a16z Podcast - David Solomon & Ben Horowitz on Building Organizational Resilience & Navigating Macro Uncertainty

Starting point is 00:00:00 We were the largest wholesale funder in the world 10 years ago. There are a lot of things you want to be the largest in the world. A sale funder, not one of them. We got a lot of criticism. Like, why are you raising money now? What are you? Stupid. And it turns out that the best time to raise money is when nobody has money.

Starting point is 00:00:14 Last year, the four largest company has contributed 1% to GDP growth with their $400 billion of spending. M&A and capital raising and IPOs are driven by confidence. For the last four years, whatever the question was, the answer was no. Okay, now whatever the question is, the answer is maybe. I've been at Goldman now over 25 years. You know, what are you focused on to position Goldman for the future? If you're in our kind of businesses, if you're attached to financial assets, this is as sweetest spot that I've seen with AI.

Starting point is 00:00:42 If you have proprietary data and you have enough GPUs, you can solve like almost any problem. It is magic. What if the thing that made software companies defensible for 50 years just stopped being true? In 1975, Fred Brooks published the mythical man month, which included a simple observation. Nine women cannot have a baby in one month. You couldn't accelerate software development by throwing more engineers at it. That insight shaped how startups competed for decades. A small team with a head start could outrun a giant because you can't buy your way to a breakthrough.

Starting point is 00:01:13 50 years later, something has changed. Companies are going from zero to more than a billion dollars in revenue in less than a year. OpenAI built a $10 billion business with a seemingly insurmountable leave, and competitors are catching up anyway. The old playbook assumed that leads compound. the new reality suggests they might not. This raises uncomfortable questions for founders and investors alike. If you can throw money at the problem, what happens to the advantage of being first?

Starting point is 00:01:38 And if incumbents can close gaps faster, does that change when companies should go public or how much capital they need to stay ahead? A16Z general partner David Haber spoke with A16Z co-founder Ben Horwitz and Goldman and Goldman, Goldman, about how AI is reshaping competitive dynamics, while enterprise adoption is harder than it looks, and what today's policy fights over crypto and AI actually mean for builders. I've had the distinct pleasure of working, at least indirectly, for both David Solomon and Ben Horowitz,

Starting point is 00:02:08 and have a lot of affection for both Goldman Sachs and A16Z. If you haven't read, I highly recommend reading the book The Partnership, which is written by a guy named Charles Ellis, which chronicles Goldman's nearly 160-year history. And I think the most remarkable thing about Goldman's history is the fact that it's not a business built through a series of bank mergers. unlike many of its peers. It was really a business built brick by brick by generations of entrepreneurial partners raising their hand, going off and building new businesses, whether it was

Starting point is 00:02:38 expanding into Europe or starting the merchant banking business or the wealth management division. Many of these business units became global franchises. And I'd argue that Goldman was and still is one of the most entrepreneurial financial institutions in the world. And as I think about where we are in our own evolution at Andreessen Horowitz, I kind of like to think that this is what Goldman Sachs must have felt like 50 or 75 years ago. You know, a small group of entrepreneurial investors betting on a future. Partners weren't as rich as you guys. Yeah.

Starting point is 00:03:07 Also, Goldman stopped speaking to Sachs like forever. They got very mad at each other over, it was at Sachs who supported Germany and World War I. So he said. You actually remember your history. Well, yeah. Well, yeah, small partnership betting on the future with big hopes and ambitions. I'll leave it at that.

Starting point is 00:03:24 Well done, David. Thank you. But maybe just pulling on that thread, I mean, you've been at Goldman now over 25 years. You joined the firm, I believe, in 1999 just after the firm's IPO. How is the firm evolved during your tenure? And maybe more importantly, what are you focused on to position Goldman for the future? First of all, it's great to be here, great to be with everybody.

Starting point is 00:03:42 Before I start on that, I just say one of the big lessons I have in my life is if you're joining a new firm, it's a private partnership. Don't spend six months negotiating so you carry over past the IPO date. John before, Joan Dufoy the IPO. It's a good lesson for all of you in private partnerships. The firm's a remarkable place. And I really appreciate what you said about the firm and the entrepreneurial spirit of the firm. The firm was for a long time a private partnership. And the thing about private partnerships is you have this mutual agency where people go off and they do things.

