A16Z Founder Interview: Venture Capital Philosophy of Tech Optimists
"Marc Andreessen" by Joi, CC BY 2.0
Marc Andreessen probably needs no introduction, but I think it is necessary to introduce his legendary experience.
Marc helped write Mosaic, the first widely used graphical interface browser, making him one of the inventors of the Internet. Marc co-founded Netscape and several other companies. He later also co-founded the venture capital firm Andreessen Horowitz (with Ben Horowitz), also known as A16Z, one of the largest venture capital firms in the United States. He recently launched a media publication called Future, where he occasionally writes about his thoughts.
Marc has been a hero of mine since I was a teenager, when Netscape Navigator opened up the world to me. Part of the reason I moved to California was to meet people like him. Now I know Marc very well, he is a subscriber to my blog! We often chat together because of his ability to bolster this optimism with a combination of gritty optimism—both a knowledge of specific details and a broad understanding of various schools of thought. Many people will tell you that the future is full of possibilities; Marc will tell you exactly what those possibilities are and why they are possible.
I recently sent Marc a list of ten questions about technology and the future - about automation, US institutions, social media, but also competition from China, crypto, the future of the venture capital industry, and more .
The following is his answer, hoping to give you some new inspiration.
Q: So, back in April 2020, you wrote a widely read article called "It's Time to Build," which basically argued that the pandemic had exposed deep dysfunction in many institutions and industries in the United States, We need to build new things to take us out of this routine. I very much agree with this. My question is: what do you think are some of the top priorities for the things we need to build in the private and public sectors? Who should build them?
A: In the 15 months since I wrote It's Time to Build, three events have dominated: the devastation of COVID, the systemic failure of almost every public sector entity in the world (previously powerful Asian countries failed to quickly Vaccinations), and the notable success of the private sector, especially the U.S. tech industry, in helping us all get through this pandemic in better shape, and rightfully so.
So the good news is that despite the apparent long-term collapse of state capacity in our time almost everywhere, even under considerable pressure, much of our political system is committed to killing it with regulatory handcuffs, with the wrong Policy destroys it. The private sector can and does, too.
Now, you know there's a lot more to build. First, much of our country, and much of the world, has yet to achieve the dramatically improved standards of living that the elite readers of this interview expect. Consider the three main hallmarks of the American Dream, or middle-class success more generally—housing, education, and health care. You've detailed how these three markers of success seem increasingly out of reach to many ordinary people. I think - would you agree? — These three deficiencies not only create problems for the way people live and the way our economy works, but they also greatly damage our politics.
Housing, education, and healthcare are all very complex, but what they all have in common is skyrocketing prices in a world where technology drives down the prices of most other goods and services (see chart below). I think we should spend the next decade building new technologies, businesses, and industries that break these price curves—indeed, reverse them, and make these three main hallmarks of the American Dream more and more accessible to the average person. people want to achieve. I'm proud that my VC firm has exciting startup investments in all three areas, but we still have a lot of work to do. I hope more people join our mission.
Q: One of the themes of my blog so far has been technological optimism. I have to say, some attitudes come from talking to you over the years! Are you still optimistic about the near future of technology? If so, which technology should we be most excited about?
A: I am very optimistic about the future of technology, at least in areas that allow software-driven innovation. It's been ten years since I wrote the article "Software Eats The World," and the case I made in that article is even more true today. Software will continue to eat the world, and will do so for decades, and that's a wonderful thing. Let me explain why.
First, a common criticism of software is that it's not something that takes physical form in the real world. For example, software is not a house, school or hospital. This is certainly true on the face of it, but it misses a crucial point.
Software is the lever of the real world.
Someone writes the code, and all of a sudden, riders and drivers coordinate a whole new real-world transportation system we call Lyft. Someone writes code, and suddenly homeowners and guests coordinate a whole new real-world real estate system we call AirBNB. Someone writes code and all that, and we have cars that drive themselves, planes that fly by themselves, and watches that tell us when we're healthy or sick.
Software is our modern alchemy. Isaac Newton spent most of his life trying, unsuccessfully, to transform a basic element -- lead -- into a valuable material -- gold. Software is an alchemy, turning bytes into actions by atoms and atoms. It's the closest thing we have to magic.
So instead of feeling like we've failed if we're not building in atoms, we should try to use software as hard as we can. Everywhere software touches the real world, the real world becomes better, cheaper, more efficient, more adaptable, and better for people. This is especially true for those whose real-world needs have been reached through software, at least until now - such as housing, education and healthcare.
