David Senra - Marc Andreessen, co-founder of a16z & Netscape

Starting point is 00:00:02 I wasn't expecting to start here. I want to talk about why you were consuming so much caffeine that you noticed that your heart was skipping a beat. I love caffeine. So for a very long time, I always said it was the ultimate day. Like the perfect day was 12 hours of caffeine followed by four hours of alcohol. Like that's just like the ultimate. I did cut out, or at least for now, I've cut out the four hours of alcohol.

Starting point is 00:00:22 But caffeine is just like one of nature. It's most marvelous things. But it turns out you can't overdo it. And so, yeah, a while ago I was drinking so much coffee at once. that I was sitting in a meeting a couple years ago, and I started to feel just a little bit, something felt off, and I just took my pulse. And I realized I was skipping about every 10th heartbeat.

Starting point is 00:00:41 So I had like an existential crisis, because I'm like, all right, you know, I need to call 911. It's just like, I'm about to have a heart attack, and I'm about to die. And so I go out under the table and I Google, and I'm like, is this a problem? And before Dr. Google said, no, it's okay, it's fine.

Starting point is 00:00:53 You just might want to cut back a little bit on the caffeine. You said something that I love, and I never hear other entrepreneurs talk about, but I think it's super important, that you don't have any levels of introspection. Yes, zero, as little as possible. Why? Move forward.

Starting point is 00:01:07 Go. Yeah, I don't know. I've just found people who dwell on the past, get stuck in the past. It's just a real problem. And it's a problem at work and it's a problem at home. So I've read obviously 400, I think now 10 biographies of history-grates entrepreneurs.

Starting point is 00:01:18 And that was one of the most surprising things. Like, what's the most surprising thing that you've learned from this? They're like, oh, they have little or zero introspection. Like Sam Walton didn't wake up thinking about his internal self. He just woke up. He just woke up. He's like, I like, I like building Walmart.

Starting point is 00:01:28 I'm going to keep building Walmart. I'm going to make more Walmarts and just kept doing it over and over again. And you probably know if you go back, before 100 years ago, it never would have occurred to anybody to be introspective. Like it's the whole idea. I mean, just all of the modern conceptions around introspection and therapy and all the things that kind of result from that are, you know, kind of a manufacturer of the 1910s, 1920s.

Starting point is 00:01:44 Say more about that. Great men of history didn't sit around doing this stuff at any prior point, right? It's all, it's all a new construct. It was, you know, first Western civilization had to kind of invent the concept of the individual, right, which was like a new concept, you know, several hundred years ago. And then, you know, for a long time, it was all right, the individual runs, right? And, like, does all these things and, you know, builds empires and builds companies and builds technology, does all these things.

Starting point is 00:02:08 And then, you know, kind of this kind of guilt-based whammy, you know, kind of showed up from Europe, a lot of it from Vienna, you know, 1910s, 1920s, Freud and all that entire movement. And kind of turned all that inward and basically said, okay, now we need to like, you know, basically second guess, the individual. We need to criticize the individual. The individual needs to self-criticize, right? The individual needs to feel guilt, it needs to look backwards, needs to dwell on the past. It never resonated with me.

Starting point is 00:02:32 Do you find a lot of the greatest founders that you've spent time with and backed and partnered with or have low introspection? Generally, although in fairness, the introspection is probably linked to the personality trade of neuroticism, right? So, you know, a lot of the best founders are, you know, I think at like zero percent neuroticism. Like they just don't get emotionally phased by things that happen, which is a superpower when you're an entrepreneur. But having said that, some of the great entrepreneurs are, in fact, very neurotic. Like, you know, that's also the case.

Starting point is 00:03:00 It's not a, you know, it's not, it's, maybe it's a nice to happen to be low neuroticism, but not necessary. And so, you know, there are some that kind of get wrapped around the axle on kind of personal issues. You know, as you know, these days, sometimes that then, you know, kind of turns into, you know, use of, you know, secedelics, you know, different kinds and the hallucinogenic drugs. And, you know, that's like one very interesting kind of trajectory for, you know, kind of the culture of the country, culture of the world. And, you know, we'll see where that goes.

Starting point is 00:03:24 We've recorded under like a dozen of these so far, most of them with some of the greatest, you know, founders living for the show. I can't believe how many times on almost every episode, psychedelics pops up. And they're like, you should try them. I'm like, I'm not. I'm not doing any drugs. Is it to be clear, I'm not. I've never happened or going to. Like I have horror. I have, you know, the problem is I already have like tons of horror stories from people I know or know of that, you know, kind of came out the other side. Like, well, I actually, I had a, my deepest conversation was actually with Huberman. And I was describing this phenomenon where we see at Silicon Valley where, you know, kind of these guys get under pressure and, you know, they kind of feel anxious or whatever. And they decide, you know, somebody tells me about psychedelics and they try it.

Starting point is 00:04:01 And they kind of come out the other end as a changed person. And they kind of come out like much more at peace. But then they also tend to like quit their companies. They like moved Indonesia and become a surface structure. Like there's just like peace out, right? They're just done. There's a whole bunch of examples of this. And I was complaining to Huberman about this.

Starting point is 00:04:17 And in true Huberman kind of wise Yoda style. He's like, well, you know, how do you know they're not happier? Like maybe that was the positive outcome. Like maybe the thing that was driving them to be a great entrepreneur was a fundamental level of insecurity. Right. And kind of this, you know, this kind of unsatisfied, you know, kind of neurotic impulse. And now they're just, now they're just, you know, whatever the serotonin levels or whatever, better recalibrated, that they're just kind of satisfied sitting on the beach and being a surf instructor.

Starting point is 00:04:41 And, you know, maybe they're better off. And I'm like, yeah, but their company is failing. And so anyway, yeah. So there's a possibility that there's a better version of you or me on the other side of, you know, ayahuasca, but I'm not willing to find out. I'm not either. Daniel Eck has the greatest way to put this, like, he thinks the best entrepreneurs are not optimizing for happiness or optimizing for impact. I think that's true. I think it's certainly true for Daniel, yeah, who's, you know, kind of a great case study of that. You know, having said that, you know,

Starting point is 00:05:04 you know, I always kind of wonder is that, well, intrinsic versus extrinsic motivations. Impact strikes me a little bit as an extrinsic motivation. You know, it's like, yeah, impact, money, fame, you know, and by the way, I think extrinsic motivations are fantastic. And I think, you know, they can be very motivating. The people who kind of get kind of the great rewards for building great things, you know, deserve them. But at least what I found is it's the intrinsic motivations that actually get people up in the morning. And there's where you, you know, you're dangerously closed to straying into introspection. But, you know, it's like, okay, like what, you know, what is the thing that causes somebody who's now, you know,

Starting point is 00:05:35 extremely materially wealthy, extremely successful, you know, to get up in the morning and continue to, you know, kind of punch away at the world. I think those tend to be interior. What's that for you? Oh, I mean that that would require introspection. I'll let other people speculate. No, you have to have it. It's a lot more fun to speculate about other people, other people's, other people's but I am curious about you because, like, you have a series of quotes that I absolutely love. I save on my phone, I reread from time to time.

Starting point is 00:05:58 One of them, I'll butcher, which is like, you know, the world is way more malleable than you think. And if you just pursue something with a lot of maximum effort, drive, and energy, the world will recalibrate around you easier than you think. And I actually reread that this morning before I came over here. And I was like, what is that for Mark? Like today, like, what are you waking up trying to change in the world? Yeah, there's a lot that we're actually trying to do. I'm suspicious that that's my actual underlying motivation. Why?

Starting point is 00:06:22 Just because, like I said, I don't think external impact is enough to keep people going. Or at least, I've seen way too many people who had a high level of external impact, and then at some point they just stop. Okay. Well, here's the problem with external impact. It's like, okay, it's four in the morning. You're staring at the ceiling. Like, is that enough.

Starting point is 00:06:37 Like, external impact is stuff that's happening to other people, right? But it's like, all right, what is it about you? The story I like to tell myself is that I'm competing with myself, right? The story I like to tell myself is I'm getting up in the morning because I'm trying to become a better version of myself. I'm trying to become smarter and better informed and, you know, reach better conclusions and, you know, be better at what I do

Starting point is 00:06:55 and continue to expand my skills. But, you know, again, to actually analyze that properly require a level of therapy that I'm not willing to engage in. So anyway, so, yes, the much more comfortable conversation is that, yeah, what are you trying to do in the world? Which I would love to talk about. I have almost no introspection either. So, like, I understand that.

Starting point is 00:07:16 All right, so tell me what you're trying to do the world now. Yeah, I mean, look, we just, we have had this. It's actually fairly amazing that it's become a controversial, you know, kind of thing, but we just have this like fundamental view. The technology is like on balance an enormously powerful force in the world. And basically that's a big problem with the world is that there's, you know, there's not enough technology, there's not enough information. There's not enough intelligence. And, you know, we have this opportunity. We have these special sets of technologies that let us fundamentally improve things. And then there's this very special, you know, kind of personality type of the entrepreneur who's able to build

Starting point is 00:07:44 the product and then able to build the company and build a phenomenon and really make an impact on things. And so, you know, when I look at the world, I'm just like, okay, this is just a very, the world we live in is just a very primitive and crude place as compared to what it should be and what it could be. And so the whole thing that we've been trying to do, you know, for 17 years at our firm is, you know, build kind of the ideal partner to the founders that are, you know, trying to do that based on our own experiences of having been founders that we're trying to do that. Overall, the world, especially the Western world, it's just stagnant. Like, you know, the overall kind of theme of things. It's just everything is stagnated. And we could, you know, we could talk a lot about

Starting point is 00:08:18 about that. But, you know, every once in a while you have somebody who comes along, it's just like, all right, no, I actually have an idea of how to make things like fundamentally better. And I have a way to build a business around that and build a company, build an empire around that. And that, you know, and those people, you know, include ourselves in this, but, you know, those of us that are trying to do that, you know, we're like a rep movement basically against stagnation. But like, you know, without us, there's nothing but stagnation. But it's actually really funny. I always, there's always this kind of criticism that you get from, you know, whatever, the, you know, kind of the corporate press or kind of outside critics. So it's just like, oh, you know, you VCs are funny the wrong things or you entrepreneurs are building the wrong things.

Starting point is 00:08:52 It's like, well, nobody like licensed us to do any of this. Like we didn't like apply for a permit, right? Like get like judged by somebody ahead of time and told, yes, you get to do this. You don't get to this. Like many people could be trying to do this. Anybody can do this. Anybody can, you know, start, build a product, start a company, you know, start, you know, try to be a VC. like these are all completely open fields.

Starting point is 00:09:12 And it's just, it's shocking to me how few people actually give it a shot. And, you know, the fate of the world over the next 1,500 years is writing on the people who actually want to give it a shot. I want to tell you about the presenting sponsor of this podcast, Ramp. I have been reading a lot about SpaceX lately. SpaceX is one of the most valuable private businesses in the world. And one of the main themes in the history of SpaceX is constantly attacking and questioning your cost.

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Starting point is 00:10:40 But yeah, the core thesis was kind of the startup, the entrepreneur, the founder is going to be the core engine of progress in the world. And I think that, you know, I think that's more true than ever. In fact, when we started, it was still controversial, the idea that the founder would run that company. Even in 2008, 2009? Yeah, it was still very controversial. In fact, they were high profile companies at the time that were getting heavily criticized for, you know, basically having these little kids running around, running these companies.

Starting point is 00:11:03 Okay, so you have this, like, encyclopedic knowledge of the history of Silicon Valley in your head. I probably read, I don't know, 30 to 40 books on it, so I have some level, but not that you do. I remember reading a book on Nolan Bushnell in front of Atari. He was like 27 at the time, and it was excessively rare. It talks about that in his stories. It's like, excessively rare for him not to be replaced once Atari started growing with, you know, CEO, like an older CEO. Yeah. Like, were there other examples that before him?

Starting point is 00:11:28 Well, so Christopher Columbus. Alexander the Great. Right. So throughout history. most of the, you know, Thomas Jefferson, throughout history, most of the great things that have been built have been built by this kind of super charismatic founder type, you know, Will the Power founder type

Starting point is 00:11:45 who basically built and run something to do that. Henry Ford. Hold on. I love that you went here because you don't remember this, but we had dinner in Miami with Jared Kushner like a year ago or something and me and you would wrestle because I was so excited to talk to you. And I was trying to get out of you like, you know, because I think about history-scrutist entrepreneurs all day.

Starting point is 00:12:01 Like this is why I do it seven days a week. Like who are these entrepreneurs from history that you like? He's our naming country founder. Yeah, sure. Exactly. There's this, like, recency bias, right? Which is, like, the world that we live in today is the normal state of the world. And, like, everything that happened in the past is, like, weird and different.

Starting point is 00:12:15 And those people were, like, number than we are and, like, all screwed up. And it's like, well, maybe. Or maybe the world worked a circuit away for thousands of years and we're in the weird time. Like, maybe we're in a time that's just, like, really unusual from a historical, you know, from a historical standpoint. And I think this is one of those dimensions in which that's true. It just, it never would have occurred to anybody 100, 200, 300, 300, years ago that if somebody was going to, like, you know, start something that they were

Starting point is 00:12:36 to be the person who ran, like, obviously. It was just obviously the case. The book that I was recommend on this topic is called the Machiavellians, which is this sort of famous book from the 1940s by this guy, James Byrne, who's one of the great geniuses of the 20th century. And he described, the way he describes it basically is he said, like, there have been two, like, fundamental modes of, like, business organization over the course of, like, basically the history of capitalism.

Starting point is 00:12:57 There's what he, what he calls bourgeois capitalism, which basically is, like, founder runs the company, name on the door. And the classic archetype for bourgeois capitalism was Henry Ford, you know, in the 1920s. And today it's Elon Musk, right? It's just like, that's you. And by the way, in the old days, it was Ford Motor Company. You know, it's not Musk Motor Company. But, you know, everybody knows Tesla and SpaceX, like, you know, these are Elon.

Starting point is 00:13:15 And again, that maps to this historical thing, which is that's also how countries ran and that's also how, you know, cities ran and like all these things. You just religions, by the way, like, you know, basically everything, you know, founders led the way. That's the historical norm. And then he said what he basically says in this book is he goes through and he says there's this new, basically, basically, is an artifact, again, it's an artifact of kind of this weird period of time between the 1880s and 1920s were kind of the modern world, you know, as we know today, kind of formed.

