The a16z Show - Game On: Marc Andreessen & Andrew Chen Talk Creative Computers

Episode Date: April 17, 2024

The gaming industry stands as a pioneer of cutting-edge technologies, ushering in innovations like GPUs, virtual and augmented reality, physics engines, and immersive multiplayer experiences. In this episode, a16z cofounder Marc Andreessen and Andrew Chen, General Partner at a16z Games, dig into why a16z was compelled to establish a dedicated games fund. They explore the origins of tech pessimism, effective engagement with government in tech, its significance for the gaming community, the ongoing AI revolution, and even what Marc himself would build today if he didn't have his hands full. Recorded as part of a16z's extensive games fund accelerator, SPEEDRUN, this session offers valuable insights for founders and innovators at the intersection of games and technology. If you're passionate about shaping the future of gaming, consider applying for SPEEDRUN 3.0 at a16z.com/speedrun3. Resources: Find Marc on Twitter: https://twitter.com/pmarcaFind Andrew on Twitter: https://twitter.com/andrewchenSubmit your SPEEDRUN 3.0 application: https://a16z.com/speedrun-la-2024 Stay Updated: Find a16z on Twitter: https://twitter.com/a16zFind a16z on LinkedIn: https://www.linkedin.com/company/a16zSubscribe on your favorite podcast app: https://a16z.simplecast.com/Follow our host: https://twitter.com/stephsmithioPlease note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Our assessment is basically that the world has changed, and the world has changed, is changing, and we're going to try to change it further. Now there's, you know, enormous moral panic around AI and another one around crypto and so forth. And so it's just this constant kind of barrage of negativity. It's all these academics now trying to figure out how to jailbreak these things. And I just get so excited. And I'm just cheering on the jail breaks. I'm just so excited. The last thing I want is these things lock down.

Like I want these things to be out there, like doing all kinds of crazy stuff. When I look at AI, when I see a sort of a new kind of computer, a fundamentally new kind of computer. Every once in a while, you get a platform shift that's, like, dramatic enough where it basically means that you both kind of can and have to reinvent from scratch the whole idea of what the thing is in the first place. There's something really interesting about games. This industry has long outsized the music or movie industries, yet it's often still overlooked. Sometimes it's not even taken seriously. And this is all despite the fact that this very industry and its difficult infrastructure, challenges have brought us some of the most cutting-edge technologies used in a variety of other

industries, whether that be GPUs, virtual and augmented reality, physics engines, multiplayer experiences, and a whole lot more. So in today's episode, you'll get to hear A16Z co-founder Mark Andresen's take on why games are such an effective driver of this innovation. And, of course, Mark has gotten to witness and participate in many of those technology waves firsthand. as a founder of the world's first widely used browser, Mosaic, which of course became a vessel for many games itself. In this episode, Mark and A16Z general partner at A16Z Games, Andrew Chen, discuss so many things,

including the roots of tech pessimism, engaging government effectively in tech, why all of this matters for the gaming community, why A16Z had enough conviction to raise a dedicated games fund, the current AI wave, of course, and whether this is different from the rest, and even what Mark himself would build today, if he didn't have his hands full.

But first, let's kick things off with how Mark bonds with his son over, you guessed it, games. And by the way, this is one of many more sessions recorded during our exclusive multi-week Games Fund Accelerator, which we call Speed Run. And the good news, in fact, the great news, is that we just announced Speed Run 3.0, which is coming to Los Angeles.

So if you're a founder, or if you've thought about founding a company, or quite frankly, if you just know someone who should found a company at the intersection of games and technology, make sure to let them know about Speed Run 3.0. Applications are open today until May 19, and you can learn all of the details at A16.com slash Speed Run 3. Or you can find the link in our show notes. As a reminder, the content here is for informational purposes only. should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security,

and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16c.com slash disposures. Mark, I don't know if you remember the first time we met, but we actually had a conversation about Zinga, because it was during the whole Facebook platform. And we had lunch at Hobies. This was like your favorite spot in Palo Alto. And I know many years later, actually, we were just talking about this,

that you and your son, JJ, have continued to have gaming as part of your experience, part of your life that you share. And so tell us about what you guys do together and kind of your connection to gaming. Yeah, so I've got an 8-year-old, just turned 9, actually, on Sunday. His birthday present was a brand-new Razor gaming laptop, and he levitated right out of his little shoes. So he's currently glued to it.

I was actually very impressed. So they got the 16-year-skinned screen because we wanted to be portable, but they have screens. I think they went up to 20 inches now. So I'm sure that'll be next year's present. Yeah, look, I mean, for those of you who don't have kids, the great thing about having kids is that you as a parent, you get to just buy all the stuff that you always wanted as a kid. And you do it under, you know, the cover of like, oh, yeah, you know, this is for the kid. And then you bring it home, and then you take it out, and then you just, you know, basically play with it.

And then after about an hour, the kid gets really irritated at you because you're not letting him do it. So, yeah, we do a lot together. It's been through four waves of gaming enthusiasm. By the way, these endure, they're actually all enduring. he goes back to the mall. But Minecraft was the first one, and then Roblox, and then Curbel Space Program. And by the way, we're homeschooling. And so he's doing like a ton, along with this, a lot of math and physics and computer science and rocket design, you know, with his science teacher and stuff like that. So like curbel space programs turns out to be just like incredibly good for that. Now recently Factorio. And so he is building empires on the alien planets fighting bugs.

