#129 Marc Andreessen: Interview with an Icon
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What each of the top venture capitalists of all time has in common is each of them missed almost all of the great deals of their generation. We see this a lot. We do performance reviews, right? We do performance reviews. And so it's like, well, they've made 10 investments and, you know, one of them is just this huge success and the other nine are like, you know, sucking wind. And it's like, okay, is this a good venture capitalist or a bad venture capitalist? And it's like, well...

In any domain that's not probabilistic, you'd say this person's terrible, right? You know, it's batting average of like 100 out of 1,000. It's like this person's awful. And there's always the temptation to say, well, this one thing that's working is it's like it's a fluke, right? And so who knows whether they'll ever get it again. And it's at that point where I put my head up and I say, we're in the fluke business. The whole point of this is to get the flukes. You don't have to score 100%. And not having to score 100% basically means you can take chances. ♪♪

Welcome to the Knowledge Project Podcast. I'm your host, Shane Parrish. The goal of this show is to master the best of what other people have already figured out so that you can unlock your potential. We interview world-class doers and thinkers so you can better analyze problems, seize opportunities, and live a more meaningful life. Every episode is packed with lessons and insights that never expire.

If you're listening to this, you're missing out. If you'd like special member-only episodes accessed before anyone else, transcripts, and other member-only content, you can join at fs.blog.com. Check out the show notes for a link. Marc Andreessen is here today.

Thank you.

I've been wanting to talk to Mark for a long time, and this conversation does not disappoint. 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 Mark knows about decision-making that most people miss, our largely dysfunctional education system, assessing the judgment of founders, and so much more. It's time to listen and learn.

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So there's a lot going on. So the full answer to that question would probably take the entire podcast. But, you know, I would say probably two big buckets of things. You know, my day job is, you know, being obsessed by all of the sort of changing technologies and then, you know, the sort of impact that all the new technologies are having on the, you know, on different industries and on the world broadly.

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, 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, kind of sometime between 2008 and 2015, you know, and then for sure heading into the last five years.

And so 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. You know, back to my kind of day job, which is that society changes and as technologies change society and as, you know, frankly, also society changes technologies. How much of what we experience as new is actually new?

versus how much is old, right? How many of the sort of behavior patterns or societal changes do we, you know, do we kind of experience this brand new that actually turned out to be quite old patterns? What I find generally is if I don't understand something, I try to read backwards and kind of the further back I read, the more universal themes I find. And the more things that I think are kind of remarkable and unique to our era actually turn out to be quite universal. And,

And at least for me, that's a calming experience because it makes me feel less less like the world is sort of spinning, you know, in a different direction and more just that we're, you know, we're playing out patterns that are kind of deeply rooted in humanity, which is what I mostly believe. So anyway, that's the that's the current thing. Can you talk to me a little bit about those patterns? What what comes to mind when you think of an example that you're you're surprised by?

I mean, you take almost anything, but I mean, I'll just give you the most basic one. So most basic one is societal reaction to new technology. Right. And so there are, you know, there are these new technologies of our era. You know, we could make whatever list we want, you know, and, you know, everything from social media and Internet to many other things, automation, robots.

uh and so forth 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 um you know there's a reaction from different political movements you know political candidates right are now you know taking you know kind of major stands on these things

both in the US and around the world. You hear it a lot like around the kid, like what technology does to kids, right? And say sort of the go-to thing, which is sort of this technology is gonna ruin the new generation of kids. And then you just kind of ask yourself, well, is this the first generation of technology for which they have made those claims, right? Or in fact, have those claims been made for basically prior generations of technology? And then of course, the next question is like, okay, were the claims different in the past or were they actually the same claims?

And then to the extent that they were the same claims, you could ask like, okay, how are they playing out differently this time? And are they playing out differently this time? There's actually quite rich literature, both in the history of technology and on the sociology of technology. Prior generations of sociologists who I think were actually more kind of interested in the current generation, actually grappled with these questions a lot. And I mean, even like Marxism itself is heavily based on the impact of technology on society, or at least on Marxist theories on it.

And so I found this just like fantastic book that I just really highly recommend. It's a great example of this. It's a book written by MIT professor 50 years ago. They just did a 50 year reissue of the book.

So it's a book that it's very, I can state very confidently, it's a book written before the internet, before any of the things people, you know, people are mad about today. Right. And it's this great book with this great kind of, you know, title from, you know, kind of the 1950s, early 1960s called, it's called Men, Machines, and Modernity. I'll have to look it up, but it's Elting Morrison is the title. But it's like, I think it's Men, Machines, and Modernity, you know, but it's this, it's basically, it's a short little book and it goes through basically, it goes through this history of like how new technologies are sort of received.

in society. And it just briefly, it proposes this basically three-step process.

And sort of, you know, step one is basically just like flat out ignore, right? New technologies are just like dismissed. All the experts and all the people who are kind of in power, you know, just kind of say, okay, this thing is not going to matter. It's not going to be a thing. Step two is rational counter argument, right? 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. But like they really get into the argument in step two and they really like try to reason it through. And then he says, step three is when the name calling begins.

Which is to say step three is when the status quo basically goes bananas and gets like super emotional and super irate and kind of goes on tilt. Right. And starts name calling and starts accusing those sort of proponents of the new technology of sort of all these evil kind of moral crimes. And basically 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. 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 come to the foreground and take the power. And of course, in human society, power and status battles are the core battles like that. They are the most vicious fights. And so

Basically, what happens is a lot of technologists kind of start out by assuming that they've built a better mousetrap. And of course, people should appreciate them for it. And then they find out that everybody hates them for it. And basically, that's the reason why. And that this is a persistent pattern through history, that this is, in fact, not new.

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? So the really big one is basically hierarchy versus network, right? Or you kind of say institutions versus network.

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. 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. It's funny. The last third of the book made me very mad. And,

And of course, the reason it made me mad is because he mounts sort of a rising defense of the old power structure. Sorry, rousing defense of the old power structure. Right. Whereas, of course, I'm on the side of the new power structure. So, of course, that would make me mad. It's kind of the reverse of that. Right. I'm mad by the resistance. And so anyway, the big battle is sort of you could call it kind of institutions versus networks. You could call it kind of top down hierarchy versus sort of lateral kind of network building. And so you start by saying top down institutions, a top down institution building is kind of how the West works.

you know, and, you know, it's a certain, I'm sure of some other cultures as well, but let's just, you know, I'm most familiar with the West, so I'll just focus on that. It's sort of how the West was won was we got really good at building these, basically these giant hierarchies. 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. And so mass manufacturing, right. And then, you know, mass transportation and then mass media, right. And then mass government. And,

And so we got really good kind of between call it 1880 and 19, you know, basically, you know, I don't know, 1939 or something. We got really good at building, you know, giant industrial companies, right. You know, General Motors and General Electric and, you know, all these companies. We got really good at building, 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, you know, after the 1930s that, you know, that's only, you know, it's only accelerated since.

And then we got really good at like mass media, mass communication, right, radio and television and so forth. And then also, right, therefore, you know, mass politics. Right. So this kind of absolute dominance of these two major political parties. 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 a great empire, we got really good at kind of building the American empire.

Right. And of course, the American empire kind of continues to this day as not as a not as a literal empire in the old sense, but as a sort of a, you know, a modern empire, which is to say, you know, cultural and intellectual and societal empire. You know, somehow, by the way, we still have 800 foreign military bases, but, you know, for the most part, sort of a soft power empire.