Starting point is 00:13:40 And he said there was sort of a new philosophy of sort of leadership and management, which is called managerialism, sort of the rise of the concept of a manager. And specifically a manager as contrasted to a leader. And so therefore the manager, therefore the idea of a management school, right, therefore Harvard and Stanford business schools, right, therefore the idea of the manager who replaces the founder running a company, you know, therefore the idea of management as a skill set that can be used to run many different kinds of businesses. In the 70s, this then turned into the conglomerate,

Starting point is 00:14:07 which was the idea that it doesn't matter what the company does. If you have a good manager, the company should do 30 different things. And so managerialism is this idea that you have this kind of interchangeable management skill and that that can basically run anything. And actually what Burnham says is he says, look, people are going to try to draw a value judgment on this and they're going to try to say this is better or worse than the old name on the door model. But he said the reality of the modern world is everything is big.

Starting point is 00:14:28 Like, you know, for the electrical power grid to get big or the road network to get big or the car industry to get big, large-scale systems need to be run by people who are training how to run large-scale systems. And so he said, you may or may not, same thing with the countries, large-scale countries are going to be run by people who are good at running large-scale things, right? And the founding personality type is not the manager personality type. Those are different. And so there's going to be a handoff when things get big and complicated.

Starting point is 00:14:50 And so that's the model that Nolan Bushnell talks about, and that's the model that dominated the Silicon Valley for 50 years. The problem with his argument is that assumes the managers are going to do a good job, right? And I think if there's like one dominant theme that we're seeing in the last, you know, 30 years, you know, in the West for sure, is like managers generally, you know, writ large are not doing a great job. Or another way to put it is, the managers maybe are good at managing something that's going to be status quo for a long time. Like if it doesn't change, maybe they, you know, maybe they can run the banks for a long time or they can run the power company for a long time or the car company.

Starting point is 00:15:19 And as long as the car is the car is the car, you know, or soup, soup is soup, it kind of doesn't matter. But the minute thing has changed, the manager personality type, because it's not the founder personality, type, it doesn't know how to be able to change. Not everything is changing. A lot of things aren't changing, but for the things that are changing, they're changing, like, really, really quickly. I mean, SpaceX is like the classic example of this. Imagine being a professionally trained manager trained at, like, you know, a top management school working for a rocket launch company, competing with SpaceX. And the assumption of the entire rocket industry for, you know, the last hundred years has been the rockets are used once, and then, you know, that's it. And the economics

Starting point is 00:15:54 of launch are dominated by having a building a rocket every time. And then this, like, crazy guy in California comes up with this thing where the rockets, line on their bunk. And you can't replicate it. Okay, your management skill, what good are your management skills at that point? And I think there's like a whole bunch of interesting areas of human activity where like that shift is happening. And so I think this is where Burnham's thesis collapses where it's just like, okay, the managers actually can't do it. Yes, there's a need to run things at scale, but no, the managers actually can't do it because they can't adapt. And the founder can just learn how to run things to scale. Well, that's the theory. And that's a big part of our

Starting point is 00:16:23 theories. Yeah, the founders can actually learn how to do this. And, you know, this is still a controversial topic, this, you know, this still comes up, like, is it controversial? Well, it is, because founders aren't necessarily, especially founders on day one are not good at doing this. Like, okay, so in tech, let's talk about tech specifically. Like, in tech, the founder tends to have been in a lab, you know, literally or metaphorically for 20 years before they start their company. Like they've been, you know, probably working by themselves or in a small team. They've been building technology. They haven't been running things. Like, they haven't been, you know, managing large organizations. They haven't been, you know, running public

Starting point is 00:16:53 companies. And so there, there is a missing skill set, right? And on day one, they don't know how to do that. And so they do need to be willing to learn how to do that. And then they, and then by the way, they do need to be capable of doing that because, you know, some of them can and some of them can't. But yeah, so this maybe is like the court thesis behind our firm, which is you're much more likely to build something important in the 21st century. If you start with the founder and train them on management, then you are to start with the manager and try to train them on creating new things. And I think that this trend is intensifying. And so you're, because what's happening is all the old edifices, all the old incumbent institutions

Starting point is 00:17:27 of the last hundred years that are run by managers, they're all in some state of fundamental collapse. Like, they're all collapsing in, like, trust and credibility because they can't adapt. And so this issue is becoming more and more acute, which is the system that we thought was necessary and sufficient actually just, like, does not work. And if anything good, it's going to happen,

Starting point is 00:17:44 it's going to have to be somebody, it's going to have to be Henry Ford, Elon Musk type who actually does it. You think it's in a vast majority of people agree with you? Look, it's becoming more common. I mean, when you get an Elon Musk and Steve Jobs, when you get these kind of archetypal examples, of it, it's a lot easier to, you know, to, you know, to sell it. You know, Mark Bars Zuckerberg,

Starting point is 00:18:01 we were talking about earlier. Like, you know, he's now a great case study of this, right? He had, you know, when Mark started Facebook, he had never, he had never had a job before. Okay. Not only had he not managed people, he had not worked for anybody, right? So, like, he had, he started it with zero and his learning curve, which by the way, was happened fully in the public eye, right? His learning curve was vertical. And by the way, it's still vertical. Like, he spends, like, an enormous amount of time learning how to become better at running, running these things at large scale. He's still the, he's still the founder and he's still the innovator and he's still like a fountain of ideas to do. So he's,

Starting point is 00:18:31 he's that double, you know, he's like the class example of a double thread. And then what happens is other founders look at that and they're like, oh, I could do that. Right. Which is exactly what Steve Jobs said when he saw Nolan Bush now. Exactly. I can run my company. I can do that. Yeah, exactly. And by the way, you know, it's amazing like how fast this stuff shifted because like Steve famously had this, you know, short period of time where he worked for Hewlett-Packard. And I think, I don't know if it's true. The legend is the Jobs pitched his manager at Hewlett-Packard. No, Wozniak pitched him. Was it Was it Was it? Okay. Okay. Okay. Well, well. There was some other story where Jobs went into some meeting with some manager trying to pitch the thing.

Starting point is 00:19:01 And the line for the manager was, absolutely not. This is the dumbest study I've ever heard. Get your feet off my desk and get out of here. You can just imagine, Steve, with his, you know. And they had to be bare feet at that time. My favorite Apple lore is that the first sale in Apple and Apple's history was made barefoot when he walked into the bite shop. He was barefoot. What's amazing about that is, you know, yes.

Starting point is 00:19:22 So Wozdaf for sure, we're for Hewlett-Packard. Everything I'm describing was Hewlett-Packard in the 1950. 50s and 1860s, in 1940s. That was also Dave, Dave, Dave, Packard, and Bill Hewlett were that founder type. And Dave Packer and Bill Hewlett ran their company for between the two of them for like 50 years. Do you think that's the most... And by the way, Silicon Valley was built in large part on HP. HP was the original Silicon Valley company. Okay, that's the next question. And it was run by its founders for 50 years and yet people

Starting point is 00:19:45 concluded the founders shouldn't run the companies. Right. And so it's like, it's one of those things where it's like it's kind of so obvious it was staring everybody in the face. And so people had to construct kind of elaborate, you know, basically, you know, these elaborate kind of lattices of like, you know, theories to basically get around the fundamental fact that you need somebody who knows what to do actually running the thing. Do you think HP might have been the most influential company in Silicon Valley history? It was for sure the most influential company from 1940 to 1980. And then probably after that, Intel.

Starting point is 00:20:12 Well, go to the founders of Intel and you read biographies of them and they talk about modeling off of HP. Yeah, that's right. Yeah, that's right. And then how many founders modeled off of Bob Noisse and Intel after the fact, including Steve Jobs, who would go to Bob Noisse's house for dinner? Yeah, that's right. By the way, that's another great example, because Bob Noyes, at least, you know, if you look at photos of Bob Noyes, you're like, wow, this guy's like a pillar of society. Like he's, you know, he's very farewell dressed and he's kind of very adult and he's very, like, you know, the leader of the traitorous aid. You know, the group that left Shockley to start Fairchild. And then left Fairchild to start Intel. And so Bob Noisse was 100% of the Steve Jobs of his time, just in a short, short, sleep white dress shirt and the skinny black tie. But it was, again, it's like the exact same thing. And so I, you know, I never, I unfortunately never met Bob Noiss, but I could easily imagine. Imagine Bob Noyce and Steve Jobs sitting down and being able to talk for three hours and completely

Starting point is 00:20:59 understanding each other despite the fact that they look and feel is like completely different. He was almost like a disciplinarian to Steve because Steve was, you know, wild and reckless. Like I was also wild and reckless. You need to mature. And I think Bob's wife maybe went to work at Apple early on too. So it was he talked about this in his biography. There's a few great biographies of Bob Noyes. But he said that the reason he spent so much time after he was really successful spending time with young entrepreneurs.

Starting point is 00:21:21 He said it was restocking the stream in which he fished from. Amazing. He thought it was really important. He's like, I learned from all the guys before me. I need to take that knowledge I've built up over multiple decades and push it down the generation. I'm going to go back to starting the firm, though. This is interesting. What was occurring in your life either at that time or before that you had this observation that this had to be done?

Starting point is 00:21:41 Oh, so we've got all these labor theories. The practical reality of it was, my partner, Ben and I had become very active angel investors. And I'd been an angel investor since like the mid-90s. But then Ben and I started doing it kind of as a real thing, pretty significant time in. but probably starting in, you know, 2003, well, I did it kind of throughout the early 2000s, but 2003, 2004. It's hard to remember now, but if you go back to like 2000, 2003, 2004, there weren't like thousands of Asian investors.

Starting point is 00:22:05 There were like eight. It was like, sure, you know, it was like Ron Conaway and a handful of people. And then Ben and I were running around doing it. And this was very significant in the evolution of the venture capital industry because this was the point at which the traditional VCs got disintermediated by angels and seed investors who kind of inserted in before the proceeds arrived, which was this, you know, fundamental change that the change of the whole industry. But, you know, we were part of that.

Starting point is 00:22:25 So, but as a consequence, like we were investing in all these new companies, you know, basically at the point of formation, you know, we're basically playing amateur early stage VC. And we're going to, and we're always like, we're not going to raise money for a real venture firm later. They're going to go on your board and whatever and work with you. And what we just found over and over and over again was we ended up getting pulled into these companies, either because there were issues that just like the other people that they were, you know, working with or they either had raised venture yet or the VCs that they'd raised from couldn't help them with. And so we just got pulled in. And the reason was we had been running companies at that point for, you know, whatever, 20 years. And so, you know, we at least had some idea of what we were doing. And then the other is we kept getting, we kept getting brought into conflict resolution between the founders and the VCs.

Starting point is 00:23:08 Because, you know, it's like, especially, especially, because, again, much more common at that time, especially at the VC's fundamental point of view is the founders not going to run the company and we need to, like, replace you the professional manager as fast as possible. Like, the founders are not necessarily going to like that. And they might resist that. And by the way, even if they're on board with that idea, they might not like the person who the do the VC wants to bring in. And so we kept ending up in these kind of, basically,

Starting point is 00:23:27 as arbitrators in this sort of, you know, in theory, we were kind of trusted intermediaries because we knew the founders, we knew the VCs, and we could kind of help bridge between that. But literally what happened was, after a while, we were, like, spending like eight hours a day, just doing this. And we're like, all right, and it's like weird.

Starting point is 00:23:42 It's like you're writing a $100,000 check and you're like spending all this time doing it, and then to basically arbitrate it somebody who wrote a $10 million check. And it's just like, all right, we should probably just write the $10 million check. And that was, that was, that, So it was, I always think like the best, the founders, I always, one of my theories of like the great founders is they, they tend to be able to operate at kind of the strategic conceptual level and then the practical level at the same time. And so we had a whole theory I could take you through for the evolution of the venture business.

Starting point is 00:24:08 Please do. Yeah. But underneath that was just this actual, you know, the lived experience of what was actually happening on the ground. The big theory of the firm that we that we had at that time was linked to this idea of, was linked to this idea of founders running the show. But it was also a structural observation of what was happening in the venture industry, which was. Basically, what we did was we sort of in line with your philosophy. We went back and we studied a lot of other businesses that have similarities to the venture business. So we studied private equity, venture capital, or sorry, private equity hedge funds, investment banks, law firms, management consulting firms, ad agencies, accounting firms, you know, basically anything where the product is fundamentally a relationship, you know, a knowledge work, you know, kind of relationship as compared to something that gets manufactured.

Starting point is 00:24:49 And what we observed is basically, and in, Hollywood talent agencies, actually is the one we've probably talked publicly about the most. And so that was a great case study. The Ovald's story.

Starting point is 00:24:58 He was in this studio a few months ago. And so, and he actually, and by the way, he gave us, you know, he made a point of crediting. Like,

Starting point is 00:25:04 he gave us a lot of this theory. So a lot of this comes from him. But, well, actually, I'll tell it through, through, through his experience. So when he started his agency, and was it 80, whatever, no, 75, 75.

Starting point is 00:25:16 In the 70s. It was actually a very, It was structurally, it was very similar to when we started A16Z in 2009, which was the configuration of the industry at that point was basically a bunch of, essentially service firms, a bunch of talent agencies, none of which were at very high scale. And then each of them was basically a tribe of basically solo operators, kind of lone wolves. And so the concept in Hollywood was you had an agent, and that was your guy. And that agent knew, whoever that agent knew and had whatever relationships an agent had.

Starting point is 00:25:46 but the other agents at your agency were not available to you. And there was no collective benefit to the fact that you were at an agency that had not just your guy, but like 100 other guys, there was no collective payoff to that. They ran that way for a very specific reason, which is this kind of this, eat what you kill professional services mentality, where everybody should have to go build their own book of business. But you end up, you're just dealing with a guy as opposed to a firm. Like there's no firm. There's no collective thing. And that was basically the condition of venture capital in 2009, which is you have been, at this point, we knew all the VCs really well. And we had raised venture and we had worked with all these other companies that had raised venture.

Starting point is 00:26:19 And basically all of the sort of legacy venture firms at that point, they were all like that. They were all just like tribes of Long Wolfs. And then the thing that we knew that was not publicly known was generally speaking, inside the firms, they didn't even like each other. Oh, I hear stories like this all the time. Right. And so it's like, you know, whatever. There's Joe and Mary, you know, who are partners in a venture firm.

Starting point is 00:26:39 And you're working with Joe. And Mary has, like, a key connection that you need access to. And yes, Joe, can Mary introduce me so-and-so on what you do? don't know is they're having like a brutal fight. They're like trying to destroy each other, because they're fundamentally economics, they're going for a greater slice of the profit pool. And so they're really going out.