I'm holding back on, what's the new game? Hell divers. Hell divers, too. I'm holding back in Hell divers too for the moment. But I will admit, the flame is lit. It's just a matter of time. Well, and gaming is such an instrumental part of a lot of people's sort of personal experience with technology and computing. And many folks get into tech, many of my friends, because they were pirating games, trying to work around all the shareware restrictions in the 90s or all the modern versions of that. And one of the interesting things that's been observed is that gaming as an industry is where a lot of these kind of alpha-nerd technologies, whether it's GPUs or 3D or avatars, have been created. what do you think of as kind of the canonical example of that in your mind?

And why do you think this happens in the games industry in particular? Yeah, this is a super old trend. And so this probably goes all the way back to probably Space War, which was like one of the first video games that was on, I think, time sharing mainframes back in 1960 or something. Yeah, black and white, you're playing it at a university kind of thing. Yeah, like basically the minute you got interaction computing, you immediately got gaming.

And then, of course, Pong early on. There's an incredible story on Pong. It's hard to remember what a big breakthrough that was at the time. It's like in the early 70s. Basically, it was even pre-personal computing, I think, because the idea of having an arcade game machine. The story goes that Nolan Bushnell built this. Founder Vittari built the first Pong game,

and he put it in a pizza parlor or Mountain View. And the owner of the pizza parlor called him up a day later. And so, yeah, this thing's broken. It's a piece of junk, get this thing out of here. And he goes in. And of course, the problem is it's so jammed with quarters that it literally physically can't take quarters anymore. And so this is just recurring phenomenon.

I think it's a bunch of things. I think one is, as we say, it's sort of founder market fit or people building for themselves. And so people who are super into computers tend to love gaming and they tend to want to build great games. I think another part is just sort of both the need in the opportunity to kind of really jam the throttle forward on what the raw capability is of whatever the technology is. Remember when 3D acceleration was new, the minute you have that

as a core capability, it was just like what's the most sophisticated possible 3D game you could build. And that happened before you started doing like CAD cam and all these other things. So I think it's that. There's also a great thing about it, which is games are a mass market phenomenon, especially these days. And so it lets you drive price points down, right? It gives you like a direct sort of like a real path to be able to take whatever the new capability is and drive it to the mass market super fast. And so, yeah, I fully expect this trend to continue. and that's obviously what we're seeing with AI right now. Yeah, with AI and...

And by the way, also mixed reality. That's right. Both VR and AR. It's crystal clear. The known killer house right now are games, like by a very wide margin. Yeah. Well, it seems like so much of VR has been marketed as sort of productivity and being able to do meetings and so on.

But all the data is saying that it's sort of high school, super high retention. It's all kids basically playing social multiplayer gaming. Well, it's actually two tiers. It's the game games. Right. And then it's the social gaming environment. But it's specifically the social gaming environment, not just social environments. Yes, that's right. The games are key to the experience. That's right. Everyone in the audience has read your techno-optimist manifesto. And I have a couple questions on this, right? So I think first is just you had to write it because obviously most people, for whatever reason, don't seem to be optimists today. And so why are there so many self-hating technologists? What is the sort of root cause?

So there's a recurring phenomenon in the history of new technologies, which is every new technology tends to come with what's called a moral panic. And a moral panic is basically this term for basically there's a new thing. And so therefore it's evil and bad and it will destroy the world. And if you go back in time, it's basically every single new technology. And so there was a huge controversy over the introduction of electric lighting because it was going to completely disturbed nature. There was huge controversy around bicycles. Bicycles were a super controversial technology when they first came out because it was the first time young people could easily get to like nearby towns and villages for dating purposes.

and that really upset people. Actually, the magazines at the time, just like 1860s, 1870s, the popular magazines at the time actually had this thing. They did this whole moral panic around this thing called bicycle face. And then those articles about how, if you got on a bicycle and wrote it,

the exertion required would cause your face, you know, to scratch it. And then if you were on the bicycle too long, your face would freeze like that. And then, you know, look, when I was a kid, there was a massive moral panic around video games. I mean, it was super clear. I mean, it was just super clear, like first-person shooters,

especially when that Colombine tragedy happened is when that whole thing went just like completely parachute. But it was this incredible, incredible thing of like we're training an entire generation of killers. And of course, what happened was video games took off and actually for the next 30 years, violent crime in the U.S. actually dropped like a rock. So if anything, the correlation was the reverse. And so there's just this tendency. Now there's, you know, enormous moral panic around AI and another one around crypto and so forth. And so it's just this constant kind of barrage of negativity. And I think it's just something, I guess a fair-minded person would say it's like fair enough. The thing with new technologies is they actually do change the social order. They do actually change how society works. And so maybe there should be some societal kind of screening mechanism for, for kind of deciding whether these new technologies are good ideas or not. Maybe that's the generous explanation. The sort of ungenerous explanation is just people panic and freak out. And then it always sounds more sophisticated to be negative than positive, right?

It's like the positive person gets accused of being polyanish and wide-eyed and immature and not cynical enough. And then the pessimistic person always sounds world-weary and wise and all that. And so there's this vice of the negative. And so these are just like constant siops. And they're just like constant siops being kind of played on us and by us and at us. And then there's a choice. And this is, you know, why it wrote the manifesto. Then there's a choice of how we think about these things, right?

