The Knowledge Project with Shane Parrish - #129 Marc Andreessen: Interview with an Icon

Episode Date: January 25, 2022

Silicon Valley icon Marc Andreessen explores investing, decision making, and the art of solving unsolvable problems.    In this discussion, Andreessen reveals why the Internet has become the conduit for some people to disrupt traditional power structures and for others to enforce them, optimistic and pessimistic scenarios for the future of the Internet, assessing judgment, and the book he turns to for insight.    Andreessen is a co-founder and general partner at the venture-capital firm Andreessen Horowitz, and has invested in companies such as Facebook, Pinterest, Twitter and Skype, among others. He co-created the highly influential Mosaic internet browser and co-founded Netscape, and has been named one of the 100 most influential people in the world by Time.   The books recommended by Marc Andreessen in this episode are:  The WEIRDest People in the World, by Joseph Henrich The Machiavellians: Defenders of Freedom, by James Burnham The Revolt of The Public and the Crisis of Authority in the New Millennium, by Martin Gurri The Ancient City, by Numa Denis Fustel De Coulanges  -- Want even more? Members get early access, hand-edited transcripts, member-only episodes, and so much more. Learn more here: https://fs.blog/membership/ Every Sunday our Brain Food newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish Learn more about your ad choices. Visit megaphone.fm/adchoices

What each of the top venture capitalists of all time has in common is each of them missed almost all of the great deals of their generation. Well, we see this a lot. We do performance reviews, right? We do performance reviews. And so it's like, well, they've made 10 investments. And, you know, one of them is just this huge success. And the other nine are like, you know, sucking wind. And it's like, okay, is this a good venture capitalist or a bad venture capitalist?

And it's like, well, in any domain that's not probabilistic, you'd say, this person is terrible, right? You know, it's batting average of like a hundred, you know, out of a thousand. It's like this person's awful. And there's always the temptation to say, well, this one thing that's working is it's like it's a fluke. right? And so who knows whether they'll ever get it again? And it's at that point where I put my head up and I say, we're in the fluke business. The whole point of this is to get the flukes. You don't have to score 100%. And not having to score 100% basically means you can take chances. Welcome to the Knowledge Project podcast.

I'm your host, Shane Parrish. The goal of this show is to master the best of what other people have already figured out so that you can unlock your potential. We interview world-class doers and thinkers so you can better analyze problems, seize opportunities, and live a more meaningful life. Every episode is packed with lessons and insights that never expire. If you're listening to this, you're missing out. If you'd like special member-only episodes, access before anyone else,

transcripts, and other member-only content, you can join at FS.com. check out the show notes for a link mark andresen is here today mark is co-founder and general partner of the venture capital firm andresen horowitz he's an innovator and creator and one of the few to pioneer an entire software category used by more than a billion people and one of the few to establish multiple multi-billion dollar companies mark co-created the highly influential mosaic internet browser and co-founded netscape which any of you over 30 will remember I've been wanting to talk to Mark for a long time, and this conversation does not disappoint. We explore why he studies history to see the future, his optimistic and pessimistic view of the future, how A16Z makes decisions, and specifically what Mark knows about decision-making that most people miss, our largely dysfunctional education system, assessing the judgment of founders, and so much more.

It's time to listen and learn. what are you obsessed with right now so there's a lot going on so the full answer to that question would probably take take the entire podcast but you know i would say probably two big buckets of things you know my day job is you know being obsessed by all of the sort of changing you know technologies and then you know the the the sort of impact that all the all the new technologies are having on the you know on different industries and on the world broadly um and then the other thing i've just, you know, really, you've gotten just sort of extremely curious about, I would describe, you know, like a lot of people, a lot of my assumptions about how, you know, the world worked

and about how the U.S. worked and about how politics worked and about how society worked or kind of upended, you know, kind of sometime between 2008 and, you know, 2015, you know, and for sure heading into the last five years. And so I've become somewhat obsessed with kind of reading my way back and basically trying to figure out essentially what the hell is going on. You know, back my kind of day job, which is as society changes and as technologies change society and as, you know, frankly also society changes technologies, how much of what we experience as new is actually new versus how much is old, right? How many of the sort of behavior patterns or societal changes do we, you know, do we kind of experience this brand new that actually turn out to be quite old

patterns? What I find generally is if I don't understand something, I try to read backwards and kind of the further back I read, the more universal themes I find and the more things that I think are kind of remarkable and unique to our era actually turned out to be quite universal. And at least for me, that's a calming experience because it makes me feel less like the world is sort of spending, you know, in a different direction and more just that we're, you know, we're playing out patterns that are kind of deeply rooted in humanity, which is what I mostly believe. So anyway, that's the, that's the current thing. Can you talk to me a little bit about those patterns? What comes to mind when you think of an example that you're surprised by?

I mean, you take almost anything, but I mean, I'll just give you that. I'll just give you that. The most basic one. So the most basic one is societal reaction to new technology, right? And so there are, you know, there are these new technologies of our era. You know, we could go, you know, make, you know, whatever list we want. You know, everything from, you know, social media and internet to, you know, many other things, automation robots and so forth. And then there's, you know, there's sort of the societal reaction.

There's sort of the, you know, the reaction in the press. There's the reaction from politicians. You know, there's a reaction from different political movements, you know, political candidates, right, are now, you know, taking, you know, kind of major stands on these things. things, you know, both in the U.S. and around the world. You hear it a lot like around the kit, like what technology does to kids, right? And say it's sort of the go-to thing, which is, you know, you know, sort of this technology is going to ruin the new generation of kids. And then you just kind of, you know, ask yourself, well, is this the first

generation of technology for which they have made those claims, right? Or in fact, have those claims been made for basically prior generations of technology? And then, of course, the next question is like, okay, are, were the claims different in the past? Or were they actually the same claims? Right. And then to the extent that they were the same claims, you could ask, like, okay, how are they playing out differently this time? And are they playing out differently this time? And there's actually quite rich literature, both in the history of technology and on the sociology of technology.

You know, prior generations of sociologists who I think were actually more kind of interesting in the current generation, you know, actually grappled with these questions a lot, right? And I mean, even like Marxism itself is like, you know, heavily based on the impact of technology and society, or at least on Marxist theories on it. And so I found this just like fantastic book that I just really highly recommend It's a great example of this. It's a book written by an MIT professor of 50 years. It gets it, they just have a 50-year reissue of the book.

So it's a book that, it's very, I can state very confidently as a book written before the internet before any of the things people, you know, people are mad about today, right? And it's this great book with this great kind of, you know, title from, you know, kind of the 1950s, early 1960s called, it's called Men, Machines and Modernity. I'll have to look at that, but it's Elting Morrison is the title. So I think it's men machines and modernity, you know, but it's this, it's basically, Basically, it's a short little book, and it goes through, basically, it goes through this history of, like, how new technologies are sort of received in society. And it, just briefly, it proposes this basically three-step process.

And sort of, you know, step one is basically just like flat out ignore, right? New technologies are just like dismissed. All the experts and all the people who are kind of in power, you know, just kind of say, okay, this thing is not going to matter or it's not going to be a thing. Step two is rational counter argument, right, which is sort of the status quo assembles all of the different arguments as to why this thing can't possibly work. and won't possibly be important. But, like, they really get into the argument and step two, and they really, like, try to reason it through. And then he says, step three is, he says,

step three is when the name calling begins, which is to say step three is when the status quo basically goes bananas and gets, like, super emotional and super irate and kind of goes on tilt, right? And it starts name calling. It starts accusing the sort of proponents of the new technology of sort of all these evil kind of moral crimes. And basically, the reason he says it goes through this three-step process is because he says what people think of,

of as technological change is actually societal change and specifically societal change of the form of a reordering of the power and status structure, right? And so all of the people who have achieved positions of power and authority in the world based on prior generations of technology are inherently threatened by new technology because new technology will upend the power and status structures and then a new set of people will, you know, come to the foreground and take the power. And of course, you know, in human society, power and status battles are the core battles, like that, you know, they are the most vicious fights. And so, basically what happens is a lot of technologies kind of start out by assuming that they've built a better

mouse trap and of course like people should appreciate them for it and then they find out that everybody hates them for it and basically that's the reason why and that this is a persistent pattern through history that this is in fact not new can you walk me through how you sort of see some of these technological changes and how they'll impact sort of this social hierarchy or how people get into positions of power so so the really big one is um is uh you know basically hierarchy versus network, right? Or you kind of say institutions versus network. And so, and by the way, for people interested in this, Neil Ferguson actually wrote, he wrote a really interesting book called The Square and the Tower that goes through this in some detail recently. That's very, you know, kind of historically

informed, another great source on this. I should say I agree a lot with like the first two thirds of the book and then I kind of take the polar opposite view of him on the last third of the book. It's funny. The last third of the book made me very mad. And of course, the reason it made me mad is because he mounts sort of a rising defense of the old power structure. Sorry, rousing defense of the old power structure, right? Whereas, of course, I'm on the side of the power structure. So, of course, that would make me mad. It's kind of the reverse of that, right? I'm mad by the resistance. And so the big battle is sort of you could call it kind of institutions versus versus networks. You could call it kind of top down hierarchy versus

