's like, look, it's a probabilistic domain.
32:46
Like, some percentage of them are simply going to fail.
32:47
If you if you try to explain what fundamentally is kind of the result of randomness, right, through a narrative, like you're you're basically fooling yourself.
32:53
Like, you're making you're making yourself ironically making yourself miserable in a counterproductive way. Right?
32:57
And and and the right thing to do, right, if in poker, the right thing to do is to like play the next hand of poker, right?
33:02
With the exact same way you play the previous hand, right?
33:05
Cuz you're you're operating in this in this domain of probability.
33:08
The right thing to do if you're Kobe Bryant is to is to shoot the next, you know, the next basket.
33:11
The right thing to do as an entrepreneur is to start the next company, right?
33:14
The right thing to do as a venture capitalist is to fund the next to fund the next startup, right?
33:19
Even in a space where you've already tried and failed before.
33:23
Uh, and and then I I would apply at Tech, I would say I I believe in the strong version of this.
33:26
I I used to kind of say this to try to kind of exaggerate to make the point, but now I don't think I'm exaggerating, which is I no longer think there are any bad ideas.
33:32
I I no longer think there are any qualified people starting tech companies that actually have bad ideas.
33:37
I think all the ideas are good ideas.
33:38
Um, I think it's just a I think it's just a question of timing and execution.
33:42
We we try really hard to say, oh, this idea is stupid, this will never work. Right?
33:45
Like, we try really hard to never do that.
33:49
Instead, we try to just say, okay, this idea if this is a smart enough person and they put enough work into it, um, then this idea is probably a good idea.
33:57
It is likely to work at some point, and then we just have a very specific question, what which is like, is this the right person to bet on, and is now the right time to make the bet?
34:03
And then and then as as evidence of my strong view, I basically I basically say you can go through the entire, I think at this point, catalog of all of the failed dot com ideas of the late 1990s, and I believe they've now all worked.
34:16
How do you assess the judgment of founders?
34:17
If you're not assessing the idea, how do you assess the judgment?
34:21
Yeah, so I'd say there's two two categories of two categories of founders, two two two ways to do this.
34:24
So, there's sort of, you know, there's sort of there's the ones who've done it before, right?
34:27
Um, and so the the ones, you know, the the ones where this is their second or third or fourth time starting a company.
34:31
Um, you know, with them you have this just obviously enormous advantage, which is you can basically look at the work that they've done, you know, it's like anybody else who's done, you know, who now has a track record.
34:40
You can look at the work that they've done.
34:41
And again on this, it's not that you're necessarily looking for the track record of like the level of success per se, right?
34:45
Although, you know, is is it Was it Napoleon?
34:48
You rather you want to you rather have a a lucky general than a smart general.
34:52
So, like, you know, somebody who's had a highly successful company once, right, has has, you know, people has an enormous benefit of the doubt when they walk in the door for for obvious reasons.
34:59
Um, but you know, but even people who haven't had a big success before, it's like, okay, you can look at kind of how they did the work, right?
35:06
And so, you can look at like, you know, how you know, how did they prosecute the opportunity, you know, the the previous time, you know, and you can talk to the people, right, who they worked with.
35:13
And it's like, okay, you know, how were they under pressure?
35:14
How were they on in terms of like inventiveness?
35:17
How were they in terms of, you know, you know, persistence, you know, how did how did they make the decision about when to give up, right?
35:23
Um, you know, or when something just, you know, simply wasn't going to work and and so forth.
35:25
And so, you you can kind of, you know, you can you can kind of learn from their experience.
35:29
You know, the harder one is somebody brand new, right?
35:30
The harder one is somebody shows up, you know, right out of college or something.
35:32
Or, you know, you know, these days, right, the ultimate golden credential is they got admitted to a top-end school and dropped out after one day. Um, right?
35:40
So, so, um, you know, it's it's sort of the kid, right?
35:43
Uh, and of course, you know, I say kid cuz I I, you know, part I think of myself cuz, you know, this was me at one point.
35:47
And a look, a lot of the real breakthrough companies, the a lot of the big franchises, you know, Mark Zuckerberg had not had a job before he started Facebook, right?
35:55
Like, you know, the the Google guys came straight out of Stanford MBA you know, uh, Stanford uh, the PhD program and so forth and so on.
36:02
You know, Bill Gates dropped out of college and uh, and so, you know, a lot a lot of times these these big breakthrough companies are people they, you know, they have no track record.
36:08
Like, their track record, you know, you could ask for their high school, you know, GPA or something, but like, there there's no track record, right?
36:14
Uh, and so, there you're kind of, you know, evaluating, you know, de novo.
36:18
And I think there what we do, the the cliche is basically, right, that it's, you know, some kid with some crazy idea and then some crazy VC gives them some money and, you know, some miracle happens and all my god, you know, what a weird, you know, non-reproducible thing or whatever.
36:31
Um the reality is the kids that make new things work from scratch.
36:36
It actually turns out that they actually have been deep in the domain for a long time.
36:39
Almost every case, they've been thinking hard about the problem that they're trying to solve actually for in in a lot of cases for many years.
36:45
Um and and and and what that actually means, you know, this is actually really kind of interesting and maybe software is kind of this unique kind of area like this, but you know, as a consequence you like in software you can have a 21-year-old who's basically been a professional level programmer for 10 years, right? Right.
37:00
Cuz they you know, you can trace it back and it's like, well, we hear the story all the time.
37:03
It's like well, the specific story here all the time.
37:06
You know, I really loved video games, right?
37:08
Um and so therefore, right, when I was, you know, 11 or 12, I, you know, learned how to code so that I could figure out how to like make my own video games.
37:16
Based on that, I found it really interesting how, you know, for example, clans or tribes form inside games.
37:22
And so, when I was in high school, I built this app that, you know, did people matching for whatever World of Warcraft, you know, guilds or whatever it is.
37:29
Um and then, you know, in college I got a degree in computer science and then I did this project which is to do this new kind of social networking app.
37:38
Um and now I've been thinking about that and building that for the last 5 years and now here I am and now, you know, after 10 years of thinking about this, now here's my new social networking idea. Right?
37:46
Like that this is not a rare thing and and and literally they've been thinking about this now for, you know, they've been thinking about this specific thing for 5 years and the the general kind of pattern or category for like 10 years.
37:55
And of course, you know, for things, you know, this of course is heavily biased towards domains in which kids get to participate, right?