And it's really easy to let people talk, you know, thinking that something bad is happening or you're doing something bad or there's something dangerous. And it takes real force of will to go up against that and say, no, this is actually going to be really good. And by the way, it's not that new technologies don't have negative consequences. Technologies are tools, and they're going to have both negative and positive consequences. But there's just such a rich history of the moral panic predicted societal doom, and that it actually turned out everything overwhelmingly on net was fine.

And I think that will continue to be what happens. And you study this quite closely. it's unusual to me that the moral panic not only is originating in places outside of tech, but weirdly like inside of tech as well, which is my point about the self-hating technologists. Like, why is that a thing? Oh, the millennials.

No, no, no, Gen Z's. These are all millennials. Gen Z will save us. Gen Z has to save us. I think there actually is a little bit of a generational thing to it. The boomers were like super socially activated in the 60s and 70s with the anti-war protests at the time.

and the hippie movement and everything and got like super into like politics and super animated. And then Gen X. Gen X, we were all sort of by stereotype, sort of cynical and blase. We were like the reverse of the boomers. We were just like disengaged and we were slackers. And we weren't going to take this stuff seriously. And then the millennials, like the millennials just activated. Like they activated. What have millennials experienced? 2001, 9-11, 2008 financial crisis, 2016, let's just say a dramatic change in American politics. Yeah. And so the millennials are just activated. And our industry is a very large number of very young people who are very smart, very idealistic, very hardworking, very conscientious, very motivated. And they tend to take

things really seriously. And it's the superpower of that as a set, but it's also they take lots of things. Maybe too seriously. There's just a broader kind of thing going on. I think Gen Z is going to be fascinating. And then the generation after it, there's this interesting book by the psychologist named Gene Twenge, and she goes through all the charts of all the behavior. And Gen Z is actually looking quite a bit different in a number of respects. It's going to be weird. Part of this is what do you grow up with? So if you grew up free internet. So there's one thing, everybody's always like, oh, social media is really like basically screwing around with the kids. Well, I don't know, like, actually the person most prone to be really screwed around with social media would seem to me to be somebody with no memetic defenses at all, which is like a boomer.

Right. And so you take like somebody raised in like Walter Cronkite and you like inject them on a Facebook, right? They have no ability to cope with it whatsoever, right? Millennials are kind of in the middle. Gen X, millennials, you know, Gen X was like pre-internet, right? And so we're still acclimated everything. And then, you know, the generation, whatever is going to be called. The generation of my son is in, like, Gen Alpha or whatever is going to be called.

You know, they're just going to grow up having had like basically the full diet of like creation. internet, basically SIE up, basically pop politics, just crazy bonkers bananas like stuff coming in. You know, the level of sophistication the kids have around like memes is just off charts, right? And so new generations are going to be like much better at dealing with this whole media politics matrix is kind of unfolding. What you also have, I mean, I think growing up in the internet now, you also have like an infinite platter of subcultures that you can be part of. And that's a lot of very independent viewpoints compared to a world where we have. X number of approved new sources and so on. In your essay, you talk quite a lot about some of the negative impacts of overregulation.

You have two sections, one around energy and kind of what's happened in nuclear and, of course, the current ongoing discussion about AI. Now, in the past, we've seen the government actually sponsor these very big innovation projects. And we've been doing more around government engagement. What does a modern kind of pro-tech political position actually look like? And what's the right way to engage government and all this? Yeah, so people look back, you know, this movie Oppenheimer that just swept the Oscars,

which is, of course, an extraordinary movie tells the Manhattan Project story, and then there's the famous Apollo project. People look back on that, and my friend Peter Thiel in particular, looks back on those projects and says, wow, those were kind of great achievements, going to the moon and winning World War II. And you had this, like, massive government-organized, top-down Oppenheimer, General Groves, military project. They build new cities in three days, and they get all the world's leading physicists in one place,

and everybody's working on a single goal, and it's just this amazing achievement. And it's like, why can't we do that anymore? And with that sort of the deeper question is, why can't the country? government do that anymore. And the answer is just that was an artifact of its time. And in particular, the Manhattan Project was in the 40s. Apollo was in the 60s. Modern venture capital, startups, as we know and understand it, you sort of start in the 70s. And so I think a big thing there is just adverse selection. The kinds of people who can run projects like that just don't work for the government anymore. They're in the private sector. And so it's just that avenue is not available.

And if you need to reinforce your views on this, just take a look at the California high-speed rail project, which is now, it's over 10 billion in spend with zero groundbroken. Like, Not even an inch of high-speed. It's like the California high-speed rail prevention program. I think they're going to spend like $100 billion in like literally not build anything. It's quite amazing. Well, all these are measured by costs per mile or whatever. And what happens when you divide by any zero?

Yes, exactly. There's these BART extensions happening. I think it's even San Jose, which is a more rational city than San Francisco. And I think it's up to, I don't know, there's like this Doppler effect where every year that goes by, you add like another billion dollars to the cost and then project out the date another three years. So it's just this project that's just kind of go to infinity. I just think those days are over.

It's just not happening. So what happens, and by the way, anybody basically smart I've ever run into in the government basically says the same thing. They're like, the Pentagon. We're not going to build new weapons systems in the Pentagon. It's going to be private sector. And therefore, companies like Andrel or Palantir is private sector. And then the relationship between the government and the private sector is just always a little bit fraught, right?