sort of lateral, you know, kind of network building. And so start by saying top down institution. So top down institution building is kind of how the West, you know, it's a certain, I'm sure of some other cultures as well. Let's just, you know, I'm most familiar with the West. focus on that. It's sort of how the West was won was we got really good at building these basically these giant hierarchies. Like we got really good. And in particular, right, in the, you know, kind of in the late 19th, early 20th century, you know, with the rise of sort of the second industrial revolution, you know, we sort of had all these mass scale technologies of that era, right? And so mass manufacturing, right? And then, you know, mass transportation and then mass media, right? And then

mass government. And so we got really good kind of between, call it 1880 and 19, you know, basically, I don't know, 1939 or something, we got really good at building, you know, giant industrial companies, right, you know, General Motors and General Electric and, you know, all these companies. We got really good at building, you know, giant government, you know, the sort of, you know, the New Deal and sort of this massive expansion of state power, you know, that kind of hit, you know, after, you know, after the 1930s that, you know, it's only, you know, accelerated sense. And then we got really good at like mass media, mass communication, right, radio and television

and so forth. And then also, right, therefore, you know, mass politics, right? So this kind of absolute dominance of these two, you know, major political parties. And then, of course, you know, even like to the extent that you consider America, you know, kind of in that era, kind of as, you know, great empire, we got really good at kind of building the American empire, right? And of course, the American empire kind of, you know, continues to this day as, you know, not as a literal empire in the old sense, but as a sort of a, you know, a modern empire, right, which is to say, you know, cultural and intellectual, right, and as a societal empire, you know, and somehow, by the way, we still have 800 foreign military bases, but, you know, for the most part, sort of. of a soft power empire. So we just, we got really good at these giant kind of top-down things. And then we, we lived in this world for 50 or 60 years in which basically these giant

top-down institutions just kind of ruled everything and we just kind of got used to it. And, you know, there are these famous books from that era, you know, the organization man is probably, you know, the key book kind of of of that era that kind of described. There's this great line of the organization man where he says, you know, the, you know, in sort of this era of all these, these mass systems, he said, you know, the route to power leaves, you know, inevitably leads through the conference room, right? It's like, right, the way that power has been exercised in our society kind of through the, through these decades of mass systems has been basically people in conference rooms arguing with each other over control, you know, basically of

these mass mechanisms, right, over control of what the ad campaign is going to be, over control of what the, you know, the new car model is going to be next year, over control of, you know, which, you know, which candidate's going to be the, you know, Democratic Republic and Provincial nominee or whatever, you know, it sees people at the top of a hierarchy kind of battling in conference And by the way, it's also, right, as a consequence, it's like, you know, all these institutions over time kind of end up run by lawyers, right, of one form or another, right? There's sort of, you know, people who kind of deal in words, right? People who deal in kind of symbolic manipulation at the word level, you know, sort of the sort of non-quantitative conceptual level. And, you know, it looked by the, you know, kind of 80s or 90s, like that was just going to be how it was. And then, you know, this internet thing comes along. And, you know, the core, a lot of foundation of the internet, of course, is, you know, it's a, it's not that, right? It's not a top-down institutional thing. It's a, by definition, it's a lateral peer-to-peer, right, that, you know, the core architecture, famously, the internet is surviving nuclear strike, therefore there is no

central node, right? Therefore, you're able to route around damage, right? Therefore, you're able to sort of expand the network laterally. Anybody can plug in it. Anybody can build whatever, whatever app they want. Anybody can build whatever website they want. They can, you know, put on any information they want. They can organize any movement they want, right? And so you have this introduction of this, like, fundamentally disruptive lateral network-based technology. That's sort of the precise time when it looked like we were going to have sort of peak centralization. And so I think what we have now is kind of at the sort of deepest level, what we have is kind of this big fight between people who want to use the internet to basically reinforce top-down power

versus people who want to use it to disrupt top-down power. My analysis is basically that's what's happened to our politics, right, on both the left and the right, which is the internet is both the enabler for traditional political movements and parties to try to establish egemony, right? It's sort of permanent and during advantage, but it's also the enabling technology for disruptive movements, whether, you know, on the left and the form of, whether it's democratic socialism

or, you know, these kind of more energetic, you know, kind of forms of leftism, or, you know, on the right, the Tea Party and then the Trump movement and, you know, and, you know, the new right and all the sort of new disruptive movements on the right. So there again, you see the same, you know, the same fundamental battle between, basically, institutions and networks.

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I can just put my ideas out there and let other people be the judge of those ideas. Yeah, that's right. And there's this huge tension. So there's this thing. Well, so let's take mobile, you know, because the smartphone is kind of the key revolutionary technology in terms of, you know, sort of access to all this stuff. It was not that long ago. As recently as 2006, right, which was only 15 years ago, as recently as 2006, exactly to your point,

If I wanted to, I could actually build smartphone apps in 2006. I could build an app that did whatever I wanted on a phone. But to get it distributed, to get it actually onto the phone for people to use, I literally had to go to the headquarters of Verizon or AT&T, right, or one of the big telecom companies. And I had to basically apply, right? And literally, I had to go into a conference room. You had a gatekeeper.

Absolutely, 100%. And it was famously the term in those days, it was called the deck. And the deck basically, it was basically the home screen or like the UI on the phone. And if you wanted your app in the deck, you went in and you started negotiating in a conference room, right, with, you know, men and suits. And, you know, the opening, you know, the opening, you know, the opening bed was, you know, 40 or 50% of your thing. And then they could basically dictate, like, if it does this or that, like whatever, whatever. And then by the way, you know, to this day, like, you know, Apple, you know, opening up the iPhone and the App Store was a big step forward. But, of course, even Apple continues to exercise a fair amount of control.

I mean, they're far more open than Verizon was in those days, you know, but even still, like, you know, Apple bans entire categories of apps and then, of course, they extract 30% economics. And so even still, like, there's still kind of a legacy holdover of that level of control. Right, but in stark contrast, right, and I think this is a good news story, right? In stark contrast, you know, the web, like, the web has never had that property. The web didn't have that property on day one. The web didn't have that property in 2006. And the web, in fact, doesn't have that property today. And, you know, it's like, you know, there's a compromise, like, I was special on it's

smartphones. Like, there's a compromise for building a mobile website versus building an app. And, you know, there are issues involved in that. But, you know, the fact remains, like, you can still build whatever website you want. You can put whatever information you want on it. And just from a historical standpoint, that's just such a change. I mean, the most dramatic, the most dramatic way of thinking about how big of a change that is as sort of a global kind of macro level is that, you know, the Soviet Union, you know, there was this, there was this dissident movement inside the Soviet Union in the 1980s, right? And, you know, they didn't know that they were going to win, like, up until I think the very last minute, like they, you know, they didn't know the USSR would ever fall.

But, you know, they tried. And there were some very, great people behind the Iron Curtain in Russia and the other, you know, kind of East Block countries that, you know, that battled for a long time. And so they, you know, they had this concept to Samastat, right, which was, was basically, you know, it was basically, you know, information, free information, right, about like, you know, open criticism of the Soviet regime. And it was necessarily an underground phenomenon because if you were caught with it, right, you would get shot. And so they had, So then there's this sort of practical question of like, how do you produce Sama's dot? And the answer in those days was you produce Sama's dot by mimeograph machine, right?

Which was sort of the, you know, for kids listening to this, this was photocopiers before photocopiers. You know, so these were sort of, you know, pretty expensive, complex kind of, you know, basically basement. You put one of these in your basement in your office and you can do, you make copies of paper, you know, kind of invaluable. And, you know, sure enough, like there was like a whole thing involving smuggling mimeograph machines into Russia into the Soviet Union. and then if you were caught with a mimeograph machine, you were shot. And so just the level of overhead involved in even getting, you know, information that contradicted sort of centralized power out, you know, was still really hard, you know, even at that point.

And then, you know, the internet kind of popped, you know, it's kind of interesting. It's like, could you ever have another Soviet Union, like in the era of the internet? You know, North Korea is doing their damnedest to try to maintain that model, you know, but without going full North Korea, like, I'm not sure you can. I mean, I guess I'm an optimist on this point. Like, I tend to think open access information basically makes a lot of these historical things, you know, fundamentally impossible. Not, you know, not necessarily, you know, not all centralized institutions get torn down on day one, but like over time, if people are able to actually like debate things, people are actually able to see, you know, alternate viewpoints. People are actually able to point out flaws, you know, kind of in the systems that are ruling them.

Like, over time, you know, I don't think people will put up with the kind of draconian kind of top-down control that, you know, that we used to have to put up with, you know, before these technologies exist. Can you give me both sides of the next 10 years? I'm interested in hearing your most optimistic scenario and your most pessimistic scenario. Look, optimism is just like, it's basically the Morrison book, right? It's basically you have, you have all these kits. So you have kind of the world as it is. You have the status quo. You have the power structures.