38:00
And so, this is less true and, you know, anything involving, you know, you know, there's lots of areas, you know, there's lots of areas of technology where you you know, 11-year-olds are not working on it.
38:10
But there are areas increasingly where they are.
38:11
Um and so and so basically it's basically we call it the idea maze.
38:14
It's basically the back story.
38:16
Um it's what have they done in the past to really kind kind reason their way through and and often and often you literally have people who have been like writing prototypes and and a lot of the time you have people who have running code at that point. Right?
38:27
And then it's like, okay, now now you're dealing with somebody where yes, they're on the surface they're 21, in reality they're already 5 or 10 years into the journey.
38:34
And you're like, okay, now I get it.
38:34
Now I have somebody who's like a primal creative force who's actually like really thought deeply about this.
38:37
And so it's a So it's a it's a much safer bet than it looks.
38:41
Can you walk me through in detail how you make those bets?
38:43
Like what is the big capital allocation decision-making process that you use that is 16Z?
38:49
So there's basically there's three tiers.
38:51
The way we operate is there's basically three tiers of bet.
38:55
Sort of small, medium, large.
38:55
And the small one is so-called you know, seed funding.
38:58
The medium one is so-called venture funding and then the the large ones are growth funding.
39:04
You know, the the seed bets, the small ones are, you know, two you know, any I don't know anywhere two to five million dollars on average.
39:10
Which you know, is a lot of money absolutely speaking, but it's it's small in the context of, you know, the It's small in the context of the global economy.
39:17
It's small in the context of funding your businesses.
39:19
It's small in the context of our funds.
39:20
The the venture bets are much more serious.
39:22
The venture bets are 10 plus million.
39:26
And then for the venture bets, they're more serious for us cuz that's what we get really involved in the companies.
39:30
Like that's when they form a board of directors.
39:33
And we have, you know, somebody who goes on the board and we tend to really like work hard at the company.
39:36
And so that that's like a you know, that's signing up from our standpoint to like a 10-year journey with the company.
39:41
Including, you know, an obligation to put more money in later rounds and so forth.
39:43
So that that's a that's a more serious bet.
39:45
It's sort of sort of size 10 10 million and up.
39:46
And then the the growth bets are for companies that have kind of, you know, they've kind of hit their stride and they have a business that's working and they're growing.
39:53
And so it's it's like expansion capital.
39:54
So, you know, it's a different thing.
39:56
And And you know, the check size there is sort of 50 and up.
39:58
And then, you know, on the high side it's 100 or 200 or 300. So, million.
40:00
So, you know, the amounts of money get large.
40:03
But at that point you've got a business that's working and you're you're trying to figure out how to scale it to, you know, to to kind of to be a global global champion.
40:10
Um And then there's just there's there's there's different criteria You know, there's sort of similarities with the three.
40:14
You know, we're we're trying to It's the same We're trying to back the same kind of founders and the same kind of businesses across the three categories.
40:21
Um but you know, there it's very different decision-making process, very different criteria depending on the stage.
40:26
Um on the seed side, it's almost 100% a bet on the people.
40:28
You know, it's a little bit on the idea, but it's mostly the people and it's and basically the way you evaluate the idea at that point is like you're basically evaluating the idea as a lens to evaluate the people. Right?
40:39
So it's like you know, it's like the it's like it's like I was talking about like the 21-year-old comes in with this like crazy idea, something they've been thinking about working on in a college or something and they want to start a company.
40:46
Um and it's like you're you're evaluating the idea, but really what you're doing is just like, okay, is this person capable of doing this kind of thing?
40:53
And then you're evaluating the idea and that worth they've done so far to kind of just draw a bead on how good the person is.
40:59
As opposed to saying, oh, you know, we've been waiting to back this idea.
41:02
At the venture stage, there's the people component, but there's also this other really important thing, which is you have to have some reason to believe that this thing is going to be the one that wins.
41:10
Um because we we sort of take on this sort of formal conflict at that point.
41:13
We get very involved in these companies.
41:15
We you know, we can't invest in in in competitors after that in in that category.
41:18
And so then there's this thing of like, okay, out of all of the different teams, both current teams and future teams that might pursue this idea, um you know, is this really the one that has the best chance of going all the way to victory?
41:29
Um and so that's, you know, trying to kind of dig in harder on the kind of competitive advantage and and you know, capabilities at at a deeper level.
41:34
Um and then at the growth side, it's a you know, that's more of a of a of a of a business analysis.
41:39
Um the growth side is where you start to get to start to make decisions based on numbers. Um right.
41:45
Um and so you start to get to evaluate, you know, revenue growth and and market size and you know, uh profit margins and and you know, and then and then by the way, but but also you're still evaluating the people.
41:54
You're still evaluating the idea. Right?
41:55
And then you by the way, at the growth stage, you're also still looking for new ideas. Right?
41:59
Where you're you're looking for existing businesses that also have new growth opportunities inside them.
42:04
Um and so you're looking for basically, you know, does the is this person so good that they have additional kind of venture quality ideas that they haven't even gotten to yet.
42:13
And so, you know, the best case scenario is you make this investment in a company that's doing X, and then over the course of the next 5 or 10 years, they also do Y and Z and A and B and C, and they just keep layering in all these new things, and then you get this kind of multiplicative effect.
42:26
Is there a challenge function internally?
42:27
Like how do you decide in in terms of making the actual decision?
42:34
Yeah, so there's there's a there are if you kind of poll top end venture firms on this, you'll get actually every possible answer.
42:41
Um and so there there are some firms that run on a a unanimous vote model, um where they they literally need unanimity.
42:46
Um you know, there are other firms that have a um you know, they have a they have a majority thing, um or they need a certain number of people to get critical mass.
42:53
There are some firms that run a top-down so-called investment committee, where you you know, you you know, the younger partners in the firm get to propose ideas, and then there's sort of a council of elders, you know, that either you know, does the does the Gladiator Joaquin Phoenix thing, you know, thumb thumb thumbs up or thumbs down.
43:07
We have optimized very strongly towards what we consider to be kind of the most aggressive and most, you know, and you might say contrarian model.
43:15
So, our model is what what we call single trigger puller. There's no vote.
43:18
There's no investment committee. There's no override.
43:22
There's no like, I don't, you know, I formally sign off on all, you know, Ben and I formally sign off on all the investments, but like I don't I don't like evaluate the investment proposal and then basically do thumbs up thumbs down.
43:33
Like that's not like I don't do that at all.
43:36
Um instead of what we do basically is we we basically we basically delegate budgets.