So, so we just, we got really good at these giant kind of top-down things. And then 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. And, you know, there are these famous books from that era, you know, the organization man is probably, you know, the key book kind of of that era that kind of described it.

There's this great line in The Organization Man where he says, you know, in sort of this era of all these mass systems, he said, you know, the route to power, he said the route to power leaves, you know, inevitably leads through the conference room. Right.

It's like the way that power has been exercised in our society through these decades of mass systems has been basically people in conference rooms arguing with each other over control, basically of these mass mechanisms, over control of what the ad campaign is going to be, over control of what the new car model is going to be next year, over control of which candidate is going to be the Democratic or Republican presidential nominee or whatever. It's these people at the top of the hierarchy kind of battling in conference rooms.

And by the way, it's also right as a consequence. It's like, you know, all these institutions over time kind of end up run by lawyers. Right. Of one form or another. Right. There's sort of, you know, people kind of deal in words. Right. People who deal in kind of symbolic manipulation at the word level are sort of the sort of not non quantitative conceptual level. And, you know, it looked by the, you know, kind of 80s or 90s like that was just going to be how it was. And then, you know, this Internet thing comes along.

And the core technological foundation of the internet, of course, it's not that, right? It's not a top-down institutional thing. By definition, it's a lateral peer-to-peer, right? The core architecture, right, famously, the internet is surviving nuclear strike, therefore there is no central node, right? Therefore you're able to route around damage, right? Therefore you're able to sort of expand the network laterally. Anybody can plug in it. Anybody can build whatever app they want. Anybody can build whatever website they want. They can put on any information they want.

They can organize any movement they want. Right. And so you have this introduction of this like fundamentally disruptive lateral network based technology. That's sort of the precise time when it looked like we were going to have sort of peak centralization. And so I think what we have now is kind of at the sort of deepest level we have is kind of this big fight between people who want to use the Internet to basically reinforce top down power versus people who want to use it to disrupt top down power.

My analysis is basically that's what's happened to our politics, right, on both the left and the right, right, which is the internet is both the enabler for traditional political movements and parties to try to establish hegemony, right, it's 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, and, you know, the new right and all the all the sort of new disruptive movements on the right. And so

So there again, you see the same fundamental battle between basically institutions and networks. I think that's fascinating. And one of the things that I sort of see is it's permissionless. I don't need anybody in the boardroom saying that I can go talk to people now. I can just put my ideas out there and let other people be the judge of those ideas. Yeah, that's right. And there's this huge tension. So there's this thing. Well, so let's take mobile, you know, because the smartphone is kind of a key revolutionary technology in terms of, you know, sort of access to all this stuff.

It was not that long ago, as recently as 2006, right? Which was only 15 years ago. As recently as 2006, exactly to your point, if I wanted to, I could actually build smartphone apps in 2006. I could build an app that did whatever I wanted on a phone. But to get it distributed, 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. And I had to basically apply.

Right. And literally I had to go into a conference room. You know, you had a gatekeeper. Absolutely. One hundred percent. And if it was famously the term in those days, it was called the deck and the deck. Basically, it was basically the home screen or like the UI on the phone. And if you wanted your app in the deck, you went in and you started negotiating in a conference room. Right. With, you know, men in suits and, you know, the opening, you know, the opening, you know, the opening bid was, you know, 40 or 50 percent of your thing.

And then they could basically dictate like if it does this or that, like whatever, whatever. And then by the way, you know, to this day, like, you know, Apple, you know, opening up the iPhone and the App Store was a big step forward. But of course, even Apple continues to exercise a fair amount of control. I mean, they're far more open than Verizon was in those days, you know, but even still, like, you know, Apple bans entire categories of apps. And then, of course, they extract their 30% economics.

And so even still, there's still kind of a legacy holdover of that level of control. But in stark contrast, and I think this is a good news story, in stark contrast, the web has never had that property. The web didn't have that property on day one. The web didn't have that property in 2006. And the web, in fact, doesn't have that property today.

And, you know, it's like, you know, there's a compromise, especially on smartphones. Like there's a compromise for building a mobile website versus building an app. And, you know, there are issues involved in that. But, you know, the fact remains, like you can still build whatever website you want and you can put whatever information you want on it. And just from a historical standpoint,

That's just such a change. I mean, the most dramatic way of thinking about how big of a change that is as sort of a global kind of macro level is that the Soviet Union, there was this dissident movement inside the Soviet Union in the 1980s. And they didn't know that they were going to win up until I think the very last minute. They didn't know the USSR would ever fall. But they tried. And there were some very brave people behind the Iron Curtain in Russia and in the other kind of East Bloc countries that battled for a long time.

And so, you know, they had this concept of samizdat, right, which was basically, you know, information, free information, right, about like, you know, open criticism of the Soviet regime. And it was necessarily an underground phenomenon because if you were caught with it, right, you would get shot. And so they had and so then there's this sort of practical question of like, how do you produce samizdat? And the answer in those days was you produce samizdat by mimeograph machines.

Right. Which is sort of the, you know, for kids listening to this, this was photocopiers before photocopiers. You know, so these were sort of, you know, pretty expensive, complex kind of, you know, basically basement. You put one of these in your basement or your office and you could make copies of paper, you know, kind of invaluable. And, you know, sure enough, like there was like a whole thing involving smuggling mimeograph machines into Russia, into the Soviet Union. And then if you were caught with a mimeograph machine, you were shot.

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. 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, you know?

North Korea is doing their damnedest to try to maintain that model, you know, but without going full North Korea, like I'm not sure you can. I mean, I guess I'm an optimist on this point. Like I tend to think open access information basically makes a lot of these historical things fundamentally impossible. Not all centralized institutions get torn down on day one, but like over time.

If people are able to actually like debate things, people are actually able to see, you know, alternative viewpoints. People are actually able to point out flaws, you know, kind of in the systems that are ruling them. Like over time, you know, I don't think people will put up with the kind of draconian kind of top down control that, you know, that we used to have to put up with, you know, before these technologies existed.

Can you give me both sides of the next 10 years? I'm interested in hearing your most optimistic scenario and your most pessimistic scenario. Look, optimism is just like it's basically the Morrison book, right? It's basically you have you have all these kits. So you have kind of the world as it is. You have the status quo. You have the power structures, the hierarchies and whatever. They work as well as they do and so forth.

And then you basically have all these kids. And this is kind of one of the things in my day job that's just always so interesting is like, because these kids like walk in the door and they're just there and they walk in the door from all over the world, right? From every walk of life, from every possible background. And they walk in with, you know, an idea and a skill set. 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.

And part of it is, you know, kids now are growing up on the internet in some fundamental way. And so, you know, we see kids now from all over the world who walk in and they are like far more educated, right? And skilled already to be able to do, you know, a startup or, you know, create new software or do any of these things, you know, than I was at their age because they've learned on the internet. Like they've gone online, they've read, you know, they've read everything, they've watched everything. They, you know, it's just kind of their depth of sort of technological knowledge and business knowledge and finance knowledge and cultural knowledge is just like incredibly broad.

And so these kids walk in and they, you know, like kids, you know, like any generation of kids, 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. 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 in a position to be able to support them and help them do that. So there's, you know, there's a system kind of waiting for them. You know, basically it's that we're just going to see this or, and you see it now, but you're just going to see this sort of continuous kind of movement.

of all of these new ideas and all these new ways of doing things. And, you know, look, you know, they're not all going to work. It's a rebel alliance versus an empire.