Starting point is 00:04:10 There's some structure that creates a collective each year or each cycle where everything comes back. And then there's a reevaluation of the partnership shares and you go off again, you know, into the future to do more. And that's served the firm incredibly well. and the firm state of partnership much longer than any other real big Wall Street firm. But I'd like to say that the firm state of partnership into the last moment when it absolutely couldn't be a partnership anymore, it needed the permanent capital to really make it a relevant business. If the firm hadn't gone public in 1999, it would have missed kind of the global expansion of capital markets and probably would look more like, not to pick on anybody,

Starting point is 00:04:48 but just to pick any more like a wizard today than like Golden Sachs. And so the stewards of the firm at that point did an incredible job. I think the challenge for us over the last 25 years, and I think the leadership team over the last eight years has really done an incredible job at this working together to do this is somehow 25 years after an IPO, we still have this partnership culture. It's highly aspirational every two years to become a partner of Golden Sachs.

Starting point is 00:05:12 We have 450 people who really are compensated in a correlation to how the overall enterprise does. But the big thing that I'm really proud of that is a broad leadership we've done is we've started to recognize that we're not a small private partnership and you can't be a public company and not grow and have some form of top-down strategic direction that really gets the whole thing making the one plus one plus one equal more than what the map adds up to. And that's been a journey. And it's been bumpy. You were there for part of those bumps. But I think we've navigated well. And I still think

Starting point is 00:05:45 principles, the values that we kind of sit upon as a firm, we really strive to be the most exceptional financial institution of the world. We don't always get there, but we strive for that. And we really sit on four core values of client service, partnership, integrity, and excellence, try to live it. And I think the firm's in a really good place. But in some ways, it hasn't changed at all in 26 years. In some ways, it's changed, it's changed massively. Are there a few things you're most focused on as CEO kind of looking forward for the next five or 10 years? Sure. You know, I was a banker and I advised CEOs for a lot of my career, but actually owning the responsibility. It's one of my big takeaways the last eight years is very different than giving

Starting point is 00:06:24 advice. I think the most important thing that a CEO has to do in a big enterprise like this is they have to kind of own the strategy in the direction of the firm. And, you know, I'm focused on how we ensure we're executing toward growing the firm, because I know we have to do that to perform on a relative basis. But then I'm also thinking about and worrying about big picture strategic risks that can make the firm less relevant, less successful, less important, less competitive. And for us, I think there are two things that the firm is really focused on. I think, first of all, one of the things that makes the United States an extraordinary place is we have the most extraordinary capital markets, most extraordinary financial system,

Starting point is 00:07:05 the most extraordinary financial institutions. I would argue that the six most important financial institutions in the U.S. are all U.S. financial institutions. And there is no global institution that can compete in terms of its relevance in the world with the six most important U.S. institutions. When you look at those institutions, there are different kinds of institutions. There are retail banks, more traditional banky banks.

Starting point is 00:07:29 That would include J.P. Morgan, Wells Fargo, Bank of America, Citibank. They all have global businesses, but they are truly banks and what they do. They have retail platforms, retail businesses. And then you've got two institutional firms. That doesn't mean they don't touch any. individuals in different ways, but Morgan Stanley and Goldman Sachs are both institutional firms. And Goldman Sachs is a little bit of an island of one in the context of the way we're positioned

Starting point is 00:07:55 as an institutional firm, and Morgan Stanley is a little bit of an island of one in terms of the way they're positioned. Scale matters a lot, and I just went through all those firms. The two smallest firms of all those firms are Goldman Sachs and Morgan Stan now. And so when there's turbulence in the world, you always want scale. Scale in these businesses because there's so mature, gives you enormous leverage and attitude. And so we continue to think a lot about scale. And we think our five, 10, 15 years, how are we going to maintain a level of scale that makes us competitive? Ten years ago, it would

Starting point is 00:08:28 be unfathomable that Goldman Sachs could have a $1.9 trillion balance sheet. But at the moment, J.P. Morgan has a $4.5 trillion balance sheet. When J.P. Morgan's six, we're going to have to be at least three and a half. You know, at least three and a half. And so we have to think about how we can continue to create that scale because these are very mature businesses, and it's hard to really build that scale just purely organically. So that's one. Two, funding. Funding these enterprises is one of the big strategic risks to these enterprises. These enterprises live on funding and liquidity, and we don't have a traditional deposit funding platform. We've got, you participated in this, a very excellent digital deposit platform that now has over $200 billion