Starting point is 00:26:54 And so we just, we saw example after example, of venture firm that was basically either, two things actually. One is either melting down due to just internal strife and conflict. Or by the way, the other was generational succession, right? The other issue is a lot of the dominant venture firms of 2009 had been around for 30 or 40 years, and they were now on their third generation of partners,

Starting point is 00:27:11 going to their fourth generation of partners. And, you know, and again, it's the same. same thing. They had been founded by dynamos, and then they were, you know, the later generation people were not like that. So we basically said, oh, this is where the oldest thing comes in, as we said, look, like that, that's not going to last. And so our theory of it was what we call death of the middle or we sometimes, the negative way to frame it is death of the middle, the positive way is the barbell, which is what's happened in all these other industries, which is basically the industry gets stretched apart like Taffy. And what you get is you get this

Starting point is 00:27:39 barbell thing. And on one side of the barbell, you get early stage angel seat investor who are really like first money in, like, you know, staying very light in their feet, writing a relatively small check, but like being involved in companies extremely early on, you know, taking a lot of risk. And then on the other side, you get basically scaled platforms, right? So, you know, you get large-scale enterprises that have like a lot of throwaway, a lot of access, very big networks, and then access to a lot of money. The other comparison we always make is to retail shopping, right, which is there used to be department stores like Sears and JCPenney, which basically where the brand promise was

Starting point is 00:28:08 pretty good selection of products and pretty good prices. Right. And then now those are dead. instead of boutiques, like the Gucci store or the Apple store, and then you've got this super scale e-commerce companies like Walmart and Amazon. We were to the point where it's just like there's no reason ever go to a department store because it's got less selection than Walmart and Amazon, but it doesn't have the quality tier and the special experience of a Gucciier or Apple store.

Starting point is 00:28:30 You had that thought in mind when you started 86-80s? Yeah, 100%. Yeah. It was a conceptual leap for venture capital at the time, but the exact same thing had happened to private equity, the exact same thing had happened in hedge funds, the exact same thing had happened in investment. And you knew that by what, just reading about the history? So like investment banks are a classic example. So if you read about the sort of the original investment banks in the U.S.

Starting point is 00:28:49 between like 1880 and 1920, they were all like boutique venture capital firms in the 1970s, 1980s in the U.S. It was like 20 guys. And these are more like merchant bankers. Yeah. Well, and so the classic stories, which I love so much, so J.P. Morgan's one of my kind of favorite historical figures. And J.P. Morgan was an example of that. The J.P. Morgan Investment Bank was like this basically this time. It was very important, but it was like this tiny little operation.

Starting point is 00:29:11 It was a, you know, fit in a single office. It was, you know, probably 20 principals and some office staff or something. You know, it was not, it was not large. And actually, the hidden secret to J.P. Morgan was, he was the son. The father was Junius Morgan. Okay. I literally, when you were stuck, I was like, wait, you, you, I was shocking that you would say pick him because I actually found his father more formidable individual than him.

Starting point is 00:29:33 He was. So he was, which is almost always the case of any famous public figure. It's the father is almost always a more interesting story, which a lot of examples of that. But, however, yeah, so Junius Morgan, and then J.P. Morgan has filled a specific economic role that's gotten lost in history, which is basically Junius Morgan. The Junius Morgan Bank was in London. The JP Morgan Bank was in New York and what the Morgan family was doing was they were funneling money from the old slow growth economy of Europe into the new high growth economy of the U.S. But again, it was exactly your point. Like it was this little boutique family operation. The other great thing about that era of history is these were, they were all bifurcated by religion. They were the Protestant investment banks and they were the Jewish investment banks. And they did not mix. No, not at all. Completely different worlds.

Starting point is 00:30:16 And as a consequence, J.P. Morgan was the Protestant banks, like J.P. Morgan, were able to find, like, the railroads, which were considered, like, the real businesses at the time. But then, like, all the disreputable stuff, like, movie companies and, like, department stores, like, those are all the Jewish investment banks. By the way, with Jewish founders. And J.P. Morgan is the big survivor of that today in the form of J.P. Morgan Chase. and then on the Jewish side, it's Goldman Sachs, you know, is the great survivor. But again, if you go back there were... So that's, you consider that the barbell in investment banking.

Starting point is 00:30:45 You have the J.P. Morgan kind of like family partnership, and then you have the complete scale of like Goldman Sachs. And so what happened was both JPM Martin and Goldman Sachs started out, 100 years ago, they were on the one side of the... A hundred years ago, they were actually in the middle. They were kind of, again, this sort of, you know, they were boutiques. But they were like, of their time. They were like, today you call them like mid-market, you know, who's sometimes called

Starting point is 00:31:06 Bolchbracket, you know. kind of thing, as opposed to just like a solo operator or something. Actually, the way JFK's father got started was he literally hung out a shingle in the 1920s, which is Joseph P. Kennedy banker, you know, private banker, and he just did deals. And he was like an angel investor of the time. And so, and then you had the big commercial banks, but the big commercial banks had no interest in issuing loans to these speculative crazy, you know, entrepreneurs. And so in that time, JP Morgan and Goldman Sachs and Kuhn, Loeb and all these other kind of mid-market banks, Morgan Stanley, the bank that became Morgan Stanley, were kind of these mid-things. Now, what's happened,

Starting point is 00:31:36 you know, sitting here 100 years later, those are now the scaled players. The ones who didn't scale are kind of long forgotten. Having said that, there's one firm that survives in the old model, and that's Allen & Company. And there are other boutique investment bank study, but Allen & Company was found in the 1920s and has, you know, is uniquely the one that survived in the original model of boutique and deliberately being a boutique investment bank. And it stayed that way for 100 years. And so one way to think about it is today that's the Barbill in banking, which is Allen Company on the one side and then JP Morgan and Goldman Sachs on the other side. I found one of my all-time favorite quotes when I was reading the book zero to one.

Starting point is 00:32:08 The quote says, the single most powerful pattern I have noticed is that successful people find value in unexpected places. And they do this by thinking about business from first principles instead of formulas. That is exactly what Apploven has done with their new advertising platform, Axon. Axon is the most powerful advertising platform in a generation. Axon allows you to capture undivided attention. Axon ads are full-screen videos that are watched for an average of 35 seconds, retention that blows other ad platforms out of the water, and you can launch in minutes. You set the goal, and Axon achieves it.

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Starting point is 00:33:09 And you can do that by going to axon.aI. That is axon.com. So are you reading about this while you're funding the firm, before you're funding the firm? Ben and I spent about a year and a half planning the firm. And part of it was he was in, we call industrial servitude. he was working for Hewlett-Packard after we sold our company to H.P. So he was running a big part of HP at the time.

Starting point is 00:33:32 And so we could literally start a new full-time thing until he got free of that. So we had a year and a half to kind of study and think of work. And because you had this period from 2003 or 2002 when you're doing angel investing, you know, a lot, until you start your company six, seven years later, you're observing all of the weaknesses in the model. And that's where you have, hey, why don't we take the CAA? I think Ovitz calls it like the phalanx, where it's like if you have one agent at CIA, you have all of us. And they would, like, roll deep.

Starting point is 00:33:56 I think he says in this book, like, oh, my agents coming to the career. No, it's like 20 agents are coming. And I think they'd be dressed in like the same kind of suit maker. And like they were intentionally trying to to intimidate like their competition. Armani suits, Salka shirts was a little shirtmaker in Beverly Hills. And so we're, you know, all sober colors, white shirts. And then I think he had a bulk purchase deal, I think with the local Jaguar dealer.

Starting point is 00:34:21 And the legend at least has it is that the license plates all said CA1, CAA2, C, C, A, A3. And so late, you'd go to a premiere and there would be like 20 jags lined up. And then 20 guys in identical suits coming out. And yeah, this is exactly the thing. It's just like, now that's, you know, that's the Hollywood version. But like, just imagine the psychological impact of that if you're just like an old school agent. This is sort of, you know, Michael's a very dear friend. He became very controversial over the years. And the reason he became so controversial, I think, is just because he smoked his competition so severely. Like, he pounded them so hard. There was no response. You're just a guy. You're just a guy working. for an old agency and you've got your clients in these 20 CAA motherfuckers are showing up. And like it's just, yeah, it's this force. And the clients, if you talk to them, by the way, a lot of his clients are, you know, still active today, you know, from the period of you talk to him, it's just like, yeah, it's just a no-brainer. It's like, do you want to work with a guy or do you want to work with a firm? It's just obvious.

Starting point is 00:35:12 He has, I don't know if he told you all these stories. Do you tell you about the morning schedule thing? The getting on the bike doing the karate. For the firm, for the firm. No, no, no, no. So this is, again, something that's specific to Hollywood, but it's a great example of it. Okay. So the agency business, at the time he started CA, the agency business is like 90 years old or something, right?

Starting point is 00:35:30 It like started out doing vaudeville bookings and like music halls and like it had been around for like decades. And so the people involved in it had had decades to think about like the best way to do it. And they had arrived at a set of practices. And one of the practices, I think I'm getting this right, one of the practices was at every agency they would have their staff meeting in the morning at 9 a. And they would basically share, you know, whatever information was going to get shared in the agency would get shared at that point. And oh, you know, this studio had wants a script to do. He wants to do a crime thriller and here's the script and whatever. And this is like the point where there would be at minimal, you know, whatever, minimal handoff existed to the other agency.

Starting point is 00:36:00 And so this is where everybody would kind of get updated. And so the staff meeting would go from like 9 a.m. to 10 a.m. And then at 10 a.m. they would start calling their clients. And they'd be like, oh, you know, we heard there's a, you know, whatever. There's going to be a casting call for, you know, this great new role for this professional fee for whatever. And you should consider you that. And so, of course, Michael's like, all right, well, we'll have our staff meeting at 7 a. We'll be done at 8.

Starting point is 00:36:19 Yeah. Between 8 and 9, we'll call all the clients. By the way, we won't just call our clients. we'll call their clients, right? And so imagine you're whatever, Paul Newman, and you've got some agent you've been working with for 20 years. And he calls you at, your agent calls you at 11 o'clock. And it's like, I've got this great role.

Starting point is 00:36:35 And you say, oh, the guy's CA called me about that three hours ago. And your agent's like, they don't represent you. And Paul's like, yeah, isn't it great? Isn't that fantastic? And so, again, you just like, you rinse and repeat that a thousand times. And it's just, to the client, it's just like completely obvious what to do. And so, yeah, so the reason I go through this, the moral of the story is, again, it's sort of this,

Starting point is 00:36:54 this idea, incumbency, you know, incumbency status quo, like you just end up, you end up in any business, you just end up with all these embedded assumptions generally, and then, you know, 90 years later, right? So the founders of the agencies were 90 years ago, they weren't involved anymore. So the people who were running competitive agencies were managers, not, right, same thing, managers, not founders, right? And so the thing a manager never does unless they're under duress is reconsider fundamental assumptions.

Starting point is 00:37:18 Like, they hate that. Like, that's not, the whole point of running something big is you don't have to do that. You get to run the big thing at scale. You don't have to go in and like reinvent it from scratch. Like that sounds like a nightmare. Right. And so, but anyway, as a consequence of that, you end up with like all these embedded assumptions that are basically just like unspoken.

Starting point is 00:37:35 Nobody's questioning it's not happening. And if you take the time, you can kind of go in and go back, you know, first principles, you can kind of go in and you can say, okay, well, how do they arrive with that? And what we found in just industry. I mean, this is what our founders do every day is just an industry after industry after industry. There's all these embedded assumptions that made sense in 1970 or 1930 or 1880 that just don't make sense anymore. I love that you did it.

Starting point is 00:37:54 I always say it's like not what you do, it's how you do it. And if the idea that you could take, I'm like, I'm not running a talent agency, but there's so many of these principles that I comply to venture capital. And your blog archive, which I absolutely love, and I told you I've read like multiple times. I did episodes on it. You would give advice to like young people. And it's like, my advice is like go work in an industry that's still, the founders of that

Starting point is 00:38:13 industry are still working. When I read Ovitz's book, the way I would summarize his approach, because he isn't this big, stodgy, slow-moving, you know, very bureaucratic. organization is like, oh, mediocrity is always invisible until passion shows up and exposes it. Oh, interesting. Yes, right. And that's what he did. Yeah, that's right. He's just like, there's so many things that you guys can be doing better here. I can't do it in the, and I remember correctly, he took some of these ideas to his boss. Because that guy was his mentor. I can't remember his name. You're famous to work for the CEO of William Morris. Yeah. Yeah.

Starting point is 00:38:42 Which was the biggest of the talent agencies at the time. So were you, you had been essentially just designing what you wish you had when you were founders? Yeah, that's right. And again, and again, that may be a cheat code. But yeah, if you've been the customer, obviously, this this all becomes a lot more obvious. I don't know if you want to answer this question or not, but in Warren Buffett-Shareholder, he has this great line where it's like really important to pick to play against weak competition.

Starting point is 00:39:03 Did you feel that there was going to be, like that point in time in venture capital history that you were going to be playing against weak or weaker competition? I would say not exactly. We didn't view them as weak. We viewed them as basically, we viewed them as running on a status quo set of ideas.

Starting point is 00:39:17 And so, and to be clear, like we, and part of why we'd think about this way, we had erased money from at the time, in the time, we're probably the two-best-fisher firm. So Claren-Brickens in the 90s, and I work in John Doer very closely for five years in Escape. And then we, I thought we raised money from benchmark when they were like King of the Hill,

Starting point is 00:39:32 and Andy Rackleff, who was one of the founders of the firm and is a legendary, brilliant VC. And so we had worked with, we just had, you know, for action of history, we had worked with two of the whatever top five or whatever people in the field, you know, for a long time. And they were and are, by the way, brilliant at running on the model that they existed.

Starting point is 00:39:52 John was brilliant at that. Andy's brilliant at that. They're still brilliant today. It was less a competition of, oh, these people are soft or these people aren't smart or it was none of that. It was no, they're really good at executing against this particular playbook. And by the way, that's why it's okay. Like, if we're going to do this, we need to be playing by a different playbook.

Starting point is 00:40:08 There was no such thing as like scaled venture capital at the time. No, at the time, no, no. Because the firms all hit this, they all hit this limit. They all fundamentally hit this limit. They all hit this limit where they just could, the idea of a partnership of equals or even a hierarchical partnership. Like, it just breaks at some point because there's just too much internal dissension. It is too hard to coordinate.

