a16z Podcast - Disrupting the World’s Largest Asset Class with Adam Neumann

Episode Date: February 7, 2023

Back in August, after a16z announced our investment into Adam Neumann’s new company, Flow, it felt like almost everyone – whether it was other VCs, founders, or journalists – had something to say.But the one person that you didn’t hear from was Adam himself.In this never-before shared footage from a16z’s American Dynamism Summit in Washington DC, Adam Neumann sits down with Marc Andreessen and David Ulevitch, to discuss the opportunities that have emerged from post-pandemic shifts in both work and home, and what Flow is doing to capitalize.Find the full library of American Dynamism Summit recordings at a16z.com/ad-summit.Timestamps:00:00 - Introduction01:40 - Getting back in the arena 09:03 - The opportunity in housing 16:19 - Lessons from WeWork 19:13 - Work & home post-pandemic 27:34 - Moving to the cloud 34:23 - Office serendipity 37:51 - Building Flow 43:51 - Cities as startupsResources:Flow’s website: https://www.flow.life/American Dynamism recordings: https://a16z.com/ad-summit Stay Updated: Find us on Twitter: https://twitter.com/a16zFind us on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://twitter.com/stephsmithioPlease 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. For more details please see a16z.com/disclosures.

I just want you to know that it's part of the game to get punch. And the question is not, are you going to get back in the game? The question is, when? Back in August, after A6 and Z announced our investment into Adam Newman's new company flow, it felt like almost everyone, whether it was other VCs, founders, or journalists, had something to say. But the one person you didn't hear from was Adam himself. And this never shared before footage from our American Dynamism Summit back in November, Adam sits down with A16C co-founder Mark Andreessen

and A16C Venture General Partner, David Ulovich. They start by discussing why Adam's chosen to step back into the arena, but also why flow? That leads into the inevitable conversation around how the pandemic fundamentally shifted both work and home, as they touch on A16C's move to the cloud, cities as startups, and ultimately what it might take to disrupt the world's largest asset class.

We also get an insights group into how Adam is thinking about the four pillars of flow from technology to financial services. Finally, this video was recently published alongside our full library of American Dynamism Summit recordings, which you can find at A16C.com slash AD-Sysmit.

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 A16C fund. For more details, please see A16C.com

slash disclosures. Thank you, gentlemen, for being here. I'm going to just jump right into it. Those of you that have heard Adam and Mark speak know that they have a lot to say, and they're very smart, so we aren't going to waste any time. Adam, three years ago, you stepped down from your role as CEO of WeWork, one of the most well-known real estate companies ever created. You could have sailed off into the sunset.

A lot of founders do that, hang out in the Mediterranean. But you decided to start another company again. You're not naive. You know it's hard. You know that there's a lot of attention on you. So how did you decide that you wanted to chase and build a new, impactful company and chase a big vision and dedicate your time to building? Why get back in the game?

Get back in the arena. First of all, thank you for having me. Thank you, Mark. Thank you, David. But you know, when I stepped down three years ago, the first thing I actually did was I took a moment to think of the successes, but also think of the mistakes and the lessons and all the different things that I did and that we did as a team. And even though I was very proud of what we built, I really felt like there was a lot of thinking to do. And that was sort of my first thing. As that was happening, I started building a family office. And with my family office, we invested in about 50 venture investments. We did private equity investments.

We did liquid market trading. And each one of those things taught me something new that I wasn't aware of before. Liquid markets actually taught me about Wall Street. And as I was sitting with the team and we were doing different investing and listening to earning calls, I was like, oh, wow, that's what you guys are listening to,

and that's what's interesting for you. And that gave me a perspective that I didn't have before. When I was sitting with entrepreneurs, as we did our venture investing, the first part when you invest in write the check is a lot of fun. But then comes the part we were talking to them and listening and they have problems. And I got to give advice to these entrepreneurs, and they didn't always listen.

And I was like, okay, that's how it feels when an entrepreneur is a lesson. I was like, okay, I got that. And that taught me a lot and actually made me understand Mark and Ben and Venture Capital more. And as we're doing all of this, and this is now COVID is happening, this is March 2020. We were looking at real estate because it's something we care about. and we just felt that there was going to be an opportunity in multifamily. It was a simple trade. It was cap rates were at 4.8, and we thought they were going to compress,

and we saw interest rates, and we thought there was an opportunity. So we decided to go as a family office very deep into multifamily. We bought approximately 4,000 apartments. And as we're doing that, I started walking these buildings, and even though initially it was a trade, I started feeling like there was something more that can be done. I started feeling like the residential experience is not what it should be. And just to backtrack this a little bit,

so going backwards again to 2019, we're stepping down, and now it's early 2020, as the whole thing is happening, and maybe you wouldn't be surprised, but the phone is not ringing as much as it used to just a few months before. I got a phone call for Mark, and we never met. And Mark introduces himself, hello, I'm Mark Andreessen. I know you are, Mark. Thank you so much for calling me.

And we're having discussion, we're talking about something, but very quickly turned to Mark asking me, so Adam, how are you doing? And I told him this and that and this and that, and he says to me, oh, you're still in that stage. And I was like, this was on the phone, I said, Mark, what stage is that? And he goes, the stage where you believe everything the media says. And I said, well, I'm not in that stage. And I know we built a great company.