Starting point is 00:09:12 dollars of deposits. And we've also, we have about $500 billion of total deposits. Fifteen years ago, we had zero. So we fund about 40% of the firm deposits, but deposits is a much more stable funding source than institutional wholesale funding. Commercial paper. Yeah, we were the largest wholesale funder in the world 10 years ago. There were a lot of things you want to be the largest in the world wholesale funder, not one of them. And so that strategically is another thing we were about. So those are big things on stepping back and getting away from the execution day to day and thinking 10, 15, 20 years, which, by the way, I won't be here running the firm, but it's still my responsibility to steward and chart that. I worry about that. The short term, much more focused on technology

Starting point is 00:09:50 across the organization, how technology ships the way we do things, how are rebuilding processes operating differently while staying true to what we do. Awesome. We're here to help with that today, too. Absolutely. Ben, maybe transitioning to you. You and Mark started the firm in an auspicious time in the wake of the financial crisis in 2009. 2009. You know, it turned out to be a really interesting moment because it was, you know, the beginning of mobile and the rise of the cloud. Well, it's funny. Also, you know, we got a lot of criticism in kind of venture capital. Like, why are you raising money now? Like, what are you? Stupid? And it turns out that the best time to raise money is when nobody has money. I mean, like, it's very obvious and, you know,

Starting point is 00:10:30 when you say it that way, but just the nature of investing is people always want to invest, you know, high and they always want to walk away when the market is low. And it just is one of those things. So we got very fortunate at that, I think. Yeah. And maybe you can kind of describe the evolution of the phone, you know, since you started. And again, maybe what your ambitions are, you know, for the future as well. Yeah. So the original idea, and in venture capital, like the fundamental thing that you have to be is you have to be what's on this top tier. Because if you're not top tier, then the best entrepreneurs want to take your money. And so, like, there are times when you can, you know,

Starting point is 00:11:10 when the market is so blazing hot that, you know, you can be like a not important venture capital from and dump into good deals and make money. But in most times, if you're not top tier, you're going to go to the business. And so you have to be that. And the difficult thing about being top tier is historically the way you became top tier

Starting point is 00:11:31 was refutationally, oh, if you're a Sequoia, you had invested in Apple and Cisco and Yahoo and Google. And so it's really hard to make up that ground if you're starting in 2009. So the idea we had originally to get to top tier was to basically have a better product, a better product specifically for entrepreneurs. So the venture capital product was great for LPs,

Starting point is 00:11:55 but we thought mediocre for entrepreneurs. So we designed the firm to basically really enable a founder to basically build his or own company and run it as CEO, which wasn't kind of an idea then. The idea was most part of replace the founder. And, you know, there's a lot that went into it, and because we were founders, we knew what that was. And so we kind of created a firm to give a founder,

Starting point is 00:12:23 like a brand and power and access and all these kinds of things. V.C. said they did, but they didn't have to because, like, they were top tier, it didn't matter. And so we did that, and that's kind of how we got into position to kind of be a long-lasting firm. The second phase was really kind of based on something that Mark wrote in 2011 called Software's Eating the World. And the idea of a software as eating the world was basically, if you looked at venture capital

Starting point is 00:12:56 up to that point, there were these studies that said, in any given year, there are going to be 15, you know, approximately 15 technology companies that get to 100 million in revenue, and those are going to be the companies that are worth money, and nothing else is going to be worth money. So the whole venture capital sport was how many of those 15 can you get into? Now, with software, if software was going to eat the world, though, we thought, well, maybe that 15 is going to be 150, and maybe one of the features of the venture capital, is going to be you're going to have to be able to scale it. And none of the, you know, traditionally, I remember Dave Swenson, the great Dave Swenson, RIP,

Starting point is 00:13:41 saying to me who ran the Yale Endowment for years, he said, you know, a good venture couple firms like a basketball team, you know, five, maybe six players, that's it. But you can't address, you know, a market we have to be in 150 companies with six players. So how do you organize? How do you scale? how do you design the firm so that you can get to the whole opportunity, yet still be really, really good at investing and not have more than five or six people talking about a deal?