Starting point is 00:40:27 And then everybody's fighting for slices of what it was viewed at the time to be a fixed-sized pie. And so none of the other firms could, structurally, there was just no way to get to scale. Where else did you take ideas from besides the agent business in Hollywood and like the merchant bank investment banking industry? Oh, I mean, it was just very obvious that it had happened in private equity. Like, you know, this was the time when like, it was actually really, this was around the time when like KKR and firms like it were hitting their stride with, They're actually building like a lot of operational capabilities in-house. They were actually building their own, actually, investment banks in-house. One of the things we've never done, but it's always been on the ideal list is to actually just have an in-house bank.

Starting point is 00:41:03 And KKR had actually done that, just build a captive bank. And so they had done a bunch of things like that. And so we saw it happening, which is the mid-tier private equity firms were collapsing. And you either needed a solo, you know, very light in your feet kind of solo operator on the one side doing small deals, or you needed to have a scale platform like KKR. It happened in hedge funds. It happened in... But, I mean, it had long...

Starting point is 00:41:24 Actually, the TV show of Mad Men. Mad Men tells the structural story of this happening in the advertising field in the 60s and 70s. And I will ruthlessly spoil Mad Men because it's been out of the year for like 20 years at this point. But, you know, a big part of the arc of Mad Men is those guys are working... Sterling Cooper is a classic mid-market ad agency. Right. And then it's... And then whatever.

Starting point is 00:41:46 The third season, they sell it to McCann, which was the scale... player at the time. And they show you all the pros and they clearly talk to people who had been through this because they showed you all the pros and cons of working for McCann because McCann's this giant machine. And so Don Draper's used to like making all the creative decisions and now he's just in this conference room arguing with people until he just like gets up and walks out. But then Don Draper and Roger Sterling start their own startup. They start Sterling Cooper Draper Price. That's the second one, which starts out as a as a true startup, as a true boutique startup. And then they have this whatever year and a half just just fucking hell. Like they can't get anywhere.

Starting point is 00:42:18 They can't get clients, like, because they're too small. You know, they're sub-scale. And so it kind of, and then I think in the end, I forget, it's very long, but I think in the end up, I think they end up, I think they end up selling it. No, no, no, no, no, no, no, sorry, I got it wrong. They sell the first one to the British ad agency that just completely destroys it. And then they sell the second one in the can. So they actually show that process happening twice. And so that, again, if you go back in history, that is what happened in the ad agencies, basically between the 40s and the 70s.

Starting point is 00:42:44 Like, basically television catalyzed that. Like when television emerged, advertising became a month. much bigger deal than it had been before, and it just had to be professionalized in a different way. The other thing happened is, of course, the external environment changes, right? So everything we just talked about just has to do with the internal mechanics of how these things run. But the other thing happens is the external environment changes, right? And so part of what I think what Michael would say, I think you would agree with this, part

Starting point is 00:43:03 of what may CAA possible is at one point, basically Hollywood was just movies. And then there was like whatever a low kind of TV division. And by the 70s and 80s, the, you know, Hollywood was becoming much bigger than just movies, It was movies and TV and advertising and music and sports and, you know, politics and culture and like all kinds of things. In fairness to the kind of our competitors, you know, Silicon Valley between, call it 1950 to 2010 was primarily just in the tools business, right? Primarily the companies that, you know, starting with Eilockard, the companies that we all backed and built were basically just building tools. And you'd build a tool like an operating system or a disk drive or something and you'd sell it to people and they'd figure out what to do with it. It was right around the time we started our firm that the Valley was going from being primarily tools businesses to,

Starting point is 00:43:44 to actually building directly competitive companies in the company industries. And so Airbnb going directly into the hospitality industry, right? So alternate universe Airbnb is just boutique booking hotel software, right, for any Airbnb's. It's a tiny little boutique business, building basically a little spreadsheet software. But no, Airbnb, Brian Cheskey decided, brilliantly,

Starting point is 00:44:03 we're just going to go into the hospitality business that compete with hotels directly. Uber and Lyft, in the old world, we're just taxi dispatch software. In the new world, they're full transportation providers. Tesla, in the old world, would have just been software for self-driving cars, Tesla, and the new world builds, you know, the entire car. By the way, Facebook, same thing. Prior to Facebook, if you built, like, online ad, you know,

Starting point is 00:44:24 software, you were selling it to the media companies. Mark's like, no, we're just going to beat the media company. Like, we're just going to build the entire thing. And so this was the other thing that happened was, you know, for us, was that that was right around the pivot point when the Valley's ambitions went from just building tools to going directly into incumbent industries. And, and then this goes back to the scale thing. It's like, okay, why do you need to scale a venture firm was because the companies need to scale, right? And, and, and, and, and, And then, of course, AI now makes that crystal clear, right? Because the winning AI companies are raising, you know, billions, tens of billions,

Starting point is 00:44:49 in some cases, hundreds of billions of dollars. Right. The old world of $10 million or $30 million or $50 million checks, you know, where VCs tap out. It's just not a relevant thing anymore. But did you know the scale was changing at the time you founded the firm? We had pretty good idea. So I've been involved in Facebook, you know, basically, you know,

Starting point is 00:45:05 informally since inception and then formally on the board since 2007. And so I saw the, when that thing hit the knee in the curve, it was just very clear. It was to us, it was just like very clear that, you know, big it was going to get, but it was going to get much, much bigger than the Internet 1.0 companies had gotten. And so there was that. What else? It was also around the time Apple was directly entering the cell phone market, which was another great example of this. Silicon Valley didn't used to make cell phones. The original cell phones weren't made by Silicon Valley. They were made by these giant industrial companies like Sony and Nokia and whatever, in Motorola in Illinois or whatever. And then Silicon Valley would make the chips that go into them or the software. And of course, Steve was like, yeah, no, screw that. We're just going to make a phone, right? There were these signals that it was happening. And then the other thing was just the, The internet itself was maturing, right? And so, you know, at that point, the consumer internet was 15 years in, and we had, you know, seen every part of that.

Starting point is 00:45:52 And so, you know, I forget what the number was. But that was probably around the time the global internet penetration was like crossing a billion users on its way to five billion. Yeah, you have a very interesting lived experience where, like, you were there at the very beginning of the internet. One thing that I'm fascinated by, and that's actually going to be the first question for you, because I've never heard you speak about this, at least on a podcast. but your partnership and relationship with Jim Clark.

Starting point is 00:46:16 You were at 20 when you met him? How old were you? I was old-fashioned. I actually graduated from college and got my degree. It's a very stone-age concept these days. So that was in 1994. So I was probably 22, 22. So there's this great book.

Starting point is 00:46:29 I don't even think you like the book written by Michael Lewis, Silicon Valley's story. I've skipped it. I've read it twice just because I don't know if anything's in there is true, but the portrait he paints of this very eccentric character. It's just wildly entertaining to. me. But what's shocking to me is when you talk to young founders. I'm like, this guy started three, I think it was the first person in history just to found three separate billion-dollar

Starting point is 00:46:51 technology companies. I think that's right. And almost no one knows who he is. Can you just talk about how you met him, what was like working with him? I knew exactly who he was. And the reason was because his company, Silicon Graphics, his first company, they were the company in the valley between, like, call it 1988 to 94 or something. They were like, whatever, Google or Open AI or whatever, you know, comp you want to make. Like, they were like, the company. And by I mean like they were the company where the smartest people in the industry all wanted to work there the product they built the products that were like the coolest products you could possibly imagine they had this incredibly young and vibrant and

Starting point is 00:47:20 dynamic culture and then they hit this like cultural moment that was just incredible in I think 92 which was yeah which was the turning point in the movie business when computer graphics really kept in and the two movies back-to-back were Jurassic Park and Terminator 2 run on the machines they made we built on the machines they made the technology they made it technology Jim invented was the technology that made that possible and those movie you know those are still two of the great all-time you know movies and but at but at the time.

Starting point is 00:47:43 I mean, I still remember the chills that you get seeing dinosaurs on screen. It's just like, this is, and then there's this company that builds the machines that do this. By the way, the silicon graphics computers are actually in the movie. There's a scene in Jurassic Park

Starting point is 00:47:56 where the kids are navigating through Unix. Yeah. And it was actually the, it was actually the 3D software. It was actually those were actually the silicon graphics computers. And so, like, they just, that was like this moment where they were just like,

Starting point is 00:48:07 they were just like the absolute it company of all time. But by the way, Their legacy lives on it in Invidia. Nvidia is Silicon Graphics, basically, with one, it's like a trader-sate-thing. It had to be a new company for reasons we could describe to do the GPUs instead of the workstations and servers. Nvidia fundamentally is based on Jim's ideas. That's where that stuff all comes from.

Starting point is 00:48:31 And so he was already legendary. And again, he was one of these, he was the full deal. He was legendary as a innovator in technology because, you know, he's a PhD in computer science. And he actually, he himself invented the original, figure what they call it. was the reality engine. The original interactive 3D graphics on a chip thing was actually him. I think it was like his PhD thesis.

Starting point is 00:48:50 And then he started the company, and then he ran the company. And then by the way, and then the VCs brought in a professional manager. By the way, and the reason we know about Nvidia today and not SGI is because of this founder-manager issue, which we could talk about.

Starting point is 00:49:03 No, let's talk about that real quick. Yeah, yeah. Because I don't remember this part of the story. Yeah, yeah. So, now, by the way, there's two sides of the story. And I wasn't there. And so I just reflexively side with Jim Clark, but I'll try to at least represent both sides of the story. So, so, so Jim, I don't even remember what's in the Lewis, but like, Jim's like a true, Jim's like a true, Jim's like a true, he's like an Elon, he's like a true Elon Steve Jobs level guy.

Starting point is 00:49:27 And so like incredibly creative, incredibly bright, incredibly charismatic. But like he's volatile. Like he's he's he's exciting. Like he's exciting. It's like being around him just like an incredibly exciting. There's always something new. He always has new ideas. And again, that was in that time.

Starting point is 00:49:42 it's just like, okay, that's the personality type that clearly can't run the company. And so the VC's brought in a guy out of Hewlett-Packard who had been trained in Hewlett-Packard because at the time, what happened is he wanted to hire a professional CEO. He went and hired a general manager out of either Hewlett-Packard or IBM, where the two training grounds for this guy. So they brought in a really, really sharp guy.

Starting point is 00:50:00 I don't really know. I think I met him once. I don't really know. By all accounts, he was like a very good example of this kind of HP general manager type who became a CEO. He took over it. He took over the company.

Starting point is 00:50:10 And by the way, like in his defense, Under him, the company scaled enormously. Like, I forget when he took it over, but it was like 87 or 88 or something. And then, you know, by the time I got to the Valley 94, like this company become huge and, you know, whoever's running the company gets at least some credit for that. So, but anyway, they got in this classic fight. Like, they got in this classic fight. And the classic fight was, you know, you can just, it's the same story every time. The founders like, the founder's starting CEO and the founders like to the CEO of like, we need to do things completely different.

Starting point is 00:50:36 And the CEO's like, no, like what we're doing is working. Like, stop fucking with, stop. fucking thing that's working. And the founder's like, no, it's working now, but it's not going to work in the future. And the manager, and the CEO's like, well, then we'll deal with it in the future. And the founder's like, you can't wait to deal with it in the future because by the time the future arrives, it's going to be too late. And the manager's like, why are you in my pants? I'm like making you all this money. The company's super successful. Like, get out of my shorts. Right. And you get in this, and that was exactly the deadlock that they got into. And Jim Clark basically made two

Starting point is 00:51:05 predictions as the founder of Silicon Graphics. So Silicon Graphics at the time was selling, their computers basically started list price at like $50,000 for a desktop workstation and then scale up into the millions. And Jim was like, look, two things are going to happen. It's amazing that he, and you figured this out by like 1991 or something. He said two things are going to happen. He said, number one, everything that we sell today from $50,000 is going to go on a chip, and that's going to go on a card, and it's going to go on a PC, and it's cost $300.

Starting point is 00:51:27 And either we're the company that's going to make that or we're going to get destroyed, right? Which, by the way, is what happened. That's Envidia. Like, that's what actually happened, right? And so he was completely correct about that. The other thing that he had was he's like, look, this idea of standalone computers is not going to be the thing. These computers are all going to get network together, and the network is going to become

Starting point is 00:51:45 the important thing. At the time, there were different terms. There were people who were using terms like information super highway or video on demand or 500 channels. You had all these kind of concepts, kind of coalescing around what became the Internet. And even before the Internet kind of became a mainstream thing, Jim is just like, look, it's just inevitable that this is all going to become connected. And then the function of a computer is no longer going to be mainly what just the computer

Starting point is 00:52:05 does. It's going to be the fact that it can talk to all the other computers. And we need to do that. And to do that, he actually went to Japan. He actually got this incredible deal. Nintendo then and now is like this giant video game company. So he actually had this deal with Nintendo where, number one, is he actually, in Silicon Graphics, actually built the original 3D graphics chip

Starting point is 00:52:22 for a consumer game player for the Nintendo 64. So he did that deal. And then he went to Time Warner, which at the time was this very important media company doing all kinds of things. And he struck a deal with them to do it. It was called Interactive TV, which was basically pre-internet, Basically, it was like Netflix before Netflix in 1991, right? Like, like amazing foresight, right?