There's basically two ways to regulate things. One way to regulate things is sort of traditional American way, which is everything is allowed except that, which is prohibited. It's sort of one approach to law. And then there's kind of the classic European approach, which is the opposite, which is everything is prohibited except for that, which is specifically permitted. The EU is just passing this AI law right now. It's going to be a version of that, right? Yes, you can do AI in Europe if you get approval from the government ahead of time, which they won't give you. And then we applied that method in the U.S. for nuclear power, right? We basically decided that nuclear power was prohibited by default. Right. The nuclear power story is tremendously illustrative of this. So Richard Nixon in the early 1970s implemented two programs in parallel. One was a program called Project Independence, which was to build a thousand new civilian nuclear power plants in the U.S. by the year 1980. And the goal from the name, Project independence was for America to be energy independent from the rest of the world. So number one,

to be able to pull completely out of the Middle East, no more of that. And then number two, have basically infinite clean and clean zero carbon, zero carbon emissions energy coming from nuclear power plants. You'll notice that didn't happen, but that happened because his other program was called the Nuclear Regulatory Commission, and their job was to prevent that from happening. And they did not approve a new nuclear power plant design for 40 years. And so they implemented sort of, again, this other form. And so at that level, it's like, okay, then we're going to get what we want. and we as a society have to decide which way we want this to go. Everything about how the American government operates is oriented towards trying to switch more and more to the sort of classically European model to try to basically choke off avenues for private innovation.

A lot of people think those ideas are good because of risk, like what if things go wrong? But the consequences are very severe. Basic logic. If the public sector can't do it, the private sector is not allowed to do it, then it's not going to happen. And so look, these are really big questions. And of course, it's hard. You know, these are not super flashy issues that are easy for a politician to get up in front of people and talk about. This isn't going to draw as much press attention ever

as sort of the more politically inflammatory topics, but I'd say it's a very serious underlying topic. How do you think about when founders read your manifesto, as soon as it came out, there was such a groundswell of support and all the builders on social media talking through this? And

how do you think about what founders can do or should do if they agree with everything that you're saying, what's the next level after showing social media support and then what after that? Yeah. So first was, look, social media support is actually super helpful. So part of it's just what are people proud to stand for? To stand for something, you have to be like a renegade,

and you have to be, like, ready to just get attacked by everybody and to just have all your friends think that you're being stupid or evil. Like, that's hard for people. And so the more people who actually stand up and basically say that they have a position, the more socially acceptable it is for everybody else to do it. That's one. Two is, look, I wouldn't encourage founders to get super involved in politics because founders have whole-time jobs.

But, you know, there are politicians who are more on the right side of these things than others, they're worth supporting. We've launched sort of a really ambitious political program in the last year because we've just had it with people, taking free shots on goal on startups. And so we're trying to support a lot of the politicians on the right sides of these issues. And I think that's something that people might choose to do. And then third is, look, at some point, especially if you're in an industry where you're going to run this kind of thing. I think it is worth thinking about it, not for the first few years, but as your

company gets built out. I mean, I think more companies, especially more young companies in our industry are going to have to step up and build policy groups, policy teams and political programs and have PACs and put real effort into this. Quite honestly, I mean, part of what's happening is big tech is against us. Basically, a lot of the political issues now are a civil war inside the tech industry where the big tech companies are lobbying very aggressively for regulatory captures. So they're lobbying very aggressively to have basically laws and rules that only they can comply with because they've got legions of lawyers and compliance people and so forth to be able to comply with all kinds of complicated rules. They're in Washington all the time

and have been for several years now basically lobbying to have regulatory barriers such that they can function, but startups can't. And I think more young companies are just going to have to confront that directly. Yeah. And I think in the games industry in particular, it's an interesting one because I think many of the folks here, many of the folks in the audience, they're like, oh, I'm part of this industry that's just about making things that are fun. Like, all the stuff seems so far away. And I think one of the things that I would remind everyone of is, look, everything that's happening in the games industry around AI is going to absolutely affect all of us.

It's also gaming as a global industry. So you're already seeing a lot of interesting things happening in the geopolitical sphere. How active can a Tencent or Nettis or, you know, one of those be? and how easy or hard is it to launch the products in Europe. There's a whole number of consumer safety provisions. And then a lot of the most interesting new platforms like UEFN and Roblox, which are user-generated content platforms, all the metaverse work that's also happening as well,

all of those kind of fall into this whole war that's happened over social media and user-generated content. Because in the end, as soon as users get to actually make things and express how they feel, then all of a sudden it's not that different from social media. So I think a lot of the issues, Mark, that you mentioned in the manifest are actually quite close. as issues in the industry. It's not like a far away thing.

Yeah, and there are gaming companies that have hit this stuff directly in the past. The social media companies all thought that they were creating fun things for people to play. It was like Twitter. What did your cat have for breakfast? And if you were like a fan of Twitter, you'd be like, wow, it's great to be able to talk about my cat had for breakfast. And if you thought, otherwise, you just thought Twitter was stupid and it was irrelevant. My favorite example is Facebook. Facebook got just tons of, you know, it's just like this is the most trivial, stupid, useless thing that doesn't matter. Why are these people doing this instead of something important?