43:39
Like so, the the governance mechanism is is budgetary, so we basically we raise a fund, we have a certain number of investment partners, we we delegate the budget down to those partners.
43:47
And then basically, if you're a partner to our firm, um within your budget envelope, you can make whatever investments you want.
43:52
There are expectations around how you're going to do that, right?
43:55
And so, there's an expectation you're going to do the work, right?
43:58
By which it's going to be like you're going to go in like really deep, you're going to like, you know, talk to all the people, you're going to really investigate everything.
44:03
We We mind an investment that doesn't work.
44:05
What we do mind is like what we're we're in the wrong one and the right one was out there.
44:10
Like the winner in the category was out there.
44:11
We didn't even know about it.
44:12
Like that that that in our firm is like a big problem.
44:14
And so you're expected to do the work and we you know we have we have you know we have a whole kind of system for that.
44:20
And then there you know there is you're expected to like you have to communicate.
44:22
Everybody has to know what you're doing. There's no secret deals.
44:25
You have to you know and you have to be willing to kind of describe it and you have to you know be willing to kind of deal with you know we weigh you know everybody weighs in on everybody else's things and so you have to be willing to kind of have the conversation.
44:33
You know because you know that you get to make the decision you know you are hopefully less defensive than you would normally be when other people say things like this is really stupid. Why are you doing it?
44:45
You know that the peer pressure basically doesn't turn into an actual explicit veto.
44:47
Like you can still do the deal and you know that you're in a firm that really prizes that and wants wants us to do do do investments like that.
44:53
And so but but you know you do have to you have to be willing to like sit in a room and describe what it is and you have to be willing to like listen to people you know crap on it right without without getting dissuaded.
45:04
And then you know there there is this thing this conflict thing right which is it's a big deal for us internally which is probably our biggest limited on our ability to do business is we take on these conflicts.
45:12
And so you know the stickiest conversation we'll have internally usually is like boy like it'll be like between teams right?
45:18
It's like okay if one team does or if one partner does this investment then it conflicts the entire firm out of the category going forward.
45:26
And so you know you can imagine pretty vigorous arguments and debates around that.
45:30
But the result of that is basically it's like I think we're way out on the edge of being able to be you know sort of creative in the investments.
45:38
We're able to back the entrepreneurs that color outside the lines right?
45:39
That that basically come in with ideas that sort of you know break the existing paradigm you know that there's no precedent for you know that just where we're at a more structured or formal you know firm it might be like well I don't even know what box this goes in. Right?
45:53
Like it's just this is so weird and like offbeat like what how do we even classify this?
45:56
And then you know if we have to explain this to the council of elders how are they going to ever understand it? Right?
46:00
And in our firm it's like we can we can make all those bets.
46:03
And And in the history of of venture and new technology is those are often the most successful bets.
46:06
So, that that's why we we've optimized that way. And you also get speed.
46:10
It sounds like a lot of velocity with how fast you can make decisions. Yeah, we have a partner.
46:16
I won't name I won't name name name name name.
46:18
We have a partner where he was in the he was in the he was in the West Coast office.
46:20
Uh it was in the Palo Alto office of an East Coast firm.
46:22
Uh a firm that had historically grown up in East Coast, very successful investment firm.
46:28
Um but, you know, he would have to fly to New York and present all of his investment ideas to a group of five senior partners in New York.
46:34
And And by the way, the five senior partners in New York incredibly like established, you know, legendary investors like with incredible track records.
46:41
With like absolute moral authority to be able to, you know, make such judgments.
46:44
The problem, exactly your point, the problem is yeah, speed.
46:48
And then just like, you know, this stuff changes, right?
46:49
Um You know, there's this this scar tissue thing um this scar tissue thing there's a specific form of the scar tissue thing that we see a lot.
46:56
I I call this sort of the the is is is like the idea of an event horizon or something, which is there there's a point a lot of people reach where they're just done with new ideas.
47:05
It's like the general version of the problem.
47:06
It's just like, okay, like I got through the PC, I got through the internet, um I got Facebook, all right, I got okay, food delivery works, but like TikTok? Like, really? It's too much. Yeah. It's just too much.
47:20
It's just like, okay, this is just at this point the world is getting ridiculous and like I don't want to process this anymore.
47:27
And like almost everybody hits that point at some point.
47:30
Um and And so, I I I just think like the the the the the Let's say yeah, I I just think that the bad way to do venture um is to have people who have reached that point doing sign-off on the decisions.
47:40
And And I hope Ben and I have not reached that point, but I I even if we do reach that point at some point, we have the firm to continue to be able to make good investments.
47:46
What have you learned over the years about making exceptional decisions that most people miss?
47:52
So, I I I quite honestly I think I think a lot of it is embracing the uh the the probabilistic nature of the domain.
47:57
You know, a of these questions like venture teaches you they're very direct versions of these lessons cuz it you know what is it that Bill Submariner's slogan is uh stupid will be punished.
48:04
We when you pass on enough companies that turn out to be these giant, you know, kind of global, you know, kind of behemoths, you know, at some point you're just like, okay, like obviously I'm not I'm not a super like I I have to have some level of epistemic humility here because I'm not making all these decisions properly.
48:19
And and again, the nature of the domain is I'm not going to make all the decisions properly.
48:21
Like what what each of the top venture capital capitalist of all time has in common is they they all each of them missed almost all of the great deals of their generation.
48:30
The the bad news is you're going to like make all these mistakes.
48:31
The the good news is you don't have to score 100% and and not having to score 100% basically means you can take chances. Right?
48:37
And and and and specifically the way that you instrumentalize that is this basically and this we talk about this a lot at the firm is success or failure is not at the unit of an individual investment. Right?
48:47
Success or failure is at the level of a portfolio. Right?
48:52
And so um and and we and we basically see these portfolio effects everywhere in the business.
48:55
So we see the portfolio effect happens at the level of an individual partner.
48:59
It happens at the level of a fund.
49:01
It happens at the level of what we call a strategy which is like a basket of investments, you know, in the in the same theme. Right?
49:07
So let's say we're we're at our firm and we decide well, I'll give an example.
49:10
We have this big gaming push right now, right?
49:11
Um as we just brought up this new this new gaming partner we're very proud of and we got this big gaming push and we've been you kind of investing in in gaming now for a while.
49:18
And it's like, okay, so we want to go out and make whatever, you know, we want to go out and make whatever, you know, bets in in in in new game companies.
49:21
And so we we we literally have a strategy to like back new game studios, new new new new game companies.