It's asymmetric, right? The empire has to win 100% of the time, right? They have to defend against all attackers, right? Whereas, you know, so you can have many different attackers who kind of keep coming. 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, you know, better ways of organizing the economy and productive activity and creating job opportunities for people and education and, you know, how the, you know, how, you know, just like all aspects of how people live and work.

you know, just like more and more choice, more and more options, more and more better ways of doing things.

And, you know, the incumbents will, you know, they'll go through the three stages, right, every time. And you see it, you know, like I said, it's either denial, it's sort of rational, you know, counterargument, or it's name calling. Is that inherent to even the winners today? Like Google is now an incumbent, right? So this is one of the funny things I talk a lot to our founders about. And this is not a, you know, what's so useful, I think, in this view is this is not a criticism of any individual person, right, or any criticism of any individual company. This is why I try to get to the broader trends, right?

right because like the broader trends like are impersonal in the sense of okay if you see this pattern over and over again then it's not just you like when i you know when i tell somebody you're doing x it's not like a criticism of you're doing x it's more an observation of you know you're doing x just like everybody else who's ever been in your situation has done x 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 you don't like that 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

That's about five years until they become a new incumbent. And they actually start to behave like an incumbent. That's rational. Like, of course, that's rational. Like they've now built something worth defending.

Right. And they've like they've now established power in the world. Right. They've established a position for themselves. You know, they've built something of value and now they have something worth protecting. And of course, the next you know, the next thing comes along very quickly. You know, the next kid comes along five years later. You know, and a lot of times it's really funny because it's like, you know, the new incumbents run by like a 26 year old. Right. And then and then the new disruptors like a 21 year old. It's like, you know, it's sort of like one kid really mad about the other one. And it's like, yeah, well, you know, that was you five years ago. Right. Like so, you know, this is the way of the world.

And so, yeah, no, look, so this is actually a really big question. Actually, Peter, my friend Peter Thiel has talked a lot about this in public, and he's much more, I would say, kind of hardcore on this than I am, but Peter sort of characterizes Google as no longer a tech company. Peter now just flat out calls them their anti-tech company. In his view, it's their enemy of innovation, like they're a blockade.

of innovation, they're no longer doing anything sort of disruptive. Instead, what they've done is they've established a new monopoly in search, and they're using that monopoly in search to try to basically prevent new technologies from coming to market, including new competitors, but also just more generally, a lot of new technologies.

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. So so they become kind of anti-change. Now, I would say that that's Peter's view. It's a it's a very strong view. I would I would not say that about Google. I would just say more generally, like that is the incumbent temptation.

It's basically go from attack mode to defend mode, right? Go from being the pirate to being the Navy, go from being the rebel to being the empire. And so, yeah, it is a thing that happens. I think, you know, 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. 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.

And what sort of the most pessimistic scenario you can come up with, with how technology plays out to the incumbent, start using it to squash free speech. Like, how do you think about this? Yeah, I think you could paint. Yeah, you could paint maybe two, two pessimistic scenarios. So pessimistic scenario number one would be the one you just alluded to. And it basically is like, okay, this technology had the potential to be, to be revolutionary and to kind of disrupt all these hierarchies and institutions.

But in fact, it turned out that it was fundamentally enabling technology for top-down control. There's 1984, which basically is the pessimistic view, which is like technology is used by the state, kind of the full kind of, I don't know, with the Hegelian world state dominant totalitarian regime, Soviet Union kind of thing.

You know, technology is used to basically control the populace in sort of this very overt kind of top-down way. There's this other really wonderful book called Orwell's Revenge written by this guy, Peter Huber. And

In Orwell's Revenge, he actually does a rewrite of 1984. And he does a rewrite of 1984 through the optimistic lens, you know, sort of your optimistic scenario. And the optimistic lens, the twist that he puts in the plot of 1984 is he basically just makes the telescreens, you know, the sort of technology in 1984, these telescreens interactive, sort of interactive TV thing. He basically, he makes the telescreens two-way.

like the internet. And of course, then he elaborates out kind of the implication of that in the story. And of course, in Orwell's Revenge, the rebels win, the totalitarian system is overturned because people are able to organize and hear the truth and so forth through the two-way system. And so anyway, yeah, the pessimistic view would be the 1984 model.

Contra, the Orwell's revenge model that we kind of talked about earlier. And then look, there is another pessimistic view, and this is the Martin Gurry view, if you've read his book, The Revolt to the Public. The Martin Gurry thesis basically is, yes, and I can hear him, by the way, talking about this right now in his wonderful Cuban accent. Yes, smart guy. The internet is very good at tearing down these hierarchies.

But the internet has not yet proven its ability to build governance systems, right? And so it has not, yes, you can build these new peer-to-peer networks, but can these peer-to-peer networks actually take power and actually serve the productive roles that the hierarchies used to serve, right? And so can you actually have, for example, a functioning democracy, right? If what you have basically is basically people arguing with each other in this peer-to-peer network like all the time, right?

Right. And never basically forming instruments of state power, you know, or if you have, you know, this, you know, 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. Or, you know, whatever the version of that might be. Right. That they're that they're basically these networks are not, in fact, basically sufficient substitutes for for for the institutions that they're displacing. And he describes this as the scenario sort of nihilism.

which is basically that the peer-to-peer networks are good at destroying, but they're not necessarily good at building. And so he's fairly pessimistic. And I think this is why this is what Neil Ferguson also is reacting to in his book, which is I think this is also kind of his latent fear. He kind of describes it differently, but also his kind of latent fear that if the institutions are torn down, that there's no guarantee that productive things will be built on the other side. So there's probably that that would be the other the other kind of really pessimistic scenario.

A lot of people get scar tissue. They're still sort of like fighting the last war. You've been around the first internet big wave in the late 1990s and the failures that happened there. How does that affect your thinking? Like Webvan, for example, failed, but the same thing today might be a resounding success. How do you switch your mind to...

Not getting burned. Yeah. So this is really, yeah. So this is really fun. This is one of these things, again, I've realized it's actually really fundamental to human nature. 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.

I think they are, but I think there's a real question about that from a broader kind of cultural societal standpoint, which is right. It's the most, to your point, it's the most natural thing in the world to try to learn from experience, right? And so I, you know, we all go through this, right? You touch the hot stove, it burns. We don't touch the hot stove again, right? And that happens at like age three or whatever. And then like from then on, basically, like one way of just viewing like our 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.

You know, or it's like, you know, don't act out at work. You know, you learn all these things. And then one of the things you learn is like, okay, like, you know, actually what a lot of people learn is they work at a startup, the startup doesn't work. You know, the one that they're at doesn't work. And so the lesson is don't work at startups, right? Or by the way, the other lesson, right? The other lesson is a lot of people went through in the last 50 years this thing where they thought they had lifetime employment.

at some big company and then they got laid off at some point and then sort of the lesson is, well, don't work at big companies because you can't trust them and they don't care about you and they'll lay you off. So anyway, it's like the most natural thing in the world to sort of learn from these mistakes. And so what happens is, it's absolutely like scar tissue. What happens is you just, as you age, you just naturally build up all of this sort of psychic scar tissue and you have all these cautionary lessons in your head all the time. And therefore, as a consequence, your aperture of what you're willing to explore as you get older just shrinks.