Q: You recently invested in at least two companies, Clubhouse and Substack, which are part of a new wave of social media. Discord may also be included on that wave. why now? What's missing from "old social media" like Twitter, Facebook, Instagram and YouTube? How will the new network improve?
A: What the incumbent lacks is not so much. Even more important is the importance of communication as the foundation of everything people do, and how we can open up new ways for people to communicate, collaborate and coordinate. Like software, communications technology is something that people tend to sniff at and even scorn — but, when you compare what any of us can do individually, what we can do when we're part of a group or community or a Be it a company or a country, there is no doubt that communication forms the backbone of almost all progress in the world. Therefore, improving our communication skills is crucial.
Clubhouse is an Athenian bazaar that comes alive around the world. I mean seriously. Clubhouse is the first place where people anywhere in the world come together to talk about just about anything they can think of - not figuratively, but literally. It’s amazing how, in our largely text-based world, people are immediately enthusiastic about the opportunities to engage with oral culture online—whether it’s around a campfire 5,000 years ago or on an app today, talking in groups has eternal meaning.
Substack is a business model of intellectual creativity that has been missing from the internet for 30 years. I'm very excited about this. Substack is not a new form of communication. In fact, it's the original form of Internet communication -- written articles, IETF calls for comments, newsgroup postings, group emails, blog posts. But until now, you could never get paid to write online, and now suddenly you can. I think it's hard to imagine how transformative this would be.
Substack is leading to a flood of new high-quality writing that otherwise would never have existed—raising the level of thought formation and discourse in a world that desperately needs it. A lot of traditional media will make you stupid due to the technical limitations of distribution technologies like newspapers and television. Substack is a profit engine for stuff that makes you smart.
Q: Probably your most famous quote is "Software is eating the world". How might this manifest in the next decade or so? Will AI automate entire business models? Will established companies trying to tinker software into their existing operations and business models, as my friend Roy Bahat believes, be beaten by those who start out as software companies and then venture into traditional markets? or something else?
A: My "Software is eating the world" thesis unfolds in business in three stages:
1. The product changes from non-software to (entirely or primarily) software. Music discs are turned into MP3s and then streamed live. The alarm clock went from a physical device on your nightstand to an app on your phone. Cars go from bent metal and glass to software wrapped in bent metal and glass.
2. The producers of these products change from manufacturing or media or financial services companies to (all or mostly) software companies. Their core competency becomes creating and running software. Of course, it's a very different discipline and culture than what they've done in the past.
3. As software redefines products, and assuming competitive markets are not protected by monopoly positions or regulatory captivity, the nature of competition in the industry changes until the best software wins, which means the best software company wins. The best software companies are probably the ones that make the best software, whether they are incumbents or startups.
My partner Alex Rampell says the competition between incumbents and software-driven startups is "a race where startups try to gain distribution before incumbents get their innovations". The incumbent starts with a huge advantage, which is the existing customer base, the existing brand. But the software startup also has a huge advantage, a culture of creating software from the ground up, without having to adapt to the old culture of standing or answering the phone.
As time went on, I became more and more skeptical that most incumbents would be able to adapt. Culture change is hard. Good software people often don't want to work for a company whose culture is not optimized for them and is irresponsible. It turns out that in many cases it is easier to start a new company than to try to revamp an existing one. I used to think time would improve this as the world adapts to software, but the pattern seems to be intensifying. The percentage of the top 100 executives and managers with computer science degrees is a good test of how seriously incumbents place software. For a typical tech startup, the answer might be 50-70%. For a typical incumbent, the answer might be more like 5-7%. This is a huge software knowledge and skills gap, and you see it happening every day in many industries.
As for AI, as an engineer myself, it's hard for me to be as romantic as many observers. AI — or, in more prosaic terms, machine learning — is an incredibly powerful technology, and the past decade has seen explosive AI/ML innovations that are increasingly coming to reality in the world. But it's still just software, math, numbers; machines don't have self-awareness, Skynet isn't here, computers still do what we tell them. Therefore, AI/ML is still a tool that people use, not just a replacement for humans.
A famous story of the birth of computer science is that Alan Turing, the father of computing, and Claude Shannon, the father of information theory, had lunch in the AT&T executive cafeteria in the early 1940s. Turing and Shannon had an increasingly heated discussion about the future of thinking machines when Turing stood up, pushed back his chair, and exclaimed, "No, I'm not interested in developing powerful brains! What I'm after Just a mediocre brain, like the president of AT&T."