49:27
And like we go out we invest not in one of them, but we invest in 10 of them. Right?
49:31
And you know, in in making different kinds of games, right?
49:32
You know, different different kinds of approaches.
49:35
Um and then we're going to evaluate the success of that program not based on any of those individual investments, but based on that, you know, the basket as a whole.
49:42
And so when you liberate yourself away from I have to get this decision right to I have to execute a strategy that is going to result in a series of 10 bets um and then I'm going to be evaluated not by you know any individual one and by the way I'm not even going to get to get evaluated by the average outcome, right?
50:00
I'm going to get evaluated by the total performance of the basket.
50:03
Um, and if one of those bets accounts for 99% of the profit of the basket, that is a perfectly fine outcome. Right? But we see this a lot.
50:14
We do performance reviews, right?
50:15
We do performance reviews and so it's like, okay, we we do performance reviews of a of an investment partner here and it's like, well, they've made 10 investments and you know, one of them is this this this this huge success and the other nine are like, you know, sucking wind.
50:27
And it's like, okay, is this a good venture capitalist or a bad venture capitalist?
50:29
And it's like, well, you know, in any domain that's not probabilistic, you say this person's terrible, right?
50:34
You know, it's batting average of like a hundred, you know, out of a thousand.
50:37
It's like this person's awful.
50:38
Um, and and there's always a temptation to say, well, this one thing that's working is it's like it's a fluke, right?
50:42
And so who knows whether they'll ever get it again.
50:43
And it's at that point where I put my hand up and I say we're in the fluke business, right?
50:48
Like the whole point of this is to get the flukes.
50:50
Um, and so of course, that person should get full credit for the fluke. Right?
50:54
And in fact, I hope they go make 10 more investments and get another fluke.
50:57
And so anyway, it's it's basically like it's getting into a domain in which you can basically make those risky bets in a way where you know that you're not going to lose everything if you don't score 100%.
51:05
Um, and you know, and look like is you know, like not all domains are like this.
51:11
Like, you know, the person running a nuclear power plant doesn't get to live in this world, right?
51:14
Um, but you know, uh, it will put it this way.
51:18
Anybody doing anything creative right, does live in this world.
51:20
Um, and I you know, I think that the creative artists of all kinds, you know, basically live in this world and and and the really good ones are are unafraid to take the bets, you know, because of because because they know that this is the domain they operate in.
51:32
We sort of talked about the the probabilistic thinking in terms of the magnitude and test taking as it relates to the education system.
51:40
To me, I mean, from the outside looking in, the education system seems a bit dysfunctional.
51:44
Uh, you're a parent, what what do you think is wrong with it and how do you go about navigating it and what can we do to fix it?
51:51
So, it's completely unfixable.
51:52
So, so it's it's it's it's like none of the specific point things people are worried about are fixable because the the whole thing is built in a certain way.
52:01
So, it it it goes back to this this it goes back to this historical thing we started with which is it's it's a it's a mass education system, right?
52:06
So, it it's a mass education system that was created in a time and place.
52:10
Um and it was created in a time and place and you you know, you probably know the history of this.
52:15
It was created in a time and place roughly 100 years ago, 110 years ago.
52:17
And there were a set of, you know, theoreticians and with names like, you know, John Dewey.
52:20
Um and they, you know, developed a, you know, a system.
52:23
And and at the time, by the way, at the time it was like a huge advance, right?
52:27
Cuz it was like we were going from like a nation of farmers right into this into what was, you know, this sort of second industrial revolution and into the 20th century.
52:34
You know, most kids didn't have much education in the 19th century and, you know, um you know, growing up on farms or whatever and like they they knew the theoreticians, the experts knew like we need a system to educate all the kids.
52:44
Um and then and then they built a system the way that you built systems, you know, the way that you built systems in 1910 or 1920.
52:51
Um which is you built a mass manufacturing system, right?
52:53
So, you you took all of the same methodologies that were being used to make the factory for Model T cars and all the same methodologies that were being used to do, you know, radio you know, RCA was doing to do radio broadcasting to the masses and that's the you know, that General Motors you know, General Electric was using to kind of, you know, build out the electrical grid for the country.
53:10
You know, these these the mass system you built mass a mass education system.
53:13
Um and and you built it like a factory, right?
53:15
Um and and that made sense because number one, that let you get to mass scale.
53:19
That solved the problem they had at that point.
53:20
Um but but the other thing was you knew that you were training kids fundamentally for the industrial economy, right?
53:26
And so, you were training kids at some fundamental level to work in factories. Right?
53:30
Or or by the way, to work in offices and of course the offices in those days were also factories, right?
53:36
They were factories for knowledge work. Right?
53:38
Right? Um and so, if you know you know the history of mass manufacturing, there were all these ideas like time and motion studies and all these guys like was it Turner um you know who had these you know who optimized mass
53:46
manufacturing and basically all of the leading intellectuals of that era basically said we use that that same battery of techniques we use for mass manufacturing we're also going to use for mass media we're also going to use for mass education. Um and so these are you know these are
53:56
Um and so these are you know these are factories just these are schools are factories to stamp out kids who are optimized to work in either a you know if they're blue collar to work in a literal factory uh or if they're white collar to work to work at General Motors or General Electric in the you know in a conference room you know in a in a in a giant hierarchy to be an organization man.
54:14
Um and so we built that system and then we set it on autopilot um and it's been on autopilot for 100 years and here we are and it doesn't fit at all to the world we live in today.
54:22
Like not even a little bit and then of course it it it it has you know it has suffered the fate of every institution that sort of goes across multiple generations which is it has been taken over by a set of people right? Incentives right?
54:33
It has been taken over by a set of people who have absolutely no intention to change it. Right?
54:38
100% they're not going to change it.
54:39
Like uh the people who run this system 100% of their power and status and authority in the world and their income and everything else in their lifestyle it's 100% you know bought and paid for by this legacy system and of course they're not going to change it.
54:51
Um and so it's not I'll tell you one thing I don't believe in is reform.
54:53
Like I have all these friends that work on like you know school reform.
54:58
God bless them like they're just the wonderful most wonderful sweetest well-intentioned people in the world and they're just burning huge amounts of money and time on trying to reform the system that has absolutely no intention of being reformed.
55:07
And and they're they're having no impact whatsoever.
55:09
Like it's not working at all.
55:09
Of course like we have a biological tendency sort of to defend our territory right?
55:13
So it it would be it would be hard especially with a organized unions and all of this other stuff that's involved with the education system to reform it.