Starting point is 00:52:45 Just like amazing foresight. But again, he and the CEO got in this conflict, and the CEO's like, look, we just can't. We have to focus on the thing that we're doing. We're not going to do these things. And so Jim did the classic founder thing and he left. And when I met him, basically, that was the state that he was in, which was, okay, like, you know, I, Jim, am like in the prime of my life. I know I have all these ideas. I don't know exactly what to do with my next company, but I know it should be a

Starting point is 00:53:07 software company, not hardware company. I know it needs to be a company that is able to anticipate these changes that are happening in the world. And I know that, and he was very sad about this, Silicon Graphics is not the company that's going to be able to do these things. And so I have to build the new company that's going to do it. Brad Jacobs has started eight separate billion dollar companies. He said, I've come to know a lot of extremely successful people in my life. And they all have one thing in common. They think differently than most people. All of them, to a person, have rearrange their brains to prevail at achieving big goals in turbulent environments where conventional thinking often fails. What Brad noticed is that great business leaders are pattern spotters,

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Starting point is 00:54:20 I want to hear more about what I was like working with them, but there was a very astute observation you made in your blog archive because you're trying to, you know, essentially this post was trying to educate founders, just like recruiting is the most important thing you're doing at the very beginning of company, maybe forever, and you're underestimating how difficult, it is and you tell the story of Jim Clark in the blog archive. You're like, this guy was a legend. He was. Yeah. Like, most famous person, best entrepreneur. And he's like, he tried to recruit all these other people. And like, I don't know, there's like 100 people. And you're like, you were one of,

Starting point is 00:54:49 one of two or three that actually followed through and took the chance and jumped and started working with him. Yeah. And again, this is like, I don't know, Zuckerberg or Sergey Brann or Elon or whatever decides to start a company. Like that was his candle power wattage in the community at that time. And so, yeah, you would think that the obvious thing people would just like say, you you know, Jim Clark was to start a company with you, you know, just the obvious thing is you just say yes. Like, it was not happening. And so the, I don't know if I told the story, but the, my crystallized memory is a dinner of 12 of us at Elf, this famous Italian restaurant in Palo Alto got Elf and Ile, that's where a lot of these companies were formed. It was Jim's favorite restaurant at the time. So Jim had like a dozen of us, us being people who were like in existing companies, who were like basically technical people who he knew. Well, this is the thing. He was, he was constrained. He had a not solicit agreement with Silicon Graphics. And so he couldn't just rip. people out. And you didn't want to violate that. And so he needed, he needed to basically reach out to the tackle community and find new collaborators. So there were like a dozen of us in there. And I remember that, I remember that dinner very precisely for two reasons. Number one is I was

Starting point is 00:55:49 the only one of the dozen to basically to say yes. And then the other was, it's the first time my life I drank red wine. And I didn't know what to make of it. And so I kept sipping it, trying to figure out if I liked it or not. And I didn't realize that I was getting completely hammered because I had no idea how to calibrate red wine. And so the true version of the story is, you know, I leave the dinner and I'm like, wow, this is amazing. Like, you know, I'm going to say yes to this. We're going to do this. And I go to my car in the parking garage from Palo Alto across the street. And my brand new car. My first, you know, new car I've ever owned, right? My brand new car. And I, and I gun it and I pull it on and I rip the entire front end of the car off.

Starting point is 00:56:25 It's like this screaming metal. It's a sound. So like the whole front of my car is just like hanging on the ground. And I'm like, oh, fuck me. So anyway, I parked the car, get out of the car, walk home. No Uber. This time. No Uber. I'm just like, no, three mile walk at, you know, whatever, 11 o'clock at night with, you know, six bottles of red wine. And you're what, 22? No problem. 22, yeah, exactly. I'm like, I think I probably won't mention this to Jim. I don't know. There's some wild stories in that book. He might have admired you even more. He might have. Yes, yes, yes. How many founders of the companies, just you and him?

Starting point is 00:57:00 And so originally, yeah, originally it was him and me. We started the company. And it was, again, one of these things where we had a long conversations about like what to do. Well, good. Okay. So then there was the problem, the problem that he had was, there was the idea of doing the graphics chip. But like, and again, that's what anybody did, but it was essentially a spinoff of SGI. But like at that time, starting a new chip company from scratch would have been tough and he didn't want to compete with SGI.

Starting point is 00:57:22 Doing that. And then the interactive, you would call the interaction, it's lost a history, but this interactive television street, like it wasn't time for that yet. It wasn't actually time for Netflix yet. And so it was going to be cost prohibitive. Time Warner had rolled out this interactive television thing in Orlando, Florida to 500 people. Yeah, and Microsoft was involved. They were doing a ton and Oracle. At the time, like all the big companies were.

Starting point is 00:57:43 It's all these Bill Gates' lot. Yeah, exactly. He talks about that a lot. But the CAPEX per, you know, house was like $50,000 or something because you had to have like a silicon graphics station in the house. It just wasn't going to work. And so you couldn't figure that out. And then we cycle through a whole bunch of ideas.

Starting point is 00:57:57 We actually went, he actually went back to Nintendo and we almost pulled the trigger on basically building what today you'd call like Xbox Live or what's it called PlayStation Network or Xbox Live, like an online gaming service for the Nintendo 64 in 1994, which might have been a good idea. We thought it was too early. We almost did that. And then what happened literally was the Internet, you know, I had worked on the Internet in college. And then, you know, this is, you know, fortunately only a few months later.

Starting point is 00:58:20 But the Internet just kept growing. Hold on. Hold on Mark. Yes. You'd work on the Internet. That's a little bit modest. Yes. Well.

Starting point is 00:58:28 I think a lot of people listening to this will know. but you should probably explain how you're working on the internet. So at the time, it was not, so this is part of the story, at the time it was not that big of a deal. It's not nearly that much of a big of a deal at the time as it's viewed now. So the internet, I've told the story many times, so I won't go on a huge detail. But yeah, so a group of us at Illinois did this thing called Mosaic,

Starting point is 00:58:46 which was the first widely used web browser, the first one of the graphics. Explain what was different about what you made compared to what it existed before. Yeah, so the previous web browsers were like text-based. So there was like this nascent concept of the web, but it was like text-based terminals. And then it didn't have graphics. It wasn't put and click.

Starting point is 00:59:03 You know, it didn't work in the way that you would like the spec software to work. And then, by the way, it didn't also have like, you know, no scripting language, no security. You know, none of the actual capabilities that, like, make the browser a useful thing. And so there was this like nascent idea, but it needed to get built into a full thing. And so we built the original kind of full, full thing, full browser at Illinois. And then we also built the first kind of mainstream web server, like the first web server, again, that kind of had everything that people needed. You know, this had been a project at college,

Starting point is 00:59:32 and then this was a, and again, at the time the Internet was not viewed as a consumer phenomenon. Was it illegal to commercialize? Steve Case of AOL tells a story, that he had to, like, lobby and get a law changed? Yeah, that's right. What was the details there? So the Internet, as we know it today,

Starting point is 00:59:48 in the 1980s, was called the NSFNet. NSF stands for National Science Foundation, which was a branch of the U.S. government that funds research. And the National Science Foundation funded the internet. The reason I was able to do the work I was able to do at Illinois

Starting point is 01:00:01 is because the NSF had actually dumped a ton of money into four universities around the country to build what we're called the supercomputer centers. And then those were also the main hubs for the NSF net. And the function of the NSF net was fundamentally to connect the supercomputers to all the people who were going to use them. And so it was this government research academic program

Starting point is 01:00:18 and it was very exciting in the technical field, but there was no conception that ordinary people are ever going to use any of this. Like it was just not, nobody ever thought that this was a thing and the normies were going to use. And so NSF, it's taxpayer funding. So the government, at least, is not supposed to be funding businesses directly, although

Starting point is 01:00:37 sometimes they do. But there was, there was, you know, formal legal restrictions on funding things with, with, commercial applications. And so what there was is there was something called the AUP, the acceptable use policy. And the acceptable use policy said that basically the internet, the NSF net turn internet was for academic and research use and commercial activities were strictly prohibited, like literally not allowed. And again, it's just like, oh, as a taxpayer, that makes total sense. Like, I'm glad my tax money's not going to fund something, you know, like that. But like, as a user, you're just like,

Starting point is 01:01:08 all right, that's nuts. Like, that's clearly crazy, right? And if you took the conceptual leap to say, no, this is going to escape the lab and this is going to be something normal people are going to use, then it just became obvious that it would have to have commercial activities. Yeah. And then AOL was one of the early pre-internet online services that wanted to connect to the internet. I think they famously connected to the internet in 1993. Do you know about the concept of Eternal September? No. Oh, okay.

Starting point is 01:01:31 So there are two internets. There are two internets. There is the internet that existed before 1993 and the internet that existed after 1993. People who were on the internet before 1993 often describe it in utopian terms because it literally was like you take the whatever million smartest people in the world and you put them on a network together with like no commercial activity, no advertising, no nothing, just the million smartest people in the world and you just like let them talk to each other. And it's just like amazing.

Starting point is 01:01:56 It was like amazing. Like there was this old messaging system was called Usenet. And like the discussions on Usenet were just like absolutely spectacular. It was just like this. It was like, it was amazing. It was like the most pure, clean, intellectual, like vibrant space since like, I don't know, Athens in 500 BC. It was just like this amazing phenomenon. And then AOL connected.

Starting point is 01:02:15 AOL had, I don't know, whatever million or two million people at that point. They connected, they connected all the AOL users, which were just normal people to the internet, September, 1993. And so that became eternal September, which is that's the day the internet changed. And by the way, I'm pro that. I'm proud of that. But like the pro and the kind of that is that took the internet from this like ivory tower kind of thing to this basically mainstream consumer ordinary people thing, which is of course is just a fundamentally different thing.

Starting point is 01:02:40 Obviously, right. Concept of the eternal September literally was it was like when every new wave of college graduates like graduated and got their first job and then went online. So September is when the new crop of like internet users showed up for a long time. So the September effect didn't just happen once, it happened over and over and over and over and over again. And every cycle of Internet user would basically be like, oh my God, this is great,

Starting point is 01:03:03 but like it's all going to get ruined in September. Yeah, right. And so the Internet that we live in today is the result of... They could only see us now. 30 September. Right. But yeah, by the way, there was controversy, there was controversy of time about whether the Internet,

Starting point is 01:03:17 whether they acceptable use policy should be revoked. There was controversy over whether normal people should It should be on it or not. There was controversy over whether the kind of content normal people wanted to be on it should be allowed to be on it. There was controversy about whether there should be like there was controversy. We got quite a bit of flag at the time for putting images into web pages under the theory that that would like fundamentally make everything worse because you'd have like normally content. That would be bad. And then you know, so said about like e-commerce.

Starting point is 01:03:42 By the way, advertising. I remember when there was actually a moment there was a guy. There was a guy. There was a guy named Sanford Wallace and he became known as Spamford. Spamford Wallace. And he was literally, he sent out the first spam message on the internet in like 1992. And it was like literally,

Starting point is 01:03:59 it was like the first internet ad. And it was like a spam for, I don't know, whatever legal services or something. And he just dropped it in the use net. And it was like a thermonuclear explosion because it was like, you know,

Starting point is 01:04:07 get this commercialized crap out of my, out of my news feed. And so, so like all of these things were like hot, hotly controversial. I was generally on the other side of all these arguments because I was like, look, this thing is great.

Starting point is 01:04:20 Obviously, everybody should have access to this. obviously we need to connect everybody to this. Obviously to do that, we need these need to be businesses. There needs to be commerce. There needs to be advertising. Like all these things obviously need to happen. So is that the discussions you and Jim were having where you're like, okay, we're going

Starting point is 01:04:34 to start an actual company on this? So yeah. So that's how we got to the conversation Jim and I had, which was basically like, okay, because that was right at the pivot points was like in early 94. So this is like the AUP had just been revoked and it was just a, and it was just done the first September and it was the whole thing was just about to tip. And I knew that, I knew that. because I was tech support for the browser, personally.

Starting point is 01:04:58 No, explain that. Just me. Well, so if you did Mosaic at the time was the browser everybody used. And so if you use Mosaic, there was a, you know, submit a bug report or whatever. You have a question submitted here. And that went to an email box, and that email box was me. And so I became tech support for the Internet for like, you know, three years. Wow.

Starting point is 01:05:16 I got all the emails. How many emails were you getting? Well, I asked you, too. That was one email box. The other email box was Mosaic was actually created under by, it was also funded by the National Science Foundation. So it was actually not the original license. It couldn't be used for commercial use. It was for academic and research and individual use.

Starting point is 01:05:34 And so we had this thing, we did a deliberately ambiguous license. And we said if you want to use the browser commercially, you need to email us to arrange terms. Now we had no concept at all of what those terms would be, but we just said we need to create the same coming flow. So I was getting bombarded with tech support requests. And by the way, tech support for the internet means your tech support for everything. So it's like, you know, the old PCs had, you know, they had CD-ROM tray. So you press the button, the CD-ROM tray comes out. You put the disc in the thing.

Starting point is 01:06:01 The problem is a lot of people thought that those were cup holders. Right? So you press the button, the cup holder comes out. You put your cup-and-cuffing down. And then, you know, 10 seconds later, the cup holder retracts back into the PCs, fills your coffee all over the place. You're like, how the fuck do I keep the cup holder out, right? It's like, man. Let me email Mark.

Starting point is 01:06:15 Yeah, let me email Mark. You know, it's like, sir, that's the CD-ROM drive. So there was a lot of that. So one of the funnier things you can always do, in politics, they call this focus groups, but you can user testing. You see this over and over at tech companies, take whatever amazing new thing you have and just put it in a room with like normal people and let them try to use it. And you just like learn so much about how much of a bubble that you're in about the kind of

Starting point is 01:06:40 things that you're familiar with that like normal people are just like, I don't know what the hell any of this stuff is. So there was a lot of that. But then I had this other email box, which was all the commercial licensing requests. And so I saw the consumer takeoff on the one side. And then I basically, I think that, and then the commercial requests hit like 400 messages that people wanted to like pay money for this thing. And so I basically took those to Jim and I was like, there's a business.

Starting point is 01:07:01 Yeah, this is going to happen. And then we actually went to my underwrite, my old, my old boss and I at NCSA actually had gone to, we actually went to Washington in 93 to try to get NSF funding to staff a support desk so that it wasn't me answering all the emails. And the National Science Foundation people were very nice. were like, yes, the National Science Foundation is not in the business of funding customer support desk for your software. And so I still have the denied NSF grant that would have kept the whole thing at an academic project. But yeah, so at that point, at least to Jim and me, it was just obvious that that was going to be business.

Starting point is 01:07:39 By the way, again, very controversial. The original press coverage on Netscape for the first year was that these people will never make money. Like, this is ridiculous. Like, everybody knows the Internet's free. Like, everybody knows that none of this is going to work. So, you know, even... What did you think the business model... even then it was controversial.

Starting point is 01:07:53 Was just literally licensing it? It was a combination of things. So it was definitely software licensing. And we did this thing up front where the browser was free, but the server software costs money. And then we out of the gate started building all these, we called applications, server site applications. So we built like the first publishing system. We built the first publishing system for like running a newspaper or magazine online. We have content management system.

Starting point is 01:08:11 We built the first e-commerce system for selling, you know, it's pre-Amazon. So we built the first e-commerce system for selling things online. So we built a lot of that software. And then we own, you know, the main website that the browser had is its default homepage. And so we built the original Internet advertising business was basically. So Netscape was the largest internet advertising company until I think 97. That's incredible. I didn't know that.

Starting point is 01:08:33 In Yahoo passed us, yeah. And so, yeah, so we invented, people at the firm invented, at the company invented, I don't exactly who gets credit, but like the original ad formats, you know, were right around that time and a lot of them rolled out on our site, you know, first. And so it was literally, it was advertising for Yahoo. So it was e-commerce pre-Amazon. It was, yeah, content pre. You know, we literally sold.