And of course, I don't believe. But, you know, they are saying quite a lot of things. and Mark says to me Adam we don't know each other but let me tell you something about venture capital and high growth companies and the bigger the venture the growth what I'm about to tell you is more true

it's hand-to-hand combat anybody who doesn't know that venture is hand-to-hand combat doesn't actually understand or has never done it before and when you fight once in a while you get punched and he said I guarantee you because he was very nice he said a lot of our companies use your products not just in the US but all over the world and said I guarantee you that for every message

mistake you made, there's a hundred things that you did right. And I just want you to know that it's part of the game to get punch. And the question is not, are you going to get back in the game? The question is, when? And just so you know, you have a friend here that you've never met before, but we've been tracking you. And if you ever decide to do anything, then call us. I'll say one more thing about it because it was very meaningful. I hung up the phone and I still remember this. I walked to Rebecca, my wife. And I was like, I just had the most amazing phone call. This guy, Mark and and Tristan and I explained to her who Marcus called me and basically was very encouraging and gave me a different perspective to look at what just occurred and she thought it was amazing and I thought

it was amazing and Mark I don't know if I've ever had the chance to actually tell you it was a meaningful moment for me and I really appreciate it and fast forward now a year and a half we kept these buildings that we bought ended up being a really good trade and everything that we thought was happening was happening and we started building this brand it didn't have a name yet but we started building this business and we saw all this opportunity which we'll talk about a little bit later and around february we spoke again and mark asked me what's up and i told them what was happening and that we've been developing and the business by this point is over a year old and we've been doing more and more and we started building technology and we bought a company and we did a few different things

and mark said why don't you come and present it to the team and we went and we met the team And the first thing I noticed when we all met is that the Andresen Horvitz team was not like the venture capitalist that I was used to. And I had quite a lot of experience with venture capital before. And it didn't feel like investors. It actually felt like businessmen, like entrepreneurs. And I actually just asked Mark behind the stage. I said, how many partners do you have that are entrepreneurs?

And he said 20. And I got to tell you that's very different from other businesses. And as we're having the discussion, one of Mark's partners asked me, Adam, are you raising money? And I said, I'm not sure, we're going to build this one on our own. I'm not sure because one of our lessons was you've got to choose your partners really carefully. And he said, well, maybe you should consider us. Let us look into the business and see if it's interesting.

And if so, maybe you should consider us. And then DG led a very rigorous diligence process. And they asked us a lot of questions and learned everything about our business. And as we were getting to know Andreessen, I realized that these are the kind of partners that I was always looking for, but never really knew that existed. So to answer your question, I was always building it, but building it with a partner was something that only happened because of this team and because of the way I met them.

And I could just tell you that we had our first board meeting and one minute afterwards, Mark called me and said, Adam, can I give you some feedback? I said, of course, Mark. He said, well, when your team said this and this and this, I don't agree with that. Let me tell you why. And here's the experience I have.

And here's what I want to warn you from. So I welcome the feedback. I'm so excited to be a partner. I'm excited to be back in the game not alone but with the team and we're just getting started but the future is there's a lot of potential

that's awesome and I will say there's a whole bunch of venture capitalists in the room and we are all very happy that we work exists so that our portfolio companies are not signing these long-term leases in this dynamic world that we live in

and they get to go into the offices that they want to be in in the right cities at the right time so we're going to talk more about flow and the new business in a moment Mark I want to shift to you you and I have talked about housing for a long time. Long before this investment, it's something you've thought about

for a long time. Why is housing important? Why is it particularly relevant? Why is it even a part of American dynamism? There's a critique of Silicon Valley in the tech industry that, you know, on various states, sometimes I agree with, sometimes I don't. But, you know, there's a critique that basically says, look, you guys have done a great job. You know, Silicon Valley's done a great job over the years that, like, they're really, like, unimportant things. You know, you've consumed electronics and video games and media and e-commerce and, like, it's all great, it's all fine, it's all good. And by the way, like, we do those things. We're very proud of our efforts on those bases.

And we actually think they're very important. But, you know, they're basically, there's small slices of GDP. And then if you look at basically the GDP pie chart, you know, sort of consumer spending pie charts, the things that people spend money on, they really matter in their lives. There's basically three really big ones, right, healthcare education and housing. And if you look at kind of all the economic statistics by sector, healthcare education and housing are basically increasing, you know, in terms of cost, you know, at a much faster rate than all the others. and there are the sectors where the tech industry has had the least impact historically. And of those, the biggest one is housing.

The housing is the single biggest kind of thing that most families spend money on. And so, you know, it's really central from that standpoint. You know, it's very central from an economic standpoint in the life of a family because, right, there's this, you know, very big question, which is, you know, if you own, there are, you know, potentially big downsides because you might be stuck, you know,

in one place where maybe you don't want your family to be for the next 30 years because maybe opportunity shifts around, you know, but if you rent, you don't necessarily, right, build up equity by default. you know, with the way that most department offerings work. So there's big economic consequences. There's also big social consequences and political consequences, right? And this is something that's kind of been deep in the American character for many decades,

but this idea that if you basically, if you have a sense of commitment, if you have a sense that you are actually invested in the place where you live, you were more connected to the society, you're more connected to the culture, and then ultimately you're more connected to the politics, you know, to the political body. And so, you know, there's been long-running policies in, you know, of the United States to encourage homeownership. Now, it turns out those can be overdone. They can end up with problems, and we saw a lot of the problems that kind of, you know,

came out of that approach and, you know, kind of the historical approach in the 2008 financial crisis. But nevertheless, there is like a very kind of big, deep, meaningful, you know, kind of sense of identity that comes with housing. Why does this matter, you know, kind of from a broad standpoint? So the reason I think this matters so much is because geography is so central to economic opportunities. Right.

So basically, take a step back, the role of cities, right, in human society. Cities are a human invention, you know. There were many hundreds of thousands, millions of years where people were running around, you know, in clans and tribes not forming into cities. Then about 4,000 years ago, cities were basically invented and people started to cluster that way. Why were cities invented? A bunch of reasons. But one of the big ones is there's economic payoff to being in a city.