55:21
Well it's like the the the tip-off the tip-off if you just you know step back and think about it for a second.
55:27
Like you can be pro-union or anti-union you have whatever people you have whatever views on unions you want organized labor you know big debate for a long time you have whatever views you want but the idea of a unions the idea of unions of public sector employees. Right?
55:40
Like so you now have people you have a double layer of civil service protections and union protections. Right?
55:49
And you're going to reform that system? Like no, you're not.
55:53
Like they're going to take your money, laugh at you, and like nothing is going to happen.
55:56
And so yeah, there there there there is no unless there is no fix.
55:58
There is only one thing to do in my my opinion.
56:02
There's only one thing to do, right?
56:03
Which is to build a new system. Right?
56:05
And the new system has to get built from scratch.
56:06
It has to get built the hard way, right?
56:08
Uh it will probably not look right or sound or smell like, you know, these you probably, you know, the new system will probably not be a giant pyramid.
56:14
It'll probably be something else. Right?
56:16
It'll look like synthesis or something like that.
56:19
be or it'll be like it'll be distributed, you know, it'll be you know, like I'll I'll I'll I'll this I'm just going to I'll paint a vague picture of what it might be, but it might be, you know, Look, the country clearly right now, and I'm actually we're we're actually living this with our 6-year-old right now.
56:32
Like there needs to be like a home school network. Right?
56:33
There needs to be a whole like support structure, right?
56:38
And network and knowledge flow and expertise flow and talent hiring pipeline, right?
56:44
And, you know, quality standards and and resources and activities, right?
56:49
For for home school kids, right?
56:51
And and for the for these slight micro schools that are popping up all over the place, right?
56:55
And and, you know, And by the way, like now's the perfect time to do that, right?
56:57
because then the post-COVID, you know, all the changes you're well aware of, but like, you know, that there's this massive spike in home schooling.
57:02
Uh there's this massive spike in parents who are very unsatisfied with with formal, you know, all are sort of say newly unsatisfied with the the the legacy model.
57:11
Um and so now is obviously the right time for this.
57:13
And anyway, and look, there are lots of example there are lots of people working on this, and there are lots of really examples of this, and so I hope something really takes here.
57:18
It it's also interesting when you you look from the outside in that there's sort of like no individual to blame, right?
57:23
Like I feel for the teachers in the classroom.
57:27
I feel for the principals.
57:27
I feel for everybody involved in the system, but the end outcome is just terrible.
57:35
Yeah, Charlie Munger has this great thing I really like which he says look, if if you often in the world of this great example, you often have a system and the system has incentives and this and the incentives result in terrible behavior.
57:46
And then you have a choice which is do you blame the people who are exhibiting the terrible behavior or do you blame the people who created the incentives? Right?
57:53
And and and he he believes and I agree on this.
57:54
I I think 100% you blame the people who created the incentives.
57:57
Right, I think I think you're right.
57:58
Like I I I think when you take human beings and you put them in a system where they have bad incentives and you get bad results.
58:02
Like it it at some level it's not their fault.
58:03
Like you know, you could say maybe they should resign on principle or something like that, but like most people need to live their lives and they need to like, you know, put food on the table for their families and so forth and so like I just don't have expectations of like mass revolt.
58:14
Um I guess people's self-interest.
58:16
Um and so yeah, no, I I totally agree with that.
58:17
And and so therefore I think you have to look at incentives.
58:20
Um and then you have to look at the people who are putting the incentives in place.
58:23
Um and you and you have to judge them.
58:25
And and and and that's the that's the thing with this thing is like the people who put these incentives in place are dead. Like they're gone. Right?
58:31
Like we we can, you know, I can I can sit here and yell at John Dewey all day long. It doesn't matter.
58:36
Like he's, you know, he's he's gone.
58:40
Um and and the people who are running these institutions now are just basically at some fundamental level executing scripts that were developed 100 years ago and like it it to to some extent it's like not their fault.
58:48
And then look, you know, there is corruption, right?
58:51
I mean like the level to which a lot of these legacy systems are intertwined with the political system, you know, up to the level of just over corruption.
58:59
Like at some point you're you're in this like really sleazy zone where, you know, politicians are just being bought off to, you know, to basically preserve a system that's obviously, you know, dysfunctional and corrosive.
59:07
Um and so anyway, you you can certainly, you know, I don't I don't need to let everybody off the hook, but but yeah, look, the the the key thing at at the core of it is yes, how was the system constructed?
59:17
Um and then um and then and then what are the what are the incentives for it for its continuity?
59:21
Um and and again, that's why I said like I'm not That's why I think reform is impossible.
59:25
Like there's no way at this point to go in and change the incentives inside one of these systems.
59:28
Like, I I it just There's too much vested interest. It just can't be done.
59:31
What would a political policy platform look like that encourages innovation?
59:34
What are the sort of like key variables that matter?
59:39
I don't know if it's too I don't know if it would work um because it's a little bit too abstract, but it it it is kind of at the heart It's a little bit at the heart of populism.
59:45
It's a little bit at the heart of actually a lot of the left-wing critique um actually of business also.
59:50
So, you you see you see it actually There's a critique from both the left and the right.
59:53
And I think it's a critique the way the libertarians uh Let's just say libertarians have the answer, but the way the libertarians would put it is there's a difference between being um pro-business and pro-market. Right?
1:00:05
Um and so and and what they mean by that basically is is like there's one concept of a business, right?
1:00:09
Or an entity an entity of any kind.
1:00:11
Let's start with the business, but we can apply the same thing to other other kinds of institutions down the road.
1:00:17
Like, um there's one form of business that's like actually forced to compete in a fully competitive market, right?
1:00:22
So, sort of fully subject to market discipline. Right?
1:00:24
And so, like, if whatever, you know, and I don't even I'd say like the car industry works like this or something, right?
1:00:28
Which is or I don't even Let's Actually, the car industry gets repeatedly bailed out, so they're probably not the the right example.
1:00:33
I don't know, soft drinks or something.
1:00:34
It's like, you know, Coke and Pepsi and Dr. Pepper and so forth.
1:00:36
Like, they, you know, every time you, you know, buy a can of a soft drink or a, you know, any any you know, I went to, you know, a gas station the other day and it's like, you know, there's like 400 different, you know, bottles and cans of drinks right on the shelves.
1:00:49
You know, those companies are like forced to compete every day, right? For for every purchase.
1:00:52
And so, there there's there's a standards bar that they have to hit.