Starting point is 00:14:12 And so that was sort of phase two. And that's really kind of, I would say, when we somewhat left the building in terms of, you know, what was going on Silicon Valley because nobody else was thinking that way. And so this last year, 2025, about 18.3% of all venture capital raised in the U.S. was raised by us. So we're now, like, from tier one to the biggest. And going forward, what I think that looks like is, and then I get a lot of this thinking, my old mentor was Andy Grove. And it was actually at the end of his life.

Starting point is 00:14:55 But one of the things he said to me that I'd always remember. And for those of you don't know him, he was, you know, he ran Intel. He got it through that great memory crisis and changed the company, probably the greatest tech CEO we've seen. But he said something that is very obvious in a way, but also profound, which was, you know, if you're the leader of an industry, then the growth of that industry depends on you. You have to grow the market.

Starting point is 00:15:24 Like nobody else is going to do it. It's not going to, like, that is incumbent on you, and he really took that seriously at Intel. And so when I think about, you know, what we are as a firm, a lot of it is, you know, it's incumbent on us. And a lot of the work that we've done on policy for crypto and things that we're doing international, things we're doing on American Dynamism is like, how do we win not just, you know, we and Dresen Horowitz, but how does the country win technologically? How do we continue to compete with China? how do we be relevant in the next 100 years like we were in the last 100 years. And so, and then that drives backwards into how we think about how we have to develop

Starting point is 00:16:03 and increase some Harwitz. Awesome. Maybe we'll transition just a little bit to markets. You know, David, how would you describe kind of the macro environment? What are you hearing from the CEOs that you work and advise most closely? Sure. You know, first, just and Ben and I were talking about this. If you're in our kind of businesses, if you're attached to financial assets or investable assets, this is, you know, I've been doing this for 40-some years.

Starting point is 00:16:36 This is as sweet a spot that I've seen kind of macro picture. Now, that doesn't mean there aren't all sorts of difficult complex things going out in the world. But I think we're at a moment. Let's just be here in the United States for a minute. that we can go around the world and talk about any way you want. Let's just start here in the United States. The combination of the significant amount in continuing to increase fiscal stimulus.

Starting point is 00:17:08 And by the way, the big, beautiful bill that started in 26 just adds more to that. It's not that we weren't in a very stimulant of place. We just added a whole bunch of more. We have fiscal stimulus. We have monetary stimulus because we're in a rate-cutting cycle. That doesn't mean I think we're going to see many more rate cuts,

Starting point is 00:17:23 but we're probably going to see a couple more. We are in a capital investment super cycle, like something we've never seen. Last year, the four largest company has contributed 1% to GDP growth with their $400 billion of spending. We are in a deregulatory unwind cycle from a massive regulatory surge

Starting point is 00:17:49 during the last administration to a deregulatory windback, That is very stimulative. All these things, it's just such a cocktail of stimulus that it's very, very hard to slow the economy down. And while average Americans definitely feel a lot of stress because everything's more expensive, you can talk about inflation going from nine to three,

Starting point is 00:18:11 but the bottom line is everything is 25 to 30 percent more expensive, and that's the way Americans feel it. There's pressure, but at the same time, there's enormous financial leverage that keeps the economy going, and it makes the economy a little bit more versatile. And so if you own monetary assets or investable assets, if you're around growth and technology,

Starting point is 00:18:31 these are pretty, this is a pretty prime environment. I give you 100 things that can set it off. Last April, you know, if you were in Davos last January, people felt the same way. And then in April, we had a speed bump, but we were all of these short speed bump. I think one of the things that also, as there are two things that I think has the market moving ahead.

Starting point is 00:18:49 One, you've got a president that, If you look at the speed bump last April, he marks to market to that market every single day. And the market's going in the wrong direction. He has no problem adjusting very, very quickly. And number two, the productivity gains from AI investment and putting it into the enterprise and having the enterprise pick it up, the market is pulling forward a lot of what they expect to be delivered over the next one, two, three, four years. And so that's a pretty prime macro environment. Now, geopolitics, much tougher.

Starting point is 00:19:19 we're moving back to a multipolar world and the risk of a geopolitical problem that really slows down growth is just, I'm not saying it's high, but as much higher than it's been for the last, you know, kind of 10, 20, 30 years since the wall fell. And, you know, look, the world is,

Starting point is 00:19:39 the world is fragile. Social media creates a lot of volatility and division. The way people absorb information, the way information moves, makes the world faster moving, but also more volatile. And so a lot can go wrong, but at the moment, from an economic, a base economic perspective,

Starting point is 00:19:54 that cocktail stimulus is pretty powerful. Maybe a follow-up question for both of you. I mean, do you expect to see a lot of M&A or IPOs this year? How are you sort of advising your CEOs? We have a lot of them in the audience. It's a good banker. Just fact-based. We had a very, very tough regulatory environment.