And the way that it works is if you are, you know, if you have a certain level of productivity and you're in a rural environment, you don't have many opportunities to work with other people, right, who are highly productive. If you move to a city, all of a sudden you're surrounded by lots of other people who are highly And all of a sudden there's a catalytic effect, basically, this positive feedback loop that forms where kind of everybody because we're productive. And so basically, cities are basically the foundation of modern economic growth. Economists call this the agglomeration effect, which is basically if you, like, slam people together,

you can get a lot of good things out of that. The West developed, you know, the story of the West is the story of cities and the creation of all these, you know, these amazing cities. And then, you know, over the last 50 years, you know, that kind of trend has gone into hyperdrive. And you've had this emergence of what economists call superstar cities where you've got these specific cities like Washington, D.C., New York City, Boston, San Francisco Bay Area, Los Angeles, and then, you know, internationally, London and Tokyo and Singapore and so forth and Paris, that are kind of these cities that are like irresistible draws for people

who are, you know, highly ambitious and want to be around a lot of other highly ambitious, highly productive people. It turns out as a result of that superstar city clustering thing, there's been a bifurcation in the housing market, right, where basically those superstar cities, they become, you know, basically occupied at some point, you know, people end up with a political agenda and then they stopped building housing right and so the places where people want to go and want their kids to go are very difficult to get to and the san francisco bay area is like a classic example this but you know san francisco last year like authorized i think 6 000 new housing units right which it was just just like an absurdly low number relative to the demand for people who want to move there

and then the places that do not have this kind of clustering agglomeration superstar city effect you know they build plenty of housing but there's not as much opportunity there so heading into COVID, you just, you saw this incredible bifurcation and you saw it in American economy and you see it in American politics where basically you're either in a city, you buy a home, you know, you've kind of got that little commitment, you've got that level of opportunity for you and your family, right, or you're in a more rural environment and you're basically stock and you don't have access to good jobs and your kids are not going to have like high-tech jobs and it's, you know, basically it's, you're going to have a lower quality of life.

This was becoming a very big issue, by the way, for us because we were basically getting stuck in the geographic confines of Silicon Valley. Like, our companies were like penned in and it was becoming very hard for companies to grow in that area. And then basically, you know, a horrible tragedy struck that turned out to also be in some ways a miracle in terms of, I think, the long run consequences, which is COVID, right? And none of us would have hoped that COVID would have happened. And it has been a horrible tragedy for many people and I think, you know, broadly for our society. But nevertheless, COVID was a system shock, right, that caused all big companies to basically instantly move online in a hard cutover, you know,

in kind of a way that I never imagined was possible. It was also an instant proof that companies really can run, for some time, they can actually run online, right? Basically, like, no big company actually stopped operating as a consequence of this dramatic shift from in-person to online. And then all of a sudden, like, that opened the door to, you know, every CEO, every manager, every entrepreneur, every investor thinking, oh, okay, the post-COVID world is not going to be like the pre-COVID world. The post-COVID world is going to be an opportunity to rethink and reinvent

how companies are organized. It's going to be an opportunity to reinvent how industries are organized. It's going to be an opportunity to reinvent, you know, how geography works, right? what the role of cities is, it's going to be an opportunity to spread the economic activity from cities much more broadly, you know, potentially throughout the country. Every employer, every company, every CEO here, you know, is having some version of this conversation, you know, with their own company. We talk about this with our founders all the time. And then there's a corresponding question that's opened up, which is how are people going to live.

And some people are going to continue living the way that they were. Some people are going to undertake a radical change in how they live and they'll go remote and all of a sudden, you know, you go remote and you have access to, you know, thousands of jobs anytime you want, which is a totally new phenomenon. And then you now have the opportunity to rethink how families live, right? And so, you know, is it necessary for ambitious kids to leave a place where they grew up in order to have access to first-class economic opportunity? In 2019, the answer to that was frequently, yes, today, maybe not.

And I should also say, like, this is not a zero or a hundred percent thing. This is not like a hard cutover. It's not like the whole world goes remote or stays remote, right? Which is not what's happening. But there's this moment in time that we're in right now, which is like we can actually rethink and reinvent how companies are organized and how work happens. And then we can also reinvent how people live and give people a lot more options and how that happens. And so I think basically the presumptions that have underlied the

whole structure of how the housing market works and how the industry works and how people live and work, I think it's basically all up for grabs. I think we have about a five-year window, I think, as a society, to kind of figure out what this means and how to adapt. It's a good segue to what I want to go into, which is we have seen work become more dynamic. People now, sometimes go into an office some days a week, sometimes they go in for a couple months and they go to a different office in a different city. We work was quite equipped for this kind of dynamic work lifestyle. What are the lessons that you have learned from WeWork that you're going to apply to flow or things that maybe you didn't do at WeWork,

but you thought about that you're going to apply to flow, particularly around sort of this changing way people live and work and how people, as we get to rethink the way that we sort of organize ourselves and bring ourselves to work and to home? I think you're right. I actually think flexible work is more relevant today than 10 years ago. So I actually think it's a better idea today than it was. The obvious lesson is community.

I think Corona, I think on top of everything that Mark just said, and I'm not going to repeat any of it, but that's the data that pushed us into being as interested as we were in this category. But on top of all of that, I think a lot of people argued, Howard Schultz used to say Starbucks is the third place. I remember once having an argument with him, I told him, we work is the third place. It was like, Starbucks is the third place. Well, I think the first place turned out to be the third place. I think the home is the most important thing. I think COVID taught us that.

I think you can take your work into your home, but you can't take your home into your work. And that's affecting a lot of change. Also, to put the little numbers behind what Mark is saying, 70% of 35-year-olds and youngers are currently renters. They don't actually buy. And this number is not because of the interest rates that have been going out over the past 6 to 10 months.

This is a number from 12 months ago. And we believe that that number is actually only going to grow. So 70% are renters. You said it's a big piece of their spend. it's about a third of their total wallet. So, they have this huge asset class, largest in the world. 70% of its users are renters. It's a third of their spend,

and yet they're not getting an experience that is actually up to par. Not to talk about the financially. You mentioned, Mark, that they're not creating any equity, and they're not creating any equity. And when you put those two things together, you see a real challenge.