1:00:57
And then there's and that's and and and sort of libertarians are kind of classic free market economists are like, that's that's market economy.
1:01:03
Like, you the market economy you you you don't want businesses kind of run on tramadol, but you want them is you want them subject to market discipline.
1:01:08
You want them forced to compete all the time.
1:01:10
Um and that and that's how you you get quality control and and innovation.
1:01:13
Um and then and then there's there's pro-business.
1:01:17
And pro-business basically the problem with pro-business is basically what happens is a lot of industries over time end up not like that.
1:01:22
They end up not being actually a fair and free market with market discipline.
1:01:25
They end up as something else.
1:01:28
In the business world, what they end up with is either just, you know, one company with a full up monopoly or more commonly they end up with what's called an oligopoly, right?
1:01:34
They end up with a small number of companies that sort of dominate the entire sector.
1:01:40
Um and then what you get and you know, you see this over and over in the economy.
1:01:43
It's like, you know, three car companies, um you know, for a very long time.
1:01:46
It's, you know, four movie studios.
1:01:47
It's three accounting firms.
1:01:49
You know, it's just you go right down the list, right?
1:01:51
Um and it's just, you know, three big banks.
1:01:54
Um you know, um and so and these are oligopolies.
1:01:56
And oligopolies are not monopolies.
1:01:58
Like each company doesn't have total, you know, there's no one company that has total control, but, you know, now you've only got three companies and are three companies really, is that sufficient competition to really have market discipline or do they kind of end up with sort of a cartel?
1:02:09
And there's all these ways that they like signal to each other to price fix and so forth.
1:02:12
Uh that sometimes verges into a real price fixing.
1:02:18
Um and then what happens is the oligopolies basically they get big and start to find and then what happens is they basically end up sort of colonizing politics. Right?
1:02:25
And then this this leads to this concept of regulatory capture, right?
1:02:28
Where basically the the, you know, the the companies end up basically essentially occupying the government, you know, at usually at the same time the government's occupying the companies. Right?
1:02:37
And so you end up with these like giant regulatory edifices, you know, Dodd-Frank and all these things.
1:02:40
Uh you know, you end up with you know, these bailouts.
1:02:43
You end up with all these, you know, intertwining and you know, revolving door, right?
1:02:48
Where you've got these regulators that all know that they're going to get, you know, these really high paying jobs at these companies when they when they when they step out of government service or, you know, or, you know, it's like, you know, friends at Goldman Sachs, you know, like the number of people who had like, you know, Goldman Sachs on their business card who now work for the federal government is just incredible, right?
1:03:04
Like it's just it's incredible talent flow, right?
1:03:05
Um and so you end up with this sort of intertwining um of business and government.
1:03:11
And then of course, you know, we experience this in a very tangible way, which is it's okay then, you know, imagine being a startup, right?
1:03:16
Imagine being a new bank, right?
1:03:18
Or a new car company, or a new movie studio, or a new whatever going up against, you know, these cartels.
1:03:23
And it's just, you know, it's just like, "Oh my god."
1:03:24
Like, you know, it's like it's like a mountain that is, you know, for at least for most entrepreneurs it's almost impossible to conceive of climbing. Right?
1:03:29
There was not a new car company in the US that mattered for 80 years, you know, between the establishment of the of the oligopoly in the US and then and then the emergence of Tesla. Right?
1:03:39
So, that's like a 80 years is a long time.
1:03:42
Um And so, you know, what is that, right?
1:03:46
It's It's certainly not a free market economy, right?
1:03:47
It's not company subject to market discipline.
1:03:49
It's It But But it's also not just like flat-out top-down socialism or communism. Right?
1:03:54
It's something else, right?
1:03:54
It's this It's this kind of hybrid mutant, you know, kind of entangled thing.
1:04:00
Um and then you can generalize this idea to, you know, many of these other topics.
1:04:03
And so, it's the same, you know, higher you know, education is education is Through that lens, education almost starts to make a lot of sense cuz like what is education?
1:04:09
K-12 is a monopoly, right?
1:04:11
It's a It's a government-sponsored and run monopoly.
1:04:13
And so, of course it's going to you know, it's a Soviet It's a Soviet system, right?
1:04:16
It's going to It's It's It's run exactly the same way education was run in the Soviet Union.
1:04:19
Of course it's going to generate the exact same results.
1:04:21
Actually, it's going to generate worse results cuz the Soviets were really good at math and science.
1:04:27
Um and then, you know, higher ed is a cartel, right?
1:04:30
It's It's quite literally a cartel.
1:04:32
And the universities form, you know, they have an industry group uh they have these industry groups that they run.
1:04:38
Then then and then they have what's called accreditation.
1:04:39
Um and they control the accreditation process.
1:04:41
And you need to get accredited to get access to federal student lending and all and federal research funding and all these other things, right?
1:04:47
Um and so, it's it's a it's a flat-out oligopolistic cartel.
1:04:53
Um and so, of course it's going to be non-innovative, and of course prices are going to spiral like crazy, and of course there's going to be more and more government subsidies over time, and of course the quality's going to collapse over time.
1:05:00
And the sort of intellectual version of the platform would be sort of anti-monopoly, anti-oligopoly, anti-concentrated power, anti-government, you know, in uh government entwining itself in the economy, right?
1:05:10
Anti-regulatory capture, anti-legacy institutions that are no longer being run by their founders, right?
1:05:15
Um anti-systems for which there's no competition, right?
1:05:17
Um anti-anything that basically tries to, you know, do what's called rent-seeking, you know, to kind of, you know, extract, you know, basically economics from the broader society without competitive alternatives.
1:05:28
Like that would be the core of it.
1:05:29
The the right-wing populist version of that, I think, is sort of very straightforward, which is basically, you know, it's Tea Party, right?
1:05:35
It's basically just like how absurd is it that we have these huge things that just keep getting bailed out? Like what the hell?
1:05:39
Um and then the, you know, and by the way, I you know, sort of Occupy and Tea Party actually kind of have the same, you know, in a lot of ways the same argument.
1:05:45
Um you know, from the different sides of the spectrum.
1:05:47
And then you know, the the the the modern form of that is, you know, the you know, the the the left-wing version of that is is, you know, you do hear it.
1:05:54
And and you know, the left the left-wing people argue more directly for the government to just do all this, but you know, they are onto something, I think, with the critique of like, "Look, like are these even companies?" Right?
1:06:03
Is is is this even capitalism, right?