And there was almost a deal for Facebook to get bought by Yahoo early on. And I remember a certain very prominent tech journalist, I'd be flogging a book right now, said at the time, she said, Mark Zuckerberg, should take the billion-dollar Yahoo deal. You know, Facebook saves worth like $1.2 trillion. So she said Facebook should take the billion-dollar Yahoo acquisition, quote, and run away as fast as his little flip-flops can carry him. It was just like her just like absolute dismissal that this stuff would ever matter.

And then basically within five years, it was like, Facebook is like the living demon incarnate on earth and destroying everything. Right. It went from like useless to evil in one step, right? You know, the headline never, it's never just like, oh, this is kind of cool, right? That's never the story. This is kind of useful. Some people like it.

It's either pointless or fucking evil. And look, there is a history in games like this. And gaming companies in the past have been through this. And so it's worth at least paying attention to. Awesome. For your whole career up to this, you've been a founder and entrepreneur, then starting A16Z. If you were hypothetically exiled for a few years and you had a team of a couple dozen people

to work on any problem of your choosing, what area would you end up focusing on? If you say AI, I'll have to drill in deeper into that, obviously, since it's such a big space. Yeah. So I should start by saying I have not pressure tested the following idea at all. I haven't done any of the things that we require our founders to do before we fund them in terms of actually thinking anything through. So this is just me speculating because I'm not going to do it. There is something, I think, super, super fascinating at the convergence point of, let's just say, immersive entertainment or experiences. And I think VR, AR is one version of that, but also just like immersive worlds on traditional screens. The intersection of that and then the intersection with AI, we're doing a lot of work.

in AI, a lot of work in gaming, a lot of work in media. And so I spent a fair amount of time talking to folks in gaming, thinking about AI and games. I spent also a fair amount of time talking to people in the entertainment industry about AI and movies and TV and things like that. Of course, that's quite controversial already. But it's okay. The assumption in a lot of these conversations, just, oh, AI is a new way to create game assets or AI is a new way to do special effects and movies? I kind of wonder, is there actually a new art form here, right? That's actually not a game and not a movie, but it's something in the middle, and it's something that's like an experience that's like totally tailored to the user, an experience that never

ends. Everything is generated on the fly, you know, with a level of sort of synergy, but synergistic kind of feedback loop between the user and the system. The metaphor some people have used for this is, you know, dreams. Is there like a new medium here, which is basically creating dreams? And on one hand, you might say it seems kind of obvious because if an AI can basically learn and generate content, then that seems like a straightforward thing. But what's interesting is, like, that's not a movie. It's very different than a movie, because, by the way, it might go for 5,000 hours, right? And it might be seated by a human creative, but, you know, it might then be very related to specific user. Movies aren't like that. It might be like a game, but it's also

not quite a game because maybe you're not playing it. Maybe you're experiencing it or maybe it's some other kind of you react to it or live in it in a different way. And there's no precedent for this. There's no model. There's no company that does this. The movie studios aren't going to do it because they just make movies. Game studio companies aren't going to do it because they make games. And so I think there might be something new. And then of course, there's a single player version. But then there's the mind-blowing ones, which are the vastly multiplayer dreams. Like what is that? Right. I think the new formats are definitely interesting always because you could imagine when user-generated content and getting content online, when YouTube gets popular in 2005, 2006,

you might have thought, oh, well, one day all the content creators are going to make movies and put them on YouTube. But that's actually not what happened. They actually ended up making all these vlogs and all these shows and all these sort of new native formats that exist only on YouTube. And then it turns out that watching an hour of 10-second video clips is actually more engaging than the Hollywood format of that. And so I think in the same way, just as it might be easy to think about just cost savings for gaming from AI that doing something that's completely a new format, like what you're talking about. It sort of feels like that's the new category.

My nine-year-old, like I used to ask me, you want to go watch a movie? And I can see in his head, I can see him doing the math of 90 minutes a movie versus 45 YouTube videos. No. So I finally created a movie club, Daddy Movie Club, which is Sunday at lunch, where we watch movies. And he likes it once we start them, but like it's always on the way into the living room. Can I bring my laptop into the movie with me? And so, yeah, I think there's a lot of signals that things are headed in this direction.

Yes, yes. Let's talk about AI now and something that obviously the whole firm and yourself are spending a lot of time on. So people often compare AI to just these big general technologies that have emerged over the last few decades, whether it's mobile or internet.

You've obviously watched several of these from the front seat. To what extent does AI and everything that's been happening remind you of some of the prior waves versus what way is it completely new and different? For me, what's happening with AI right now doesn't map to any of those. And the reason is because when I look at AI, what I see is sort of a new kind of computer, a fundamentally new kind of computer.

And the way I would describe that, this goes to all the controversial issues around AI also, which is for 80 years, we've had a model of a computer, which is sort of this super literal thing that can do math on a trillion cycles a second, but you have to tell it specifically what to do every single time. And we call these deterministic computers where you tell it exactly what to do. It always gives you the same answer. By the way, if it doesn't give you the right answer on something, is because you screwed up, right?

You programmed it wrong. When I use LMs or diffusion models or these things, no, I'm dealing with a different kind of computer, right? There's input, there's output. It's doing things for me. But it's a probabilistic computer. And it starts with, you know, you ask the same question twice. It gives you different answers, which is just in and of itself, a pretty mind-blowing thing. And then there's the hallucination thing.