Here's how I feel about AI - although, for the record, the president of AT&T is my friend and he's actually pretty smart. I suspect that "artificial intelligence" is the wrong frame for the technology; Doug Engelbart might be more correct with what he calls "augmentation," so think "augmented intelligence." Augmented intelligence makes machines better thought partners for people. The concept is clearer when considering the technical and economic consequences. In a rapidly growing world of augmented intelligence, we should see the opposite of a jobless dystopia—productivity growth, economic growth, new job growth, and wage growth.
I think that's exactly what we're seeing. It's worth remembering that pre-COVID, just 18 months ago, we were enjoying the best economy in 70 years -- rising wages, low and falling unemployment, and essentially zero inflation. The country's economy improved even more for low-skilled and low-income people than it did for people like us, despite the ubiquity of computers. Unemployment among the most vulnerable in our society—even those without a high school degree—is as low as ever. This is far from an automation-driven dystopia. In fact, this is the payoff of three centuries of increasing mechanization and computerization. As the economy recovers from COVID, I expect these positive trends to continue.
Q: Speaking of software eating the world, I've been writing that the true productive potential of the internet is just beginning and that the pandemic will eventually push us to develop more distributed production systems - like electricity that allowed factories to move from a single drive a century ago The system switches to multiple independently powered workstations. Do you think this is basically correct? Are you seeing more remote work and/or business operations becoming more distributed between different companies?
A: I think it is correct.
First of all, COVID is the ultimate cover for restructuring - what my friend and ex-CFO Peter Currie once called a "shake it up". This is an opportunity for every CEO to do everything s/he might have wanted to do in the past to increase efficiency and effectiveness—from basic headcount realignment and restructuring, to changing geographic footprints, to exiting legacy lines of business - but no, because they would cause too much disruption. Regardless, disruptions are happening, so you might as well do everything you've been wanting to do right now.
Second, it's hard to overstate the positive impact remote work works on. Remote work isn't perfect and has its problems, but nearly every CEO I've spoken to over the past year has been amazed at how well it works. Working remotely working under the extreme duress of a pandemic, with all the human effects of lockdowns and children not being able to go to school and people not being able to see their friends and extended family. It will work better with COVID. Companies of all shapes, sizes, and descriptions are recalibrating their assumptions about their geographic footprint, where they work, where their employees are, how offices are configured, and whether they should even have offices.
Combining these factors, we have the potential to see a substantial increase in productivity over the next 5 years. In my opinion, this productivity growth is the key to the powerful "roaring 20" argument that we will see amazing economic prosperity in the United States in the next few years, even the incredible prosperity in 2009-2020 Above. I don't think it's a certainty, but I think it's possible - even likely.
Third, this is a sea change not only in the way companies operate, but also in the way individuals live and work. For anyone who works primarily with other people and/or through screens - a growing number of the workforce every year, and most with a college degree - it's a time to rethink everything from careers to what to pursue Opportunities, why employers work, where to live, how to live in order to stay alive. Driven by both employees and employers, we've seen massive increases in job turnover at large tech companies, and I expect this to continue as people reconfigure their lives for new options in a post-COVID world. The biggest change is the separation of where you live and where you work, but beyond that, I think a lot of people may choose to live very different lives -- forming new conscious communities, for example.
There is also the fact that in the past most employers were unable to hire the highest potential employees due to geographic constraints, but now they can - the talent may not actually be evenly distributed, but it is certainly far more distributed than the company and the employees can be Leverage - Suddenly, there is an opportunity to more effectively match employers and workers around the world.
Add it all up, and you can dramatically unlock potential economic growth in the United States and around the world. More people getting better jobs, more spending power creating more demand, more new industries and business creation, more job growth and wage growth... I don't want to just predict The future looks blue, but the positive scenarios may be underestimated.
Q: In recent years, you have become more and more interested in the field of cryptocurrencies. Are there cool things about encryption that aren't emphasized enough in popular discussions?
A: Encryption is one of those themes that brings to mind the parable of the blind man and the elephant - there are many facets to how it works and what it means, and you can interpret it in a number of different ways and grab one part or the other to come up with it Any point of view you want. For example, many people have seized on the currency component, either glorifying it as a new monetary system that liberates humans from nation-states, or viewing it as a threat to economic stability and the ability of governments to collect taxes. All of these are interesting arguments, but I think they all miss a more fundamental point, which is that encryption represents an architectural shift in how technology works and how the world works.