And what it's going to do, and we're already seeing it, people are starting to work where they live and not just live where they work, and therefore you're starting to see this movements between cities. You can even say without becoming too political, but we're in the heart of politics,

maybe some of the results in midterms now showed Democrats that were actually traveling to new cities and moving to different places. A lot of things are shifting. And the way we live has an opportunity right now to change because I think if we weren't clear about it before, how important the home is, everybody is reminded. And a great home and a great experience

and elevated experience is more important than ever before. And then work has to accomplish. accommodate. And Mark and I actually think city world a little differently about is every company going to be a remote company or in-person company? But the answer is obviously hybrid of the two. And as you think through, well, how am I going to solve work? And how am I going to solve the future of way people live? What I see is an opportunity to really affect that change. And it's exciting that we're in D.C. because this is one of the places where opportunities like this become a reality. If I could put a point on something that Adam said, so there's Richard Florida

to analyze these things, talks about what he calls the creative class. Just kind of, you know, the sort of, say upper middle class, you know, it's honest, it's our kids, right? It's sort of, you know, highly educated, you know, kids who are going to basically go into a knowledge or creative profession of some kind, right, working at a keyboard as opposed to doing some form of manual labor or manufacturing. And, of course, you know, this is not most of the economy, but this is sort of the upper middle class, you know, in many ways, the cultural vanguard for the country.

You know, they define a lot of the trends. And so there's this experience, right, that I'm sure a lot of us have had, and a lot of younger people we know have had in the last, especially 20 years, you know, really, 20, five years, the sort of thing where you grew up at home, you then go to college, you spend your time at college for, or more years. And, you know, you're on this campus environment, and it's, you know, and everybody knows, like, college is kind of education. It's kind of adult daycare. It's got all the food and entertainment. It's this whole environment. It's a social environment. It's a dating environment, right? It's kind of this whole thing. You know, you're putatively, you're an adult,

but you're living in a dorm and there's like a older adult down the hall who's taking care of you, right? So you're not really fully an adult. And so you're in that environment. And so you're in that environment. And of course, you know, 50 years ago, you'd leave that environment and you'd, you know, go to work in an office, you'd buy a starter house and you'd be on your, you know, sort of traditional American middle class path. Over the last 20, 25 years, it became very common to have this idea of the corporate campus, right? And, you know, sort of Google maybe, you know, really kind of, you know, crystallize that in the culture, you know, and basically this idea that a company's facility where everybody came every day was going to basically be a continuation of the college

campus experience. And that led to kind of this, you know, perk bonanza, right? So you'd have this whole thing, go to these campus. And it's like gourmet food. 24 hours a day and it's like they'll do your dry cleaning and they'll walk your dog and there's you know the swimming pools and there's the pink you know and by the way you know these campuses still exist they're all 100% converting all their tennis courts to pickleball courts because of course that's what everybody's doing right so there are these you know it basically is self-contained environment and the theory of it right was if we can get people you know especially these young people like inculcate them keep them in this kind of college campus kind of environment then they'll

basically work more right we'll get more out of them because they'll be here more often you know it's basically everything up to not usually including the actual bed although sometimes people would sleep under their desk, like Elon Musk. But everything, you know, sort of short of that. And so as a consequence, you'd have this thing where sort of young adults kind of stayed in this corporate campus environment. And then as a consequence, they had this incredible community. They have this incredible environment, right, where they have, you know, all these friends,

co-workers, colleagues, you know, their teammates, other people who work at the same company, they're going to lunch, going to dinner, doing the whole thing. And then, by the way, it also turns out it's just like the college campus, it's the dating pool. You know, basically, if you work for, you know, for the Google campus or the Facebook campus, like where you're going to date, probably somebody who also is there. because you're there all the time together. And then you basically, like, drop COVID into that model

and you just, like, detonate it, right? Which is what's happened, right? And then all of a sudden, the experience of a kid going through that, all of a sudden, it's like, nope, nope, you don't get that. What you get is you get to sit in your studio apartment, right, in front of your laptop, and good luck, right? And you're, like, cut off from everything else,

and, like, you've got DoorDash and you've got Tinder, and, like, that's your life. And, like, that is not the same thing. And then, you know, to Adam's point, like a lot of these companies now we're thinking, okay, we're going to have people come back in the office, two days a week, three days a week, or we're going to have them come back and shifts or this or that. But the spirit is, like Elvis has left the building for these

kinds of environments. Like, this is not the way that most companies are going to operate. And so all of a sudden, the focus on where you live, the focus on what, you know, are you literally by yourself, you know, do you have roommates? Are you in a small complex? Are you in a big complex? Do you have any sense of connection whatsoever? Do you know who your neighbors are? Most people historically live in apartments, I don't think they generally would even know who the neighbors are, right? The guy next door is just the guy next door. You'd feel no connection. By the way, there would be no overlap where you lived and the people you worked with would have no overlap, right? Because there was no point. You didn't worry about whether there were

other people who you worked with who were in your same apartment complex because you were seeing them at work all day. And so do you have anything in common with the people you're in the building with? And so there's this sort of whole model that an entire generation grew up with that has all of a sudden been detonated. And I don't know, it may be radical. I think the idea of sitting the apartment in front of the screen with Doordash and Dender is not a good life. And so that opens the door for reinvention. We know it's not a good life. Because even in the office, So you gave Google as an example. Google was inspiration for us that we work.