And it's just it's just an incredibly natural thing to have happen. And so I so I would say the the the the good news, you know, kind of the escape hatch for that is is being in my day job. My day job is an incredible teacher that that's a bad idea.

Because what happens in my day job is basically I've now been kind of doing startups first as an entrepreneur for 15 years. Now it's a VC coming up 15 years. And basically what you see if you kind of swim in kind of this pond for long enough is basically you see your web example, you see example after example of startups that tried something and failed. And then you basically draw the experience from that. Okay, well, we know that's never going to work because it failed.

And you see kind of a lot of people around you kind of going through the same process. And then you just see example after example of basically what happens next, which is some kid shows up with that same idea five or 10 or 15 or 20 years later, and they take another swing at it and it becomes a gigantic success, right?

And so, you know, you use that to your point, like web van doesn't work. And now with now today, you've got these just giant successful companies and food delivery, right. That are like huge successes. And so like that idea absolutely works. Let's hone in on that just a little bit more in the sense that the wrong lesson to extract from that experience is this idea will never work. How is it that we extract the right lesson from an experience? Yeah. So let's, let's say,

I think this goes to, I think you want to really understand the domain in which you're operating, right? So 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. It's a probabilistic domain, right? So, you know, it's sort of inherent to the venture capital startup process, which is, you know, basically, I'll just give you the numbers, like for top end venture, right, for top end venture backed startups.

about half the companies in any given period work and generate positive returns and about half of them don't. We start out every new fund knowing that half the companies that we invest in are probably going to fail. By the way, they're going to fail for a bunch of reasons. A lot of the failures are idiosyncratic, the team breaks up or whatever, something specific to the startup. But in a lot of cases, it literally is like they're going to fail because they're just flat out too early.

It's going to be a web van if it's time, not whatever the new companies. And so a lot of us just simply flat out timing. But you can see what I'm saying is you're thinking probabilistically. We're not trying to score 100 on the exam. And this is maybe a thing that is a big difference between the education system and the real world. In the education system, it's like we're supposed to get 100 on every test.

right it's sort of this deterministic realm right in which you know there is a way to kind of achieve perfection and we're kind of going for the 4.0 grade average or whatever um you know in quote unquote real life right which is starting businesses or you know writing books right or composing music or playing basketball or playing poker right or basically doing anything interesting we're in a probabilistic domain

Right. And the probabilistic domain is just like we're not going to we're not going to score 100 percent. 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 percent. Right. 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. And then the other fascinating thing to look at is just, you know, the ranking of the basketball players who have missed the most baskets. Right.

And it turns out like it's the same people. Like Kobe might be number one on the list of like total misbaskets. That is what it is, right? It was an Annie Duke has this great, great term. She is brought in for the world of poker in her book, Thinking at Best. And she calls this, she says what a lot of people do is they basically, when they're in a probabilistic, if they're in a deterministic domain and they get less than 100%, then they can self-critique and they can say, why didn't I get 100%? I should have gotten 100% and I did something wrong.

Right. And that is a correct analysis. Like you could have gotten 100 percent of that test. You probably didn't study hard enough. You didn't read all the material or whatever. Right. In a probabilistic domain, it didn't work. OK, it's again, the scar tissue. It's now now I do what she calls resulting. Right. Which is basically now I need an explanation for the result.

Right. And the explanation for the result is, you know, I don't know, I should have this or that or I should have bluffed or not bluffed or done this or done that or not started this company or waited five years or, you know, whatever, whatever. And and she's like, look, it's a probabilistic domain, like some percentage of them are simply going to fail. If you if you try to explain what fundamentally is kind of the result of randomness right through a narrative, like you're basically fooling yourself. You're making you're making yourself ironically making yourself miserable in a counterproductive way.

Right. And the right thing to do, right, in poker, the right thing to do is to like play the next hand of poker. Right. The exact same way you play the previous hand. Right. Because you're operating in this domain of probability. The right thing to do if you're Kobe Bryant is to shoot the next, you know, the next basket. The right thing to do as an entrepreneur is to start the next company. Right. The right thing to do as a venture capitalist is to fund the next startup. Right. Even in a space where you've already tried and failed before. Right.

And then I would apply in tech. I would say I believe in the strong version of this. 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. I no longer think there are any qualified people starting tech companies that actually have bad ideas. I think all the ideas are good ideas. I think it's just I think it's just a question of timing and execution. We try really hard to say, oh, this idea is stupid. This will never work.

Right. Like we try really hard to never do that. Instead, we try to say, OK, this idea, if this is a smart enough person and they put enough work into it, then this idea is probably a good idea. It is likely to work at some point. And then we just have a very specific question, which is like, is this the right person to bet on? It's not the right time to make the bet. And then and then 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.

How do you assess the judgment of founders? If you're not assessing the idea, how do you assess the judgment? Yeah. So let's say there's two categories of two categories of founders, two, two ways to do this. So there's sort of, you know, there's sort of, there's the ones who've done it before, right?

um and so the ones you know the ones who are this is their second or third or fourth time starting a company 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 you can look at the work that they've done 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 although you know as napoleon was it napoleon you'd rather you want to you'd rather have a lucky general than a smart general so like you know

Somebody who's had a highly successful company once has an enormous benefit of the doubt when they walk in the door for obvious reasons. 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. And so you can look at like, you know, how did they prosecute the opportunity the previous time? And you can talk to the people who they work with. It's like, okay, how were they under pressure? How were they in terms of inventiveness? How were they in terms of persistence? How did they make the decision about when to give up or when something just simply wasn't going to work and so forth? And so you can kind of learn from their experience.

You know, the harder one is somebody brand new, right? The harder one is somebody shows up, you know, right out of college or something or, you know, or, you know, these days, right? The ultimate golden credential is they got admitted to a top-end school and then dropped out after one day. So, you know, it's sort of the kid, right? And of course, you know, I say kid because I, you know, the part I think of myself because, you know, this was me at one point.

And look, a lot of the real breakthrough companies, a lot of the big franchises, Mark Zuckerberg had not had a job before he started Facebook. The Google guys came straight out of Stanford, the PhD program and so forth and so on. Bill Gates dropped out of college and

And so, you know, a lot of times these big breakthrough companies are people that, you know, they have a track record, like their track record, you know, you could ask for their high school GPA or something, but like there's no track record, right? And so there you're kind of, you know, evaluating, you know, de novo. And I think there what we do

The cliche is basically right, that it's some kid with some crazy idea, and then some crazy VC gives them some money, and some miracle happens, and oh my God, what a weird non-reproducible thing or whatever. The reality is the kids that make new things work from scratch, it actually turns out that they actually have been deep in the domain for a long time. In almost every case, they've been thinking hard about the problem that they're trying to solve, actually in a lot of cases for many years.

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, like in software, you can have a 21 year old who's basically been a professional level programmer for 10 years, right?

Right. Because, you know, you can trace it back and it's like, well, we hear this story all the time. It's like, well, the specific story here all the time. You know, I really loved video games. Right. And so therefore, right. When I was, you know, 11 or 12, I learned how to code so that I could figure out how to like make my own video games. Based on that, I found it really interesting how, you know, for example, clans or tribes form inside games.

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. 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. And now I've been thinking about that and building that for the last five 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. Like that. This is not a rare thing. And literally, they've been thinking about this now for, you know, think about the specific thing for five years and the general kind of pattern or category for like 10 years. And of course, you know, for things, you know, this, of course, is heavily biased towards domains in which kids get to participate. Right. 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 various technology where, you know, 11 year olds are not working on it. But there are areas increasingly where they are. Right.