Starting point is 01:08:56 I mean, we put the Wall Street Journal online. It was our, you know, that was our software that did that. And a lot of other newspapers, magazines, all that stuff. And so, yeah, it was a lot of that. And then it was the web operation. And again, it was, again, it all looks obvious in retrospect. But, like, again, it was like, okay, when we started this, like, I don't know, the total number was.

Starting point is 01:09:13 And so we started the company April 94, there couldn't have been more than 2 million people total online, right? And then almost everybody was coming in over dial-up. This is like pre-broadband, right? So everybody's coming in at like 14.4-kilobit modems. And we're, like, hoping that people are going to upgrade to 56-kilobit modems, like, you know, that that would be, like, super helpful. Computers at that time did not come with TCP-IP installed.

Starting point is 01:09:33 So to get your PC actually on the Internet. You needed to buy a TCIP stack. Try explaining to a normal human being what a TCP-a-P stack is. Like, it makes no sense at all. So that's going to ask if they could put it next to their cup holder. Exactly, yeah. It was just like, it was just like talking to Martians, right? Talking to us is like talking to Martians.

Starting point is 01:09:49 And then, you know, monitors were, you know, like three feet deep and just, like, bathing your radiation. You know, just, you're kind of hoping that the radiation stays up here and, you know, everywhere else. In retrospect, it was like, it was like super early and it was all very. And then again, it was just like, okay, e-commerce, like, are people going to buy things online? It's like, I don't know, maybe.

Starting point is 01:10:05 But, like, the press at that time, it was just, like, wall-to-wall. Like, if you put your credit card number online, like, hackers are going to steal it. I was to say, if you read any books around this time, they're like, there's no way in hell anybody's ever going to put their credit card on Internet. By the way, the other thing you would never, ever, ever do is put your real name online, because it would be immediate identity theft. Your life would be ruined. So you would never, ever do that.

Starting point is 01:10:23 By the way, the other thing was right in the beginning, you had all the panic around. You know, this is going to destroy children. You know, this is a huge risk of children, so you had all that panic. And then there was immediate, you know, there was the beginning of the calls for censorship. You know, there's clearly all this stuff that you have to take down. Your time's getting for running stories talking about how the whole thing was fake anyway. They kept saying that, like, all the numbers were made up. And, like, there actually wasn't anybody online.

Starting point is 01:10:42 It was like a tiny little user base. And we were all, like, infligging the numbers. committing fraud. And so it was just this, it was just this. In retrospect, it's all like quaint and cute and sweet, but it was like the, it was the precursor. It was all the, all the, all the, moral panics around technology today. You could see nascent versions of them back then. You pick up on something that, because me and you've read a bunch of same books where it's like humans' reaction to something new, it's just consistent throughout history. And so I heard a podcast with you. I thought it was the only one that would tell the story in private about bicycle face.

Starting point is 01:11:09 Bicycle face. Do you want to say what bicycle face is? Bicycle face, bicycle face, yes. So it basically turns out every new technology is greeted with what they call a moral panic, right? So a moral panic basically is whatever this new technology is or this new form of media is, it's going to ruin everything. It's going to ruin everything. It's going to ruin everything.

Starting point is 01:11:28 It's going to ruin morality. And then especially it's going to ruin the children. And then back, the bicycle was pre-feminism. So it's also going to ruin the women, very specifically. It's going to ruin the women, which clearly cannot be, because women clearly in 1880, you know, cannot be trusted to use a bicycle without getting into real trouble. I'll explain why. So this is this persistent theme.

Starting point is 01:11:46 And basically, you go all the way back and this is like, you know, this is like this famous thing where Plato and Socrates thought that like, you know, basically that they thought that written language was a big mistake, that all information transmission should be oral. And they have this, you know, whole thing back in 500 BC. And then it was just like every, you just have to like imagine it's, I always like to hypothesize like, you know, the first guy brought fire. You know, it's like down from the mouth. They killed him. Yeah.

Starting point is 01:12:09 They're like, what the fuck is? Right. Exactly. Like, you know, this thing is worse. This thing could burn down the village. Like, this is awful. This is going to destroy everything. And so it's just been this consistent thing.

Starting point is 01:12:18 And there's this great website called Pessimus Archive where these guys who go back and they find all these newspaper articles that are contemporaneous to these things. But it's everything. And, you know, so when I was a kid, you know, it's like heavy metal music, Dungeons and Dragons.

Starting point is 01:12:30 You know, it was like all this stuff was awful. I remember the moral panic around the Walkman, the very first cassette, portable cassette player with the headphones because it was going to, he was going to destroy society because everybody's going to just be listening to their own, you know,

Starting point is 01:12:40 their own music. I remember the moral panic around the calculator was going to destroy education because kids were not going to learn how to do math anymore. And then you go back and it's like in the 50s, it was like comic books and it was, you know, rock and roll music. Obviously it was going to ruin everything. In the 20s, by the way, jazz music was going to ruin everything. Playing cards were going to ruin everything. What else? Novels. Paperback novels. You know, we're taking kids, kids are going to sit around and just read novels all day instead of doing any real work. So it's just over and over again. It's this

Starting point is 01:13:07 story. So the bicycle one is the great one. So the bicycle rolls out in like 1870, 1880. And so So the U.S. still at that point was like, you know, thinly populated, you know, from today. And the West had been settled and sued all these little towns and villages scattered all over the place. But, you know, to get from one town to the next, it was like, you know, five, 10, 50 miles. And so people didn't generally walk that. And so the bicycle comes out, all of a sudden, it's easy to go five miles into the next town. And then, you know, young people discover the bicycle. And they discover there are young people who they didn't grow up with who were in the next town over.

Starting point is 01:13:34 And they're like, you know, they head up to do it. And so the specific. To do it. Well, to do it. Yes. Do everything. To do whatever it is, the young people do. they're gonna head, they're gonna head to, yeah,

Starting point is 01:13:44 because look, look, it's just the nature, you know, if you've known the same group of people since you were two, like you're gonna, yeah. What's over that hill? It was over that hill, yes, exactly, right. I grew up in a small town, I can identify with that. And so, so, and then specifically at that point, young men obviously, but specifically young women

Starting point is 01:14:02 started to do the bicycle and so, and this is a big threat. And so like, if you're like a guy in a town and like all the, you know, attractive young women are like heading over the hill to the next hill on this bicycle thing, like that's a big problem. And so the press at the time, created this thing called bicycle face. And the idea of bicycle face was,

Starting point is 01:14:17 it was part of the moral lecture that was given to young women in the press at the time, which was basically young women should not use bicycles, because if you go on a bicycle, you have to exert yourself. And if you exert yourself in the bicycle, you're going to end up making like an exertion, you know, exertion face. But the thing was, if you did that too much,

Starting point is 01:14:32 your face would freeze in a bicycle face. They literally thought it would stay that way permanently. It would stay that way permanently, and then you would never find a husband. Right. And so, yeah, so that was that more. Moral panic. Yeah.

Starting point is 01:14:43 And so these things just like ripped through every, I mean, it's just, it's incredible. Music is always a great one because it's like, you know, I don't know, it's over now. But like in the, in the 90s, 2000s, you know, it was all this moral panic around hip hop. Dude, Jimmy Iveen, who's your neighbor. Yeah. He was in here two weeks ago. Yeah. And he had to deal with it.

Starting point is 01:15:00 They called him a, uh, yes. Like a chemical gas or mustard gas. Like they compared him to literally like what he's doing is the same as genocide. Yes. That's right. Because he's funding hip hop music and white kids are starting to listen to hip hop music. music in the late 80s, early 90s. In front of, like, congressional hearings on this,

Starting point is 01:15:17 like the media behind him, he was pushed out of a conglomerate. This wasn't a joke. Yes, that's right, that's right. And it's actually funny because, like, we, I'm not in the music business, but like, hip hop has become so normalized that today, it would just never even occur to you. It just, like, it feels like, in fact, hip hop is kind of, you know,

Starting point is 01:15:32 is a cultural phenomenon. He's even kind of fading today. But yeah, no, that was super intense at the time. And then rock and roll, that was like super intense in the 50s and 60s. And then the amazing thing is, remember Elvis Presley? They wouldn't shoot him.

Starting point is 01:15:42 That's right. Because he would shake his hips, so they're like, no, no, he can't, it's waist up on TV from now on. That's right. But here's the one, here's the one that I look, jazz. They said all the same things about jazz in the 1920s and 1930s. It was jazz music corrupting that. And it was the exact same thing. It's because, like, kids are going to get together and they're going to dance to jazz.

Starting point is 01:15:58 And then who knows what happens. And then it was like there's a jazz musician that's like smoking pot. And that means all the kids are going to start smoking. It was just, so it's the same, it's the same story over and over and over and over again. And I'll also say, by the way, in fairness, like, it's not the society doesn't change. Like, you know, many of the technologies that we just described did cause society to change. Like, you know, things are different pre-imposed the bicycle. They're different pre-imposed the car.

Starting point is 01:16:20 You know, they're different pre-imposed, you know, the creation of modern culture, rock and roll or whatever. But like this, like, the more, again, this idea of the moral panic, this idea of just like outright panic end of the world is just like this repeated over and over and over again thing. And then what's happened is like this is just, this is the obvious way to sell newspapers. Right. Right. Like this is like the meta story of the press, which is just like whatever's happening is like horrible and awful. and it's going to kill everything. You know, be sure to buy our newspaper tomorrow.

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Starting point is 01:18:15 Is there anything that you learned? Because Jim Clark was, what, like, two-deck, probably 20 years older than you? Yes, about that problem. So, like, is there anything that you learned working? What a fucking education you had to be able to work with that guy in your early 20s. Yeah, that's right. So is there anything that you learned by working with him back then that you still used today? I mean, yeah, a lot.

Starting point is 01:18:34 You know, he said it was very formative for me, so a lot of it. But, yeah, I mean, you mentioned the sort of quote earlier about the world was a valuable place. Like, Jim was like, the ultra-off version of that. And so, yeah, he would just like, yeah, when he had an idea, and he was right, his ideas were correct almost all the time. He would just, like, pound the world into adopting them, into believing them. Like, you know, the idea of being like a complete force of nature. One thing that was Malia will was himself. He has this great quote in that book where he calls himself a self-described loser at 38 years old.

Starting point is 01:19:02 I mean, the guy had like two PhDs. He was a professor. But he just, like, I think he'd been in a second or third divorce. And he just snapped one day. And he's just like, I had woke up one day with the undeniable urge to achieve something. And that's when he goes from academic to founder and just rips off company after company for like a few decades. So it's like, oh, he's, he realized that he is malleable too. He just reinvented himself over and over and over again.

Starting point is 01:19:23 And of course, he does that not just by like starting a company, but like inventing interaction computer graphics. Like completely changing the field, you know, indirectly like completely changing Hollywood. But is there anything about recruiting or managing or any other way that he ran his company? No, so my two mentors at that time, actually they were in some ways polar opposite. They always got along with their kind of polar opposites. They were both Jim. So Jim Clark or Jim Barstale. So the Jim Clark side of my personality is like the like world of power, like, I'm just

Starting point is 01:19:47 going to bludgeon in the doing what I want. You know, and then the idea of just like, you know, try to be a fountain of creativity. Like just like there are many new ideas out there. And like you just, you need to go find them. And then, you know, I'm going to say also put this like a sense of professional dissatisfaction. Like, okay, like whatever. Look, this is the other part of the story.

Starting point is 01:20:06 Like a lot of founders would have had a success like selling graphics and that would have been it. the next, whatever, whether they were totally happy with how it turned out or not, like they would have spent 30 years just coasting on that, right, and having a great time and taking credit for it and the whole thing. But Jim, you know, was always, you know, at least in that part of his life, you know, dissatisfied in the productive positive sense of like, okay, no, there's something better, there's something bigger, you know, there's something new that we should do.

Starting point is 01:20:28 So, you know, there's that side of it. And then Jim Barksdale was the other, was the other, who I just literally was with yesterday in, in Jackson, Mississippi. Jim Burson's the other side, which was, Jim Barsdale's like the, the manager of managers. So Clark is like the ultimate example of that bourgeois capitalist thing I mentioned. So the Henry Ford, Elon Musk type. And then Jim Barclay was like the ultimate example of like the super manager. And Jim had run, you know, big parts of IBM and AT&T and the Federal Express. And, you know, came into running, you know, came into a run Netscape. And what was interesting was like, that's kind of

Starting point is 01:20:59 where I got a lot of this from and a lot of my skills from is I got trained by both of those guys. And then kind of both of those guys at the same time and then was able to like very clearly observe what is just the difference between those mentalities. But then the other is, of course, how those concepts converge, right? Because just the fountain of creativity, you can't build, you can't build anything big just with that. Just the management, you don't do,

Starting point is 01:21:21 you do it in new things. Who's a great example of that from history? So like, would it be like Nikola Tesla, found of creativity? Oh, that's right. Yeah, so somebody, he needed like a George Westinghouse to commercialize his ideas.

Starting point is 01:21:29 Well, it's a Tesla versus Edison. Okay. Yeah, so Tesla versus Edison. So I'm an Edison guy. I'm an Edison guy. So Elon's a Tesla guy, obviously. But Elon, of course, himself has now become like a business.

Starting point is 01:21:40 really outstanding, I mean, obviously, become an outstanding manager, like in his own way. Back to the point where I think he's actually inventing an entirely new school of management, which we could talk about. Let's go there next. He's maybe the greatest manager of our era, despite the fact that nobody thinks of him that way.

Starting point is 01:21:55 So I actually think Elon's more like Edison than he is like Tesla. And there was a big war. And it was kind of this thing, because everything kind of turns into these little morality plays. And so kind of the basic story of Tesla and Edison was Tesla had all these ideas, but couldn't commercialize them,

Starting point is 01:22:10 couldn't turn them in companies ultimately, you know, couldn't figure out how to make money on them, couldn't build like big, big companies, you know, kind of based on them. And then Edison, you know, it basically, at least the way the legend goes is he was more this grinder. He was less incandescently brilliant and he was more of a grinder and he's just like, we're just going to try a thousand things. You know, so when they invented the filament for the light bulb, they just tried like a thousand different combinations of things to get to the filament and, you know, sort of this brute force approach. But then he built general electric like he built the like national electric grid, you know, he built these giant companies.

Starting point is 01:22:38 And then he, you know, he funded by... Funded by J.P.M. Morgan. There you go. As a venture capitalist in his spare time. Yes, exactly. 100%. And so... And then, you know, Edison also advanced at the movie projector and then literally spent years trying to enforce his patents, right?