Starting point is 00:20:16 M&A and capital raising IPOs are driven by confidence. And so if you have a tough regulatory environment, that is something that affects comforts. From an M&A perspective on strategic M&A, for the last four years, whatever the question was, the answer was no. Right. Okay, now, whatever the question is, the answer, even if it's very, very significant, the answer is maybe. So what do CEOs like to look forward. They like to do big things. They want to, and so there's a lot of activity, fact.

Starting point is 00:20:43 And so I just think, again, this is an environment where you're going to see a significant, I think this could be the biggest M&A year. It's just me predicting. I think it would be the biggest M&A year in history this year. It's going to be a bigger IPO. You're going to think you've got a bunch of these big companies that are finally deciding they want to come through the pipe. But you'll have a view on that, too.

Starting point is 00:21:03 I could be in a public company is a horrible thing. I'd be not rare. Do not rare. It is challenging from hindsight. You just have to be okay with getting sued all the time. You know, it's funny. We had a company that just found public, and they're like, we might get sued. I was like, of course you're going to get sued your public.

Starting point is 00:21:26 This is America. Like, what are you talking about? So I agree a lot on the M&A front, except with the kind of exception that, like, it's not clear the FTC's kind of position on these things yet. And so far, I mean, yeah, especially on big tech. on like small tech, they'd been very, very aggressive. So I think MNA will happen, but it may happen more in the form of IP transactions and that kind of thing than as a traditional M&A. I hope not, but that may be the case.

Starting point is 00:22:08 And then, yeah, like, I think there's going to be a lot of IPOs coming out of our world. So I think there's going to be some out of necessity that companies are growing so fast. We have so many companies, like, went zero to over $100 million in less than a year. Some zeroed over a billion dollars in less than a year. So it would take like we've never seen that before. And then the kind of correlated out in AI is that leads aren't what they once were. So for my whole life in technology and for the whole history of software, there was this thing called the Mythical Man Month.

Starting point is 00:22:44 And the way the Mythical Man Month, nine women could not have a baby in a month. And so you can't just, if you're Google, you can't just put a thousand software engineers on a product and wipe out a startup because you can only build that product with, say, seven or eight people. And once they've figured it out, they've got that lead and you're going to have to, you know, you're going to be behind for a long time. That's not true with AI. So with AI, if you have data, particularly proprietary data, and you have enough GPUs, you can solve like almost any problem. It is magic.

Starting point is 00:23:26 But it means that you can throw money at the problem. And we've never had that in tech. And so I think that that's actually going to drive a lot of IPOs because people are going to want to get out and have the capital to continue to compete because it's really necessary. You don't just have a lead you can sit on. So it's going to be a very exciting year, I think. You were talking about the FDC earlier.

Starting point is 00:23:51 I know you and Mark are spending a lot more time in D.C. than you ever have. You know, what are some of Chris and Chris, yeah. You know, what are some of the policy, you know, agendas you're most focused on? And why do you think this is, you know, more important now than it's ever been? Well, the first one was crypto because, you know, we thought then and we continue to think crypto is an extremely important technology. It's kind of, you know, not just the kind of most profound breakthrough in kind of financial technology that we've seen, but a real breakthrough in just how society works.

Starting point is 00:24:30 So everything from, you know, how do property rights work on the Internet? You know, like, you know, how, what is the right architecture for things that, where creatives contribute most of the value, what's the right business architecture, what is stakeholder capitalism, really. These are all things that get solved with crypto. So we thought it was so important and so important for the advance of society

Starting point is 00:24:58 and to not have us descend into communism and these kinds of things. And it got completely banned by the last administration, but not through a legal process, not through a legislative process, but just through like sheer will and, you know, we'd say abduous of power of the government, including techniques like debanking.

Starting point is 00:25:17 Our company has got Wells notices, which I've never seen before in a private company. So just an attack from the government on an industry, a technology industry in this country. And so we were like, well, we've got to get in and work on that. And so the first thing was the Genius Act and the StableCoin bill, which passed in its own law. And we're very proud of that.