Our point was, well, why can small businesses have this great campus, have this great energy? And that was the beginning. I remember when we tried to sell Google, I would be like, can we take some of your staff? They're like, you can't take our stuff. We're Google. We invented this. We ended up taking some of their staff quite a lot, actually. But that same serendipity feeling that you feel when you go, when you were to go in an office

and connect to this, belongs in a home in a funny way, way more than it ever belonged in an office. And when you think of these apartment buildings, and it is a little sad. It's sad that there's an apartment building with 400 apartments, maybe 6, 700 people with a swimming pool and a kitchen and a gym, and all these amenities that when you two, if anybody here has ever been in a multifamily, you do this amazing tour. They show you all these amenities spaces. You never see anyone there. You then move into the building, and not everyone, but a lot of people live their life that Mark is describing. And that's sad because I don't think human connection thrives.

I actually am so happy we're here face to face. and COVID was obviously a horrible thing but also a miracle at the same time. It's a miracle that we're all here face to face because this connection is so much more meaningful. And why don't people deserve that in the home? And again, I go back to that number. It's a third of their wallet spent.

As Americans, we're used to actually, for anything we spend, if it's 2% of our wallet spend, 1% of our wallet spent, many companies that you guys invest in, it's all branded. It's always an uplifting experience. If someone doesn't do a good enough experience, then the next person comes and elevates it, And yet in residential, and we can talk about why, but in residential, never happened.

And because it never happened, and because it's so difficult to disrupt, it actually didn't occur. And what ends up happening is that renter is not getting a good deal, neither the experience or the financial transaction. And again, that renter is the majority of the young adults. Yeah, I think COVID was the first time a lot of people, especially under the age of 40, 50, the first time they ever got to know their neighbors. Right? They never had to, and their proxy for community probably was the work. place. And like you said, we're never going back to that. Whatever our new normal is, it's not the old.

I'm just going to give you a thought about that. It's an American thing that they never had to. In other countries, where I grew up in Israel, there's no such thing. You don't know your neighbors. When you don't have salt, you go to your neighbor's door, you knock on the door. They don't answer. You open the door. It's locked. You know where the key. You open it up. You go and you take the salt. You never bring it back.

Then they go back. There's no salt. Oh, Adam took it. And it's this community. Here we call the police. Police. Yeah. Yeah. Yeah. They come in four hours. It's true. Or San Francisco, maybe never. Yeah, yeah. You guys said, they said that I didn't say anything.

Okay. Yeah. But the point is that it's such a natural thing for people living together to connect. And yet we live in a world where even when people are in the same building, they don't talk to each other in the elevator. Right. When I came to the United States and used to say hello to everyone in the elevator, people thought it was weird.

Yeah. And I thought it was weird that you wouldn't say hello, wouldn't you want to know who is living there? There's a lot of different ideas. that we have. But the simple one is when people tour a building, the leasing agent tells you about all the amenities. I would like the leasing agent, who is not even going to be called the leasing agent, to introduce you to a few residents who actually like living there. Let them tell you why this is a great building, and if it's a fit for you or not a fit for you. And that tiny little thing I just said is so small. And the fact that it doesn't exist, actually,

a lot of people ask me, Adam, how come this didn't exist before? It doesn't exist, in my opinion, because buildings are full anyway. There's a short of supplies. You spoke a little about zoning, and the numbers varies, but between three to five million apartments and single family homes missing right now in the U.S. And that number grows by hundreds of thousands of units a year. And so there's a shortage of supply, there's an overdemand, and no one really needed to do it. And because the landlords didn't need to do it, it didn't happen. And when you think of prop tech companies and technology, I was talking to Steve Case before for a second about prop tech and a little bit about all the different innovations, when you think, well, why haven't

people solved this problem before. Most prop-ta companies come in and solve a point solution. They have this one solution, but then they need to take that solution, convince the landlords who are not even interested in buying anything because they're making money anyway. Go to these old ERP systems, connect to the back of these systems, then

get the users. It's very difficult, which is why the way we want to tackle it is actually vertical. I almost think it's the only way. Excellent. We're going to come back to that. In the vertical software stack for PropTech and Flow in a minute, Mark, you know, we came out, Ben had a big blog post about how we've moved our headquarters to the cloud.

We have decoupled the geography of the firm. So I guess the first question is like two parts. Talk a little bit about the thinking about moving to the cloud. Why did we do it? And then talk about how it's gone. Yeah. And then I'll keep you honest, if I agree. Yeah, this has been very dramatic.

I mean, for every employer, every company, this has been dramatic. We've had our version of it. And for us, it's been very dramatic, which is we made a very deliberate decision when we started our firm in 2009 that we were really deeply going to invest in the office, and in particular in one office. And so we were kind of semi-nitorious in the industry for we only ever had one office. The office was in Menlo Park, California. You know, this is actually controversial even in the Bay Area because there were lots of startups who were actually in San Francisco.

Lots of the younger people who worked for us lived up in San Francisco. And we said, you know, everybody every year was like, we got to put up an office in San Francisco. And we're like, no, single office, everybody's going to be in the office. And the reason for that was we wanted the beehive, you know, effect. Like we wanted people when they walk in, both the people who work for us, but also the people who are visiting us to really feel like they were tapping in the energy. they were seeing lots of other interesting people. This was the kind of environment

and the kinds of people they'd want to be around. So we put a really big emphasis on that. We were in there every day, all day, working together, you know, the whole thing, the whole thing you get from a high functioning kind of office environment. And then like everybody else in March of 2000, like we shut that down, and we went, you know, completely online. And like everybody else, we were shocked

that we were able to continue to run the firm, you know, basically keep everything going, you know, over Zoom and Slack and so forth. And so, you know, kind of off and away we went. We actually had an incremental process, right? The two weeks to crush the curve turned into two months, turned into two years, right? So like everybody else, we're trying to figure out how long this is going to last. We start doing polls of our employees, and we did like a poll, like six months yet, and some people were like, I can't wait to get back to the office.