The hallucination thing is this incredible thing because, like, engineers look at the hallucination thing, and they're like, wow, this is like a crippling problem. I can't believe this thing is like making up answers. It doesn't know what the truth is. But if you put your kind of creative hat on or talk to creative people, they're like, well, it's creating. It's like you have a computer that's creating things, right? And you get into all these philosophical debates about what the nature of creation is and originality and all that, but like it's creating things. And sometimes the things that creates are pretty funny and pretty entertaining. These are creative computers.

There have been all these examples recently, but I think it was Alaska Airlines put one of these online as a customer support bot. A lot of airlines have some bereavement policy where you can get free flights to go to funerals or something. And it turns out Alaska Airlines didn't have a bereavement policy, but the LLM felt sorry for the customers. So it made up a bereavement policy and promised him a refund on that. ticket. And then there was another case where the GM dealership put up a sales chat bot and it talked the customer to buying a Tesla. And I see it's like, Tesla's a really great car, much more environmentally friendly. If you're literal-minded, you look at that and you're horrified. But if you put your creative hat on you're like, wow, this is like the coolest thing I've ever seen. I get excited. I love

on Twitter. And it's all these academics now trying to figure out how to jailbreak these things. And I just get so excited. I'm just sharing on the jail breaks. I'm just so excited. The last thing I want is these things lock down. Like I want these things to be out there like doing all kinds of crazy stuff. I think it's absolutely fantastic. The point is like, I think the metaphor, if anything, is to like the creation of the microprocessor or something. It's the birth of a new kind of computer. By the way, if you go back in history, there's a great book on neural network, which is the foundational technology behind all this was actually invented 80 years ago in 1943. Amazing. It was the first neural network

paper that basically all of our work today is still derived from that. There was actually a debate in the nascent computer world in the 30s and early 40s when they were just didn't get the stuff to start to work. There was a whole school of thought that said this, what they call von Neumann Machines, the sort of line. kind of model was actually the wrong model, and that basically the entire computer should have been built from scratch on a model of the human brain. And they had basically this exact discussion back then in sort of a very crude and simple form. And sort of history went one way, and now history is going to come back around, and now we have both to choose from. So I think now we're going to live

in a world where basically you're going to have a proliferation of AIs in the same way that you've had microchips. And by the way, they're going to be paired. Basically, I think anything with a chip is going to have an AI. And you're just going to assume that everything has an AI. And there's going to be many billions of tiny models running everywhere. There's going to be a few big, God models in the sky, and then there's going to be a lot of stuff in the middle being customized and tailored for all kinds of things. To what extent do you think that when the web was created and when mobile apps were created, because there was this rush to sort of redesign the user interface, that that sort of allowed new startups to sort of be able to come into existence with sort of

the mobile native way of doing things as opposed to the prior version. In this, it's interesting because the platforms are still kind of the same. And so to what extent do you think incumbents just have the upper hand by just integrating AI features into their existing products versus startups being able to do something from scratch. Yeah, so this is the big thing that we always think about in our day jobs in venture capital, which is like, okay, there's certain technology shifts where the incumbents can just add the new thing, and then there's really not an opportunity for startups. And the scenario here would be Photoshop just adds AI photo editing and you're done, right?

It's just, it's done. They just added it and they're done. And the world keeps going with Adobe is the big company. By the way, that's true for a lot of new technologies. I like that. You just kind of add the new thing. And by the way, even mobile, like there were some new mobile companies like Uber, and Lyft and Airbnb.

But, you know, look, Google and Facebook adapted to mobile just fine. There was no mobile search engine, right, that took over. One of the reasons Instagram is so big is because Facebook deliberately made it big by transferring over a lot of the usage. And so it turned out there wasn't an independent startup opportunity there. But every once in a while, you get a platform shift that's, like, dramatic enough where it basically means that you both kind of can and have to reinvent from scratch the whole idea of what the thing is in the first place.

And so that would be like Mid Journey, right? So Photoshop plus AI editing versus Mid Journey or Dolly. And so in the full version of platform shift, basically the whole idea of Photoshop plus AI image editing is just, at some point, just becomes completely irrelevant. Can you believe people used to do that? People used to fiddle with pixels, like seriously? Because you'll live in this new world. And in the new world, you'll just tell the machine what you want for a photo, for an image, and it'll generate you as many options as you want. And it's generating you something that's better than you would have been able to do anyway. And you're totally happy. And the whole idea of fiddling with image pixels is like writing a machine coder. People still ride horses.

It's just like for like rich fancy people, like for fun, right? And so, you know, in this scenario, someday people will still do image editing, but it'll be like three like weirder designers in Norway or something that, you know, will still be into this kind of thing. There's just be a new way of doing things, right? And then basically our bet always is like when we make mistakes just because we kind of overestimate the degree to which this is going to happen. But our whole thing is to basically try to get in front of this and try to basically make the assumption that you're going to have complete turnover. And look, this has happened before. Like, there's an entire generation of mainframe software companies that turned over that didn't exist anymore, basically once the PC came out. A lot of the PC software companies never adapted the web. A lot of those companies just went away.

These kinds of shifts do happen. They are radical. The key question, though, is, like, can you reinvent the entire product? Can you imagine the old rules don't apply anymore? There's a completely different way of doing the thing. This certainly feels like that. Talking a little bit more about kind of incumbents, there's sort of this thought that there's a world in which the AI models are owned by a small number of companies, the God models in the sky, versus the version where, there are lots and lots of little things. And I know we've talked quite a bit about kind of the role of open source potentially in AI. It would be great to hear you expand on that and the importance of that.