And so basically, it's basically what we call the idea mace. It's basically the backstory. It's what have they done in the past to really kind of reason their way through. And often you literally have people who have been writing prototypes. And a lot of the time, you actually have people who have running code at that point. And then it's like, okay, now you're dealing with somebody where, yes, on the surface, they're 21. In reality, they're already five or 10 years into the journey. And you're like, okay, now I get it. Now I have somebody who's like a primal creative force who's actually really thought deeply about this. And so it's a much safer method, it looks.

Can you walk me through in detail how you make those bets? Like what is the big capital allocation decision-making process that you use at A16Z? So there's basically, there's three tiers. The way we operate is there's basically three tiers of bet, sort of small, medium, large. And the small one is so-called seed funding. The medium one is so-called venture funding. And then the large ones are growth funding. You know, the seed bets, the small ones are, you know, two, you know, I don't know anywhere, two to $5 million.

on average, which is a lot of money, absolutely speaking, but it's small in the context of the global economy. It's small in the context of funding your businesses. It's small in the context of our funds. The venture bets are much more serious. The venture bets are 10 plus million. And then for the venture bets, they're more serious for us because that's when we get really involved with the companies. That's when they form a board of directors. And we have somebody who goes to the board and we tend to really work hard at the company. And so that's like a

That's signing up from our standpoint to a 10-year journey.

with the company, including an obligation to put more money in later rounds and so forth. So that's a more serious bet, but sort of size 10 million and up. And then the growth bets are for companies that have kind of hit their stride and they have a business that's working and they're growing. And so it's like expansion capital. So it's a different thing. And the check size there is sort of 50 and up. And then on the high side, it's 100 or 200 or 300 million. And so the amounts of money get large. But at that point, you've got a business that's working and you're trying to figure out how to scale it to be a global champion.

And then there's just, there's different criteria. There's sort of similarities with the three. We're trying to back the same kind of founders and the same kind of businesses across the three categories. But it's very different decision-making process, very different criteria depending on the stage. On the seed side, it's almost 100% a bet on the people. It's a little bit on the idea, but it's mostly the people. 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. So it's like, you know, it's like it's like it's like I was talking about, like the 21 year old comes in with this like crazy idea of something they've been thinking about. We're not a college project or something and they want to start a company. And it's like you're evaluating the idea. But really what you're doing is like, OK, is this person capable of doing this kind of thing? And then you're evaluating the idea and the work they've done so far to kind of just draw a beat on how good the person is, as opposed to saying, oh, you know, we've been waiting to back this idea.

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. Because we sort of take on this sort of formal conflict at that point. We get very involved in these companies and we can't invest in competitors after that in that category. And so then there's this thing of like, OK, out of all of the different teams, both current teams and future teams that might pursue this idea.

You know, is this really the one that has the best chance of going all the way to victory? And so that's, you know, trying to kind of dig in harder, the kind of competitive advantage and, you know, capabilities at a deeper level. And then if the growth side is, you know, that's more of a business analysis. The growth side is where you start to get to start to make decisions based on numbers.

And so you start to get to evaluate revenue growth and market size and profit margins. And then by the way, but also you're still evaluating the people. You're still evaluating the idea. And then by the way, at the growth stage, you're also still looking for new ideas. You're looking for existing businesses that also have new growth opportunities inside them. And so you're looking for basically, is this person so good that they have additional kind of venture opportunities

quality ideas that they haven't even gotten to yet. 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 five 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. Is there a challenge function internally? Like how do you decide in terms of making the actual decision?

Yeah, so there's a – there are – if you kind of pull top-end venture firms on this, you'll get actually every possible answer. And so there are some firms that run on a unanimous vote model where they literally need unanimity. There are other firms that have a –

you know, they have a majority thing or they need a certain number of people to get critical mass. There are some firms that run a top-down so-called investment committee where you, you know, young, 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, thumbs up or thumbs down. We,

We have optimized very strongly towards what we consider to be kind of the most aggressive and most, you know, anybody say contrarian model. So our model is what we call single trigger puller. There's no vote. There's no investment committee. There's no override. 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. Like that's not like, I don't do that at all.

Instead, what we do basically is we basically delegate budgets. So the governance mechanism is budgetary. So we basically raise a fund. We have a certain number of investment partners. We delegate the budget down to those partners. And then basically, if you're a partner at our firm, within your budget envelope, you could make whatever investments you want.

There are expectations around how you're going to do that. And so there's an expectation you're going to do the work by which it's going to be like you're going to go in really deep. You're going to talk to all the people. You're going to really investigate everything. We don't mind an investment that doesn't work. What we do mind is we're in the wrong one and the right one was out there. The winner in the category was out there. We didn't even know about it. That in our firm is a big problem. And so you're expected to do the work. And we have a whole kind of system for that.

And then there is you're expected to like you have to communicate. Everybody has to know what you're doing. There's no secret deals. You have to be willing to kind of describe it and you have to be willing to kind of deal with, you know, everybody weighs in on everybody else's things. And so you have to be willing to kind of have the conversation, 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?

you know that the peer pressure basically doesn't turn into an actual explicit veto. Like you can still do the deal and you know that you're at a firm that really prizes that and wants us to do investments like that. And so, but, but, you know, you do have to, you have to be willing to like sit in a room, 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. And,

And then, you know, there is this thing, this conflict thing, right, which is it's a big deal for us internally, which is probably our biggest limit on our ability to do business as we take on these conflicts. And so, you know, the stickiest conversation we'll have internally usually is like, boy, like it would be like between teams. Right. It's like, OK, if one team does or if one partner does this investment, then it conflicts the entire firm out of the category going forward.

And so, you know, you can imagine pretty vigorous arguments and debates around that. 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. We're able to back the entrepreneurs that color outside the lines, right, 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 firm. It might be like, well, I don't even know what box this goes in.

Right. Like, it's just this is so weird and like offbeat. Like, how do we even classify this? And then, you know, if we have to explain this to the Council of Elders, how are they going to ever understand it? Right. And in our firm, it's like we can make all those bets. And the history of venture and new technology is those are often the most successful bets. So that's why we've optimized that way.

And you also get speed. It sounds like a lot of velocity with how fast you can make decisions. Yeah, we have a partner. I won't name names, but we have a partner where he was in the West Coast office. I was in the Palo Alto office of an East Coast firm, a firm that had historically grown up in the East Coast, very successful investment firm. 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.

And by the way, the five senior partners in New York, incredibly established legendary investors with incredible track records, with absolute moral authority to be able to make such judgments. The problem, exactly to your point, the problem is, yeah, speed. And then just like this stuff changes, right? The scar tissue thing, there's a specific form of the scar tissue thing that we see a lot. I call this sort of the idea event horizon or something, which is there.

There's a point a lot of people reach where they're just done with new ideas. It's like the general version of the problem. It's just like, okay, like I got through the PC. I got through the internet. I got Facebook. All right. I got, okay. Food delivery works, but like TikTok, like really? Right. It's just too much. 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.