This architectural shift is called distributed consensus—the ability to establish consensus and trust among many untrusted participants in a network. This is something that the Internet never had, but now that it is, I think it will take us 30 years to do all the things we can do. Currency is the simplest application of this idea, but think about it in a broader perspective - in theory, we can now build internet-native contracts, loans, insurance, ownership of real-world assets, unique digital goods (called non-fungible Tokens or NFTs), online corporate structures such as Digital Autonomous Organizations or DAOs, and more.
Also consider what this means for incentives. Until now, the human effort to collaborate online has either taken the form of actually adopting the norms of a real-world company—a company with a website—or an open source project like Linux with no direct attached funding. Using crypto, you can now create thousands of new incentive systems for online collaborative work, as participants in crypto projects get paid directly, without even needing a real-world company to exist. As great as open source software development is, more people are willing to do more things for money than for free, and all of a sudden, all of these things are possible, even easy. Again, it will take 30 years to resolve this consequence,
Finally, Peter Thiel makes the typically sweeping observation that AI is in some sense a left-wing idea - centralized machines making top-down decisions - but encryption is a right-wing idea - many distributed agents, humans And bots make decisions on the bottom. I think there is some truth to this. Historically, the tech industry has been dominated by left-wing politics, like any creative field, which is why you see big tech companies today being so intertwined with the Democratic Party. Crypto may represent the creation of an entirely new class of technology, right-wing technology in fact, that is more radically decentralized and more attuned to entrepreneurship and free voluntary exchange. If you believe like I do that the world needs more technology, this is a very powerful idea.
Q: A16Z is known for innovating in the venture capital space, providing broader services to portfolio companies, and being a registered investment advisor. What other changes do you think VC firms will explore in the coming years? Some may become similar to private equity firms or banks? Are there any entirely new business models on the horizon?
A: There's something very old about what venture capital is - Tyler Cowan used the term "project appraisal," which is a process of sorting through many possible configurations of people and ideas, and then spends money and energy on Pick a few and try to create something new and important in the world. In venture capital, the idea goes back centuries to the whaling industry, where independent financiers would finance captains and ships to hunt whales – legend has it that this is where the term “spin-off interest” originated, originally meaning A whale carried by a ship and kept by the captain and crew. The same "project appraisal" pattern has played out over the centuries for a variety of large, high-stakes projects, from colonial settlements like Plymouth Colony, to music/film/TV projects.
But of course, there’s also something very new about venture capital – we fund the most cutting-edge ideas and projects in the world, funding entirely new concepts that technology makes possible. The founders we fund often break the rules and create new models that people thought were impossible until they happened. This includes many of the cutting-edge cryptographic ideas I discussed above, many of which assume a very different form of industrial organization than the classical joint-stock company.
So we sit in a vortex of the very old combined with the very new. It is certainly possible for VCs themselves to be sucked into this vortex and turn around the other way, and indeed, that’s what some of the brightest crypto experts are predicting. However...at least for now, there is no substitute for someone sorting and sifting through all the potential projects and betting big. Is this Robert Michels' iron law of oligarchs for selecting, organizing and funding ventures, no matter the technology involved? I'm not sure, but maybe.
Closer to home, I am increasingly concerned about whether we can break out of what I call the “little boy/big boy” model of funding and scaling tech projects. The “little boys” are the Silicon Valley ecosystem that gets new businesses off the ground; the “big boys” are the New York and Wall Street stock markets, investment banks and hedge funds that often drive companies to scale during and after an IPO. Maybe it's time for Silicon Valley—as a geography, as a network, as a state of mind—to take on a bigger role in the economy, scaling our companies all the way to gigantic size without handing them over to literally another And professionals on the Metaphor Coast, who may not understand and value them as much as we do. wait and see...
Q: I remember reading an article about you in 1996, on Netscape Navigator on my dad's PC. You still have hair! Anyway, you kind of became an icon of the '90s, and that was a really big time for me and for the internet. So I want to ask: how did the dream of the techie in the 1990s come true? In what ways are they bolting on the rocks of reality? Thinking back to the post-90s generation, how should we remember that era, and which ideas of that era should we stick to?
Answer: Success! A dream come true; it all worked out. Now we are the dogs catching the bus. What do we want the damn bus for?