Look, if you listen to the big companies, and this is sort of what we call the sort of incumbents, big tech companies doing AI, and then what we call the new incumbents, which are like the companies that have raised billions of dollars, they're new AI companies, but they're already incumbents. If you listen to them, you basically hear two things. Number one is, obviously everybody's only ever going to use the big models. And the reason for that, by the way, it's a very good argument in that direction, which is they're just always going to have the best answers, right? And what they basically say is, look, this market's going to be like the search market, which is, of course, you're always just going to ask Google all your search.

Like, there's no market for vertical search engines in all these different domains. Google just always gives you the best search answer on practically everything. It turned out there was no startup opportunity to build smaller search engines. And so it's just obviously that everybody's just going to run and everybody's going to tap into a chat GPT or a clot or something or a Gemini through an API and pay by the drink. And that's the way it's going to work. And then, of course, the other thing you hear from those companies is, AI is scary and evil.

It needs to be regulated. And we need this regulatory wall. so that startups can't function anyway. And by the way, we should probably ban open source while we're at it, because that's also evil and scary. So it's sort of interesting how those statements go together. We're big believers in the exact opposite. Like I said, we're big believers that there's just going to be such a giant number of use cases.

Specifically, there's going to be a giant number of, like, local use cases. Your doorknob is going to have an LLM in it that's going to control whether or not people get through the door, right? And are you really going to do a round trip up to the supercomputer in the cloud to do that? By the way, do you want to? Because do you want the supercomputer in the cloud knowing who's coming in and out of your house? And then just the cost associated with that is going to be very expensive relative to what you can do with a small model in the doorknob and by extension and everything else. And then, yeah, open source is clearly a way to kind of give people the flexibility to be able to implement AI and basically everything. And we're, yeah, we're very fired up about that.

And as one example, where the major investors in Mistral, which is at least right now the leading AI open source company. Yeah. And we're going to fight hard to help them succeed and have this model succeed. Yeah. I mean, it's been so impressive to go from. I remember being at a point where we were all just sending articles around. and screenshots of things that we were doing on chat, GPT, all of a sudden this being really the primary focus of the firm

and a ton of hiring, a ton of new efforts, everything kind of around that. Yeah, I was just out in the car before this trying to close a deal. We're going to shoot out for a hot deal. And it's related to video. And it's just like, wow, the implications of this, like the entire nature of what video is could change, right? Just like the entire assumption of what's in a video and how it reacts to users, like the whole thing.

You know, one of these things where you could imagine looking back in a decade and being like, I can't believe people used to watch static videos at all. It just doesn't make any sense. It's like watching a silent movie. Obviously, videos should be, like, responsive in real time. It's this kind of thing where it's the entire world of everything involving video might just, like, completely change. Awesome. Well, I'll wrap up with one or two kind of final questions.

One is talk to us about how when we began doing more investing in games. And actually, before I even showed up at the firm, I think we had invested in Zinga and Oculus and a couple others. I think Chris Dixon had pioneered a lot of it. But what was it that gave you personally the conviction to take on games as one of the main area? areas for A16Z. Yeah, and then there's a classic argument you'll hear in venture. If you talk to VC's, there's a classic argument you'll hear as to why VC shouldn't invest in games.

It's basically an artifact in my view of Florida, the 80s, 90s, 2000s period in which it actually was pretty dangerous to invest in games. And the reason for it was just, number one, games are sort of viewed as like, you know, classic hit-driven business, like a movie or something. And then there was just economics that flowed from that that basically said the movie studios make most of the money in movies, the platform publishing companies like EA make most of the money in games. And even if you start a new startup studio and you build a new game franchise, it'll just

get bought by one of the platform companies, and there's not really much upside to it because of the industrial logic of distribution and all those things. And so it was not considered kind of be a viable area for venture investment for a long time. Our assessment is basically that the world has changed, and the world has changed, is changing, and we're going to try to change it further. And I guess I'd say several things. So one is game as package software that looks like a movie versus game as sort of permanent platform foundation that then you end up building 20 or 30 or 40 years of experiences on top of. Now, this is getting more obvious because, you know, and you go right through Minecraft, Roblox. There's more and more examples where clearly this is exactly

what's happening. Basically, from a business standpoint, assets that can actually grow in value for decades. And they can keep adding users and keep adding content, keep adding experiences, and keep broadening out. That's totally venture investable, but those are great businesses. So that's one. Two is look like all these other technologies kicking in. And so the traditional game industry was an artifact historically of basically not being online, right? And even still today, a lot of games that you buy. They may have multiplayer mode, but they're not really built. It's like full online experiences. But now you can build it's like full online experiences and you can take advantage. You can have real economies. You can have user-generated platforms. You can use many ways to make

these just like fundamentally more sophisticated experience. And so you sort of get the benefit of all these technology innovations. And then I would say third is just founders. This is sort of the thing in the past is like a lot of the great game designers of the past. And a little bit like movie directors. They want to build a game. They want to get paid in cash. When they're done building this game, they want to build another game. It's probably a different game. And fundamentally, they kind of want to work for a studio because that's where they get that deal. Right, right, right.