And like almost everybody hits that point at some point. And so I just think like the, yeah, I just think that the bad way to do venture is to have people who have reached that point doing sign off on the decisions. And I hope Ben and I have not reached that point, but even if we do reach that point at some point, we'll have the firm to continue to be able to make the good investments. What have you learned over the years about making investments?

exceptional decisions that most people miss? So quite honestly, I think a lot of it is embracing the probabilistic nature of the domain. A lot of these questions, like venture teaches you the very direct versions of these lessons because the old Submariner slogan is stupid will be punished. When you pass on enough companies that turn out to be these giant kind of global kind of behemoths, at some point you're just like, okay, obviously I'm not

I'm not a super, like I have to have some level of epistemic humility here because I'm not making all these decisions properly. And again, the nature of the domain is I'm not going to make all the decisions properly. Like what each of the top venture capitalists of all time has in common is they all, each of them missed almost all of the great deals of their generation.

The bad news is you're going to make all these mistakes. The good news is you don't have to score 100 percent and not having to score 100 percent basically means you can take chances. Right. And specifically the way that you instrumentalize that is it's basically we talk about this a lot inside the firm is success or failure is not at the unit of an individual investment. Right. Success or failure is at the level of a portfolio.

And we basically see these portfolio effects everywhere in the business. So, we see the portfolio effect happens at the level of an individual partner, it happens at the level of a fund, it happens at the level of what we call a strategy, which is like a basket of investments in the same theme. So, let's say we're at our firm and we decide, well, I'll give you an example. We have this big gaming push right now, as we just brought up this new gaming partner we're very proud of, and we've got this big gaming push, and we've been investing in gaming now for a while.

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 new game companies. And so we literally have a strategy to like back new game studios, new game companies. And like we go out and we invest not in one of them, but we invest in 10 of them.

right and you know in making different kinds of games right you know different different kinds of approaches 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 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. And then I'm going to be evaluated not by any individual one. And by the way, I'm not even going to get evaluated by the average outcome. I'm going to get evaluated by the total performance of the basket. And if one of those bets accounts for 99% of the profit of the basket, that is a perfectly fine outcome.

Right. Well, we see this a lot. We do performance reviews. Right. We do performance reviews. And so it's like, OK, we do performance reviews of an investment partner here. And it's like, well, they've made 10 investments. And, you know, one of them is this this just this huge success. And the other nine are like, you know, sucking wind.

And it's like, okay, is this a good venture capitalist or a bad venture capitalist? And it's like, well, in any domain that's not probabilistic, you say this person's terrible. It's batting average of like 100 out of 1,000. It's like this person's awful. And there's always the temptation to say, well, this one thing that's working is it's like it's a fluke. And so who knows whether they'll ever get it again. And it's at that point where I put my head up and I say we're in the fluke business. The whole point of this is to get the flukes. And so, of course, that person should get full credit for the fluke.

Right. And in fact, I hope they go make 10 more investments and get another fluke. And so anyway, 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%.

And look, not all domains are like this. The person running a nuclear power plant doesn't get to live in this world. But put it this way, anybody doing anything creative does live in this world. And I think the creative artists of all kinds basically live in this world and the really good ones are unafraid to take the bets because they know that this is the domain they operate in.

We sort of talked about the probabilistic thinking in terms of the magnitude and test taking as it relates to the education system. To me, I mean, from the outside looking in, the education system seems a bit dysfunctional. You're a parent. What do you think is wrong with it? And how do you go about navigating it? And what can we do to fix it? So it's completely unfixable. So it's like none of the specific point things people are worried about are fixable because the whole thing is built in a certain way.

So it goes back to this historical thing we started with, which is it's a mass education system, right? So it's a mass education system that was created in a time and place. And it was created in a time and place, and you probably know the history of this. It was created in time and place roughly 100 years ago, 110 years ago.

And there were a set of, you know, theoreticians and youth names like, you know, John Dewey. And they, you know, developed a, you know, a system. And at the time, by the way, at the time it was like a huge advance, right? Because 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, you know, most kids didn't have much education in the 19th century and, you know, you know, group and farms or whatever. And like, we,

They knew, the theoreticians, the experts knew, like we need a system to educate all the kids. And then they built a system the way that you build systems, you know, the way you built systems in 1910 or 1920, which is you built a mass manufacturing system, right? So 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, you know, the General Motors or, you know, General Electric was using to kind of, you know, build out the electrical grid for the country. You know, these is a mass system. He built a mass education system.

And you built it like a factory. Right. And that made sense because, number one, that let you get to massive scale. That solved the problem they had at that point. But the other thing was you knew that you were training kids fundamentally for the industrial economy. Right. And so you were training kids at some fundamental level to work in factories. Right. Or by the way, to work in offices. And of course, the offices in those days were also factories. Right. They were factories for knowledge work.

Right. And so if you don't know the history of mass manufacturing, there were all these ideas like time and motion studies and all these guys like what's a Turner, you know, who had these, you know, optimized mass 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.

And so these are factories. Schools are factories to stamp out kids who are optimized to work in either, if they're blue-collar, to work in a literal factory, or if they're white-collar, to work at General Motors or General Electric in a conference room in a giant hierarchy, to be an organization man.

And so we built that system and then we set it on autopilot. 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, like not even a little bit. And then, of course, 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. It has been taken over by a set of people who have absolutely no intention to change it.

right? 100%, they're not going to change it. Like 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. And so it's not, I'll tell you one thing I don't believe in is reform. Like I have all these friends that work on like, you know, school reform, God bless them. Like they're just the most wonderful, sweetest, well-intentioned people in the world. And they're just burning huge amounts of money and time on

on trying to reform the system that has absolutely no intention of being reformed. And they're having no impact whatsoever. Like it's not working at all. Of course, like we have a biological tendency sort of to defend our territory, right? So it would be hard, especially with the organized unions and all of this other stuff that's involved with the education system to reform it. Well, it's like the tip off, the tip off,

If they just step back and think about it for a second, like you could be pro-union or anti-union. You have whatever people, you have whatever views and unions they want. Organized labor, you know, big debate for a long time. You can have whatever views you want. But the idea of unions, the idea of unions of public sector employees, right? Like, so you now have people, you have a double layer of civil service protections and union protections, right? And you're going to reform that system? Like, no, you're not.

like they're going to take your money, laugh at you and like nothing is going to happen. And so, yeah, there is no, on this, there is no fix. There is only one thing to do. In my opinion, there's only one thing to do, right? Which is to build a new system.

Right. And the new system has to get built from scratch. It has to get built the hard way. Right. It will probably not look right or sound or smell like, you know, these probably, you know, the new system will probably not be a giant parrot. It'll probably be something else. Right. It'll look like synthesis or something like that. It'll be or it'll be like it'll be distributed. You know, it'll be, you know, like 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 actually living this. They're six year old right now. Like there needs to be like a homeschool network.

Right. There needs to be a whole like support structure. Right. And network and knowledge flow and expertise flow and talent hiring pipeline. Right. And, you know, quality standards and resources and activities. Right. For homeschool kids. Right. And for the for these like micro schools that are popping up all over the place. Right. And, you know, and by the way, like now's the perfect time to do that. Right. Because of the post-COVID, you know, all the changes you're well aware of. But like, you know, there's this massive spike in homeschooling.

There's this massive spike in parents who are very unsatisfied with formal-- are sort of newly unsatisfied with the legacy model. And so now is obviously the right time for this. And look, there are lots of examples. There are lots of people working on this. And there are lots of early examples of this. And so I hope something really takes here. It's also interesting when you look from the outside in that there's sort of like no individual to blame, right? Like I feel for the teachers in the classroom. I feel for the principals. I feel for everybody involved in this system.