1:06:05
And and and is the market actually delivering what the market's supposed to deliver? You got my vote, man. When are you running?
1:06:11
Never never under any circumstances.
1:06:14
You once said that you had this little I remember this interview, it was like several years ago.
1:06:18
You had this little mental model of Elon Musk on your shoulder. Is that true? And if so, why?
1:06:25
And who else do you have mental models of and how do you use them to help you?
1:06:29
You know, one of the things is you kind of, you know, as you study kind of, you know, various very kind of smart people and you know, people who have like done a lot of important things, it's like, you know, they they all had some way of operating.
1:06:38
You know, they all had some theory, right?
1:06:39
Some some some structure or framework of the world and how it works and how how to cause things to happen.
1:06:44
Um and and there one of one of the things that's interesting, you know, there there are many such frameworks.
1:06:48
Even even the same kind of person that, you know, there many very of the most successful investors, generally each of them had some unique take on the world.
1:06:55
And they and they weren't necessarily compatible takes, right?
1:06:56
And they just they figured out a you know, a kind of a a way to do things that's very different from the way a lot of other people did things.
1:07:02
And the same thing for CEOs and entrepreneurs and, you know, by the way, same thing for artists and, you know, any any other kind of you know, these these sort of very sort of successful people.
1:07:11
Um And so, like I'm pretty convinced there's no way to like synthesize all of their kind of different approaches and views and frameworks into a single model.
1:07:19
Like it's just it's too complicated and it's too contradictory, and it it it it kind of it wouldn't really work.
1:07:24
At least I I don't think so.
1:07:25
Um but what you can do, right?
1:07:28
Um you know, when when you And then what what you do is like you you know, as you go through your life you know, you talk a lot about this in your work.
1:07:34
And we talked a lot about this today is you you do try to assemble your own kind of worldview and your own framework and your own way of of of sort of of doing things.
1:07:42
Um and and and by default, your your your your kind of framework on that will get probably narrower over time cuz you'll get kind of more locked in more set in your ways.
1:07:48
Um and you'll get more resistant to new ideas.
1:07:50
Um And so, like one of the ways to offset that is to like quite literally have like have the mental model for how somebody else would think about the same situation, right?
1:08:00
In in in a way that's like not threatening to you, right?
1:08:03
Which is it's not like a Okay, this is like now I have to have an argument with myself.
1:08:06
But it's more just like, okay, like if you know, I take your pick of who you admire, but you know, in my case it's like Elon Musk or you know, or uh Steve Jobs or you know, Andy Grove or Peter Thiel, you know, were in the room, right?
1:08:18
Uh you know, what would they say?
1:08:21
And you know, and by and by the way, this itself is a daunting challenge cuz these people are incredibly smart, and I I don't know that I can even, you know, kind of replicate their thought process.
1:08:28
Um but you know, I do know, you know, I I do know a fair amount about their thought process.
1:08:31
And I you know, they and you know, I I it it it so happens that I I also have known them, but also like you know, they've they've they've both have written They've all written and talked a lot about kind of how they how they think about things.
1:08:41
Um so then it's like, okay, what what's my mental model for Yeah, how how would Elon think about this, right?
1:08:45
And so, And so, I just give you you know, the simple one.
1:08:48
Like the simple one for this the simple one for Elon.
1:08:49
And Elon's a very complex guy, but the most simple kind of form of Elon that's useful in this way is is what he calls first principles thinking. Right?
1:08:57
Which is it's like, okay, like basically in Elon's view, we all basically just like assume too many things from from the way things are.
1:09:02
And the right thing to do is to kind of, you know, he he kind of gets this from physics cuz he he was trained as a physicist originally.
1:09:07
Uh which is a very different mentality than than than the one that I come from.
1:09:11
Um and it's basically okay, strip things all the way down to basics again and start and basically start the logical thought process over again. Right?
1:09:19
And so basically, you know, go deeper into the idea to the very foundations and then build your way back up.
1:09:24
Um and and you know, just going through that process is a way to kind of really catalyze your thinking.
1:09:28
You know, Peter's form, you know, Peter's kind of core mental model that, you know, that I bought that I've kind of drawn from is, you know, his focus on this this philosopher Rene Girard and, you know, this idea of of sort of, you know, the memetic dynamics and and, you know, people copying, you know, people copying behavior between each other.
1:09:42
And then also, you know, rivalries forming and and how that plays out, you know, human dynamics.
1:09:46
And Girard had this very kind of sweeping whole theory about how that kind of determines how all society kind of functions.
1:09:51
And maybe that's not completely true, but like there's there's clearly a lot to that.
1:09:54
And then of course, there's the scapegoating cycle which which does seem to play out every day, especially when dealing with any of these internet things or systems things, networks.
1:10:04
You know, it's a very useful framework.
1:10:05
And so, you know, being able to kind of have an imaginary debate with Peter um and kind of say, "Okay, what would the lens on that be?"
1:10:11
Um you know, and then obviously we we could go on at length, but you know, Jobs and Groban, these guys had their own their own views of things.
1:10:17
Um and so it's just it's it's a way to kind of keep the actual um you know, I don't know, keep keep ideas flowing and then sort of enable yourself or force yourself to like basically stress test your own ideas uh through a lens that's not just your preconceptions.
1:10:30
Um I I think it's quite helpful.
1:10:33
I think you get a different perspective, right?
1:10:34
Like you see the problem through the lens of somebody else, which helps you actually understand the problem a little bit better than you do just seeing it through your own lens because we can't fully understand a system that we're part of.
1:10:44
So, by assuming somebody else's persona, we get more detailed information about what we're missing and we eliminate some of our blind spots.
1:10:51
And then I also think it's also I also think a lot about it's like it's also keeping a high bar um for yourself and for your work, right?
1:10:59
And and and this maybe is also something that's also has to do another thing that happens with kind of age and success is and we see this actually with founders is like at some point there are some founders where they start, you know, company three, four, five, six.
1:11:08
At some point they get tired of doing the work.
1:11:13
Like they get tired of going all the way back to basics.
1:11:16
Ben and I had this uh we had this we had this uh we talked to Jeff Bezos about this at one point and um he asked us why we were starting a venture capital firm and another company and another startup and and and and we asked him, well, if if Amazon, you know, for for some reason Amazon got sold or whatever um and you were a free agent again, like would you start, you know, would you start another company?
1:11:32
Um and he laughed and he said, you know, not in your life.
1:11:35
He's like, you know, he's like that would be going back to kindergarten.