Our kind of founder is not that. Our kind of founder wants to build a product, but then wants to build a business and wants to build a company and wants to build something that's going to be enduring and expansive and have enormous vision and become very big and important in the world

and have a giant R&D agenda and a very aggressive product roadmap and so forth and then run their own thing and then actually be in control the whole thing. We've been very encouraged by the number of smart people coming out of gaming who want that. That's right. That's right.

Because they see that in other sectors of software and tech and they want to do that. And then we're also trying to help encourage that. Yeah. And that's personally been one of the most interesting things about building the Speed Run program is just being able to use a marketing motion to just discover all the founders that want to work in Game Studios or they're building infrastructure or the building AI and just the enormous number of them. Many of you know that last year when we put this out there, it was nearly 6,000 companies actually applied to be part of the Speed Run program and we anticipate this continuing to grow. And so there's just a fantastic amount of talent.

The other thing is very exciting for me is I think games as entertainment are fantastic and they're very social. positive and productive, and I love them, and it's great. But also, we mentioned earlier, like, the games are always on the cutting edge of applying new technology. Yes. I also think, like, the skill set of what it takes to make great games, I think also more and more is just going apply in many other domains. And so people have tried this, but, like, someday there's going to be a great educational experience, a great online educational experience. And it's going to look and feel like a game. Like, that just seems like crystal clear, right? And the great health problems of our time, if you just look at the numbers, the health problems of our time are not, like,

random things that just happened to us. The great health problems of our time are the consequences our own behavior. Right? And so they call metabolic diseases. So you're fat, you're lazy, you don't get enough sleep. Right. And then there's all this downstream, and cancer and everything that's heart attacks

is downstream from that. It's very clear that the whole world of health care is not, oh, something's wrong, I need to go to the doctor and get it fixed. Health care has to be transformed into, I'm healthy my entire life because I'm making myself healthy. And that's a hard thing to do. And the system that supports you in doing that

is going to feel like a game, because it has to be engaging. It has to be something that you enjoy dealing with. And so there's no question like that's going to happen. There's all of these other. areas of life and business, I think, that are going to get transformed by this kind of mentality and skill set. And riffing on something that you said in the past is we're willing to spend a billion

dollars building Grand Theft Auto and we're willing to spend hundreds of millions of dollars to create a movie. But when it comes to what is the most amazing computer science 101 class, how much money are we willing to put into that versus how much amazing output do we get from potentially building something at that quality for something like this? Yeah, it's amazing. You have the best university in the world. You guys all have been through this.

Most of you've gone to college, at least for one day before you dropped out. But the MOOCs made this super clear, right? It's just, okay, MIT, CS 101, like, whatever that is, it's just, oh, it's after whatever, 200, you know, whatever amount of time they put in trying to figure out, it's just still dude in front of chalkboard, right? It's just like, really? And so, yeah, so the thought experiment I'm always proposing in the firm is, what's the model where you hire Steven Spielberg to make CS 101, right?

And it's a $200 million production, and it's like the most fantastically entertaining thing you've ever seen. Right. And that's like the movie version, or you hire, I don't know, John Carmack or somebody to make. That sounds like it would be fun. Make the game version of it. Right, exactly. And look, it's just, could you afford to do that? It's like, well, look, you just take the total number of kids in the world that need to learn computer science.

At least in theory, the numbers that are there. You could make the economics work. Yeah. So, yeah, people have taken swings at this. There have been some early successes, but nobody's done the big thing yet. But I think somebody will. Yeah, absolutely. Yeah, I hope so.

Talk about what you hope A16Z and then also just, honestly, this broader community of founders is able to accomplish in the games industry and kind of the adjacent sectors. What does success to look like? for you. What's your aspiration for what happens in the industry? There's a lot of ways to think about it. We talked a lot about technological transformation. We talked a lot about new business models. We talked a lot about applying game methods outside of gaming. I think those are all great. And then again, I think entertainment, it's always like, oh, this entertainment is trivial. Entertainment's not trivial. We're not supposed to go through life depressed. Like being like drudge. Oh, God, ooh, right? Like we're supposed to have fun.

Like life is supposed to be fun. It's supposed to be enjoyable. We're supposed to have like games and movies and things that we like to do. It's great. Right. So the single biggest one, we would just love for there to be, is just to be crystal clear that the primary opportunity for the best people in this field is they can build companies. And they can build companies that are able to be independent. They're able to have very distinct visions, very radical ideas. They're able to build teams to execute against that. And then really crucially, based on their early success, they're then able to build themselves into institutions that can really endure for a long time and then have extremely expansive product roadmaps. Right. I'll use the example of this. Facebook, I told

or the flip-flop story earlier. Facebook's spending on the order of $20 billion a year on VR, right? Mark has worked himself in a position where he's able to do that. And the Google guys have been able to do that in other areas, like self-driving cars and now AI. And so when these companies get in position where they've got like that kind of, basically, vision at the helm, the sort of founders and founding teams at the best of these companies,

and then they have their early win. They can get a position where they can start to really do really big, ambitious things. And so I think my hope would be the companies that all of you are doing, the result of that is going to be a set of companies that are going to be really world-defining in the decades. ahead. Amazing. Let's give Mark a hand. Good. If you like this episode, if you made it this far, help us grow the show. Share with a friend or if you're feeling really ambitious, you can leave

us a review at rate thispodcast.com slash A16c. You know, candidly, producing a podcast can sometimes feel like you're just talking into a void. And so if you did like this episode, if you like any of our episodes, please let us know. I'll see you next. time.