But the end outcome is just terrible. Yeah, Charlie Munger has this great thing I really like, which he says, look, if you often in the world, and this is a great example, you often have a system and the system has incentives. And the incentives result in terrible behavior. 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. And he believes and I agree on this. I think 100 percent you blame the people who create the incentives. Right. I think I think you're right. I think when you take human beings and you put them in a system where they have bad incentives and you get bad results, like at some level, it's not their fault. Like, you know, you could say maybe they should resign a principal or something like that. But like most people need to live their lives and they need to, like, you know, put food at the table for their families and so forth. And so I just don't have expectations of like mass revolt against people's self-interest. And so, yeah, no, I totally agree with that. And so therefore, I think you have to look at incentives.

And then you have to look at the people who are putting the incentives in place and you have to judge them. And that's the thing with this thing is like the people who put these incentives in place are dead. Like they're gone, right? Like we can, you know, I can sit here and yell at John Dewey all day long. It doesn't matter. Like he's, you know, he's gone. And the people who are running these institutions now are just basically at some fundamental level executing scripts that were developed a hundred years ago. And like to some extent, it's like not their fault.

And then look, you know, there is corruption, right? 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. Like at some point 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. And so anyway, you can certainly, you know, I don't mean to let everybody off the hook, but yeah, look, the key thing at the core of it is, yes, how was the system constructed?

And then what are the incentives for its continuity?

And again, that's why I said like I'm not that's why I think reform is impossible. Like there's no way at this point to go in and change the incentives inside one of these systems. Like it just there's too much interest. It just can't be done. Well, what a political policy platform look like that encourages innovation. What are the sort of like key variables that matter? I don't know if it's true. I don't know if it would work because it's a little bit too abstract, but it is kind of at the heart. It's a little bit at the heart of populism. It's a little bit at the heart of actually a lot of the left wing critique.

actually a business also. So you see it actually, there's a critique from both the left and the right. And I think the critique, the way the libertarians, to say libertarians have the answer, but the way the libertarians would put it is there's a difference between being pro-business and pro-market, right? And so, and what they mean by that basically is it's like there's one concept of a business, right? Or an entity of any kind. Let's start with the business, but we can apply the same thing to other kinds of institutions down the road.

There's one form of business that's actually forced to compete in a fully competitive market. So fully subject to market discipline. And I don't know, you might say the car industry works like this or something. Actually, the car industry gets repeatedly bailed out, so they're probably not the right example.

I don't know, soft drinks or something. It's like, you know, Coke and Pepsi and Dr. Pepper and so forth. Like they, you know, every time you, you know, buy a can of a soft drink or, you know, any, any, you know, I went to, you know, it's 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. You know, those companies are like forced to compete every day, right. For, for every purchase. And so there, there's a, there's a standards bar that they have to hit. Um,

And then there's sort of libertarians are kind of classic free market economists are like, that's market economy. Like in the market economy, you don't want businesses to kind of run and trample. What you want them is you want them subject to market discipline. You want them forced to compete all the time.

And that's how you get quality control and innovation. And then there's pro-business. 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. They end up not being actually a fair and free market with market discipline. They end up as something else. And the business world, what they end up with is either just one company with a follow-up monopoly or more commonly, they end up with what's called an oligopoly. They end up with a small number of companies that sort of dominate the entire sector.

And then what you get, and you see this over and over in the economy, it's like three car companies for a very long time. It's four movie studios, it's three accounting firms. It's just, you go right down the list, right? And it's just three big banks,

And so, and these are oligopolies. And oligopolies are not monopolies, 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 as sort of a cartel? And there's all these ways that they like signal to each other to price fix and so forth that sometimes verges into overt price fixing.

And then what happens is the oligopolies, basically, they get big and stultifying. And then what happens is they basically end up sort of colonizing politics. Right. And then this leads to this concept of regulatory capture, right, where basically the companies end up basically essentially occupying the government, you know, usually at the same time the government's occupying the companies.

And so you end up with these like giant regulatory edifices, Dodd-Frank and all these things. You end up with these bailouts, you end up with all these intertwining, revolving door where you've got these regulators that all know that they're going to get these really high paying jobs at these companies when they step out of government service. Or it's like my friends at Goldman Sachs, the number of people who had Goldman Sachs in their business card who now work for the federal government is just incredible.

It's just this incredible talent flow. Right. And so you end up with this sort of intertwining of business and government. And then, of course, you know, we experience this in a very tangible way, which is OK. Then, you know, imagine being a startup. Right. Imagine being a new bank. Right. Or a new car company or a new movie studio or a new whatever going up against these cartels. And it's just, you know, it's just like, oh, my God. 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.

There was not a new car company in the U.S. that mattered for 80 years, you know, between the establishment of the oligopoly of the U.S. and then the emergence of Tesla. Right. So that's like 80 years is a long time. Right.

And so, you know, what is that? Right. It's it's certainly not a free market economy. Right. It's not company subject to market discipline. It's it. But it's also not just like flat out top down socialism or communism. Right. It's something else. Right. It's this it's this kind of hybrid, you know, kind of entangled thing.

And then you can generalize this idea to many of these other topics. And so it's the same, higher education is education through that lens, education almost starts to make a lot of sense because like what is education? K through 12 is a monopoly, right? It's a government sponsored run monopoly. And so of course it's going to, it's a Soviet system, right? It's going to, it's run exactly the same way education in front of the Soviet Union. Of course, it's going to generate the exact same results, generate worse results because the Soviets were really good at math and science.

And then, you know, higher ed is a cartel, right? It's quite literally a cartel. And the universities form, you know, they have an industry group, they have these industry groups that they run, and then they have what's called accreditation. And they control the accreditation process. And you need to get accredited to get access to federal student lending and federal research funding and all these other things, right? And so it's a flat out oligopolistic cartel.

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 government subsidies over time. And of course, the quality is going to collapse over time. The sort of intellectual version of the platform would be sort of anti-monopoly, anti-oligopoly, anti-concentrated power, anti-government entwining itself in the economy, right? Anti-regulatory capture, anti-legacy institutions that are no longer being run by their founders.

Anti-systems for which there's no competition. Anti-anything that basically tries to do what's called rent seeking, to kind of extract basically economics from the broader society without competitive alternatives. That would be the core of it. The right wing populist version of that, I think is sort of very straightforward, which is basically, it's Tea Party, right? 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?

And then, you know, by the way, you know, sort of Occupy and Tea Party actually kind of have the same, you know, in a lot of ways, the same argument, you know, from the different sides of the spectrum. And then, you know, the modern form of that is, you know, the left wing version of that is, you know, you do hear it. And, you know, the left wing people argue more directly for the government to just do all this. But, you know, they are on to something, I think, with the critique of like, look, like, are these even companies? Right. Is this even capitalism? Right. And is the market actually delivering what the market is supposed to deliver?

You got my vote, man. When are you running? Never, never under any circumstances. You once said that you had this little, I remember this interview, it was like several years ago, you had this little mental model of Elon Musk on your shoulder. Is that true? And if so, why and who else do you have mental models of and how do you use them to help you?

One of the things is you study very smart people and people who have done a lot of important things. It's like they all had some way of operating. They all had some theory, some structure or framework of the world and how it worked and how to cause things to happen. And one of the things that's interesting, there are many such frameworks. Even the same kind of person, of the most successful investors, generally each of them had some unique take.

And they weren't necessarily compatible takes, right? And they just, they figured out, you know, kind of a way to do things. It's very different than the way a lot of other people did things. And the same thing for CEOs and entrepreneurs. And, you know, by the way, same thing for artists and, you know, any other kind of, you know, these sort of very sort of successful people.

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. Like it's just, it's too complicated and it's too contradictory and it, it, it, it wouldn't really work. At least I don't think so. But what you can do, right. You know, when you, and then what you do is like, you, you know, as you go through life, you, you,

you know, you talk a lot about this in your work and we talked a lot about this today is you do try to assemble your own kind of worldview and your own framework and your own way of, of, of sort of, uh, of doing things. Um, and, and by default, your, your, your, your kind of framework on that will get probably narrower over time because you'll get kind of more locked in more set in your ways. Um, and you'll get more resistant to new ideas. 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 and in a way that's like not threatening to you right which is it's not like okay this is like now i have to have an argument with myself but it's more just like okay like if you know i take your pick of who you admire but you know my case it's like elon musk or you know or steve jobs or you know andy grove or peter teal you know we're in the room right uh you know what would they say

And, you know, and by the way, this itself is a daunting challenge because these people are incredibly smart. And I don't know that I can even, you know, kind of replicate their thought process. But, you know, I do know, you know, I do know a fair amount about their thought process. And, you know, it so happens that I also have known them, but also like, you know, they both have written, they've all written and talked a lot about kind of how they think about things.

So then it's like, okay, what's my mental model for, yeah, how would Elon think about this, right? And so I just gave you the simple one, like the simple one for Elon. And Elon's a very complex guy, but the most simple kind of form of Elon that's useful in this way is what he calls first principles thinking.

Right. Which is it's like, OK, like basically in Elon's view, we all basically just like assume too many things from the way things are. And the right thing to do is to kind of, you know, he kind of gets this from physics because he was trained as a physicist originally, which is a very different mentality than the one that I come from. And it's basically, OK, strip things all the way down to basics again and start and basically start the logical thought process over again. Right. And so basically, you know, go deeper into the idea to the very foundations and then build your way back up.

And just going through that process is a way to kind of really catalyze your thinking. Peter's kind of core mental model that I've kind of drawn from is his focus on this philosopher, Rene Girard, and this idea of sort of the mimetic dynamics and people copying behavior between each other. And then also rival race forming and how that plays out in human dynamics. And Girard had this very kind of sweeping whole theory about how that kind of determines how all society works.

kind of functions and maybe that's not completely true but like there's there's clearly a lot to that and then of course there's this scapegoating cycle which which doesn't seems to play out every day especially when dealing with any of these internet things or systems things networks you know it's a very useful framework 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 um you know then obviously we could go on a length but you know jobs and groban these guys had their own their own views of things

And so it's just it's a way to kind of keep the actual, 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 through a lens that's not just your preconceptions, I think is quite helpful.

I think you get a different perspective, right? Like you see the problem through the lens with 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 the system that we're part of. 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. And then I also think it's also, I was thinking a lot about, it's like, it's also keeping a high bar, right?

for yourself and for your work. And this maybe is also something that also has to do, another thing that happens with age and success is, and we see this actually with founders, it's like at some point, there are some founders where they start in a company three, four, five, six, at some point they get tired of doing the work. They get tired of going all the way back to basics. Ben and I had this, we talked to Jeff Bezos about this at one point.

He asked us why we were starting a venture capital firm and not another company and another startup. And we asked him, well, if Amazon, you know, for some reason, Amazon got sold or whatever, and you were a free agent again, like, would you start, you know, would you start another company? And he laughed and he said, you know, not in your life. He's like, you know, he's like, that would be going back to kindergarten.

And he's like, look, don't get me wrong. I really liked kindergarten. Right. But like, you know, having built Amazon, I'm not going back to kindergarten. Right. You know, having built Amazon, I'm not starting a company again from scratch. And so, you know, and so there's this is like where the first principles thinking comes in handy, which is it's like, OK, like what's the bar here?

Right. Like what's the bar that you're applying to your own work and to your own thought process? 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? And are you able to actually, you know, because 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. How do you keep that bar rising? Right. And not let success sort of turn into complacency. You need you need some you need some forcing function.

Right. You need a reason. This is why we always in the smart, the smart entrepreneurs all know this, but this is why even entrepreneurs starting company number four or 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. As opposed to just them doing whatever it is they're going to do on their own. It's because like you need no matter how good you need some force. Most people need some forcing function where they're sort of forced to fully think things through. They're forced to do all the work and they're forced to be able to defend it.

right and if at your point like if they don't do that it's it it turns into complacency and laziness and at some point it turns into arrogance and it just it becomes very destructive and then you stop being effective and so there's gonna be some forcing function the the the the peter keel in the shoulder thing is is a forcing function is how i use it um it's like a forcing function of my own thought process 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 fucking stupid. Peter would say, I don't, I don't think you fully thought that through. 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. Like I have to be able to justify this. Um,

And it's an obligation to myself, you know, number one, because like, why am I wasting time on something if I'm not actually set up to do it right? 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. Like people are going to come to work for us, right, are going to participate in things that we're leading. You know, then we have a real obligation, right? Because 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 like that. You know, that's really unfair to those people.

And so it's a self, you know, this is the surface level answer to your question, but like it has to be a self-imposed standard at a certain point. And people either want to be able to say 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. Last question. What's the last book you reread? That's a really good question. You know, I'll tell you one book I keep coming back to. I keep coming back to I keep coming back to the Henrich, the Joseph Henrich book, The Weirdest People in the World.

Um, another book that I keep coming back to is a book called the Mac, 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. Um, so those are two big ones. Martin Gurry's book, uh, the revolt of the public. We'll put all of these in the show notes on the website to make it easier for people to get them. Oh, I'll give you a fourth one. I'll give you a fourth one. 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. It's a book called The Ancient City, and it's written by a, it's from the 1860s, but it's still a very relevant book because it's based entirely on original classical sources, Roman and Greek sources. And it's sort of, the history of it is holding up really well. 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. And it was written by a French, a prominent French academic 150 years ago. But it's a really profound and striking book. And if you read it, you're like, oh, this explains a lot. 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. And then it's the best book I've ever read on like basically the role of the cult

Right. So like why cults exist, what they are and what it feels like to be in one. And of course, you know, one way of looking at the world is the world is just basically this sort of series of cults of one form or another. I don't know that I would even say that I fully understand it yet, but it is. It's one of those books. I don't know about you, but like when I there's something interesting in a book, I underline it. And then if it's really interesting, I dog ear the page that it's on.

And then there's a few books that I've read where it's like they destabilize the piles of books because I've dog-eared like every single page. And now the book is like crooked. And the books on top of it will like tip over at some point. And this is one of those books where like I just, I've dog-eared every single page.

There's this stuff that just jumps right off the page at you and just bites you right in the nose. And it's like, okay, the world does not work the way you thought it did. People are not the way that you thought they were. And here's all this. Here's 4,000 years of history kind of explaining why. And so anyway, maybe we'll talk about that one another time. But that one I keep coming back to. Thank you so much for taking the time today, Mark. Yeah, good, Shane. A real pleasure. And congratulations on everything you've been up to. I'm a huge fan. The Knowledge Project is produced by the team at Farnham Street.

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