You have the hierarchies and whatever. They work as well as they do and so forth. And then you basically have all these kids. And this is kind of one of the things in my day job that's just always so interesting. as these kids like walk in the door and they're just there and they walk in the door from all over the world right from every walk of life from every possible background um and they walk in with you know an idea and a skill set and you know i would say the ideas are getting to be kind of increasingly i think profound and the skill sets are getting increasingly advanced and part of it is

you know kids now are growing up on the internet in some fundamental way and so you know we see kids now from all over the world who walk in and they're they are like far more educated right and and skill already to be able to do, you know, a startup or, you know, create new software or do any of these things, you know, than I was at their age, because they've learned on the internet, like they've gone online, they've read, you know, they've read, you know, they've read everything. They've watched everything. They, you know, it's just kind of their, their depth of sort of technological knowledge and business knowledge and finance knowledge and cultural knowledge is just like incredibly broad. And so these kids walk in and they, you know,

like kids, you know, like, like any, you know, generation of kids, they're idealists and they've got all these new ideas and they kind of have an intuitive sense of how new technologies can be harnessed to, you know, improve the world in some way. And they actually have the power to do it. And then, you know, break a little bit on us. You know, we're in a position to be able to support them and help to do that. So there's, you know, there's a system kind of waiting for them. You know, basically it's that we're just going to see this. And you see it now, but you're just going to see this sort of continuous kind of movement of all of these new ideas and all these new ways of doing things. And, you know, look, you know, they're not all going to work. It's a rebel

alliance versus an empire. It's asymmetric, right? The empire has to win 100% of the time, right? they have to defend against all attackers, whereas, you know, the, you know, so you can have many different attackers who kind of keep coming. And so we're just going to see in sector after sector, just better and better ways of doing things, better ways of organizing, better ways of, you know, better ways of organizing the economy and productive activity and creating, you know, job opportunities for people and education and, you know, how the, you know, how, you know, just like all aspects of how people live and work, you know, just like more and more and more options, more and more better ways of doing things. And, you know, the incumbents will, you know, they'll go through the

three stages, right, every time. And you see it, you know, it's like I said, it's either denial, it's sort of rational, you know, counterargument or it's name calling. Is that inherent to even the winners today? Like Google is now an incumbent, right? So this is one of the funny things I talk a lot to our founders about. And this is not a, you know, what's so useful I think of this view is this is not a criticism of any individual person, right, or any criticism of an individual company. This is why I try to get to the broader trends, right? Because like the broader trends, like, are impersonal in the sense of, okay, if you see this pattern over and over again, then it's not just you. Like when I, you know, when I tell somebody you're doing X, it's not like a criticism of

you're doing X. It's more an observation of, you know, you're doing X just like everybody else who's been in your situation has done X. And, you know, at the very least be aware of it, if not, you know, decide to make a conscious choice not to be like that, you know, if you don't like that. But one of the things I talk to our founders about all the time is it's actually funny. A successful company has about five years, a successful startup has about five years until they become a new incumbent and they actually start to behave like an incumbent that's rational like of course that's rational like they've now built something worth defendant right and they've like they've now established power in the world right they've established a position for themselves you know they've built

something of value and now they have something worth protecting and of course the next you know the next thing comes along very quickly you know the next kid comes along five years later you know and a lot of the times it's really funny because it's like you know the new incumbents run by like a 26 year old right and then and then the new disruptors like a 21 year old so it's like you know it's sort of like one kid really mad about the other one. And it's like, yeah, well, you know, that was you five years ago, right? Like, so, you know, this is the way of the world. And so yeah, so, yeah, no, look, so this is actually a really big question. Actually, Peter, you know, my friend Peter, TEL has talked a lot about this in public. And he's much more, I would say, kind of hardcore

on this than I am. But Peter sort of characterizes Google as no longer a tech company. Peter and I just flat up calls them they're an anti-tech company. In his view, it's their enemy of innovation, like they're a blockade of innovation. They're no longer doing anything sort of, you know, disruptive. Instead, what they've done is they've established a new monopoly in search and they're using that monopoly in search to try to basically prevent new, you know, new technologies from coming to market, from, you know, including new competitors, but also just more generally, you know, a lot of new technologies. And, you know, they become very draconian and heavy-handed in terms of what goes in the search engine. And they've become very censorious and they ban a lot of things. And, you know, a lot of people get kicked off YouTube every day and so forth. So, so they become kind of anti-change.

Now, I would say that that's Peter's view. It's a very, you know, strong view. I would not say that about Google. I would just say more generally, like, that is the incumbent temptation. It is basically go from attack mode to defend mode, right? Go from being the pirate to being the Navy. Go from being the rebel to the rebel to being the empire. And so, yeah, it is a thing that happens.

I think, you know, you could probably just fairly say companies like that are caught in some sort of intermediate state, you know, where they still have elements of both. And, you know, it's kind of probably there a lot in life to kind of figure out which side of that they want to fall on. And what's sort of the most pessimistic scenario you can kind of up with with how technology plays out. Did the incumbent start using it to squash free speech? Like how do you think about this? Yeah, I think you could paint, yeah, you could paint maybe two pessimistic scenarios. So pessimistic scenario number one would be the one you just alluded to. And it basically is like, okay, um, this technology had the potential, uh, to be, to be revolutionary and

to kind of disrupt all these hierarchies and institutions. Um, but in fact, it turned out that it was fundamentally enabling technology for top down control. There's 1984, which basically is the pessimistic view, which is like technology is used by the state, you know, kind of the full, the full kind of, you know, I don't know, with the Hegelian, like, you know, world state dominant, like, totalitarian regime, Soviet kind of thing. You know, technology is used to basically control the populace in sort of this very overt kind of top-down way. There's this other really wonderful book called Orwell's Revenge, written by this guy, Peter Huber. And in Orwell's Revenge, he actually does a rewrite of 1984. And he does a rewrite of 1984 through the

optimistic lens, you know, sort of your optimistic scenario. And the optimistic lens, the twist that he puts in the plot in 1984 is he basically just makes the telescreens, you know, the sort of technology in 1984, these telescreens interactive, it's an interactive TV thing. He basically, he makes the telescreens two-way, you know, like the internet. Of course, then he elaborates out kind of the implication of that in the story. And of course, in Orwell's revenge, right, the rebels win, right? The totalitarian system is overturned because, you know, because people are able to organize and hear the truth and so forth through the two-way system. And so, anyway, yeah, the pessimistic view would be the 1984 model, contra the Orwell's Revenge model that

we kind of talked about earlier. And then look, there is another pessimistic view. And this is the Martin Gurry view. If you've read, so his book, is it the revolt to the public? The Martin Gurry thesis basically is yes. And I can hear him, by the way, talking about this right now in his wonderful Cuban accent. You know, yes, smart guy. You know, the internet is very good at tearing down you know, and tearing down these hierarchies, but the internet has not yet proven its ability to build governance systems, right? And so it has not, yes, you can build these new peer-to-peer networks, but can these peer-to-peer networks actually take power and actually serve the productive roles that the hierarchies used to serve, right? And so can you actually have, for example,

a functioning democracy, right, if what you have basically is basically people arguing with each other in this peer-to-peer network like all the time, right, and never basically forming us from some state power, you know, or if you have, you know, this, you know, if all of your finance goes peer-to-peer and you don't have any banks anymore and there's nobody to call when your money goes away, right? Or, you know, whatever the version of that might be, right? That they're basically, these networks are not, in fact, basically sufficient substitutes for, for the institutions that they're displacing. And he describes this as the scenario of sort of nihilism, which is basically that the peer-to-peer networks are good at destroying

but they're not necessarily good at building. And so he's fairly pessimistic. And I think this is why this is what Neil Ferguson also is reacting to in his book, which I think this is also kind of his late in the fear. He kind of describes it differently, but also his kind of late in fear that if the institutions are torn down, that there's no guarantee that productive things will be built on the other side. So probably that would be the other kind of really pessimistic scenario.

A lot of people get scar tissue. They're still sort of like fighting the last war. You've been around the first internet big wave in the late 1990s and the failures that happened there. How does that affect your thinking? Like Webvan, for example, failed, but the same thing today might be a resounding success. How do you switch your mind to not getting burned? Yeah, so this is really, yeah, so this is really fundamental.

This is one of these things again. I've realized this is actually really fundamental to human nature. And by the way, why I think you have to ask questions about whether life extension technologies are actually going to be a good idea. I think they are, but I think there's a real question about that from a broader kind of cultural societal standpoint, which is right, it's the most, to your point, it's the most natural thing in the world to try to learn from experience, right? And so I, you know, we all go through this, right? It touched the hot stove. It burns. We don't touch the hot stove again, right? And that happens at like age three

or whatever. And then like from then on, basically, like one way of just viewing like our trajectory through life is it's just touching hot stove after house stove after hot stove and learning don't do Don't do that. Don't do that. Don't act out at work. You know, you know, you learn all these things. And then one of the things you learn is like, okay, like, you know, actually what a lot of people learn is, what a lot of people learn is they work at startup. The startup doesn't work. You know, the one that there doesn't work. And so the lesson is don't work at startups. Right. Or by the way, the other lesson, right? The other lesson is a lot of people went through the last 50 years, this thing where they thought they had lifetime employment, right, at some big company. And then they got laid off at some point. And then they're, and then sort of the lesson is, well, don't work in big companies because you can't trust them. And they don't care about it. you and they'll let you off. And so anyway, it's like, it's like the most natural thing in the world to like sort of learn from these mistakes. And so what happens is, it's absolutely like scar tissue. What happens is you just, as you age, you just naturally build up all of this, all of

this sort of psychic scar tissue and you have all these cautionary lessons in your, in your head all the time. And you just, and therefore as a consequence, right, your aperture of what you're willing to explore as you get older just shrinks. And it's just an incredibly natural thing to have happened. And so I, so I would say the, the, the. The good news, you know, kind of the escape hatch for that is, is being in my day job. My day job is an incredible teacher that that's a bad idea, right?

Because what happens in my day job, right, is, you know, basically, you know, I've now been, you know, kind of doing startups first as an entrepreneur for 15 years. Now it's a VC coming up 15 years, you know, coming up 15 years. And basically what you see if you kind of swim in, you know, kind of this pond for long enough is basically you see, you know, your webband example. You see example after example of startups that tried something and failed. And then you basically, you know, you draw the experience of that, okay, well, we know that's never going to work, right? Because it failed. And you see kind of a lot of people around you kind of going through the same process. And then you just see example after example of basically what happens next, which is some kid shows up with that same idea, five or 10 or 15 or 20 years later. And they take another swing at it. And it becomes a gigantic success, right? And so, you know, use that to your point. Like, Webvan doesn't work. And now with now today you've got these. just giant successful companies in food delivery, right, that are like huge successes. And so like

that idea absolutely works. Let's hone in on that just a little bit more in the sense that the wrong lesson to extract from that experience is this idea will never work. How is it that we extract the right lesson from an experience? Yeah. So let's say, I think this goes to, I think you want to really understand the domain in which you're operating, right? So So the domain that I'm talking about, like the domain of startups is representative of sort of a domain that you might call sort of probabilistic. It's a probabilistic domain, right? So, you know, it's sort of inherent to the venture capital startup process, which is, you know, basically, I just give you the numbers. Like for top-end venture, right, for top-in venture back startups, about half the companies in any given period work and sort of generate positive returns and about half of them don't.

Right. And so we start out, like, every new fund knowing that half the companies that we invest in are probably going to fail, right? And by the way, they're going to fail for a bunch of reasons. Like, a lot of the failures are idiosyncratic, right, that, you know, the team, you know, breaks up or whatever, you know, something specific to the startup. But, like, in a lot of cases, it literally is like they're going to fail because they're just, like, flat out too early, right? It's going to be, you know, it's going to be a web van of its time, not, you know, whatever, you know, the new companies. And so a lot of us just, like, you simply flat out timing. And so, but you can see what I'm saying is, like, you're thinking probabilistically.

like you're right we're not trying to score 100 on the exam right and this is maybe a thing that is like a big difference right between the education system and the real world right is you know in the education system it's like we're supposed to get 100 on every test right it's like it's sort of this deterministic realm right in which we're you know there is a way to kind of achieve perfection and we're kind of going for the 4.0 grade average or whatever um you know in quote unquote real life right which is starting businesses or you know writing books right or composing music or playing basketball or playing poker right or basically doing anything interesting, we're in a probabilistic domain, right? And the probabilistic domain is just like we're not going to score 100%. We're going to score, you know, most of the probabilistic domains, we're going to score, you know, world class is like 60%, right? I don't know what the numbers are for basketball, but it's like if you look at, I don't know whatever it was like Kobe Bryant or LeBron's like lifetime record and it's like they've scored all these baskets.

And then the other fascinating thing you think to look at is just, you know, the ranking of the basketball players who have missed the most baskets, right? And it turns out like it's the same people. yeah like Kobe's Kobe might be number one in the list of like total most baskets that is what it is right um is that Annie Duke has this great a great term uh she she she has brought it for the world of poker um in her book thinking it best and she calls this she says what a lot of people do is is they basically when some when they're in a probabilistic if they're in a deterministic domain and they get less than her percent then there's then they can self-partique and they can

say why didn't I get 100 percent I should have gotten 100 percent and I did something wrong right and that is a correct analysis like you could have gotten 100 percent of that test you probably You know, you didn't study hard enough. You didn't read all the material or whatever. Right. In a probabilistic domain, it didn't work. Okay, it's again, the scar tissue. It's now I do what she calls resulting, right?

Which is basically now I need an explanation for the result, right? And the explanation for the result is, you know, I don't know, I should have this or that or I should have bluffed or not bluffed or done this or done that or not started this company or waited five years or, you know, whatever, whatever. And she's like, look, it's a probabilistic domain. Like some percentage of them are simply going to fail. if you try to explain what fundamentally is kind of the result of randomness, right, through a narrative, like you're basically fooling yourself. Like, you're making yourself, ironically, you're making yourself miserable in a counterproductive way.

Right. And the right thing to do, right, in poker, the right thing to do is to like play the next hand of poker, right? The exact same way you play the previous hand, right? Because you're operating in this domain of probability. The right thing to do if you're Kobe Bryant is to, is to shoot the next, you know, the next basket. The right thing to do as an entrepreneur is to start the next company, right?

the right thing to do as a venture capitalist is to fund the next startup, right, even in a space where you've already tried and failed before. And then I would apply in tech, I would say, I believe in the strong version of this. I used to kind of say this to try to kind of exaggerate to make the point, but now I don't think I'm exaggerating, which is I no longer think there are any bad ideas. I no longer think there are any qualified people starting tech companies that actually have bad ideas. I think all the ideas are good ideas.

I think it's just a question of timing and execution. We try really hard to say, oh, this idea is stupid. will never work, right? Like, we try really hard to never do that. Instead, we try to say, okay, this idea, if this is a smart enough person and they put enough work into it, then this idea is probably a good idea. It is likely to work at some point. And then we just have a very specific question, which is like, is this the right person to bet on and it's now the right time to make the bet. And then as evidence of my strong view, I basically, I basically say you can go through the entire, I think at this point catalog of all of the failed.com ideas of the late

in 1990s, and I believe they've now all worked. How do you assess the judgment of founders? If you're not assessing the idea, how do you assess the judgment? Yeah, so let's say there's two categories of, two categories of founders, two ways to do this. So there's sort of, you know, there's the ones who've done it before, right? And so the ones, you know, the ones where this is their second or third or fourth time starting a company, you know, with them, you have this just obviously enormous advantage, which is you can basically look at the work that they've done, you know, it's like anybody else who's

done, you know, who now has a track record. You can look at the work that they've done. And again, on this, it's not that you're necessarily looking for the track record of like the level of success per se, right? Although, you know, is Napoleon, it's a Napoleon, you'd rather have a lucky general than a smart general. So like, you know, somebody who's had a highly successful company once, right, has, you know, people has an enormous benefit of the doubt when they walk in the door for obvious reasons. But, you know, but even people who haven't had a big success before, it's like, okay, you can look at kind of how they did the work, right? And so you can look at like, you know, how did they prosecute the opportunity, you know, the previous time, you know, and you know, and you you can talk to the people, right, who they work with. It's like, okay, you know, how were they under pressure? How were they on, in terms of, like, inventiveness? How were they in terms of, you know, persistence? You know, how did they make the decision about when to give up, right?

You know, or when something just, you know, simply wasn't going to work and so forth. And so you can kind of, you know, you can kind of learn from their experience. You know, the harder one is somebody brand new, right? The harder one is somebody shows up, you know, right at a college or something. Or, you know, or, you know, these days, right, the ultimate golden credential is they got admitted to a top of school and then dropped out after one day. Right. So, you know, it's sort of the kid, right? And, of course, you know, I say kid because I, you know, part I think of myself because, you know, this was me at one point. And look, a lot of the real breakthrough companies, a lot of the big franchises, you know, Mark Zuckerberg had not had a job before he started Facebook, right? Like, you know, the Google guys came straight out of Stanford, you know, Stanford, the Ph.D. program and so forth and so on, you know, Bill Gates dropped out of college. And so, you know, a lot of times these big breakthrough companies are people, you know, they happen for a record. Like, their track record, you know, you could ask for their high school to, you know, GPA or something, but like there, there's no track record, right?

And so there you're kind of, you know, evaluating, you know, de novo. And I think there what we do, the cliche is basically right, that it's, you know, some kid with some crazy idea and that some crazy VC gives us some money and, you know, some miracle happens and oh my God, you know, what a weird, you know, non-reproducible thing or whatever. The reality is the kids that make new things work from scratch, it actually turns out that they actually have been deep in the domain. a long time. On almost every case, they've been thinking hard about the problem that they're trying to solve, actually in a lot of cases for many years. And what that actually means, you know, this is actually really kind of interesting. And maybe software is kind of this unique kind of area like this. But, you know, as a consequence, like in software, you can have a 21-year-old who's basically been a professional level programmer for 10 years, right? Right.

Because, you know, you can trace it back. And it's like, well, we hear the story all the time. It's like, well, the specific story you hear all the time. You know, I really love video games, right? And so therefore, right, when I was, you know, 11 or 12, I, you know, learned how to code so that I could figure out how to like make my own video games. Based on that, I found it really interesting how, you know, for example, clans or tribes form inside games. And so when I was in high school, I built this app that, you know, did people matching for whatever World Warcraft, you know, guilds or whatever it is. And then, you know, in college, I got a degree in computer science. And then I did this project, which is to do this new kind of social networking app. and now I've been thinking about that and building that for the last five years.

And now here I am. And now, you know, after 10 years of thinking about this, now here's my new social networking idea. Right. Like that, this is not a rare thing. And literally, they've been thinking about this now for, you know, to think about the specific thing for five years and the general kind of pattern or category for like 10 years. And of course, you know, for things, you know, this, of course, is heavily biased towards domains in which kids get to participate, right?

And so this is less true and, you know, anything involving, you know, there's lots of areas, you know, there's lots of various technology where, you know, 11-year-olds are not working on it. But there are areas increasingly where they are. And so, and so basically, it's basically what we call it the idea maze. It's basically the backstory. It's what have they done in the past to really kind of reason their way through? And often, and often you literally have people who have been like writing prototypes. And a lot of the time, you actually have people who have running code at that point, right? And then it's like, okay, now you're dealing with somebody where, yes, on the surface, they're 21. In reality, they're already five or 10 years

in the journey. And you're like, okay, now I get it. Now I have somebody who's like a primal creative force who's actually like really thought deeply about this. And so it's a, so it's a, it's a much safer bet than it looks. Can you walk me through in detail how you make those bets? Like what is the big capital allocation decision making process that you use at a 16. So there's basically there's three tiers. The way we operate is there's basically three tiers of bet, um, sort of small, medium large. And the small one is so called, you know, C funding. The medium one is so called venture funding. and then the large ones are growth funding. You know, the seed bets, the small ones are, you know, two, you know,

I don't know anywhere, two to five million dollars on average, which, you know, is a lot of money, absolutely speaking, but it's small in the context of, you know, it's small in the context of the global economy. It's small in the context of funding your businesses. It's small in the context of our funds. The venture bets are much more serious. The venture bets are 10 plus million. And then for the venture bets, they're more serious for us because that's when we get really

involved in the companies like that's when they form a board of directors and we have you know somebody who goes in the board and we tend to really like work hard on the company and so that that's like a you know that's signing up from our standpoint to like a 10 year journey um with the company including you know an obligation to put more money and later rounds and so that that's a that's a more serious bet that sort of sort of size 10 10 million and up and then the growth bets are for companies that have kind of you know they kind of hit their stride and they have a business is working and they're growing and so it's like expansion capital so you know it's a different thing and you know the check size there is sort of 50 and up and then you know on the high side it's a hundred

200 or 300 or 300. So the amounts of money get large. But at that point, you've got a business that's working and you're trying to figure out how to scale it to kind of to be a global champion. And then there's just there's there's different criteria. You know, there's sort of similarities with the three, you know, we're trying to, it's the same, we're trying to back the same kind of founders and the same kind of businesses across the three categories. But, you know, there's very different decision making process, very different criteria depending on the stage. On the seed side, it's almost 100% a bet on the people. You know, it's a little bit on the idea, but it's mostly the people, and it's, and basically the way you evaluate the idea at that point

is, like, you're basically evaluating the idea as a lens to evaluate the people, right? So it's like, you know, it's like, it's like, it's like, it's like I was talking about, like, the 21-year-old comes in with this, like, crazy idea, something they've been thinking about working out and they have a college project or something and they want to start a company. And it's like, you're evaluating the idea, but really what you're doing is just like, okay, is this person capable of doing this kind of thing. And then you're evaluating the idea and the work they done so far to kind of just draw a beat on how good the person is, as opposed to saying, oh, you know, we've been waiting to back this idea. At the venture stage, there's the people component, but there's also this other

really important thing, which is you have to have some reason to believe that this thing is going to be the one that wins because we sort of take on this sort of formal conflict at that point. We get very involved in these companies and we, you know, we can't invest in competitors after that in that category. And so then there's this thing of like, okay, out of all of the different teams, both current teams and future teams that might pursue this idea, you know, is this really the one that has the best chance of going all the way to victory. And so that's, you know, trying to kind of dig in harder. They're kind of a competitive advantage and, you know, capabilities at a deeper level.

And then if the growth side is a, you know, that's more of a, of a business analysis. The growth side is where you start to get to start to make decisions based on numbers, right? And so you start to get to evaluate, you know, revenue growth and market size and, you know, profit margins and, you know, and then by the way, but also you're still evaluating the people. you're still evaluating the idea, right? And then, by the way, at the growth stage, you're also still looking for new ideas, right? You're looking for existing businesses that also have new growth opportunities inside them. And so you're looking for basically, you know, is this person so good that they have additional kind of venture quality ideas that they haven't even gotten to yet?

And so, you know, the best case scenario is you make this investment in a company that's doing X. And then over the course of the next five or ten years, they also do Y and Z and A and B and C. And they just keep layering in all these new things. and then you get this kind of multiplicative effect. Is there a challenge function internally? Like, how do you decide in terms of making the actual decision? Yeah, so there's a, there are, if you kind of pull top-end venture firms on this, you'll get actually every possible answer.

And so there are some firms that run on a unanimous vote model where they literally need unanimity. You know, there are other firms that have a, you know, they have a majority thing, or they need a certain number of people to get critical mass. There are some firms that run a top-down so-called investment committee where the younger partners in the firm get to propose ideas and then there's sort of a council of elders that either does the gladiator Joaquin Phoenix thing, you know, thumbs up or thumbs down.

We have optimized very strongly towards what we consider to be kind of the most aggressive and most, you know, anyone to say contrarian model. So our model is what we call single trigger puller. There's no vote. There's no investment. committee. There's no override. There's no like I don't, you know, I formally sign off on all, you know, Ben and I formally sign off on all the investments, but like I don't, I don't like

evaluate the investment proposal and then basically do thumbs up, thumbs down. Like that's not, like I don't do that at all. Instead, what we do basically is we basically, we basically we basically delegate budgets. Like so the governance mechanism is budgetary. So we basically, we raise a fund. We have a certain number of investment partners. We delegate the budget down to those partners. And then basically, if you're a partner at our firm, within your budget envelope, you could make whatever investments you want. There are expectations around how you're going to do that, right? And so there's an expectation you're going to do the work, right, by which it's going to be like you're going to go in like really deep. You're going to like,

you know, talk to all the people. You're going to really investigate everything. We don't mind an investment that doesn't work. What we do mind is like we're in the wrong one and the right one was out there. Like the winner and the category was out there. We didn't even know about it. Like that, that in our firm is like a big problem. And so you're expected to do the work and we, you know, we have, we have a whole kind of system for that. And then there, you know, there is you're expected to, like, you have to communicate, everybody has to know what you're doing. There's no secret deals. You have to, you know, and you have to be willing to kind of describe it. And you have to, you know, be willing to kind of deal with, you know, we weigh, you know,

everybody weighs in on everybody else's things. And so you have to be willing to kind of have the conversation. You know, because you know that you get to make the decision, you know, you are hopefully less offensive than you would normally be when other people say things like, this is really stupid. Why are you doing it? You know that the peer pressure basically doesn't turn into an actual explicit veto. Like, you can still do the deal and you know that you're in a firm that really prizes that and wants us to do investments like that. And so, but, but, you know, you do have to, you have to be willing to, like, sit in a room describe what it is and you have to be willing to, like, listen to people, you know, crap on

it, right, without getting dissuaded. And then, you know, there is this thing, this conflict thing, right, which is, it's a big deal for us internally, which is, it's probably our biggest limit in our, our ability to do business as we take on these conflicts. And so, you know, the stickiest conversation we'll have internally usually is, like, boy, like, it would be, like, between teams, right? It's like, okay, if one team does or if one partner does this investment, then it conflicts the entire firm out of the category going forward.

And so, you know, you can imagine pretty vigorous arguments and debates around that. But the result of that is basically it's like, I think we're way out on the edge of being able to be, you know, sort of creative in the investments. We're able to back the entrepreneurs that color outside the lines, right, that basically come in with ideas that sort of, you know, break the existing paradigm, you know, that there's no precedent for, you know, that just we're at a more structured or formal. firm, it might be like, well, I don't even know what box this goes in, right? Like, it's just, this is so weird and, like, offbeat.

Like, how do we even classify this? And then, you know, if we have to explain this to the council of elders, how are they, can ever understand it, right? And in our firm, it's like, we can make all those bets. And the history of venture and new technology is those are often the most successful bets. So that's why we've optimized that way. Wait, I didn't get charged for my donut.

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And you also get speed. It sounds like a lot of velocity with how fast you can make decisions. Yeah, we have a partner. I want name, I want name names. We have a partner where he was in the East Coast office. I was in the Palo Alto office of an East Coast firm, a firm that had historically grown up in East Coast, very successful investment firm. But, you know, he would have to fly to New York and present all of his investment ideas to a group of five senior partners in New York. And by the way, five senior partners in New York incredibly, like, established, you know, legendary investors, like with incredible track records, with like absolute moral authority to be able to, you know, make such judgments.

The problem, exactly to your point, the problem is, yeah, speed. And then just like, you know, this stuff changes, right? You know, the scar tissue thing, the scar tissue thing, there's a specific form of the scar tissue thing that we see a lot. I call this sort of the, it's like the idea event horizon or something, which is there, there's a point a lot of people reach where they're just done with new ideas. It's like the general version of the problem. It's just like, okay, like I got through the PC. I got through the internet. I got Facebook.

All right. I got, okay, food delivery works. But like TikTok, like really? Yeah. It's just too much. It's just like, okay, this is just at this point, the world is getting ridiculous and like, I don't want to process this anymore. And like almost everybody hits that point at some point. And so I just think like the, yeah, I just think that the bad way to do venture is to have people who have reached that point doing sign off on the decisions. And I hope that and I have not reached that point. But even if we do reach that point at some point, we have the firm to continue to be able to make the good investments. What have you learned over the years about making exceptional decisions that most people miss? So quite honestly, I think a lot of it is embracing the probabilistic nature of the domain. You know, a lot of these questions like Venture teaches you, they're very direct versions of these lessons because it, you know, what is it?

The old Submariner's slogan is, stupid will be punished. When you pass on enough companies that turn out to be these giant, you know, kind of global, you know, kind of behemous, you know, at some point, you're just like, okay, like, obviously I'm not, I'm not a super, like, I have to have some level of epistemic humility. because I'm not making all these decisions properly. And again, the nature of the domain is I'm not going to make all the decisions properly. Like what each of the top venture capital capitalism all time has in common is they all, each of them missed almost all of the great deals of their generation. The bad news is you're going to like make all these mistakes. The good news is you don't have to score 100%.

And not having to score 100% basically means you can take chances, right? And specifically the way that you instrumentalize that is basically, and we talk about this a lot of said to firm is success or failure is not at the year. unit of an individual investment, right? Success or failure is at the level of a portfolio, right? And so, and we basically see these portfolio effects everywhere in the business. So we see the portfolio effect happens to the level of individual partner. It happens to the level of a fund. It happens to the level of what we call a strategy, which is like a basket of investments, you know, in the same theme, right? So let's say we're in our firm and we decide, well, I'll give

an example. We have this big gaming push right now, right? As we just brought up this new gaming partner we're very proud of and we've got this big gaming push and we've been kind of investing in gaming now for a while and it's like okay so we want to go out and make whatever you know we want to go out and make whatever you know bets in new game companies and so we we literally have a strategy to like back new game studios new game companies and like we go out and we invest not in one of them but we invest in 10 of them right and you know in making different kinds of games right you know different different kinds of approaches and then we're going to evaluate the success of that program not based on any of those individual investments but based on that you know the basket as a whole and so

when you liberate yourself away from I have to get this decision right to I have to execute a strategy that is going to result in a series of 10 bets and then I'm going to be evaluated not by any individual one and by the way I'm not even going to get evaluated by the average outcome right I'm going to get evaluated by the total performance of the basket and if one of those bets accounts for 99% of the profit of the basket that is a perfectly fine outcome right Well, we see this a lot. We do performance reviews, right? We do performance reviews.

And so it's like, okay, we do performance reviews of an investment partner here. And it's like, well, they've made 10 investments. And, you know, one of them is just this huge success. And the other nine are like, you know, sucking wind. And it's like, okay, is this a good venture capitalist or a bad venture capitalist? And it's like, well, you know, in any domain that's not probabilistic, you say, this person is terrible, right? You know, it's batting average of like 100, you know, out of 1,000.

It's like this person's awful. And there's always the temptation to say, well, this one thing that's working is it's like it's a fluke, right? And so who knows whether they'll ever get it again? And it's at that point where I put my head up and I say, we're in the fluke business, right? Like the whole point of this is to get the fluk. And so, of course, that person should get full credit for the fluke, right? And in fact, I hope they go make 10 more investments and get another fluke.

And so anyway, it's basically like it's getting into a domain in which you can basically make those risky bets in a way where you know that you're not going to lose everything if you don't score 100%. And, you know, and look, like not all domains are like this. like, you know, the person running a nuclear power plant doesn't get to live in this world, right? But, you know, it would put this way, anybody doing anything creative, right, does live in this world. And I, you know, I think the creative artists of all kinds, you know, basically live in this world and the really good ones are unafraid to take the bets, you know, because they know that this is the domain they operate in. We sort of talked about the probabilistic thinking in terms of the magnitude and test taking as it relates to the education system. To me,

I mean, from the other side of looking in, the education system seems a bit dysfunctional. You're a parent. What do you think is wrong with it? And how do you go about navigating it? And what can we do to fix it? So it's completely unfixable. So it's like none of the specific point things people are worried about are fixable because the whole thing is built in a certain way. So it goes back to this, this, it goes back to this historical thing we started with, which is it's a mass education system.

Right. So it's a mass education system that was created in a time. in time and place. And it was created in a time and place. And you know, you probably know the history of this. It was created in time and place, you know, roughly 100 years ago, 110 years ago. And there were a set of, you know, theoreticians and youth names like, you know, John Dewey. And they, you know, developed a, you know, a system. And at the time, by the way, at the time, it was like a huge advance, right? Because it was like, we were going from like a nation of farmers, right, into this, into, you know, this sort of second industrial revolution and

into the 20th century, you know, most kids didn't have much education in the 19th century and, you know, group in farms or whatever. And like, they, they, They knew, the theoreticians, the experts knew, like, we need a system to educate all the kids. And then they built a system the way that you build systems, you know, the way that you built systems in 1910 or 1920, which is you built a mass manufacturing system, right? So you took all of the same methodologies that were being used to make the factory for Model T cars and all the same methodologies that were being used to do, you know, radio, you know, RCA was doing to do radio broadcasting of the masses. and the, you know, the General Motors, you know, General Electric was using to kind of, you know, build out the electrical grid for the country, you know, these, these, it's a mass system. You built a mass education system. And you built it like a factory, right? And that made sense because, number one, that let you get to mass a scale. That's all the problem they had at that point. But the other thing was you knew that you were training kids fundamentally for the industrial economy, right? And so you were training kids at some fundamental level to work in factories, right? Or, or by the way, to work in offices. And of course, the offices in those days, were also factories, right? There were factories for knowledge work, right?

And so if you know the history of mass manufacturing, there were all these ideas like time and motion studies and all these guys like, what's it, Turner, you know, who had these, you know, who optimized mass manufacturing. And basically all of the leading intellectuals of that era basically said we use that same battery of techniques we use for mass manufacturing. We're also going to use for mass media.

We're also going to use for mass education. And so these are, you know, these are factories to, these are schools are factories to stamp out kids who are optimized to work in either, you know, if they're blue-collar to work in a literal factory or if they're white-collar to work at General Motors or General Electric in a conference room, you know, in a giant hierarchy, to be an organization man. And so we built that system, and then we set it on autopilot. And it's been an autopilot for 100 years, and here we are. And it doesn't fit at all to the world we live in today, like not even a little bit.

And then, of course, it has suffered the fate of every institution that sort of goes across multiple generations, which is it has been taken over by a set of people, right? incentives, right? It has been taken over by a set of people who have absolutely no intention to change it, right? 100% they're not going to change it. The people who run this system, 100% of their power and status and authority in the world and their income and everything else in their lifestyle, it's 100% bought and paid for by this legacy system. And of course, they're not going to change it. And so it's not, I'll tell you one thing I don't believe in is reform. I have all these friends that work on like, you know, school reform. God bless them. Like they're just the wonderful most wonderful sweetest well-intentioned people in the world and they're just burning. huge amounts of money and time on trying to reform the system that has absolutely no intention to make reform. And they're having no impact whatsoever. Like, it's not working at all. Of course. Like, we have a biological tendency sort of to defend our territory, right?

Yeah. So it would be hard, especially with the organized unions and all of this other stuff that's involved with the education system to reform it. Well, it's like the tip off, the tip off, if they just, you know, step back and think about it for a second. Like, you could be pro-union or anti-union. You have whatever, people have whatever reviews in units they want, organized labor, you know, big debate for a long time.

whatever you want, but the idea of unions, the idea of unions of public sector employees, right? Like, so you now have people, you have a double layer of civil service protections and union protections, right? And you're going to reform that system? Like, no, you're not. Like, they're going to take your money laugh at you and like nothing is going to happen. And so, yeah, there is no, unless there is no fix.

There is only one thing to do, in my opinion, there's only one thing to do. which is to build the new system right and the new system has to get built from scratch it has to get built the hard way right it will probably not look right or sound or smell like you know these you probably you know the new system will probably not be a giant hair it'll probably be something else right it'll look like synthesis or something like that it'll be or it'll be like it'll be distributed you know it'll be uh you know like i'll just i'm just going to i'll paint a vague picture of what it might be but it might be you know look the country clearly right now and i'm actually we're actually living this so they're six year old right now like there needs to be

like a homeschool network, right? There needs to be a whole, like, support structure, right? And network and knowledge flow and expertise flow and talent, hiring, pipeline, right? And, you know, quality standards and resources and activities, right, for homeschool kids, right? And for the, for these, like, microschools that are popping up all over the place, right? And, you know, and by the way, like, now is the perfect time to do that, right? Because then the post-COVID, you know, all the changes you're well aware of. But, like, you know, there's this massive spike in schooling. There's this massive spike in parents who are very unsatisfied with formal, you know, are sort of newly unsatisfied with the legacy model. And so now is

obviously the right time for this. And look, there are lots of examples. There are lots of people working on this and there are lots of early examples of this. And so I hope something really takes here. It's also interesting when you look from the outside in that there's sort of like no individual to blame, right? Like I feel for the teachers in the classroom. I feel for the principals. I feel for everybody involved in the system. But the end, outcome is just terrible. Yeah, Charlie Munger has this great thing I really like, which he says, look, if you often in the world, if it's a great example, you often have a system and the system has incentives

and the incentives result in terrible behavior. And then you have a choice, which is do you blame the people who are exhibiting the terrible behavior or do you blame the people who created the incentives, right? And he believes, and I agree on this. I think 100% you blame the people who create the incentives. Right. I think you're right. I think when you take human beings and you put them in a system where they have bad

incentives and you get bad results like at some level it's not their fault like you know you can say maybe they should resign a principle or something like that but like most people need to live their lives and they need to like you know put food at the table for their families and so forth and so like I just don't have expectations of like mass revolt I guess people's self-interest and so yeah no I totally agree with that and so therefore I think you have to look at incentives and then you have to look at the people who are putting the incentives in place and you and you have to judge them and and that's the that's the thing with this thing is like the people who put these incentives in place are debt like they're gone right like we we can you know i can i can sit here and yell at john dewey

all day long it doesn't matter like he's you know he's he's gone um and the people who are running these institutions now are just basically at some fundamental level executing scripts that were developed hundred years ago and like it to some extent it's like not their fault and then look you know there is corruption right i mean like the level to which a lot of these legacy systems are intertwined with the political system you know up to the level of just overt corruption like at some point, you're in this, like, really sleazy zone where, you know, apologists have just being bought off to, you know, to basically preserve a system that's obviously, you know, dysfunctional and corrosive. And so anyway, you can certainly, you know, I don't mean to let

everybody off the hook. But, but yeah, look, the key thing at the core of it is, yes, how was the system constructed? And then, and then what are the, what are the incentives for it, for its continuity? And again, that's why I said, like, I'm not, that's why I think reform is impossible. Like, there's no way at this point to go in and change the incentives inside one of these systems. It just, there's too much interest and interest. It just can't be done. Well, a political policy platform look like that encourages innovation. What are the sort of like key variables that matter?

I don't know if it's too. I don't know if it would work because it's a little bit too abstract, but it is kind of at the heart. It's a little bit at the heart. It's a little bit at the heart of actually a lot of the left-end critique, actually a business also. So you see it actually, there's a critique from both the left and the right. And I think the critique, the way the libertarians, to say,

the libertarians have the answer. But the way the libertarians would put it is there's a difference between being pro-business and pro-market. And so, and what they mean by that, basically, is it's like there's one concept of a business, right, or an entity of any kind. Let's start with the business, but we can apply the same thing to other kinds of institutions down the road. Like, there's one form of business that's like actually forced to compete in a fully competitive market, right? So sort of fully subject to market discipline, right? And so like if whatever, you know, and I don't know you might say like the car industry works like this or something, right? right, which is early, I don't even, let's, actually the car industry gets repeatedly bailed out.

So they're probably not the right example. I don't know, soft drinks or something. It's like, you know, Coke and Pepsi and Dr. Pepper and so forth. Like, you know, every time you, you know, buy a can, a soft drink or, you know, any, you know, I went to, you know, it's a gas station the other day. And it's like, you know, there's like 400 different, you know, bottles and cans of drinks right on the shelves. You know, those companies are like forced to compete every day, right, for every purchase. And so there's a, there's a standards bar that they have to hit.

And then there's, and sort of libertarians are kind of classic free market economists are like, that's market economy. Like in the market economy, you don't want businesses to kind of run and tramble, but you want them as you want them subject to market discipline. You want them forced to compete all the time. And that's how you get quality control and innovation. And then there's pro-business. And pro-business, basically the problem with pro-business is basically what happens is a lot of industries over time end up not like that. They end up not being actually a fair and free market with market discipline. as something else. And the business world, what they end up with is either just, you know,

one company with a fallout monopoly or more commonly they end up with what's called an oligopoly, right? They end up with a small number of companies that sort of dominate the entire sector. And then what you get, and you know, you see this over and over the economy. It's like, you know, three car companies, you know, for a very long time. It's, you know, four movie studios. It's three accounting firms, you know, it's just, you go right down the list, right? And it's just, you know, three big banks, you know. And so, and these are oligopolis. And oligopolis are not monopolies. Like each company doesn't have, you know, there's no one company that has total control, but, you know, now you've only got three companies. And our three companies really, is that sufficient competition

to really have market discipline or do they kind of end up as sort of a cartel? And there's all these ways that they like signal to each other to price fix and so forth that sometimes verges into overt price fixing. And then what happens is the oligopolis, basically, they get big and stultifying. And then what happens is they basically end up sort of colonizing politics. And then this leads to this concept of regulatory capture, right, where basically the, you know, the companies end up basically essentially occupying the government, you know, usually at the same time the government's occupying the companies. Right. So you end up with these like giant regulatory edifices, you know, Dodd-Frank and all these things,

you know, you end up with, you know, these bailouts. You end up with all these, you know, intertwining, you know, revolving door, right? Where you've got these regulators that all know that they're going to get, you know, these really high-paying jobs at these companies when they, when they step out of government service or, you know, or, you know, it's like, you know, my friends at Goldman Sachs, you know, like the number of people who had, like, you know, Goldman Sachs in their business car who now worked for the federal government is just incredible, right? Like, it's just this incredible talent flow, right? And so you end up with this sort of intertwining of a business and government.

And then, of course, you know, we experienced this in a very tangible way, which is it's okay, then, you know, imagine being a startup, right? imagine being a new bank, right, or a new car company or a new movie studio or a new whatever going up against, you know, these cartels. And it's just, you know, it's just like, oh my God. Like, you know, it's like, it's like a mountain that is, you know, for, at least for most entrepreneurs, it's almost impossible to conceive of climbing. Right. There was not a new car company in the U.S. that mattered for 80 years, you know, between the establishment of the oligopoly of the U.S. and then the merchants of Tesla. Right. So that's like a, it years is a long time.

And so, you know, what is that, right? It's, it's certainly not a, free market economy, right? It's not company subject to market business plan. But it's also not just like flat out, top down socialism or communism, right? It's something else, right? It's this, it's this kind of hybrid mutants, you know, kind of entangled thing. And then you can generalize this idea to, you know, many of these other topics. And so it's the same, you know, education is through that lens, education all the sudden starts to make a lot of sense. Because like, what is education? K through 12 is a monopoly, right? It's a government sponsored and run monopoly. And so, of course, it's going to, you know, it's a Soviet, it's a Soviet system, right? It's going to, it's

going to, it's run exactly the same way education in the front of the Soviet Union. Of course, it's going to generate the exact same results. Actually, it's going to generate worse results because the Soviets were really good at math and science. And then, you know, higher ed is a cartel, right? It's quite literally a cartel. And the universities form, you know, they have an industry group, they have these industry groups that they run. And then they have what's called accreditation. And they control the accreditation process. And you need to get accredited to get access to federal student lending and federal research funding and all these other things, right? And so it's a flat oligopolistic cartel. And so, of course, it's going to be non-innovative.

And of course, prices are going to spiral like crazy. And of course, there's going to be more government subsidies over time. And of course, the quality is going to collapse over time. The sort of intellectual version of the platform would be sort of anti-monopoly, anti-concentrated power, anti-government, you know, government entwining itself in the economy, right? Anti-regulatory capture, anti-legacy institutions that are no longer being run by their founders, right? Anti-systems for which there's no competition, right? Anti-anything that basically tries to, you know, do what's called rent-seeking, you know, to kind of, you know, extract, you know, basically economics from the broader society without competitive

alternatives. Like that would be the core of it. The right-wing populist version of that, I think, is sort of very straightforward, which is basically, you know, it's Tea Party, right? It's basically just like, how absurd is it that we have these huge things that just keep getting bailed out? Like, what the hell? And then, you know, by the way, you know, sort of Occupy a Tea Party actually kind of had the same, you know, in a lot of ways, the same argument, you know, from the different sides of the spectrum. And then, you know, the modern form of that is, you know, the, you know, the left wing version of that is, you know, you do hear it.

And, you know, the left when people argue more directly for the government should just do all this. But, you know, they are on to something, I think, with the critique of like, look, like, are these even companies, right? Is this even capitalism, right? And is the market actually delivering what the market is supposed to deliver. You got my vote, man. When are you running?

Never, never, under any circumstances. You once said that you had this little, I remember this interview. It was like several years ago. You had this little mental model of Elon Musk on your shoulder. Is that true? And if so, why? And who else do you have mental models of and how do you use them to help you? You know, one of the things is you kind of, you know, as you study kind of, you know, very kind of smart people and, you know, people who have like done a lot of important things. It's like, you know, they all had some way of operating. You know, they all had some theory, right? Some, some structure, framework of the world and how it worked and how to cause things to happen. And one of the things that's interesting, you know, there are many such frameworks, even the same kind of person that, you know, there are many very, of the most successful investors, generally each of them had some unique take on the world. And they weren't necessarily compatible takes, right? And they just figured out, you know, kind of a way to do things. It's very different than the way a lot of other people did things. And the same thing for CEOs and entrepreneurs.

And, you know, by the way, same thing for artists and, you know, any other kind of, you know, these sort of very sort of successful people. and so like I'm pretty convinced there's no way to like synthesize all of their kind of different approaches and views and frameworks into a single model like it's just it's too complicated and it's too contradictory and it it wouldn't really work at least I don't think so but what you can do right you know when you and then what you do is like you know as you go through life you you know you talk a lot about this and your work and we talked a lot about this today is you do try to assemble your own kind of worldview and your own framework and your own way of sort of doing things. And by default, your kind of framework on that will get probably narrower over time because you'll get kind of more locked and more set in your ways and you'll get more resisted to new ideas. And so, like, one of the ways to offset that is to, like, quite literally have, like, have the mental model for how somebody else would think about the same situation, right?

And in a way that's, like, not threatening to you, right? Which is, it's not like, okay, this is like, now I have to have an argument with myself. But it's more just like, okay, like, if, you know, I take your pick of who you go Meyer, but in my case, it's like Elon Musk or, you know, or Steve Jobs or, you know, Andy Grove or Peter Thiel, you know, or in the room, right? You know, what would they say? And, you know, and by the way, this itself is a daunting challenge because these people are incredibly smart and I don't know that I can even, you know, kind of replicate their thought process. But, you know, I do know, I do know a fair amount about their thought process. And, you know, it so happens that I also have known them, but also,

like, you know, they've both have written and talked a lot about kind of how they, how they think about things. So then it's like, okay, what's my mental model for, yeah, how would Elon think about this, right? And so I just get, you know, the simple one, like the simple one for Elon, the simple one for Elon, and Elon's very complex guy, but the most simple kind of form of Elon that's useful in this way is what he calls first principles thinking, right? Which is it's like, okay, like, basically in Elon's view, we all basically just like assume too many things from the way things are. And the right thing to do is to kind of, you know, he kind of gets this from physics, because he was training as a physicist originally, which is a very different mentality than the one that I come

from. And it's basically, okay, strip things all the way down to basics again and start and basically start the logical thought process over again. Right. And so basically, you know, go deeper into the idea to the very foundations and then build your way back up. And, you know, just going through that process is a way to kind of really catalyze your thinking. You know, Peter's form, you know, Peter's kind of core mental model that, you know, that I've kind of drawn from is, you know, his focus on this philosopher Renee Gerard and this idea of sort of the memetic dynamics and, you know, people copying, you know, people copying behavior between each other. And then also, you know, rival race forming and how that plays out, you know, human dynamics. And Gerard had this

very kind of sweeping whole theory about how that kind of determines how all society kind of functions. And maybe that's not completely true, but like there's clearly a lot to that. And then, of course, there's this scapegoating cycle, which seems to play out every day, especially when dealing with any of these internet things or systems things networks you know it's a very useful framework and so you know being able to kind of have an imaginary debate with peter and kind of say okay what would the lens on that be you know then obviously we could go on a length but you know jobs and grov and these guys had their own their own use of things and so it's just it's a way to kind of keep the actual you know i don't know keep keep ideas flowing and then sort of enable yourself or force

yourself to like basically stress test your own ideas uh through a lens that's not just your preconceptions, I think is quite helpful. I think you get a different perspective, right? Like, you see the problem through the lens with somebody else, which helps you actually understand the problem a little bit better than you do just seeing it through your own lens, because we can't fully understand a system that we're part of. So by assuming somebody else's persona, we get more detailed information about what we're missing and we eliminate some of our blind spots. And then I also think it's also, I also think a lot about it's like, it's also keeping a high bar for yourself and for your work, right? And, and, and,

And this maybe is also something this also has to do. Another thing that happens with kind of age and success is, and we see this actually with founders. It's like at some point, there are some founders where they start, you know, company three, four, five, six. At some point, they get tired of doing the work. Like, they get tired of going all the way back to basics. Ben and I had this, we had this, we had this, we had this, we talked to Jeff Beasles about

this at one point. And, yes, that's why we were starting a venture capital from another company and another startup. And we asked him, well, if Amazon, you know, for some reason, Amazon got sold or whatever, and you were a free agent again, like, would you start, you know, would you start another company? And he laughed and he said, you know, not in your life. He's like, you know, he's like, that would be going back to kindergarten. And he's like, look, don't get me wrong.

I really like to kindergarten. Right. But like, you know, having built Amazon, I'm not going back to kindergarten, right? You know, having built Amazon, I'm not starting a company again from scratch. And so, you know, and so there's this, it's like where the first principles thing comes in handy, which is it's like, okay, like, what's the bar? Right. Like, what's the bar that you're applying to your own work and to your own thought,

process. And are you actually being as rigorous as you, you know, are you being as rigorous at, say, 50 as you were when you were 25? And are you able to actually, you know, because when you're 25 or whatever, you're doing something new, like the world is judging you every step in the way. And it's like a harsh, you know, it's a harsh environment. And the world corrects you quickly. How do you keep that bar rising, right? And not let success sort of turn into complacency. You need, you need some, you need some forcing function, right? You need a reason. This is why we always And the smart entrepreneurs all know this, but this is why even entrepreneurs starting company number four or five, six, you know, this is why they should have like a board of directors. And they should have people on their board who are actually like very smart and strong weld who will argue with them, right, as opposed to just them doing whatever it is they're going to do on their own. It's because like they need, no matter how good you need some forcing, most people need some forcing function where they're sort of forced to fully think things through. They're forced to do all the work and they're forced to be able to defend it. Right. And if at your point, like if they don't do that, it's it turns into complacence. and laziness and at some point it turns into arrogance and it just it becomes very destructive

and then you stop being effective. And so there just be some forcing function. The Peter Thiel on the shoulder thing is a forcing function is how I use it. It's like a forcing function on my own thought process. It's like, okay, if I were explaining this to Peter or to Elon or whatever, like would they be like, oh, that's a good idea, would they be like Mark? Like Elon would say that's fucking stupid. Peter would say, I don't think you fully thought that through. And you know, and then it's like, okay, now I know that I have to go. Like if I'm going to do this work, Now I know that I have to go back and do it for real. Like, I have to be able to justify this.

And it's an obligation to myself, you know, number one, because like why am I wasting time on something if I'm not actually set up to do it right? But then, of course, it's also an obligation for any of us in a position where other people are going to make decisions based on what we do. Like people are going to come to work for us, right? Are going to participate in things that we're leading. You know, then we have a real obligation, right? Because, like, it's, you know, imagine how unfair it is, you know, for an entrepreneur

who gets lazy who doesn't think things through who starts a company who hires a bunch of people. Like that, you know, that's really unfair to those people. and so it's a self you know this is the surface level answer your question but like it it has to be a self-imposed standard at a certain point and people either want to be able to say people either have a reason to impose that standard on themselves or at some point they should stop trying to do the things that they're doing uh last question what's the last book you reread that's a really good question um you know i'll tell you one book i keep coming back to i keep coming back to um i keep coming back to the Joseph Henrich book, the weirdest people in the world.

Another book that I keep coming back to is a book called the Machiavellians by this guy, James Burnham, which I think is probably the best book on politics of the 20th century and has been like incredibly helpful to understand what's happening right now. So those are two big ones. Martin Gurrey's book, The Revolt of the public. We'll put all of these in the show notes on the website to make it easy for people to get them. Oh, I'll give you a fourth one. I'll give you a fourth one. we don't have time to talk about it now, but a fourth one that people haven't, a lot of people haven't read, but it's had a really big impact on how I think about things. It's a book called the Ancient City, and it's written by a, it's from the 1860s, but it's still a very relevant

book because it's based entirely in original classical sources, Roman and Greek sources. And it's sort of a, it's sort of, and it helped the, the history of it's holding up really well. It's a reconstruction of basically human society kind of pre the Romans and Greeks of what it was actually like, and then sort of how that turned into Roman Greece and then how that turned into our world. And it's written by a French, a prominent French academic 150 years ago. But it's a really profound and striking book. And if you read it, you're like, oh, this explains a lot. It's the best book I've ever found. It's the best book I've ever found on sort of the creation of civilization, the sort of prehistory of civilization. And then it's the best book I've ever

read on like basically the role of the cult. Right. So like, why cults, exist what they are and what it feels like to be in one. And of course, one way of looking at the world is the world is just basically this sort of series of cults of one form or another. I don't know that I would even say that I fully understand it yet, but it is. It's one of those books. I don't know about you, but like when I, there's something interesting in a book, I underline it and then if it's really interesting, I dog ear the page that it's on.

And then there's a few books that I've read where it's like they destabilize the piles of books because I've dogged like every single page and now the book is like crooked and the books on top of it will like tip over at some point and this is one of those books where like I just I've dog geared every single page. There's just stuff that just jumps right off the page at you and just like bites you like right in the nose and it's like okay this is like the world does not work the way you thought it that people are not the way that you thought they were and here's all this you know here's four thousand years of history kind of explaining why and so anyway we maybe we'd talk about that one another time but that one I keep coming back to.

Thank you so much for taking the time today, Mark. Yeah, good, Shane. A real pleasure. And congratulations on everything you've been up to. I'm a huge fan. The Knowledge Project is produced by the team at Farnham Street. I'd love to get your advice on how to make this the most valuable podcast you listen to. