a16z Podcast - Ben Horowitz on Venture Capital and AI

Episode Date: April 27, 2026

Anjney Midha, founder of AMP PBC, speaks with Ben Horowitz, cofounder of a16z, about how venture capital changed from a small, relationship-driven business into a scalable system for backing new technology companies. They discuss network effects, firm design, leadership, culture, and how AI is reshaping both the capital race and the kinds of companies that can be built now.   Resources: Follow Ben on X: https://x.com/bhorowitz Follow Anjney on X: https://x.com/AnjneyMidha Watch more from CS 153: Frontiers: https://www.youtube.com/@CS153Team Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

If you share control, it becomes very, very difficult to change the organization, because everybody's got to agree. I quoted Little Wayne, I said, when I see another VC coming at me with the P-Sign, all I see is the trigger and the middle finger, and everybody hate me for that. There would only be 15 technology companies that would ever get to $100 million in revenue.

And we really thought that was going to change because, look, at that time, we thought software was going to eat the world. and every new company was going to be a technology company, and therefore there were going to be more like 200 companies a year that would hit that bar, not 15. If you have a network with a billion people on it, it's going to be very valuable, but like how did Alexander Graham Bell sell the first telephone

when there was nobody to talk to? Like, that part is actually really hard. The rules of venture capital were built for a different era. Recorded live at Stanford for CS-153 Frontiers, This conversation explores how Ben Horowitz helped rethink the structure of venture capital as software expanded what startups could become. From network effects and firm design to leadership and culture, it traces how the system evolved and why it may be changing again.

Now AI is shifting the equation once more. Code is less of a moat. Capital matters more. And the bottlenecks are moving toward compute, energy, and organizational design. Anjnee Midha, founder of AMPPC, speaks with Ben Horowitz, founder of A16Z. Please join me in welcoming Ben Horowitz. Thank you. So how many of you heard the song that was playing right before?

Does anyone know the name of that song? We Are The World. Yes, that's correct. We Are The World is a 1985 single by a supergroup of musicians that all came together to raise, it was a charity single that was produced to help raise funds for the famine in Ethiopia, I believe, in 1985. Yeah, Lionel Ritchie made a good documentary on it if you're interested. Correct.

The reason I'm bringing it up is because Ben is known for many things. He's the co-founder of Andreessen Horowitz. I'm very lucky to have called him my boss for a few years. He's also been a founder or CEO. he's built several technology companies. He's behind one of the reasons venture capital still exists today after many moments when there were times when it got threatened, including the SVB financial crisis.

But the thing I've learned most about Ben is from a documentary that Ben told me to watch about a year and a half ago. Yeah, yeah, yeah, yeah, triple OG. It's called The Greatest Night in Pop. And I would really recommend folks who haven't watched it to go watch it. We're going to put it in the reading assignment for this class.

It's on Netflix, anyone can go watch it. But it is the documentary about the making of that song you just heard. We Are the World. And there's somebody in the documentary that you'll observe if you watch it by the name of Quincy Jones. How many people have heard of Quincy Jones? Okay, about 30%. So we need to school the kids a little bit on it.

Yeah, he was the greatest. Great, great human being. Great human being. And more importantly, great leader. Yeah, well, that was the thing he could do. He was the best at handling super talented, difficult to handle people of all times. No question.

And you can see it in the dark. Yep. There's a moment in the documentary where the camera is following Quincy around, and he's walking into the studio where the musicians all are, and he points to the top of the door, and he says, read that. And there's a sign above the door that he's scrawled. on a piece of paper and he's stuck up there.

This is at like around midnight before the recording session is supposed to start. And it says, check your ego at the door. I think it says, leave your ego at the door. Yeah, yeah.

Leave your ego at the door. Sorry. Yeah. And if I had to summarize Ben Horowitz in sort of one line, I would say he's the Quincy Jones of technology.

That's a lot. High bar. Yeah, yeah. That's hard to take that credit. He is amazing, yeah. Ben is known for many things, but I think the thing he will be most known for throughout history will be his leadership, the lessons he's left with a lot of people over the years. Many leadership lessons, which I think are still not legible to the world yet,

and we'll only become clear over time. But today, Ben, I think it would be helpful to take everybody here a little bit behind the scenes of what it took for you to become the Quincy Jones of Tech. You're not supposed to be blushing this hard, Ben. I mean, Quincy. Having known him, he's a very high bar. That's a high bar. Anyway, thank you for being here.

Why don't we start with, let's zoom back all the way to the founding of Andrescent Horwitz. Let's start there. Yeah. This is a systems class. And recent Horwitz ended up being one of the most important innovations in the systems design of venture capital, of how capital should be deployed. Where we'd love to contextualize this is the students have heard that three or four of the largest bottlenecks to progress are data, context feedback, compute, capital, and culture.

And we haven't talked that much about capital and culture. So today I hope you can take us a little bit to the frontier. What's going on in capital and culture, especially in labs, in startups, in teams that are pushing the frontier. But I think to get there, we should rewind a little bit and start with what was the system, that you created to even allow capital to get to this point? Yeah, so we started the firm back in 2009, and at that time there were a couple of ideas about venture capital that I would say we thought were dated.

One was, like, it was mostly an investment idea, so the product for investors' LPs was really good in that they had very high returns, but the product for entrepreneurs, I thought was, like pretty bad and that they didn't do much for you other than give you money. So that was kind of idea, one, that we thought we could just build a better product for entrepreneurs. And then the other idea that was very, very kind of prevalent in venture capital was this idea that, you know, in any given year, and the historical data really supported this, there would only be

15 technology companies that would ever get to $100 million in revenue. So the whole industry was just about getting invested in as many of those 15 as you could. And that kind of just limited the size of the whole industry and the capital in the game. And we really thought that was going to change because, look, at that time, we thought software was going to eat the world. And every company that was going to be interesting, every new company was going to be a technology company, and therefore there were going to be more like 200 companies a year that would hit that bar at not 15.

And so we decided, you know, one of the things that I did as kind of the CEO of the operation was to say, okay, how do you scale this? Because venture capital firms kind of notoriously didn't scale because they didn't have to. It was, I remember Dave Swenson, who was the most famous LP, said, yeah, a good venture capital firm is like the size of a basketball team, you know, five guys and then a six man or something like that. And that was not going to be enough to have a great product for entrepreneurs and then also invest in such a large number of companies. And so to get to scale, there was a couple of ideas that we had that sound very, very simple, but it ended up being important. The first was normally in venture capital, it's a partnership,

and the partners share economics and control. And the problem with that idea, and you experience this in your career, at other venture capital firms is if you share control, then it becomes very, very difficult to change the organization because everybody's got to agree. And if you know anything about running an organization, the one thing about a reorg is some people are going to hate it because it's a redistribution of power.

And it's not necessarily the people who aren't good. It's just like some people are just going to hate it because nobody likes to lose power. And if people get a vote, then there's no way to effectively reorg a business. And so our idea was like, you can't share control. We'll share economics, but we'll centralize control. And that ended up enabling us to reorganize and enabling us to get into many more kind of categories like American Dynamism or crypto or bio or these kinds of things because we could change the organization and scale it and so forth. And that ended up being an important kind of systems idea.

And then because investing is always a conversation and you need a very, very high fidelity conversation to get to the truth, you never want more people in the room than can have a conversation. And so you can't have a conversation with 30 people. It's not possible. That's a presentation. Over the years, what do you think is the optimal construct of a truth-seeking conversation when you're trying to understand the future of a technology that's super complex?

Yeah, I think that if you have really good chemistry and rapport, it can be like seven. But if you don't, then even that gets problematic. But, yeah, you just can't do it with a large group. And so what we ended up doing is we just kept kind of splitting the firm into smaller and smaller groups over time. And each group would address a certain part of the market. And that, you know, that ended up being very effective. And to contextualize for folks, and when you started, the firm, the first fund was about 300-something million, 320?

300 million. 300 million. And you had all these sort of institutional folks like David Swenson and so on who had these sort of long-held, for whatever reason, priors and assumptions. What did you find was the most effective way to realign them or get them to revisit those assumptions or update those priors in a way that was aligned with your mission? Well, succeed. I mean, like that's all it is.

like I think one thing, you think another thing, we're going to find out if I'm right. So the first thing that that happened was we invested like a quarter of that $300 million fund into the Skype buyout, which everybody thought was insane. But like we knew, there was a bunch of things we knew that other people didn't know. So the first thing that made it insane was like the deal itself, When it spun out of eBay, eBay didn't own the IP.

They owned the company, but not the IP, which how they ended up there is like a crazy, dumb story. But, by the way, never do that. Never buy the company without buying the IP. So the founders kind of had this hold on them where they could have sued them and shut down the service. And so everybody was like, oh, that's an unbuyable asset. But like we knew the founders, Janus and Nicholas. and we knew, like, the one thing they had in life that defined them was Skype. So they weren't going to shut that thing down.

It was just a matter of, like, how much money did they want, did they want to be on the board? The IP at the time was basically the Skype client and the user base? It wasn't the client. It was the underlying kind of library that controlled the protocol. Oh, sure. Yeah. The communications program.

Yeah, which was, you know, very hard to replace and all that kind of thing. So anyway, we bought it, and then 18 months later, we got like a 4x return on it. And so like you got a 4X on a quarter of the fund in 18 months and everybody goes, okay, well, even though we thought you were nuts, like maybe you're not completely insane. There's so many interesting parallels to that era and now, but, you know, one property of that era was the explosion of networks.

Yeah. The idea of network effects became legible for the first time as a systems concept. So could you talk a little, take us back? you know, I think it's hard for people now to we just take these for granted, but at the time, can you talk about why was it novel,

why were people resistant to it, and what were the insights that then led to the architecture, the firm being a network effect-driven firm? Yeah, I mean, I think that, I think people just didn't understand network effects as well. So the big era of networking kind of started with the Internet. And then people thought the Internet itself was just like a unique network.

And it was weird, it was different because nobody... Like, people got value from things built on the Internet, but the Internet was not owned by anybody. It was like the kind of first real decentralized network. And so people didn't know what to make of kind of networks that, like, I mean, Facebook early on had, you know, there weren't like a ton of people giving them money for the first round.

That's why Peter Thiel was able to do it, you know, at a really good price. And then, you know, kind of the same. thing with Twitter and so forth. Like people just didn't know that basically they, how invincible those things got when you kind of got them up to strength. So the bigger, you know, it's basically like an n squared value. So every node you add kind of increases the value by, you know, kind of n squared.

So like if you have five people on the network, you know, that's 25. but if you have six, that's the 36 and so forth. And the value, you know, if you get up to Internet size, it's just invincible. Like, nobody's going to ever build a rival to the Internet or very unlikely. And so, you know, at that point, you know, us being involved in the Internet and Twitter and Facebook and so forth,

we had a really good understanding of that. And so, you know, we always thought of the firm as a network. Right. And so, you know, from the very beginning, we thought, okay, the more relationships that we have, the stronger our network effect. And so we ended up doing things that other firms didn't do. Like we tried to build relationships with like every engineer in Silicon Valley and, you know, every executive and every everything. And that, and then every corporation that bought technology and so forth. And we were in our minds creating kind of this network effect that would just make.

us the best place to raise money from because we were like an automatic you could tap into that network and become extremely powerful like right off the rick. And, you know, I think a lot of people didn't understand like how hard that was to do. And then the bootstrapping of any network is always the most difficult thing. So like, yes, if you have a network with a billion people on it, it's going to be very valuable, but like, you know, how did Alexander Graham Bell sell the first telephone when there was nobody to talk to? Like that part is actually really hard.

And so figuring that out and how to bootstrap the network effect, you know, kind of coming from behind in venture capital was the idea. Well, I mean, could you say a little bit about how you bootstrapped it? What were the things that may be now lost to the annals of history where there were individuals or as emet? You know, one of the things we talked about in the first class is, you know, often the students, get excited about the speakers like you up here,

but we reminded them that one of the most valuable assets they have is the people sitting next to them, right? It's the relationships they build. When you were bootstrapping... That's getting more important, by the way. Exactly. If there's anything that's going up, it's that value, right? But if you zoom back, when you were trying that bootstrapping

and you didn't have the largest firm in the valley, you didn't have the most capital, you had no track record as a venture capitalist other than your angel investments. How did you boot? What were the moments where that may not be legible to folks here that you used something that was asymmetric that allowed you to bootstrap, they're not working.

Well, the really simple idea was we knew, like, venture capitalists made a lot of money, right? So they would take the fee money, and then they'd pay themselves big salaries. And so we were like, well, what if we didn't pay ourselves anything? And we just took all the money, and we basically spent it on building this network. Right. So we would hire people to, like, bring people in. We, you know, with our kind of, you know, how do you get relationships with every big corporation, FedEx and this and that and the other? And the trick that we had there was we had sold the previous company to Hewlett-Packard.

And so we knew the people in their enterprise briefing center. And so we would call them every week and say, who's coming to the briefing center this week? And can we get their numbers? And we would call those companies and we would have them come to our briefing center. And we'd just show them all the startups. So it would be like, you know, and we'd have everything they like all the donuts and all that stuff. So it was like very unventure capital-like. but the corporations loved it.

So all of a sudden, we knew more big companies than VCs who had been around 50 years because we had this hack through the HP Enterprise Briefing Center. I think it's very poetic that we're sitting at Hewlett 200, by the way. This is the name of the auditorium. It all comes back full circle.

So, you know, when you started doing that, usually when somebody new shows up on the block with an insight like that, from a system's perspective, what we've observed is often the antibodies come out. Yeah. Right?

The immune response of the existing incumbent system comes out. Yeah. At the time, I was across the street with Mike, actually, a Kleiner. And I remember, you know, there was a, you know, A16Z was in the headlines all the time. And like our CMO at the time, great lady, but, you know, I remember taking one of the headlines to her and saying, like, you know, we should do this too. And she said, on, just executive briefing, says, oh, that's just marketing. Yeah.

And I said, yeah, that's your job. shot. This is working. And I've been consistently shocked by the number of times A16Z has done something from a product insight, deliver that to the entrepreneur, and then everybody else just says, oh, that's just marketing. Is that, am I being overly facetious or is that true? And what were the immune responses like that that you were experiencing and how did you deal with them? Yeah, well, it was funny because every time we meet with our investors, our LPs, they would say every time we meet with another venture capital firm, all they want to do is talk about you and say mean things. And I'm like, well, that's fantastic. That's great.

The best farmer of flattery. That's good. They used to call us Aho. That was their nickname the other VCs. You know, they hated us. Some of it was my fault, though. You know, like, because when we started, I was coming from enterprise software, which was like a very competitive bare-knuckle kind of there's no such thing as co-op petition and enterprise software. It's just like killer be killed. So I did it like, I wrote this blog post called Four Things that VCs do that I don't like that, where I just like attacked them all. And then I did this big, there was this, Sarah Lacey had this big, big event. And she interviewed me on it.

And she's like, well, you know, you seem like kind of, you don't like other VCs. And I quoted Little Wayne. And I said, when I see another VC coming at me with the P-Sign, all I see is that. the trigger in the middle finger, you know. And everybody hated me for that. So, you know, I do. But it kind of worked because they hated me so much, they weren't willing to copy what we were doing,

even though what we were doing was working. So it kind of backed. I don't know if I would have been that antagonistic again, but, you know, it worked, so you can't argue with it. Well, okay, well, I think we should come back to that later. And then what do you do differently? But, yeah. So, great, you bootstrap the network effect.

That allows capital deployment to start scaling into a bunch of startups. Now, it really does feel like a back-to-the-future moment a little bit, right? Yeah, yeah. What's going through your mind right now? Yeah, I mean, I think so. So the big thing that's changed is that, or the kind of most fundamental thing that's changed from a VC standpoint in my mind is, it used to be, I mean, for my entire career,

the one thing that you knew about technology companies is you couldn't throw money at the problem. So if somebody had a two-year lead on you, you could not hire 1,000 engineers and catch them. That was never going to work because, you know, nine women can't have a baby in a month. Like there were just things you could not parallelize, and then the communication overhead would kill you.

And my favorite joke used to be, you know, what's a man year? It's like 700 IBMers before lunch, right? Like that, you know, it's nothing. You can't catch that that way. With AI, that's really changed, and that you can throw money at the problem, because if you have enough GPUs and enough data, you can basically solve most problems right now.

Like that just is what it is. And so now, you know, the capital race becomes a real thing, and you have to think through, okay code is not really a moat. the way it was in the past and like user interface isn't really a moat and so like what is

like your barrier to entry like what is the thing that differentiates you over time these have become like really really different and it's happening at the same time that you know demand for the technology is unlimited because the products work so much better than anything we've built before

like these I mean many of you are too young to remember the products of old but like Like, none of them worked this well before. Like, this is, like, wild how well this stuff works. Are you mean companies didn't always go from 9 to 30 billion in run rate in, like, six weeks? Well, but the reason they go that fast is, like, you use them and you go, wow, this works perfectly. You know, how can I do more with it?

Whereas in the old day, like, if you bought Siebel system software, it took two years to deploy the thing in a million dollars or at minimum. And, like, so that's going to limit demand. there is no limit on demand when technology works as well. So you would say, Ange, the technology is working in a way that collapses the sort of gap that existing incumbents might have as a result of their human capital investments over the last, whatever, decade of software, there's willingness to pay at levels that are exporting. Yeah, I mean, the return is crazy, right? So, I mean, if you make an engineer 20 times as productive.

Right. And you're paying that engineer. Well, if you're a Zuck, you're paying that engineer a billion dollars. But, you know, like if you're paying whatever, it's going to be at least several hundred thousand dollars a year. That's a hell of a return. Right. So that creates this.

So, you know, the final project for the class for the students is the one person frontier lab. Because what we're trying to get everybody to realize is there's actually an extraordinary amount they can accomplish with the right tools. Yeah. Right. But. We have an entrepreneur like that.

that right now building a global VPN by himself. Yeah, and this started to become more common, I would say, when we were seeing pitches, I mean, almost a year and a half, two years ago now, right? Yeah. What does that mean for folks here who don't have necessarily access to the most capital, may not have access to a ton of compute either?

What would you say is, but want to make a difference to the frontier, right? Well, I mean, I think saying, I just be careful, a little careful with like people don't have access. Okay. Like anybody with a great idea these days has, like trust me, you have access in that there's like unlimited money for good ideas currently. You know, maybe that changes over time, but like it's definitely there.

And I would just say this, you know, the world is changing. And you can just think of it as like the jobs we had before the industrial revolution are all gone. And then we've been kind of living with the post-industrial revolution and then the post-computer age jobs since then. And we're going to get to like a whole other class of jobs and a whole other class of companies over the next 10 years that replace most of what we have now. And so if you're young, like, that's the best thing possible

for your career and for your life because in the opposite scenario where it's all the same companies, then you've got to start at the bottom and work 30 years to get yourself to be a mid-level manager, you know, and you've got a politic, and then, you know, the old people who aren't as smart as you, like, get all the money and, like, that sucks.

But in this world, it's the old. people who have the challenge because they know how to do the old thing, they don't know how to do the new thing, and you can walk in and learn anything. And trust me, when you're old, it's harder to learn new things. Like, it just is something about your brain stops functioning as well. It's all filled up with old stuff you don't need anymore, and you can't learn enough new stuff. And so I think that, you know, the main thing is just like understand the future, and then the future is yours, is the way I would think about it if I was, you know, 19 or 20. years old. Well, you said something that's pretty important there, which is for the right

ideas, there's unlimited capital, right? Could you talk a little bit about what do you think is the shape of good ideas today that's emerging in your mind? Well, look, I mean, I think that, you know, it always comes down to like, can you build something, a product, an organization, a culture an offering that people want. And then if you don't build it, is it getting built by somebody else? Or do they need you to do that? Does the world need you to do that? Or it doesn't exist is always the best entrepreneurial idea.

And so anything that needs to exist that doesn't otherwise exist is a good idea. And that was the whole story with a venture capital firm now. did the world need another venture capital firm generically, no, did it need a different kind of venture capital firm? Absolutely it did. And so that's what we built. Now, I think that's kind of true for, I mean, if you look at Open AI, they weren't the only ones trying to do AI, right?

Like Google, like it was assumed like Google was just going to own AI. I was panicking everybody, and that's why Elon, by the way, co-founded it with Sam, and Elon's still mad about what Sam did with it, but that's a different longer story. But, you know, it was one of those things. Well, we need an AI, we need an alternative. The world needs this alternative to Google, and, you know, that becomes a really, really good idea. So anything, and look, the world, the world is changing so fast that the needs are going to, the new needs are going to multiply. There's going to be many, many, many things that need to be done. I mean, if you look at, I think, you know, kind of the old, nobody, the one thing that's interesting about the SaaSpocalypse is it's definitely true that like the barrier entry on like building software and user interfaces is getting much smaller.

But by the same token, like kind of the most boring thing in the world is to just like rebuild Salesforce. Like, you know, like Salesforce at a half the cost or a quarter of the cost. cost isn't nearly as interesting as like, what do you really want for your sales organization? Because it's not bad. I mean, I don't think. You know, and then the question is, can you build it before they can, but do you really want your salespeople like entering data in a crap user interface and then, you know, most of the things that they work on aren't captured in the system and this and that and the other. Like, so, you know, going to the future, figuring out what, like, in a world of AI, like, what does that look like?

One of the traps that students often fall into is I call it the dorm room problem, right, which is you've got sort of direct visibility into problems that are in your kind of cone of the light cone, so to speak, of your visibility, which is quite narrow when you're still a student, right? Yeah, and sometimes when your friends are high in the dorm room and you have that conversation, it sounds really good, It's not actually that good. They should at least sleep for one night. I've seen a lot of those over the years. Yeah, make sure it sinks in

and you still think it's a good idea. At least one night, sleep. But, you know, there's, as you know, just because you're a student in a dorm, doesn't mean you don't want to have an impact on big problems and work on things that have an impact at scale, right? And sometimes these things are mission-critical things, healthcare, financial services, the economy,

the excelling to enterprises, but these things are not directly in your sort of line of sight, right, when you're very young. And how would you advise folks to, in particular, to bring it back to these AI systems, you know, the context feedback loop we've talked about is quite critical. But getting access to those context feedback loops when they can make a huge difference is challenging when you're young in your career and you don't have a big network and so on. So how would you go about bootstrapping that problem? Yeah, like, I think the main thing is to just solve a problem.

And what tends to happen is when you go to solve a problem, particularly if it's a hard problem, you find some other problem that's more important. I mean, and this is well known in scientific discovery, right? Like penicillin was like an accident. They weren't trying to solve that one. It just kind of rolled off of the side. And then, by the way, like META was an accident.

He was building hot or not. And, you know, he kind of stumbled into like this much bigger idea. And, you know, my friend Drew at, Dropbox, you know, he was like literally tired of having USB where he'd have to move his presentation from one thing to another. He was just solving a problem for himself. So I think the best way to come on a good, a really important idea is to go try and solve something, not necessarily build a company, just try and solve a problem. And then in that problem, if it's like a problem that you have, that means it's probably real. And then in solving it, you'll probably, or you'll

likely find something much bigger. And then that may, like, kind of force you to build the company. And those are the things that work the best that we've seen are these big things. I mean, it's really hard to, and even, like, Elon Musk didn't start his career trying to build Tesla, right? Like, he was solving a much smaller problem. And, you know, that's generally, how you build up to that. I think trying to swallow the earth from the beginning with no experience doesn't usually work.

It's good for your pitch deck, but it's not good for your company. I think Elon's first attempt was like a class of Yellow Pages competitors. Yeah, yeah, yeah, yeah, exactly. A little bit more mundane than satellite. Yeah, yellow pages and then PayPal and then, you know, Tesla and SpaceX.

Well, so on that point, you know, the time horizon on which sometimes you find entrepreneurs sort of may have an impact on humanity is quite long, right? They bootstrapped sort of the impact. I would say, or let me put this. One of the old ways we've seen

the generation of entrepreneurs that belong to Elon's generation is that they feel like they have to start somewhat with a narrow scope and then bootstrap bigger and bigger scope with every successive project. But just a few minutes earlier, you said actually, you know,

things are going through a lot of change. Yeah. You can have a lot of of impact very quickly relative to incumbents who may have had to be a little bit more measured in their approaches, right? Yeah. How you resolve these two? I think it's, I think thinking of it, like, how big a thing that am I going to do is the

wrong way to think about it. You have to start with, like, what problem can I solve? And then you solve, if you can solve that problem, that's where to start. Like, you have to size it to you. Not everybody is the same. like different people have different capabilities. You become kind of your full, like, most effective self at a different age. Like, some people are really good when they're...

By the way, like, Zuck is way different now than he was when he was 20 years old. Like, I know when he was 20 years old, like he was... It's a miracle. If he didn't have a network effect business, like that when it worked at all. He just wasn't very good. You know, but he developed that, like, entirely over the year. And because he had that kind of business that had a vertical takeoff, he could develop into that.

And, like, so if he didn't have that, like he might have been better off, you know, finishing Harvard or whatever. You know, that was just one of those things where he happened to solve a problem at that age that was important enough that it created a company. So I want to take it in a slightly different direction, which is, or analogous, which is, you know,

when Zuck, when Facebook was getting started, it had a very unique culture. Some good, some bad. Yes. And it's not always clear what is good and what's bad until much later. I think my friend Sean got in trouble with the law with that culture, but yeah. Did he get in trouble for Napster? Wasn't that one culture earlier?

No, he got in trouble at Facebook also. At Facebook as well? Okay, so I don't know. That was a different problem with the law at Facebook. I see. Yeah, he's a generally tend to get into trouble a lot. But, you know, he is a genius, so. Well, this is the thing, right?

With genius, sort of where you often find outlier technical and or any kind of outlier capability, often you find one of the problems I'm discovering today, right, in the field is that you often have really talented teams try to start a new lab or a new company, and sometimes they fall apart. You just don't get very far. From the outside, you'd be like,

oh, this is totally going to succeed. Star, entrepreneur, lots of capital, great problem. And then, like six months in to 12 months in, teams are just struggling a lot to make progress. And sometimes people leave. They've got to, why is that? What do you think is that it is about the right cultural initialization that sets apart teams that can do this and hit that takeoff

versus stumble along? And how do you skip the painful parts? Yeah. So I think there's a few things. Like, first of all, building a company is hard. and no matter what era or whatever, like the press always makes it seem easy because they hate entrepreneurs,

but it's not easy. It's always extremely hard, so some are going to fail. Like I just say that up front. But in terms of like the team and the dynamic and so forth, yeah, it's a combination of leadership and culture, and culture is a very kind of amorphous thing. but it ends up being very important.

So basically the way to think about it is it's not like people think of culture as like, you know, corporate values or some bullshit. But it's not that. You know, it's not, we have integrity. We have each other's backs. They're like, like some of these like whatever platitudes of people say. It's like, how do we behave exactly? Like, what are the behaviors? The samurai have a great kind of line, which is a culture of.

there's not a set of beliefs, it's a set of actions. And so what do we mean by behaviors? Well, like, do we come to the office or not? Do we, like, do we go home at five or do we stay longer? Do we, if somebody asks me a question, do I get back to them, like, instantly or in a week? you know, like all those kinds of things end up mattering. Like, do we believe the best idea wins, or does it, like, matter who was the founder?

You know, all that stuff, you kind of have to agree on as a team, and, like, very specifically, not, like, just, like, some high-faluting idea. And then you have to live by it. And then if you have that, if you have a standard, if you have a cultural standard, then if somebody's not living up to that standard,

then it's a simple thing. If you have no standard and people aren't living up to way you want them to, then you're pissed. But then that just starts infighting. Then it gets political, right? Because it's like, well, why the fuck is he going home? Well, we never said he needed to be here. We never agreed on that.

Like he, you know, has a date or whatever. or like, you know, he's got a family, he's got to go home, like we never, like, said what that was. And then, you know, people stop liking each other. And then you hit the first hard issue. And it's like, you know, if it I'm out, Open AI is going to pay me a lot of money. Screw you guys.

Screw you guys. I'm going home, as a cartman would say. So, but what happens if you started by standardizing on some set of beliefs, set of actions? Yeah. And then the world changes. Right?

And what you thought was going to be the right standard six months ago in a world where stuff changes so fast needs to be updated. Yeah, yeah. Like cultures can evolve. But, you know, you kind of have to evolve together. And you need a leader. You need, like having, this is why I hate the idea of like co-CEOs or like we're all equal or like we're going to run a communist organization. It doesn't actually work in a company because you need somebody who's going to break the tie. okay, yeah, you want it to be that way.

You want it to be that way. We're going this way. If you don't like it, get the fuck out. Like, that's how you have to run an organization in order for it to succeed. And I think people are, you know, we culturally got away from that idea in Silicon Valley a little bit, you know, in the end of the fat happy network effect era. But like, it's back now. So, could you say more? What do you mean by that?

Well, you know, everybody wanted to like a vote on, what the companies' values were and this and that. And then like CEOs caved to that, and that ended up not working well for any. Right, right. Companies are not democracies. They are. Yeah, well, I think a dictatorship always beats a democracy

in a competitive battle. And so because it takes a long time to decide things in a democracy. Now, look, for a country, it's different. You know, there are things when you have to last several hundred years, is that, you know, when, no matter how good the monarch is, if they die and a worst monarch comes into play, that could be an issue. Well, I'm going to push a little bit on this assumption that it's different for countries versus companies

because something I've learned from you is the way you approach, you know, the most exciting, the businesses I look up to the most, especially the ones in the A16 portfolio, are often with leaders who are thinking so long-term. the way they talk about their impact on humanity is not that different from the timescale sometimes of political leaders. In fact, arguably, some of the entrepreneurs

are thinking longer term than political leaders these days. Well, it is longer term, but so, like, if you have a king, let's say you had a king running the United States. Right. If it's a great king who was not interested in their own, like, enrichment or their family or their friends and so forth. That works like...

Who cared about the public benefit, basically? Who cares about the public benefit? I think, you know, that works better than our current system. The problem with it is, as soon as you get somebody who's not like that, that's just too much power. So you're better off decentralizing power so that the system is resistant to bad leadership. Like, I think a country has to be resilient to bad leadership.

And that, like, if a company goes away, like, okay, fine, whatever. Like, so, you know, the, the, well, Dave Packard and Bill Hewlett, you know, like, they're gone. They passed away. The new leaders weren't so good. Like, that's the end of the company. Fine, whatever. It's a company.

Yeah. They did their thing. They did their job. They fulfilled their mission. You know, a country has to persist beyond that. And so, like, I think we already see that, you know, here, be it like, you know, you know, on the nation level, on the state level, on, you know, even on the city level,

you can see, like, eventually you get politicians who just start giving stuff to their friends, and then, like, everybody suffers. At least you can vote them out. At least you can do something, whereas, you know, I think in a company, you want to be as efficient as possible while the sun is shining. I know I could keep going forever,

but we probably have a bunch of questions piling up. So I'm going to ask you one more question, then we're going to switch to students, yeah? Which is, you know, there, you talked about David Swenson, right? And he had some strong assumptions that then you felt, these were leaders of the previous generation

that you felt just didn't get it. Well, I just think that, you know, not that he, like, by the way, Yale is still like an investor in us today. So I just think, like, you can't let your investor. by the way, including us, like run your company, because you're on the ground in real time, seeing what's happening,

they have knowledge of the past, and they have a light knowledge of what you're doing, but not full of context. So they can be, like, it's an interesting conversation, but, you know, the investor can't run the company. And that's just a way with him and us. Well, so my question for you is, what prior do you feel like you now have to update

so that, you know, given that you felt like Yale at that time needed to update their price faster today, what do you feel is like the biggest assumption that you've changed about the venture capital industry that maybe was a strong belief you held, you know, 10 years ago? Well, I mean, like I said, I think, well, one, I mean, there's so many things that are changing, but, you know, and I talked about, like,

you can throw money out the problem, and that's a massive change. I think that, you know, the bottlenecks have moved. So, you know, we used to have a bottleneck on software engineers. I think, like, you know, we've got bottlenecks on things like electricity now. So I think that changes how we think about investment. And then, you know, companies are so big in the private markets that they now require things that venture capital firms didn't, you know,

previously provide. Like, so when you get a. up to, you know, a billion dollars in revenue, then you have to be like multi-country, multi-channel, multi-product. You know, these capabilities, most VCs just have never had. Right. But I think now we have to have them. And then I think the private capital markets aren't quite, don't have all the functions of the public markets. So, you know, that needs to be addressed. So there's a lot of things that are changing. This is definitely not a new questions a follow-up to that, which is, you said culture is a set of actions, right?

Yes. This is, by the way, this is on the wall at A16Z, and I, every day I would go to, you know, the office in San Francisco and I'd rent one of these, we could all book our own offices. And the one that was my favorite was in the back corner near closest to the bathroom because I could dash to the bathroom between meetings. But in that corner, it says, you know, from the Bushito, your culture's set of actions, not just beliefs. Yeah, look, I tell people when they come in, like, I don't care what you think, I don't care

you feel, I don't care what's in your heart. I just care what you do. And like what you do matters. And that's the way you have to run an organization or like you get into this bullshit. So, I mean, that's my follow-up. Yeah. A culture is often also what you don't do,

what you say no to, right? Yeah. What are the things that you've had to say no to because you're like, well, that's just not. That could be an interesting opportunity. It might have been helped an entrepreneur out, but that's just not in our mission. That's not us.

Yeah, well, so I just give you one example. So the biggest one that got proposed to me like 18 times was, well, with AI, AI is like, it's very much like when the spreadsheet happened, that kind of launched private equity, right? Because all of a sudden, you could go in and make all these big companies much more efficient by, like, having them adopt this new technology, and AI even more so, right? You can go in and you can go into an old company

and you can make it much more efficient with AI. and there's like many VCs who are kind of going with that idea. And for me, like there's, I would say two big reasons I didn't want to do it. One is it's culturally the opposite of venture capital. So. You don't like leverage biots, basically. Yeah, LBOs. So like, venture capital is about investing in entrepreneurs with new ideas

and focusing on how they can grow fast, leverage buyouts are about, you know, entry price, making it more efficient, firing people. And I don't really want to grow it. I just want to make more money out of what it is. And so, like, if you're in the venture capital mindset, you're looking for the great entrepreneur to go build something amazing. if you're in the leverage buyout market, you're caring about like, okay,

I'm going to bring in a professional, I'm going to have them run this more efficiently, and so it's the opposite motion. And so for me, I was like, well, I don't want to split the culture that way. Like, I think that's not going to be a good idea. And then the other thing is, like, I don't want to do that with my life.

Like, I have the opportunity to fund, like, the greatest new ideas that are going to push humanity forward. I don't want to, like, you know, leverage buyout, cease candy, and fire all the old ladies who work there. Like, I'm not doing that. with my life.

I'm like, fuck that. You know, like, go to another VC if you want to do that stupid shit. Or like that, like, I'm not stupid. I think it's a good business. But it's not a business for me. So sometimes you're saying it's okay to impose bottlenecks on your own growth because that's just not what is fine. Yeah, you don't have to be in every business just because there's money there.

You know, look, I believe in like you build a company to kind of do something larger than yourself and make the world a better place. And then if you do that, you will make money. But if you are in business just for making money, like that's not for me. Like, that's, there are a lot of people who think that way, and I'll let them do that, but, like, I think that great companies don't think like that to me.

Like, companies that you would want to be part of, that I would want to be part of don't work that way. And so I'm not going to, build that thing just because like, oh, there's money over there. Let's go run to the money. We're going to switch to questions. So the way it's going to work is they even bring their questions in Discord. And they're all voting on each other's questions.

And the top ones, they get voted by each other, we'll go through them one by one. First question. The question is, if I was a college student, where would I put my energy and effort? And what do I think about encouraging people to drop out of college? So, like, I think that if I was in college now, I would put a tremendous amount of, I would view AI as, like, a very powerful tool set. So I almost think of it, like, I think the best analog is electricity. So, like, okay, if you knew electricity was coming and you wanted to do something interesting in life and you were in the pre-electricity world, right? like, you know, where like it's six o'clock,

we got to be at home because it's going to get dark. We're not going anywhere. Like that world. Sounds like San Francisco. Yeah. Yeah, well, yes. You know, so then, okay, this whole new world is coming. Let me really understand this technology.

And then, like, what is interesting to me in the world? And that could be biology. It could be material science. It could be, you know, rocketry. it could be anything, but like you want to have those tools in your bag when you go do that, or it could be, you know, like, by the way, it could be in the creative field. So, you know, people, I think, misunderstand what's about to happen in the creative world,

but like somebody who used to be, like who in my era would have been like a pretty good guitar player can now make a sci-fi motion picture scored and everything by himself. And like the world is really, really different. So I would definitely kind of figure out what I'm interested and then master this new tool set and kind of apply it together. I think that's probably the thing that's definitely going to work. In terms of dropping out of school,

I think that this is very individual-based. Like, you mature at different. points in life, you know, like I think that I finished college myself, and that was good for me. Like, I think, you know, it was good for Zuck to drop out, given the idea he had, and given the kind of company he was able to build. And, you know, so I think that with career advice, let me just say this, that nobody can give you good career advice, they can give them good career advice. So I can give you good advice for me. They can't give you good advice for you. And particularly your friends are going to give you good advice for them, not for you. And so don't listen to your friends and, you know, figure out who you are

and, you know, what the best path for you is, I would just say on that. Yeah. So by the way, so just on political donations, I also donated $5 million to the Kamala Harris campaign. Important fact. Yeah. Often not report on. Just say, well, it is. put it on on Twitter every time the MAGA people get mad at me. Look, on politics, let me kind of just tell you where that came from and how I'm thinking about it in general. Tech had like very little voice in Washington, D.C., and that had extremely severe negative consequences for tech.

And specifically, so I can go through a few things in the Biden administration. One is they basically almost. ended the crypto industry by enforcing things that weren't even in the law to shut down companies. And then they were like the same thing was happening with AI. So the last Biden administration executive order was to require for all sales of GPUs worldwide that any time you sold one,

you'd first need government approval, U.S. government approval. So that would have basically taken us out of the AI race entirely. And the issue behind that was basically that we had no voice. Like the whole industry had no voice in Washington. So we kind of launched a very, very big effort to have a voice in Washington. And I would say that it's worked very well. So we have much better AI policy, much better energy policy and much better crypto policy now than we did before we got involved. So I'd say I'm like very happy about that and then all the kind of money and conversations have been about that. Look, I mean, the other thing is like I said, I gave money to comma because I know

her I've known her for 15 years. She's been to my house 17 times. My wife sat next to her in church the whole time. So I knew her. So I knew I could talk to her. Biden, like we never could get a meeting with Biden for the whole time he was in office. And if you speak to Tim Cook or Sundar Pachai or Dave Rick who runs Eli Lilly, none of them got a meeting with him in four years. Now, we all know why now, but at the time we didn't know. And the result of that was like Tech had no voice in Washington for those times. So, you know, it was a correction that we had to make. I'm not going to defend everything that Trump does or everything that Kamala would have done. Because, like, there's a lot wrong with both of them, and, like, I know them both.

But there's a lot, like, the things that we needed to influence to kind of both make the country stronger and make the tech sector stronger, I think, worked out well. So I guess the answer is, yes, I'm happy with that. Oh, here we go, man. That's a good question. So the question, to repeat the question for the podcast is, How do I think being in a rap group in college kind of affected me, and then can I rap for us now?

So the story of that was, you know, I had a friend who got shot in the face and became blind, and so we started a – and he was very, very depressed, so I would send him rap music. And in those days, rap had just kind of gotten started, and that kind of cheered him up over time. So we started a rap group called the Blind and Deaf Crew, D-E-F. And we became a group, and I wrote some rhymes. So, like, one of the rhymes was,

The Blind Deaf Crew, You Know Where Fly, Three of Us, but we got four eyes. Plus he got his eyes. All right. Thank you, Beth. There are so many very memorable and intriguing pictures. which is, well, one of the most memorable was actually Databricks because it was so bad. So the pitch was, Jan Stoica, who was a professor at Berkeley, presented the company. And the slides he made, it was like going to like a computer science lecture that you couldn't understand in college.

That's what the data rick's pitch felt like. So that was very memorable. It was memorable because of that. And then it was memorable because of what it turned into. But there was so many. If you couldn't make sense of it, why'd you invest? Well, the whole reason I had them coming to pitch is because Scott Shanker, who was another professor at Berkeley, who I knew, had called me and said,

Ben, I have the best distributed systems guy that we've seen in the last 10 years in academia. His name is Matez Zaharius. You know, do you want to meet him? I knew as soon as he said that to me I was going to invest in the company, yeah. But that pitch kind of scared my partners. Thank God they didn't talk you out of it. Yeah, yeah, yeah.

Yes, it's funny. So the question is about Cluley and, you know, what do I think about it now in terms of momentum and this and that and the other? Look, I think that an easier way to think about it is we invest in founders and you know you want founders who are original thinkers and have kind of breakthrough thinking on

on whatever it is they're working on. And I think those guys, you know, had a bunch of breakthrough ideas, including marketing. Like I think, you know, they are kind of marketing geniuses in a sense and that like you know about them. They're not the biggest company in the world, but they're the one that you know about. There's something to that.

So, you know, what it becomes from here and where it goes, we'll see. But, like, hey, I always say, you know, these things are early, and there's only one unforgivable sin in business, and that's running out of money. And until you've run out of money, like I don't count any of these companies out, by the way.

Like, I've seen, like, Slack was in dire straits before he figured it out. You know, he had built a game, on Flash called Glitch. And Steve Jobs outlawed Flash on the iPad, and it was an iPad game. And that's how dead he was. You know, and he had like $6 million left,

and he turned it into Slack. But that's Stuart Butterfield. He's a great entrepreneur. So, like, companies go through changes and this and that. If you've, you know, like if you're a special founder and you don't run out of cash, I'm still for that and would bet on that. Question is, you know,

given the SaaS apocalypse, and given that we have a long time horizon, how do you think about, like, how can you invest in anything? Because Anthropics just going to one shot at all. This is the Wall Street view. By the way, anytime Wall Street thinks one thing and Silicon Valley thinks another thing, that arbitrage is worth a lot of money on Wall Street's always wrong. So I think there's actually a lot of opportunity now in that case. Like, I think, you know, for some of these things are,

you know, the whole moat is the code in the UI, and I think that's a difficult position to be in right now, for sure. But there's a lot of companies, one, like most of the new companies, like nobody's coming in with, like, new SaaS companies at this point. Like people kind of know, like, okay, that's not that defensible. Like, you know, you can build it and so forth. So that's not the new idea. So then if you go to the old ones and you go,

well, you know, are they all dead like Wall Street things? I think, you know, not really. So, like, I'll just give you one example of a company that I'm on the board of. So I'm on the board of a company called Navon. And Navon is like a software travel agency for businesses. So, you know, in a company, your biggest kind of variable expense is travel. So you need to have, like, very tight policies around and so forth. And then to build a travel company, you actually need.

to have supply chain relationships with not every airline in the United States, but every airline in the world, every hotel in the world. And like if you scrape their websites and do that kind of thing, they literally cut you off. They send you a cease and desist and they sue you and like you're out of business instantly. So it's not that hard to build all those global supply chain relationships. And then you can't sell to any significant company that travels worldwide if you don't have all of them because, like, I need to be able to travel everywhere. And then you've got to, like, integrate with all their, whatever they're doing for their, you know, credit other systems in their company.

And then the channel to sell it, you're actually selling to somebody called the Travel Manager, which, by the way, like Anthropic is, like, the chance that Anthropic would build a channel to sell to the travel manager. Like there's gold bricks everywhere. They're not going to pick up a silver brick. Like, they're just not going to do it. Like, I can tell you, Anj can tell you, like, that's the last fucking thing on their mind. In fact, they've got an open wreck now to hire a travel manager at Anthropic to manage the Navon relationship.

Nonetheless, Navan lost two-thirds of its value in the SaaSpocalypse, and it's, you know, accelerated revenue since then. It's, you know, I think, I mean, it's, I got to be careful because it's a public company and so forth. But, like, I think they'll be fine for a very long time. So, you know, it's just one of those things where, and there's a saying on Wall Street, when the patty wagon backs up to the House of Ill repute, which is, by the way, for those of you too young to know what that is, that's a whorehouse, everybody goes to jail,

you know, not just the people recommending crime. And so in the SaaSpocalypse, everybody's in jail, whether or not they should be in jail. So, like, just be aware of that. What do you think it's going to take for the markets to realize that time. Time. Like, so I think what's happened, so if you look at the Navajat stock,

it was at like $25, it went to $8. It's now at $15. If they put up two more quarters in a row, probably be at $30. It's just like that kind of thing. It's just time. And education, I guess. Yeah, yeah.

And you learn, Paul, so the way Wall Street works is, and Warren Buffett always says, you know, in the short term, it's a voting machine, the long term, it's a weighing machine. Well, why is that? Well, the reason is it's a narrative. They buy the narrative.

They don't buy the facts. They buy the narrative. So the story, if the story is, this is a victim of the SaaSpocalypse, barring any new results from that, that's going to be a winning story because it's like such a good story. And by the way, all the portfolio managers who owned SaaS companies got fired. So like nobody wants to jump into that, you know, kind of. kind of thing if you got the new job. And so that story's going to hold for a while.

But eventually when the quarters come in, the weighing machine will go, well, maybe that narrative wasn't right for that company because why are they making so much damn money if they're a victim of, you know, if anthropics can one-shot them? Like, that doesn't make any sense. Don't the customers know the one-shot is coming?

And so then the narrative will change and a new narrative will win. And then it becomes a, Wang machine. And that's true for, by the way, every company. What's shot of advice is super overrated today? I don't know what advice. That's a good question. I'm not sure. Like, what kind of advice are you getting? What I get? I mean, look, I think you have to pay much more attention. I think the thing that is true is, like, you can't ignore AI. I remember kind of before the

internet came, which I was. was also alive for. You know, there were a lot of tech companies, and anyone that ignored the internet was just gone. Like, you can't ignore a change that big. Like, there's no way that something that worked before AI can ignore AI and survive. So, like, that part is true.

And so if you're starting a company and you're not dealing with not only AI today, but what's likely to happen, you know, as the models get bigger and so forth, like it's just not going to be a very interesting company. So that part of advice is very correct. I think the part of the advice that's wrong is there aren't going to be any employees

and companies aren't going to hire people and it's just going to be AI bots running everything. By the way, like all the data kind of is going in the opposite direction of that. Like even like software engineering jobs are growing like very fast despite what Dario says. And by the way, they're growing very fast at Anthropic. So it's like, you know, at what point do you call like bullshit on that idea? I think sometimes things get taken out of context, right?

Like with the political donation question, like what was missing context was that the donations to both sides. I think one of the things that gets taken out of context with Dario is he's often saying, hey, during the transition, some types of jobs that are low skill will get those will go away and those people will then have to, you know, take new jobs. Yeah, so there will be a job, so Dario is very right on that. There will be a job change. So not the advice Dario gives, but how he gets written up.

Exactly. It's the tweets. It's the tweets. The tweets are the problem. Yeah, so those tweets turn out to be, I would just say, like, very overblown and not kind of representative of what's likely going to happen. So, you know, don't. And in general, like the doom and gloom, I just think it's overstated, you know, a lot on AI.

By the way, the most dangerous thing I think on AI by far is that we kind of fail as a country. We get too scared. We over-regulate. We do what Bernie Sanders recommends. Some of you are Bernie Sanders fans. But like we put a moratorium on data centers. and then China wins and luck I think a world where

by the way either China has like super intelligence and we don't or we have it and they don't is a much more dangerous world than having some kind of balance to the power you know concentrations of power historically have been the worst thing for humanity and so I think that

that would be the thing to be scared of So I think the fear could cause actually a worse problem than what people fear. Well, here at AI Coachella, we are rational optimists. All right. So thank you for coming to AI Coachella, Ben. All right, thank you. Thanks for listening to this episode of the A16D podcast. If you like this episode, be sure to like, comment, subscribe,

leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcast, and Spotify. follow us on X at A16Z and subscribe to our substack at A16Z.com. Thanks again for listening and I'll see you in the next episode. This information is for educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. This podcast has been produced by a third party and may include pay promotional advertisements, other company references, and individuals unaffiliated with A16Z.

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