Starting point is 00:25:41 The second one, which we think is a more important bill, is the Clarity Act, which is also known as market structure, which kind of establishes, and it's such a necessary thing for this technology, because you have these tokens that can represent Pokemon card, that can represent a stock certificate, that can represent a dollar. And there were no rules to say, well, which one is this token? And the approach of the Biden administration was everything's the security to the point where they sued artists. for like, oh, I painted a picture and I made an NFT. Oh, you sold the security. Like that crazy. So this one we're trying to get past right now. And we've had some drama around it, which I'm not going to comment on, but that's a thing.

Starting point is 00:26:26 The second one that's really important is AI. So, you know, like with, I think with the automobile or with electricity, with these two technologies, these people kind of freak out about them because they do have big impact. They are going to change the world. And with AI in particular, some of the calls are coming from inside the house where people are really trying to kind of scare the population,

Starting point is 00:26:55 sometimes to achieve regulatory capture and other things. But if you ban the technology, which some people are calling for, or ban or kind of infringe people's ability to do mathematics, which is something that a lot of people are calling for, then I think we're definitely going to lose the AI rice to China, which has like massive, you know, 100-year implications. And so the key things we're trying to protect are, one, the model is the model. It is a model. It's a mathematical model. It predicts things. It's not

Starting point is 00:27:30 like a sentient being. Like maybe we'll figure out how to do that. We don't know how to do that yet, so it's not sentient. It's just a model. So we're trying to say, don't regulate math, regulate the applications of that math. So if somebody uses AI to break into a bank or steal your money or, you know, making a robot that shoot somebody,

Starting point is 00:27:54 then that's illegal. But the technology itself shouldn't be illegal. And then there's the kind of most pressing one right now is every state wants to have their own set of AI laws, which will basically make it impossible for new companies to innovate because you can't comply with 50 different laws from 50 different states.

Starting point is 00:28:18 So we're trying to get that done. Kind of shortly following that, there's an issue of how copyrights are treated, and can you build a statistical model over copyrighted work, not reproduce the copyrighted work, but just build a model about it so that the kind of software becomes smarter. We think that's very important

Starting point is 00:28:41 because China absolutely doesn't respect copyrights, even they don't respect just copying it, let alone building a statistical model, and we're gonna have kind of weaker AI if we can't train on all the data, can't train on the complete data. So those are the main things that we're trying to question for it. Awesome.

Starting point is 00:29:01 You know, one of the things that was very evident to me during my time at Goldman was how, you know, client-centric the firm was, and I know 1GS was a big kind of focus of yours. I'm curious how AI is changing the way you guys both work internally and also how you're delivering, you know, better for clients. Sure. Well, I mean, the firm is, the firm's business is serving our clients.

Starting point is 00:29:22 And so, you know, I, you know, I, technology has for decades and decades and decades been making productive people more productive. Goldman Sachs is a professional services firm filled with productive people that are very productive and technology has been changing the way they work, evolving the way they work, making them more consequential, allowing to expand the scope and the footprint of what they impact. And, you know, this technology is another acceleration of that for sure. You know, in the simplest form, and this is a broad oversimplification, so please take it as such,

Starting point is 00:30:02 there are two things that we're focused on. One, we've got lots of smart people. These are tools and applications. We're trying to get them into their hands and give them access to them and access to models and access to applications so that they can experiment with them, play with them, figure out how on a day-to-day basis, is they're executing for clients and doing the things they're doing, they can be more productive, more powerful, have more impact. We're good at this.

Starting point is 00:30:27 We've done this before. Our people are good at it. It takes time, but we know how to do it. to do this and we're doing it. And, you know, it's really constrained by how we get the best tools, the best models, the best applications, get them, by the way, regulatory cleared because we have to deal with regulatory constraints and everything we touch and we do. And that's a huge barrier for us. We're just not a company that can say, oh, this is great. Let's try it. We have to have a huge process before we can try anything. But we know how to do that. We're doing that. And that is

Starting point is 00:30:56 expanding the productivity of our people. And you see real time uptake on that. It's really accelerating. The more interesting thing to me is the CEO is that this technology allows us to really look at fundamental operating processes on a massive enterprise and completely reimagine them to automate them and make them more efficient, not just simply for the benefit of doing them with less people or with less costs, but for the benefit of taking some of that savings and giving us more capacity to invest in growth areas of the business will work and strain. And so we don't have the ability to just spend as much money as we want and lose as much money as we want. We actually have to be held accountable every year how much money we spend and how much money we make and what kind of a return we generate.