Starting point is 01:22:55 And the phonograph. And the phonograph. Which you tell the story, and I knew because I read the book, too. Yeah. We should tell people what he thought the phonograph was going to be used for. So this is a bit of a digression, but it gets the personality type. So one of the things that people look for is just like, oh, what are the consequences of a new technology going to be?

Starting point is 01:23:10 Oh, let's go ask the people who invent them, because obviously they know. And so this is what happens when the AI guy, for example, the AI guys get, you know, the pioneers of AI get interviewed in the press. It's like, well, tell us the future of AI. And it's like, you get the one I'll pick on is Jeffrey Hinton, who's like an actual self-declared socialist. Like he's an actual, like he's an actual capital as socialist. And people ask him, what's the future of AI? And of course, he says it's going to be rampant unemployment and we need to give UBI to everybody.

Starting point is 01:23:35 It's like, what a coincidence. The answer from the socialist is communism. Like, what an amazing quizness. But people think, because he's one of the inventors of AI, that he must be the guy who knows. And so the story I always tell is the Edison story. Thomas Edison was like a very proper wasp. It was like a waspy, you know, personality type of that era,

Starting point is 01:23:52 extremely proper gentleman and always like impeccably dressed, very, you know, kind of ethical, you know, outstanding, you know, kind of citizen of that time. And very religiously devout. And so for him, it's just obvious that the application of the record player was that everybody would buy a record player. And then everybody would buy a library of discs that would be the great sermons, religious sermons, all the great preachers of the time.

Starting point is 01:24:14 And then you get home at night after a long day of work and you turn on the record player and you would listen to a sermon, you know, with your adoring, you know, wife and kids, you know, gathered around you. And of course, the record player drops. And immediately, of course, like, it's just, it's music. It's just, like, obviously music. And it's like ragtime and you swim in as jazz. And Edison's just, like, completely horrified.

Starting point is 01:24:30 He didn't know that if you put the phonograph in the window and you play good music, then you have all these girls on bicycles coming over there with bicycle face. Exactly, exactly. And so this is always my thing. It's like, if Edison didn't know what the phonograph is going to get used for, the idea that, you know, I don't know, whatever, Joe AI entrepreneur is going to be able to forecast the economic implications. Like, no, no, like that's not going to happen. And in fact, the people who invent the technology are often like the least qualified people to understand the long-term implications because they're just, they're too,

Starting point is 01:24:56 they're too buried in the specifics of the here and now. And then, and then all these other questions, you know, these are all big cultural, social, economic questions. And by the way, I don't know, there's anybody that can predict big cultural or economic and social friends, but it's certainly not somebody who's been in the lab for 20 years, including myself. So how this started, you think you greatly benefited from the two gyms, essentially like being polar opposites. Yeah, basically. And showing you. But also working very closely together.

Starting point is 01:25:19 Did they get along? I don't know if I've told this story publicly. So I should tell this story. So they got along great, became very good friends. They both did great and they're both, you know, very responsible for certainly everything that Netscape did and everything that I've done. But, you know, it's different disciplines, different worldviews. You know, so there's an oil and a water kind of aspect of that. And so, so, you know, Clark ran the company

Starting point is 01:25:39 for the first like nine months, which at the time felt like, you know, just like this was internet time, it felt like much longer, but it was like this highly compressed nine month period. And, you know, and it was like doing, we were like all these new things, we were doing all these new things. Like the company was just doing like a hundred new things.

Starting point is 01:25:51 It was amazing. But like, nothing was being systematized, right? And it was not, it was not gonna, by default, it was not gonna turn into like a large, a large company without the management part. And so Barstow comes in and he basically, it's like, wow, this investmentness is great, but we need to like actually start to have systems

Starting point is 01:26:06 and like schedules and processes and actually like run this thing, run this thing like a business. And, and you know, as founders do, Clark, you know, originally, you know, found that a little bit frustrating because it's like, you know, whatever is the latest idea is not the thing that we're just gonna turn the entire company, you know, to pursue. And this is when Clark was still coming

Starting point is 01:26:21 to Jim, Barksdale staff meetings. And so Clark got up, got, got, got, he had a negative reaction to Barstale saying, no, we're not gonna do this new thing. We're gonna keep doing the thing that's already working, you know, one of those moments. And Barstale's like, you know, can I talk to you outside? And so, you know, they went out back.

Starting point is 01:26:36 And, you know, and I heard the story from both of them later. And, you know, Clark's like, you know, look, this is the whole reason we're here is because we do these new things. And, you know, if we don't do these new things, we're going to destroy the company. And Barstale looks right at him and says, Jim, I hear you, this is as serious as dick cancer. What? The deep Mississippi draw, right? And Clark stares him right in the face and bursts out laughing. And they got along great ever since.

Starting point is 01:27:05 Like they loved each other ever since. First of the first step basically saying, look, we can't, we're not going to make these decisions in a state of kind of superheated passion. Like, we're not going to do that. We need to have the full version of this conversation, but we're going to have it in kind of this longer and maybe more dispassionate way. But it was to puncture the stress of the moment. And so I will say I have used that one a few times.

Starting point is 01:27:27 But I could see Clark. And Clark thought it was hysterical. Nobody had ever talked to him that way before. But I could see Clark like, oh, no, here we go. go, this is a replay of what happened at Silicon Graphics, though. I think probably he was probably afraid of that to a certain extent. But yeah, yeah. But I would say, yeah, I don't want to say anything negative about the SGI guy.

Starting point is 01:27:47 But yeah, I mean, Clark, like I said, Clark was just like, Barstale was just like, was the manager of managers. He was like so advanced on this. That story notwithstanding. Barstale never took the position of like, no, it's time for the new ideas to stop. But it was always like, okay, we need to thread the new ideas into a business, which is kind of the hybrid of the two. So I just had this thought while sitting here listening to you speak.

Starting point is 01:28:07 Is there something about your partnership with Ben? Yeah. Where like you, like he's more at Barcliffe still, you're more Clark? Yeah. Although we do mix it up a little bit more because he does have his own edge. But yeah, there is some of that. Yeah. So like for example, he runs the firm.

Starting point is 01:28:23 And then I, yeah, I will, I tend to come up with new ideas. He comes up with lots of new ideas, but I do tend to come up with new ideas. And then we do have this kind of discussion, you know, frequently. So if I was to follow you around without you, knowing with a camera. What would your day look like then? Are you just like a found of ideas? Or you're like this uncontrolled energy like a Jim Clark back in the day? But I've got both. This is the thing because they both train me. I've got both parts of it. So I say you're not as uncontrollable or unmanageable as. Yeah. Like I think I believe Ben would tell you, oh, I mean,

Starting point is 01:28:51 look, Ben's been working with me now for 30 years. And so I think if this is a real issue, I think, you know, that our partnership would not have lasted. But I think he would say that I have a pretty strong internal edit function. I want to see unedited. Well, unedited is really fun. Unedited is very enjoyable. It is very disruptive. And so, yeah, it has to be, yeah, it has to be calibrated. When do you show the unedited side? I don't tend to do it in the spur of the moment.

Starting point is 01:29:17 Again, this is the thing. And, you know, Elon shows this incredibly well, just incredibly well, as does Zuckerberg. It's like, it is this thing. And again, it goes back to like the Edison Tesla thing. when you're responsible for, when you're responsible for an organization, when you're responsible for a team of people, it's more than five or ten, if you're going to have an organization, it's like 100 or 1,000 or 10,000, 100,000 people, like, you can't change the plan every day.

Starting point is 01:29:43 Like, you just can't. You'll just, you'll destroy everybody. You'll burn everybody out. You'll destroy everybody. They'll just be confusion. People will quit. It's just going to be, like, you can't do that. There has to be some calibrated middle ground.

Starting point is 01:29:52 There are a handful of examples of, like, great business successes for us, like one or two or three people. Right, and so maybe it's like Bitcoin and Minecraft and WhatsApp and Instagram and and and then I start running out of examples But like AI there will probably be more there will probably be more like single person companies You know from from here on out or by the way artists you know an artist a novelist Let me say this is a difference between like a novelist and movie maker a novelist to say you put whatever the fuck you want your novel But like if you're a director of a movie you can't like change the entire plot like on Tuesday while you're shooting the movie or you're like there's 300 people who are relying on you to like complete a movie like so So anyway, so the point being, it's like in tech, if you're going to have an organization, or by the way, in anything, in any field of activity, if you're going to have an organization,

Starting point is 01:30:35 you do need to have some calibration, titration process. Like, change does need to happen, but it needs to happen in a measured way. And so you can't just, like, blow it up every day. And so, yeah, so either what you need in that case, to get kind of the holy grail of the large-scale organization that's still innovating, either you need two people involved who are able to balance each other. And by the way, you could say this is like Steve Jobs. and Tim Cook, you know, would be a canonical example. Or by the way, early on Zuckerberg and Cheryl Sandberg,

Starting point is 01:31:01 or early on Bill Gates and, you know, Steve Ballmer. So you can have that kind of configuration. Or every once in a while, you can get that in a single person, right? Which is very rare, but like Jensen Wang would be a single person example of that. So, you know, every now and then you get that. And so I would say, Ben and I have like a version of the Yen & Yang kind of aspect to it. But like I said, he's very creative on his own. And I have this, because I have the Barclail training,

Starting point is 01:31:23 I have this additional level of sort of, most of the time, you know, sort of sell. self-governance. Like, I get it. Like, I'm not. But it's one of my big thing. It's just like, look, if I'm going to walk in and I'm going to like, we have to change everything tomorrow. And Ben's going to be like, fuck you, like this fucking sucks. I'm like, like, that leaves nowhere good, right? So that can't be the thing. And so I do, I do, I do a lot of self-editing. You just said something. I think you said, you believe Elon is inventing a new way to manage. I think you may have figured out the best way to reconcile the two. The fountain of ideas with the systematic builder, I think he might have figured out a fun of it. I don't know if it's a new way to do it,

Starting point is 01:31:56 but I think he might have cracked the code on how to do that for the next 100 years or something. So break down what you've observed with the way that Elon's managing? Yeah, should start by saying, look, Elon's method has been described by people before. And I should say, like, I work with him, but from the outside. So I've not worked in one of his company. So I have one layer of indirection, but I, you know, I work with them quite a bit now, and I study him, you know, very carefully. It's this extreme focus on substance.

Starting point is 01:32:18 It's this extreme focus on getting to the truth. So one of the things you notice in any organization of multiple layers is that basically that's compounding lies. And I got this lesson early because I worked for IBM at the point of their kind of maximum size and importance in the world. Can you explain? I don't think people understand just how big and powerful and almost monopolistic IBM was. Yeah. So I worked for IBM at the very height of their power right before they fell.

Starting point is 01:32:43 It was my first job. And when I was in college, and they were in the mid-80s, they were 80% of the market capitalization of the entire tech industry. There's nothing even close to that. There's nothing even close. Right. So this is like Google Times 10 or something. It's just like our hot times, or Apple Times 10. It's just like a level of scale and importance that just nobody had.

Starting point is 01:32:59 And by the way, the TV show actually that does a great job of this is Halt and Catch Fire in the first season has this thing, this point where these guys are basically inventing the PC effectively. It's the point where IBM shows up. And it gives you a sense of like, it's like the CAA story you told me. It's like the failings. It's like 20 people in like blue suits or just here to like completely crush you. Like it was just this overpowering, you know, kind of thing.

Starting point is 01:33:19 And, you know, they invented like all kinds of stuff and the industry wouldn't exist today without them. and they were an incredible company for a very long time. And the whole thing, by the way, run by their founder for 30 years, run by the founder's son for 30 years, you know, this incredible company. But then, you know, they're still, you know, they're not, they're not that anymore, but they're still a big and important company today, you know, whatever, 1940, so eight years later.

Starting point is 01:33:40 It's like how many companies survive in tech, you know, 80 years. My favorite idea of stories, Thomas Watson Sr. had been convicted of antitrust crimes before he started IBM. Is this the cash register? The cash register. Yeah. He had previously run a company called NCR, National Country Register, and he had been convicted by the federal government of monopolizing the cash register business

Starting point is 01:34:01 before he even started IBM. And at IBM, he monopolized the mainframe business, and then they convicted him again. He's a double dipper. He got very used to being an antitrust court. So he was incredible. By the way, there is a Kevin Mani, old school tech reporter, wrote a book biography of Thomas Watson, Sr., which you feel. The Machine and the Man or the Man of the Machine, right?

Starting point is 01:34:24 It's one of those. I'm not sure if that one, but it's one of those. I think it might be that one, yeah. And he actually went back, and this is like, you know, this is a, we're talking about, 1940s, 1950s, 1960s. And he went back and he got them at that time, they had a secretary transcribing in real time all of the executive staff meetings every Monday morning. And he went back and actually got the archives of the transcripts of the executive staff meetings.

Starting point is 01:34:44 And it's just literally Thomas Watson's just like cursing everybody out and just like, just like a complete tyrannical psych about. It's just like screaming at people. And it's all in the records. And so it's like, you know, how much of this stuff ever changes, you know, it's like, you know, whatever, I don't know, whatever Elon gets accused of or whatever, Steve Jobs, it's like, oh, no, that guy was, whatever it was, whatever it was, whatever it was, whatever it is, it's a pale version of what that guy was doing. But anyway, the point being is like IBM. So by the time I got involved in IBM was like 60 years later, you know, anyway, yeah, 50 years later after that. And so they were kind of peeking in their power.

Starting point is 01:35:14 But what happened was, I remember this because I was there intern and I was trying to figure out whether I should work there after college. and they had a, their intranet was a mainframe, mainframe app. And one of the functions was a, it was a, was the orchard. And I calculated there were 12 layers of management between me and the CEO, which meant the following. It meant it meant that my boss's bosses, bosses, bosses, boss had a boss, boss, boss, boss, before it got to the CEO. And then, and then really what happened, the story of the thing, really what happened was, and I saw that, I saw this happen.

Starting point is 01:35:45 I saw this happen up close. What I saw this happen was each layer of management was lying to the one above it. Right, because each layer wants to look good and must to, you know, whatever, put a little spin on the ball. And like if one layer lies to the next layer above it, it's maybe that's okay. But when that happens two or three times, the lies compound. And that happens six times, the lies really compound. If that happens 12 times, the CEO has no idea what's happening. Like, absolutely no clue what's going on in the company, which was the state of play that IBM had.