Think about what we have done. Five billion people now have a networked supercomputer in their pocket. Anyone in the world can create a website and publish anything they want, communicate with anyone or everyone, and access virtually any information that has ever existed. People live, work, study and love almost entirely online. Virtually all components of the 1990s vision have come true.
However, however. As Polaroid founder Edwin Land once said: "I'm not saying you'll all be happy. You'll be unhappy—but in new, exciting, and important ways." Appear."
Why is everyone unhappy? I think it's the tech industry's shift from building tools -- operating systems, databases, routers, word processors, and browsers -- into tools that other people choose and use, to being at the center of nearly every major social and political debate and on Earth The dispute is almost just one step away.
One way to think about it is that we went from pirates to navies. People may like pirates when they're young, small, and scrappy, but no one likes a navy that acts like a pirate. The tech industry today is a lot like the Navy, like pirates.
On the other hand, a navy is not necessarily great without pirates—a repressive force that prevents the formation of new ideas and activities, a global orthodoxy and set of rules that kill creativity—which creates opportunities as well as new The needs of a generation of pirates.
In his treatise Machiavelli stresses the need for a nation to return to the well, to its original founding ideas, to find renewal in later and darker times. I think the same principle applies to companies and industries. I think we should revisit the founding ideas of the tech industry — John Perry Barlow's Declaration of the Independence of Cyberspace and Tim May's Codebook in the 1990s, of course — But also Doug Engelbart and Ted Nelson in the 1950s and 1960s, David Sarnoff and Philo Farnsworth in the 1920s, Thomas Edison and Nikola Tesla in the 1890s, and even Leonardo da Vinci. I think we should treat all those unrealized or not fully realized ideas of those times as not lost but not yet found.
Q: Let's talk about the rivalry between the United States and China. How worried should we be that China - at least according to the World Bank - is far ahead of us in high-tech exports? Should we worry about China's dominance in cyber technology or drones, or their big push in the semiconductor industry and artificial intelligence? If we should be worried, here's how America should respond.
A: There's a canon on the one hand, and a puzzle on the other, which has to do with our tendency to want to punish ourselves to feel good about ourselves. What I mean is: On the one hand, it is good for the world that China develops into a technological innovation powerhouse, because new technologies are not hoarded; they are core ideas, and ideas tend to diffuse and be widely adopted. Economist William Nordhaus showed long ago that 98% of the economic surplus created by a new technology is captured not by its inventor but by the wider world; Applicable at the inventor or company level, but also at the national level. Ideas created in America have enriched the world immensely, and I think the same thing will happen with ideas created in China.
China, on the other hand, has a strategic agenda to achieve economic, military, and political hegemony through control of dozens of key technological areas—this is not a secret, nor is it a conspiracy theory; they say it out loud. Lately their spearhead has been cyber, in the form of their national champion Huawei, but they clearly plan to apply the same playbook to artificial intelligence, drones, self-driving cars, biotech, quantum computing, digital currencies and more. Many countries need to consider very carefully the implications of whether they are going to use a Chinese company's technology stack to run all the downstream controls. Do you really want China to turn off your money?
Meanwhile, America, the technology champion of the West, has decided to whip itself on — political parties and their elected representatives are busy disrupting America’s tech industry in every way possible. Our public sector hates our private sector and wants to destroy it, whereas China's public sector works closely with its private sector because of course it does, it has its own private sector. At some point, we might as well consider whether we should stop shooting ourselves in the foot with machine guns at the start of this all-important marathon.
Q: If you could give a smart 23-year-old American today some advice—career advice or otherwise—what would it be?
A: Don't follow your passion. Seriously, don't follow your passion. Your enthusiasm is probably more stupid and useless than anything else. Your passion should be your hobby, not your job. Do it in your spare time.
Instead, at work, seek to contribute. Find the hottest, most dynamic parts of the economy and figure out how you can make the best and greatest contribution. Make yourself valuable to those around you, clients and colleagues, and strive to increase that value every day.
Sometimes it feels like all the exciting stuff has already happened, the borders have closed, we're at the end of technological history, and there's nothing left to do but maintain what's already there. It's just a failure of imagination. In fact, the opposite is true. We are surrounded by decaying incumbents that need to be replaced by new technologies. let's start.
The views and opinions expressed here are solely those of the author and every investment and trading action involves risk, so you should do your own research when making a decision.
【Original】：Noah Smith, Interview: Marc Andreessen, VC and tech pioneer,
https://noahpinion.substack.com/p/interview-marc-andreessen-vc-and
【Compilation】：Crypto Geek