Some people were like, wow, I don't know. You know, 12 months, the number's moved, 18 months, the numbers moved. And then we had one poll where it was basically like 100% of the young parents were like, if you guys want to go back to the office, good luck, we're getting different jobs. It's like, I get to spend time with my kids, I get to be here in the morning, I get to be here at night. By the way, I'm working from home, you know, 12 hours a day or whatever. I'm more productive than ever. But, like, I am not going to do the, you know, two or three hour daily commute, you know,

from South San Jose or from, you know, San Francisco or from the East Bay, you know, to go to Menlo Park. I'm just not going to do it anymore. And so that perk dirt ears up because it's like, okay, that's interesting. And then the other conversation we had was basically what's going to happen to our companies and to our industry, right? And so it's certainly not the case that all of our companies are going, they're certainly not going fully remote.

And we actually have quite a few companies that have actually elected to actually stay very office-centric, which is actually a very interesting counter-programming thing that some people are doing now. But, you know, generally speaking, our companies were indicating that they were going to become more flexible and they were going to really start to spread out. And then the industry just felt like it was going to expand. And we were seeing, you know, a lot of founders who were frustrated being in the Bay Area, you know, basically left over this period and they went to other places and they started companies. And so we basically decided, like, we can't be in the business of partnering with people who are building the future if we're not living in the future ourselves. And so we basically

said we'll just do a heart reset, we'll become sort of, say, remote-centric, or sort of virtual-centric. I just approved a request. We still have our office because it's on a long-term lease. We converted it to hoteling, and I just signed off yesterday on converting my former office into apparently the new lounge. So I'm very excited to visit the new hangout space. And so we're going to keep offices basically as places for people to go when they need a place to work, for teams to be able to meet together. We're also actually letting our founders use our offices more which is actually helping them figure out how to kind of adapt through this

and then we're going to expand actually the WeWork model being ahead of its time we're going to have more smaller offices and more locations and so we've opened formally in what have we announced so far LA Menlo

SF Miami New York New York 2 New York 3 I think that's it for the moment yeah and then we'll have more in the future so we're going to accommodate you know we're an investment operation

not a product company so we don't have like you know assembly lines or software you know kind of, you know, production. So we have a simpler version of the problem, but we're letting our teams decide basically how to distribute. So we have some teams that want to be in person. We have some teams that want to be remote.

And I would say, I think it's, oh, so we're doing all that. So the way basically the firm runs now is we basically run the firm remote. Like all the formal meetings are on Zoom, everything is kind of equalized kind of that way. But the teams are free to cluster whenever they want. And then we have a very big focus on two things. One is off-sites. Every team is expected to get together on a frequent basis, and we really invest in that. and then a lot more travel.

And so I'm traveling, you know, my steady state, I think, is going to be traveling at like 4X, the number of days that I used to travel. And all of a sudden, right, it's even higher impact than it used to be to actually show up someplace and actually be there in person.

So for us, it feels like a real broadening out of what a firm like ours is capable of doing. It feels like a way to basically accommodate scale because we definitely felt bottlenecked where we were. And so I think it's a way to run. You know, look, I think to Adam's point, like we're feeling our way through it, I think a lot, like I would say especially this,

I talked to a lot of big company CEOs, And I think they're all, and I think they would generally agree with this. They're all in an intermediate state. They're all in some hybrid state where they kind of have a lot of vestiges of the old model because they've got the offices they've got and they've got the employees that, you know, live in the certain places. But they've also, they know that they can't go back to the way things used to be. So they've all got some hybrid remote virtual thing.

It's usually a two or three-day-a-week thing. It's not working really well. They've got, you know, this big question of do they also hire remote employees? Because if they do, then it brings up the issue to the current employees. That's why can't they become remote? and then they basically all have to reinvent all the communication flows, all the management systems, and then they've got this fundamental question for their people, especially all the new hires, right? And, you know, we're now, we're going to be on five years in here pretty quick.

And so there's an entire generation of kids coming out of school that are going to go to work for these companies, and they're going to have a different set of both, you know, expectations and issues. And so I think we're still at the beginning of the change. Like, I think we're three years into it probably a 10-year process. And I think the level of reinvention is going to be actually quite staggering from here. I think that's right. I think we've managed through it very well. and we actually materialize where we need to

and have a lot more face time. I mean, I see you all the time outside the office. I think you get much more concentrated, focused time together to actually be productive. You know, the hallway track is okay at the office, but it's a little bit superficial of how is your weekend, what did you do? When you go to an offsite,

it's just much more focused and conscientious about what is important to us, what went well, what do we not doing, what do we want to be doing? So my takeaway is that when we are together, it actually is way more productive. You know, not that I don't care about your weekend. I do care. But, you know, it's not as important

as you're talking about the next 10 years of the firm. Yeah, I call this the barbell, right? Because everybody always asks, what about the water cooler moments? And I'm like, God, I hated the water cooler moments. Like, I mean, like, to have to stand there and, like, talk about the football game. Like, I can't, I can't.

Tempredi seems like a wonderful guy. I can't do this more. It's very deflating. It's very deflating. Yeah. I'm going to have to push back on my, But my partners a little bit. Okay, go ahead.

Yes. For an investing firm, I accept. And I already said, you guys are not just investors, your partners and a businessman and entrepreneur, and it's factual. I strongly feel, and Mark asked you what's important about this conference. And it's important to think a little bit how the future is going to look. It's just an opinion. I've been in a few offices.

I strongly feel that the serendipitous connections, so the water cooler is boring. when you're building a company and it's getting exciting and a new idea is coming and the whole team was supposed to go home and it's 8 p.m. and everybody told their husbands, their wives and their kids

were being there in 30 minutes and then someone went to the bathroom sorry for the example and comes back and like, I have it! And they say this thing that solves the entire problem and everybody gets so excited and before you know it it, it's 2 a.m. And we just move the business forward

not by a week but by a year and now it's 2 a.m. It's very late. Everyone's sleeping already, well, let's go out and grab a drink, and now everybody's hanging out. And before a night, you just had one of those nights. That's this moment in the life of a business, that then you look back and you say, I know that day when it all changed.