Starting point is 00:31:41 So, Kang's abilities generally don't last forever. No, they don't last forever. But they actually interestingly, there are companies that have proven that they can last for 10, 15 years where the accountability on the way you're deploying your capital is put off for a long period of time. We have to look at it every year. So I would say in the last few years, we've been constrained, just simply. We spent last year, we spent $6 billion on technology. I would have loved to spend eight. Okay, but if I spent eight, our returns would have been hundreds of basis points lower, and you know what, we couldn't do that.

Starting point is 00:32:09 Sure. Now, if we can actually find $2 billion of efficiency around reimagining processes, then I can spend eight and wind up with the same returns. So we laid out, we actually called it 1GS 3.0, a program where we picked six specific processes in the firm, and we said we are going to do the work to really completely reimagined them.

Starting point is 00:32:29 We have not put out publicly how that changes workforce, how much capacity that creates, but it's super significant. And it's not that there are only six. These are just the first six. So this is one of the reasons why the market's running forward. I think this opportunity is huge, but this is hard. This is hard because you're asking people to go kind of take away their empire and do their empire differently. It's got to be driven top down.

Starting point is 00:32:55 And it's hard, but we're going to make a lot of progress. So there's a two simplification, but those are two big things would like this. Anything Ben, you'd add to that? Just where do you sort of see the proliferation of this technology in the enterprise?

Starting point is 00:33:08 And what are you most optimistic for in the next seven to five to ten years? Well, I think that for kind of the reasons David cited, like we're at the very, very beginning in the enterprise, you know, like changing people and processes and so forth in a big existing company

Starting point is 00:33:25 is, no matter whether the technology is as complicated, You know, in our firm, as you know, we are kind of taking a very aggressive approach to kind of first automating all the things people do and don't like to do. Or, you know, it's not like the funest part of the job. We've also kind of gotten all of hard data in a Databricks data lake, and so we can ask, you know, basically any question about the firm or the portfolio. Customists were fantastic. You know, AI-igent investing could be very, very interesting because, you know, models work on the facts that are available. And one of the things about investing is sometimes the biggest changes and the way you have

Starting point is 00:34:10 to think about investing in a portfolio comes from things that are completely new and unexpected. It can't be incorporated in a model. Can't be something from the past. Yeah, so the bottom line is once it happens, that it can't be quickly incorporated, models and models come move very quickly. But still, you know, you start from a place. And so it's, I'm, I'm really interested to see how it works. And with one of the things, you've got to, you've got to wonder why there are a handful of people.

Starting point is 00:34:34 There are a handful of people who have so outperformed as investors over a long period of time. But you can count them in handfuls. Generally speaking, you know, people underperform. And so if the models are based on the information that the people are underperforming all have, it's going to be interesting to see whether something different comes out of it. Awesome. I think we're running out of time, but maybe one last bonus question. Favorite DJ? No self-nomination. Favorite DJ today?

Starting point is 00:35:06 Yeah. Or it could be in the past. John Summit. I mean, John Summit is doing really, really cool things as a DJ. He's incredibly interesting young guy that's got a lot of energy, and he's evolving very much the context of how kind of big club house DJs do what they do. I think he's doing a great job. And? I'm going to stay in my lane. which is the past. And hip-hop DJs, I'm going to say DJ Jazzy Jeff.

Starting point is 00:35:32 Who is a very underrated because his partner, the Fresh Prince, became Will Smith. But DJ Jazzy Jeff is a great, great, all-time Z-Jet. Awesome. Thank you guys so much for doing this. Thank you. David. Awesome. Thanks for listening to this episode of the A16D podcast.

Starting point is 00:35:53 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 Podcasts, and Spotify. Follow us on X, A16Z, and subscribe to our substack at A16Z.com. Thanks again for listening,

Starting point is 00:36:12 and I'll see you in the next episode. As a reminder, 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. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com forward slash disclosures.

a16z Podcast - David Solomon & Ben Horowitz on Building Organizational Resilience & Navigating Macro Uncertainty

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