1:11:38
And he's like, look, don't get me wrong.
1:11:40
I really like kindergarten. Right.
1:11:41
But like, you know, having built Amazon, I'm not going back to kindergarten, right?
1:11:45
You know, having built Amazon, I'm not starting a company again from scratch.
1:11:48
And so, you know, and and so there's this is like the where the first principles thinking comes in handy, which is it's like, okay, like what's the bar? Right?
1:11:56
Like what's the bar that you're applying to your own work and to your own thought process?
1:11:59
And are you actually being as rigorous as you, you know, are you being as rigorous at say 50 as you were when you were 25?
1:12:03
Um and are you able to actually, you know, cuz when you're 25 or whatever, you're doing something new, like the world is judging you every step of the way and it's like a harsh, you know, it's a harsh environment and you know, the world corrects you quickly.
1:12:14
How do you keep that bar rising, right?
1:12:15
And not let success sort of turn into complacency?
1:12:21
You need you need some you need some forcing function. Right? You need a reason.
1:12:24
This is why we always in the the smart the smart entrepreneurs all know this, but this is why even entrepreneurs starting company number four, five, six, you know, this is why they should have like a board of directors and they should have people on their board who are actually like very smart and strong willed who will argue with them. Right?
1:12:38
Um as opposed to just them doing whatever it is they're going to do on their own is because like they they you need no matter how good you you need some force most people need some forcing function where they're they're sort of forced to fully think things through.
1:12:49
They're forced us all the work and they're forced to be able to defend it. Right?
1:12:53
And if you have a point like if they don't do that it's it turns into complacency and laziness and at some point it turns into arrogance and it it just it becomes very destructive and then you stop being effective.
1:13:00
And so there has to be some forcing function.
1:13:02
The the the the the Peter Thiel on the shoulder on the shoulder thing is is a forcing function. It's how I use it.
1:13:06
Um it's like a forcing function on my own thought process.
1:13:09
It's like, okay, if I were explaining this to Peter or to Elon or whatever, like would they be like, oh, that's a good idea or they'd be like, Mark, like Elon would say that's stupid.
1:13:18
Peter would say I don't I don't think you fully thought that through.
1:13:20
And you know, and then it's like, okay, now I know that I have to go like if I'm going to do this work now I know that I have to go back and do it for real.
1:13:25
Like I I have to be able to justify this.
1:13:28
Um and and and it's and it's an obligation to myself, you know, number one cuz like why am I wasting time on something if I'm not actually set up to do it right.
1:13:34
But then of course it's also an obligation for any of us in a position where other people are going to make decisions based on what we do, right?
1:13:40
People are going to come to work for us. Right?
1:13:41
They're going to participate in things that we're leading.
1:13:43
You know, then we have a real obligation, right?
1:13:44
Cuz like it's you know, imagine how unfair it is, you know, for an entrepreneur who gets lazy who doesn't think things through who starts a company who hires a bunch of people.
1:13:53
Like that, you know, that's really unfair to those people.
1:13:55
Um and so it's it's a self, you know, this is the the surface level answer your question but like it it has to be a self-imposed standard at a certain point.
1:14:01
Um and people either want to people either people either have a reason to impose that standard on themselves or at some point they should stop trying to do the things that they're doing.
1:14:09
Uh last question, what's the last book you reread?
1:14:11
That's a really good question.
1:14:13
Um You know, I'll tell you one book I keep coming back to.
1:14:16
I keep coming back to um I keep coming back to the the the Henrich the Joseph book, um The Weirdest People in the World.
1:14:24
Um another book that I keep coming back to is a book called the the Machiavellians by this guy James Burnham, um which I think is probably the best book on politics of the 20th century and it's been like incredibly helpful to understand what's happening right now.
1:14:37
Um so those are two big ones.
1:14:37
Martin Gurri's book, uh The Revolt of the Public.
1:14:42
We'll put all of these in the show notes on the website to make it easy for people to get them.
1:14:45
Oh, I'll give you a fourth one.
1:14:47
I'll give you a fourth one.
1:14:48
We don't have time to talk about it now, but um a fourth one that people haven't a lot of people haven't read, but it's had a really big impact on how I think about things.
1:14:54
Um it's a book called The Ancient City, and it's written by a So, it's a it's it's from the it's from the 1860s, um but it's a still a very relevant book cuz it's based entirely on original classical sources, Roman and Greek sources.
1:15:08
And it's sort of a it's sort of and it hold the history of it is holding up really well.
1:15:11
It's a reconstruction of basically human society kind of pre the Romans and Greeks of what it was actually like, and then sort of how that turned into Roman Greece, and then how that turned into our world.
1:15:22
Um and it's written by a French uh a prominent French academic 100 150 years ago.
1:15:26
Um but it's a it's a really profound and striking book.
1:15:29
Um and if you read it, you're like, "Oh, this explains a lot."
1:15:33
It it it In particular, it's the best book I've ever found it's the best book I've ever found on sort of the creation of civilization, the sort of prehistory of civilization.
1:15:39
And then it's the best book I've ever read on like basically the role of the cult. Right?
1:15:45
So, like why cults exist, um what they are, um and what it feels like to be in one.
1:15:51
Um and of course, you know, one way of looking at the world is the world is just basically this, you know, sort of series of cults of what form or another.
1:15:59
I I don't know that I would even say that I fully understand it yet, but um it it is It's one of those books.
1:16:02
I don't know about you, but like when I there's something interesting in a book, I I underline it, and then if it's really interesting, I I dog-ear the the page uh that it's on.
1:16:12
Um and then there's there's a few books that I've read where it's like they they destabilize the piles of books because I've dog-eared like every single page, and now the book is like crooked.
1:16:22
Um and the books on top of it will like tip over at some point.
1:16:24
And this is one of those books where like I just I dog-eared every single page.
1:16:28
There's this stuff that just jumps right off the page at you and just like bites you like right in the nose, and it's like, "Okay, this is like the the world is not work the way you thought it did.
1:16:35
People are not the way that you thought they were."
1:16:36
And here's all this, you know, here's 4,000 years of history kind of explaining why.
1:16:39
Um and so anyway, we maybe we talk about that one another time, but that one I keep coming back to.
1:16:47
Thank you so much for taking the time today, Mark.
1:16:49
Yeah, good Shane, a real pleasure.
1:16:49
And congratulations on everything you've been up to.
1:16:51
It's it's I'm a I'm a huge fan.
1:16:55
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1:16:57
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1:17:07
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