Starting point is 01:36:09 They actually had a term. They had a whole vocabulary. I mean, this company was like a nation estate at the time. You could like live your whole life, like in Austin, Texas and never meet anybody who didn't work for IBM. Like, it was just like this incredible thing. They had this concept called the Big Gray Cloud. And it was literally the cloud of man in great businesses who followed the CEO around and prevented him

Starting point is 01:36:26 from ever talking to anybody who was ever actually doing the work. And so when he would come to visit, it was like a state visit. It was like a visit from the King. And it was like the King and the Traveling Court. And so it was a completely impervious level to get information through. But I tell that story because that's the polar opposite of the Elon approach.

Starting point is 01:36:41 Right. And by the way, being the CEO IBM in 1989 was a great way to live, right? because it's just like, wow, everybody's bringing me good news all the time. Like, I wake up in the morning and like everything is great. And I'm like famous and I am like rich and I am successful. And like, I've got a chauffeur and I've got a jet. And I've got these 80 guys in gray suits who are like taking care of everything for me.

Starting point is 01:37:02 And I don't have to ever talk to engineers. And like, this is great. You know, until, you know, it's like the turkey on Thanksgiving, you know, until things change and there's a problem. And then you have no idea what to do about it, which is what happened to them. The E. The E.L.A.m. approach is the polar opposite of that. And the polar opposite of the approach is literally like, I'm only going to talk engineers, right? And so when there's an issue, I am going to go straight to the source of

Starting point is 01:37:20 truth, and the source of truth is the engineer who actually knows what's going on. And so what Eli, and I've seen him do this, what he literally does is he goes to whatever, when there's an issue one of the companies, he goes to whatever is the engineer who's working on that problem. And he sits down the engineer and they solve that problem. And I can just tell you, like, the number of CEOs and tech, even the great ones who do that, like, I mean, almost nobody ever does that. Why does nobody ever do that? Well, first of all, it's just like a giant pain in the ass, because, like, your life consists of, like, having to actually solve all these problems. like the whole point of being like big and powerful, successful is you pay people to do that,

Starting point is 01:37:49 and now you're doing it. And you're in there at like two in the morning doing it, right? Well, like, it just sucks, right? And so like most people won't do it. And then the other is you have to, it means the CEO, the company has to have the skill set set to be able to do that. So the CEO has to not just be a great CEO. They also have to be like a great technical technologist, not just that they have memories

Starting point is 01:38:07 of having been a programmer at one point or whatever, a chip designer, or where they can actually sit down with a chip designer right on Thursday night at 2 a.m. And they can actually figure out like what's wrong at the chip. And Elon has that ability, and he's like encyclopedic on like every area of technology and is able to go hands-on with rocket designers and AI designers and everything in between. And almost no CEO has that. And so, but that's literally what he does. And then the way that he thinks, the way that he thinks about it, I think, is basically, you know, he runs whatever six companies who wants or something. And it's like basically, in any given week, he thinks about everything is a production, basically production line, you know, sort of production process.

Starting point is 01:38:42 It's like he's actually like an old school industrialist. So everything's like a production process. And then any given week, in any production process, there's always a bottleneck. So there's always the thing that is slowing down the process the most. And that's always one thing. So what he does for each of his companies is he identifies what the, he literally maps out the production process.

Starting point is 01:39:02 He literally has these like monitors where he like has the whole thing laid out. And then he basically says, okay, this is the issue that's holding up production this week. And then he goes and he works. And that's the thing that he goes to work with the engineer on is he goes to fix that bottleneck. And he does that every week for every company. Right. And so think about what that is why Tesla is smoking the is like has been so much dramatically outperforming the rest of the auto industry. It's because Tesla, he's fixing the critical production bottleneck at Tesla 52 times a year himself. Yeah. I can tell you what the CEO of the legacy automakers are doing. Like, they're not doing that. That is not what's happening. Right. And so it's in contrast, like a normal company, it might take six months with all these problems. And Elon's like fixing it like right now tomorrow. Like, let's go fix it right now.

Starting point is 01:39:44 And so he just like runs this, he runs this loop over and over again. He's just, he's absolutely indefatigable. I offered, he famously for a while, he had sold all of his houses. And he was literally cop surfing. You know, it's one of the most successful people on the planet. Yeah. And so I have a vacation house and I offered him. I said if I'm going to take a week and use the vacation house,

Starting point is 01:40:02 whatever, take the kids, feel free. And he'd sit back five minutes later. It's like, you know, whatever, 11 o'clock at night. You know, forward response, I don't take vacations. Right? Which again, it's like there's no CEO like this. Yeah. The whole point of being a CEO is you get to go jet around.

Starting point is 01:40:18 And so anyway, so he's doing that. And then, you know, he turns this into routine. And so, you know, when he does like, he'll, he does like a day a week at each of his companies. And he'll basically do, like, all day. He'll do, like, a 12, 14-hour stretch where he'll do design reviews with, with the way that he does it, he does it with five minutes per engineer. Right. And so he does five to 60 divided by five. It's been way too long in this podcast.

Starting point is 01:40:42 How much is that? 12. 12. You can do 12 design reviews an hour. Yeah. And then he does 10 hours a day. So Elon will do 120 design reviews in the course of a day. Are these 101?

Starting point is 01:40:52 I have not actually said on these. I suspect there are other people around. Including people, you know, work for him and, you know, probably some of the leaders of the companies are involved in different ways. But it literally is, the thing I noticed, it's literally a rotating cat. It's the point engineer on each of the important things coming in and presenting for five minutes. And then the question is like, if it's going great, that's great. If it's not going, what's the problem? and then how does that problem rank, right?

Starting point is 01:41:14 Is that the production bottleneck? And if it is the production bottleneck, then that's the thing that he then fixes. And then that's when he's there from whatever 8 o'clock till 2 a.m. Working with that engineer to fix that problem. One way to think about this is the velocity, like in military affairs, it's called maneuver warfare, right?

Starting point is 01:41:30 So just the speed at which he operates is just, the cycle time is just so much faster than anybody running in a traditional method. It's hard to even compare the different. It's like four hours versus six months. It's like it's just this incredible gap. And then the other part of it is somebody I know once went for for SpaceX and they asked what it was like. And he said it's like being dropped into a zone of shocking competence.

Starting point is 01:41:55 Like everybody is like ultra competent. And the reason everybody's ultra confident is because, number one, if they're not, Elon sniffs it out and fires them. But he knows because he's talking to the people actually doing the work. So he, you know, at this point in his, you know, having done this for whatever 25 years, he can, You can sniff this out really quickly now. And then the other is, the best engineers in the world want to work for him because he's the one CEO like this who's able to work with them as a peer on whatever the technology is. And as an engineer, you're just like, what would be better as an engineer than being able to design a rocket engine with Elon Musk is your engineering partner? Right.

Starting point is 01:42:28 And so he just has this like incredible positive selection where like the smartest people in the world want to work for him and then anybody who can't cut it gets fired. The world sees this as like raw aggression, but it's beyond that, right? It's a very systematic way of optimizing these companies to be able to take on these like performance. challenges and then being able to actually solve all the problems and do these things. And at a speed that it's just like completely unmatched. The challenge of all of this is like, okay, that all works great if you've got Elon. Right. And so one of my concepts is I think we need a metric for founders in Silicon Valley called

Starting point is 01:42:56 the Millet Elon. Right. And so are you, how many Millet Elons are you, right? Are you 10 milit Elons? That would be great. Are you 100 million Elon's, 10% of an Elon? Yeah. That'd be fantastic.

Starting point is 01:43:07 You know, 500 million Elon's like, I'm going to give you all the money, right? Most people are like one millie-elon or 0.1 mili-elon. The question that falls out of this, which is the question that bedevils us, is like, okay, like, you know, you can't clone you can't bottle of the essence. So what out of that can be transplanted to like normal human beings? And how much of it is predictable or knowable when he's much younger? Because like the famous example of this is Michael Moritz passing, made all his money in PayPal with Elon.

Starting point is 01:43:41 Obviously, there was contention there. He got kicked out and everything else. But then Elon pitched him Tesla, and he passed. Because he's like, there's no way that you're ever going to surpass Toyota. And then Moritz to his credit was just like, I drastically underestimated the guy's determination and pain tolerance, I think, is the term he used. I wasn't there for that. So I don't know about that. I will say the idea of the idea of having been a software entrepreneur, building a car company.

Starting point is 01:44:04 Okay, building a, when Tesla started, there had been no new successful car companies in the United States. for like 100 years. So like 100 years. There was like 2,000 of them at 190, founded from like 1900 to 1910 and three that survived. That's right. And the previous real attempt to start a car company in the US before Tesla in the preceding decades was Tucker or something? Tucker Automotive.

Starting point is 01:44:26 Yeah, yeah, Tucker. Which was such a disaster that they made a movie called Tucker, which is about what a disaster it was. And so like this, obviously you don't do it. Obviously this is insane. And for a software guy to do this is insane. Oh, by the way, this is only one of the things he's doing. He also has the rocket company.

Starting point is 01:44:41 Yeah. Which is also insane, right? And so, yeah, so it's like the, and I wouldn't know, by the way, I didn't see it. And I didn't, I was, you know, I'm a soft for guy and I just, I don't know, whatever he's going to go. I guess he's going to go do cars. I don't know anything about cars. So it's not like I saw it.

Starting point is 01:44:53 But I'm just saying like, it, like, the level of incredulity that he was greeted with at the time was, I think, almost uniform. And, you know, there's that famous photo, the most famous Elon photo, I think, the most, the most powerful one is the one where he's young Elon probably 2005 or whatever. And he's in the shorts and the polo and all. And he's like crouched down. And there's nothing but the explosion remains of the third rocket, the second or third rocket. The one he had been funding personally.

Starting point is 01:45:17 Yes. Did you ever read Eric Berger's book, Lift Off? No, I didn't. Oh, you got to read it. I'm surprised you haven't. It's the only focuses. I like these company histories that focus on like the first like six years. And it just stops.

Starting point is 01:45:29 It's a first six years history of SpaceX. And it's just nothing good in the book. It's just reading one failure. after another, after another, and one catastrophe after another, after another. It's a great read. When my kid was five, he loves rockets. And so his favorite rocket video was the compilation

Starting point is 01:45:43 of all the SpaceX rocket explosions. Elon talks about this that before his friends, when after he sold them to, yeah, I think he had like 180, I think the story tells it said like 180 million after taxes. He's like, I'm gonna do this rocket company. One of his, I think, Deo Rossier, I forgot with the friend, sat him down. And they made him watch all the rocket.

Starting point is 01:46:02 There was a compilation, this is probably pre-Yutu of just rockets blowing up over and over again. Like, no, you're literally going to light your fortune on fire. It's going to explode in the sky. Yeah, exactly. Exactly. So, I mean, obviously, it's working. Right. So his method, obviously, it's working, like, far better than, I mean, it's certainly working far better than anybody else's method in cars. It's certainly working better than everybody else's method in rockets. And then in a bunch of other areas also. So, like, it's clearly working. And so it's like, okay, you know, and then he just draws, because of just who he is and what he's doing and how

Starting point is 01:46:31 he does it, you know, he just, he draws so much heat, you know, there's just so much, the environment is just full of criticism and attacks, you know, just not stop. And, you know, we all kind of get sucked into these narratives. But I think that, I think the key thing is just the, for me, it's just like, okay, like there is there that he has been working on and refining for, you know, coming out 30 years that has worked better than any way of the method. Like, I don't know, like I said, I don't know how many people can do it. Maybe there's just like a fundamental limitation, which is you can do it if you're Elon and you can't do it if you're somebody else. Or maybe you need to be above 30 miliolans, but not below or something like

Starting point is 01:47:02 that, right? Maybe there's some threshold where you break through on this. But it is clearly the best method. Like, it clearly is generating the best results. And then again, concept conceptually I like it, because it again, it's this bridging of the founder mentality with the manager mentality. Because he's not just doing, these are not just one-offs. He's scaling, everything is scaling.

Starting point is 01:47:20 What is it? Starlink just hit, what was the number? Starlink just hit 10, was it 10 million subscribers? I'm one of them. Yeah, exactly, right? You probably have read about iridium and telodesic. No. Oh, okay, okay. So, Eil is not the first guy who said we're going to do satellite-based,

Starting point is 01:47:34 like internet access. There was Bill Gates, Craig McCaw. So when Microsoft's on top of the world, and Craig McCaw basically built cellular telephony in the U.S., built what's now AT&T mobile. Those guys teamed up in the early 90s and did this thing called Telethycex, where they put up satellite-based voice,

Starting point is 01:47:53 and then it was going to be internet access, complete catastrophe, total bankruptcy, complete disaster. And then Motorola, which used to make all the cell phones in the U.S., had another one system that actually still up called Arridium. And again, it's just classic business school case study of just complete disaster, capital destruction. And so Elon's like, I know, I'm going to do number three of those. We're starting as a side project at the rocket ship company. Right?

Starting point is 01:48:16 Because he's like, I, we're, in retrospect, it's total genius. Because he's like, we're going to be putting up, if the rockets are reusable, we're going to be launched them all the time. And then the question becomes, what's going to go in the rockets? And he's like, I could wait for the customers to come to me with more stuff to put in the rockets. Or I could just put up my own satellites. What would be the satellite to put up? Oh, it would be consumer grade, you know, consumer priced internet access. And it's just like, okay, anybody who knew anything about the history of like satellites knew that that's like the great, you know, that's the new craziest idea in the world.

Starting point is 01:48:40 And, of course, it's like this like, you know, giant success. It's like the site. It's like the side project. There's clearly method. It clearly incorporates invention. It clearly incorporates a mission. It clearly does a brilliant job both of those. It's clearly in part the Henry Ford, whatever, Alexander the Great method clearly. But there's also like real scale and have to it. SpaceX now is building, you know, they got their own city like, you know, down to Texas, right?

Starting point is 01:49:02 And so it's a formula that captures both sides of it. And it may be like the least studied and understood thing I know of in the world right now. It's incredible. Mark, we're running out of time. When I started this show, you were out to top of my list for one of the guests I want to talk to. Thank you so much for doing this. I hope you come back in a few months because there's a million other things we need to talk about. Good.

Starting point is 01:49:20 Awesome. Fantastic. Thank you. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast founders. For almost a decade, I've obsessively read over 400 biographies of history. She's greatest entrepreneurs, searching for ideas that you can use in your work.

Starting point is 01:49:36 Most of the guests you hear on this show first found me through founders.

David Senra - Marc Andreessen, co-founder of a16z & Netscape

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