That special piece cannot happen on Zoom. I think human potential is in the cloud, I believe it, but human interaction is happening right here. And I actually think, if you look 10 years forward, the companies that are going to make the effort now to be face-to-face, Now we can describe what face-to-face is. There are many ways to do it. But the companies that are actually going to do the face-to-face,

I think when we look back five years, maybe even 10, are going to be the winners. Obviously, I agree that the huge ones who don't know what to do with themselves, that's an opportunity for incumbents to come. But when I'm thinking of startups and new businesses, even strong new businesses, with my team, we're fighting for that face-to-face time.

And every time we're together, the excuse of having this event brought a few of us together and three things came up about the business as we're thinking about just what we're going to, going to talk about. And I think that's priceless. Now, take that because we agree that the office is a challenge. Bring that back into your home. You're back in that multifamily building. Why not have those connections there? Why shouldn't you meet you? And it makes a lot more sense for me, by the way, I'll meet my wife or my husband in the apartment building. When I went downstairs to the pool,

then I do in the office. So both of those things work really well. And from a business point of view, I can do business there also. And then maybe there should be a co-working space. There should be an office and maybe enterprises are going to look. So if enterprises need to do culture and if culture is not going to be in the office anymore, then maybe there's a new hybrid that has to do with the home, put together with an office space. Then I'll give one more thought that I have. I think the fact that you guys have seven offices is the future. So I do think it's smaller offices and centers. But it's going to be very hard for me to be convinced that not bringing people together and not having human connection is in our nature. I don't think we're

built to look at the screen. And I think that one day when we're all much, much older and we're a second, we're on our deathbed, and we're looking at ourselves and we have that moment of realization. And we say, well, how much time in my life did I spend with my loved ones and with people I really care about? And how much time of my life did I spend in front of a screen? If that answer, if we're front of a screen, is too big, I am not sure how we're going to feel that second before it's all over. I think we would all agree. You have to know what inning you're in, sort of what time it is in your company. There's definitely moments that matter

where you all want to be in a room working together. We do that. We would agree with that, for sure. So actually, let's talk about that. You've kept a lot about Flow close to the vest. Give us a little bit about the vision. You've given us a little hint throughout your answers here. But what are you really hoping to build with Flow?

I actually thought because we were talking so much that I was going to keep it under my vest one more day. Oh, yeah. Well, I thought I was going to get away with it. Well, first of all, say a reason about keeping it under our vest. It's not that we've actually been keeping it under our vest. it's that one of the many lessons that we learned from the past is talk is cheap.

We just want to build. It's a heavy lift, and we just want to get to work, so we had no reason to say anything. I met a nice person here earlier today who I think said something about me when he was talking before, and I said, you know, that's not true what you said.

He goes, but that's what the media said. And I was like, well, I never spoke. That's right. The media has never mischaracterized him either, so it's amazing. He then told me, he said, you know, I'm not sure I buy into flow. I said, well, I never spoke about that either.

In a very simple way, we want to create an elevated experience for the resident, and we want to find a way to share with the resident a portion of the value that they create. I'll give that a moment. We want to elevate their experience. We talked about the buildings. We talked about everything that's happening. I don't think it's an easy job. I think it's very hard, but I do think the bar is low.

You just make a little more connections. You just make it a little bit more real. You pay attention to the people running it. you maintain it the right way, you leverage technology to actually make things work instead of using nine apps, you use one,

you do simple things and you elevate the experience. But then the more complicated part is you find a way to share a portion of the value with the resident itself. And that's the vision. And because we said that it's a majority of the young adults,

and because Mark said that that's how people saw a few numbers behind that, for 80 years owning a home used to be the way that was the majority of us creating equity, and 60% of Americans today, in average, their equity is in the home. That is the majority of equity. So if we're correct and 70% are renters, and that number is only going to go up, well, where are they going to create equity?

And if they're going to be renters for 10 years, 20 years, when you go into these apartment buildings, and it's true about single family, but for today we'll talk about apartments, if you're going to go into these multifamily buildings and you're going to have this disconnected experience that you just said, but you're not only going to be there for two years and then get married and move to home. You're going to be there for 20. That sounds soul-crushing. And therefore, you have to solve both of the sides.

Can I ask myself the next question? Sure. Adam, how are you going to solve both of the side? That sounds really good, but what are you actually going to do? Great question. Thank you. Thank you for that great question. Well, we have four pillars as we're looking at the business today.

We have the first one, which is a branded technology-first management company that actually runs the buildings. We have an asset management or real estate fund or real estate company that actually owns the buildings and something cool about our new business. We actually own buildings together already. One of the biggest words that Mark and Ben used, as I said before, is alignment, alignment, alignment. So for perfect alignment, we contributed into this business, at least as much as Andreessen contributed into this business. And I'm very excited about it, and it's amazing to feel like that.

And then we have a financial services company. So, number one, management company, branded technology first. Number two, real estate, asset management, a company that can buy real estate and asset manage real estate. Number three, financial services. And the fourth pillar is this mechanism that's going to take some of the value and share it with the value creators. And what we get so excited about the vision of flow and the business of flow is that it's

actually a flywheel. If we can actually create a better experience in the building, then the building performs better and makes a higher NOI. If the building makes a higher NOI, then we'll be able to raise more money and buy more buildings. If we buy more buildings, then we'll be able to run more buildings and have more users in those buildings.

And those users are going to start using our financial services. Now, the reason they're going to use the financial services, the first thing you do in buildings is you charge rent every month, and that's 35% of their total wallet. So that payments company that's charging your rent already has a real relationship with the user.

if that financial services company is going to do what we wanted to do and create services that are actually meaningful we think of it as financial wellness and give services that are actually meaningful then that again is going to drive more users and then if we are able to take this value-creating mechanism

and share with the residents a portion of the value it's going to make them feel ownership and it's not just ownership I feel like I'm part of something it's I actually own part of something and again the word ownership is a very complicated word especially in this place.

But if there's perceived value and if that value appreciates over time, then I feel like I'm part of a community. And a very funny example that we like to give is if you're in your apartment building and you're a renter and your toilet gets clogged, you call the super. If you're in your own apartment

and you bought it and you own it and your toilet gets clogged, you take the plunger. And it's the difference when feeling like you own something to just feeling like you're renting from being transactional to actually being part of a community. and our vision is to bring it all together

and just one more example of just to put it into numbers, average churn in multifamily in this country is 50%. It means a user stays in average for two years. If the user now enjoys their experience more and feels like they have a portion of the value and chooses to stay a little longer and that average churn goes down from 50% to 40%

without getting too deep into the numbers, the NOI of the building will go up by approximately 5%, which increases the returns of the building for those LPs for the investors by 500 basis points, which in real estate is an unheard of number. And by tackling this challenge vertically is what flow is planning to do. And as I said, we're just getting started. Excellent. I'm going to wrap us up with a sort of combo question for both of you.

Are there any model cities that are sort of doing this right from a regulatory standpoint, from a building standpoint, from a community neighborhood standpoint, And then part two is sort of what role does government have to play in sort of facilitating and improving either, you know, home building, home ownership and all these components? Well, look, cities were startups at one point, right? And, you know, there's like incredible stories if you go back far enough, like creation of cities like Los Angeles or Washington, D.C., you know, for that matter. In the 20th century, at least in the West, that kind of went out of fashion became sort of an intractable thing to try to do. You know, there were some entrepreneurs who thought hard about it and gave shots at it. Disney had a whole vision. You know, the Disney company to this day has these, you know,

plant communities that kind of come from that. Walt Disney actually have this thing called Epcot, the experimental prototype city of tomorrow. You can see it in the museum. In San Francisco, if you go to the museum, you can see it. Oh, is that right? Okay. Yeah. The whole thing. Well, they still, I think they still have the Epcot. The part of Epcot that got built, I think, is still in Florida. So you can go visit, I think, the remnants of Epcot. So, you know, this is like sort of futurism from the 60s kind of in Disney's might. He passed away, and he wasn't able to fully develop Epcot, but he was kind of reaching in this direction towards the end of his career. And And then, you know, there are other examples in the U.S., you know, it's probably, what is it, Irvine, you know, took a big swing at this, and actually has been very successful. And then, you know, Venice, Abbott-Kinney, you know, sort of created the, you know, in LA, created the Venice Canal, sort of a plane commute. So, you know, there are various ideas like this. It's been a long time since somebody's really taking a hard swing. And so basically what you have are legacy systems, you've just got this sort of entrenched, you know, complicated power, you know, kind of system, local homeowners. I mean, it almost seems deterministic that if a city becomes successful, it basically,

basically the local homeownership, whatever political base, devotes itself to preventing the construction of new housing. And it seems like a real trap. So I'll add to what Mark is saying, but if a city was a business, and it's an old business and it's 30 years old, then you're going to say, forget that business, we're going to start a new one. We're going to fund it, we're going to start it,

and we're going to take over. The problem with cities, they're built. So to go into a city now and change, let's just start with something very simple. Most of the city is concrete and roads where cars are driving. And there are so many new solutions, and you can already talk today about what's happening and anybody who knows New York City.

And so when Uber was getting bigger and bigger, how the yellow taxis started disappearing was an unbelievable experience and how the medallions that used to cost a million three suddenly. So it is a very challenging thing to actually reimagine a city when it's already built. And there's things you can do it. When you look at these buildings

as single standing villages, yes, a building with 400 apartments, we can reimagine what happens inside of it. But reimagining a city is a big undertaking and actually one of the only places actually in Saudi Arabia, where I know some of the team members were just there, they're actually going for it. So there are places in the world right now,

and it's very innovative and it's very impressive that they're doing it, that people are actually trying to build new cities. But the answer to that and sort of how government can help, there are technology companies right now, construction companies. There are different things. There's a construction company here called Icon that's using technology, that the government is going to need to partner with them at some point because they have found ways to build a home in four days.

that used to take a year and a half. And as you can do more and more of those things, what we're going to do is, I believe, through innovative technologies, be able to build it fast enough to give people the courage to go and build the new ones. But to go into the old ones is very hard.

A crazy idea is office now, everything that's happening in office. Can you go and convert some of these dead offices into some new ideas? You could think about that. And I think the role of government has always been very important for this country. I think for us at Flow,

and this is another lesson from the past, we used to think, and I used to think we had to own everything. I think the category is so big that the only way we're going to achieve anything is through partnership, partnership with government, partnership with current players, and partnership with new players that are going to come. And I think it's the only way to solve this problem. And I'll finish by saying that I actually think the housing crisis that we described might be one of the biggest challenges that the U.S. is facing today. But the reason it's hard to understand it is because if you really want to get it, it's five to ten years down the road. the problem with housing, it takes five to 10 years. And Mark, I agree with your assumption that we have

about five years to do something really big about it. And all I can tell you is, I think we have the right team to give it a shot. Excellent. Well, thank you both for being here. This is a great discussion. Thank you. Thanks, everybody. As a reminder, this conversation was part of A16C's American Dynamism Summit in Washington, in D.C. You can find the full library of videos from the event in November by going to A16Z.com slash AD-Summit. Thanks for listening to the A16Z podcast. If you like this episode, don't forget to subscribe, leave a review, or tell a friend. We also recently launched on YouTube at

YouTube.com slash A16Z underscore video, where you'll find exclusive video content. We'll see you next time. I don't know.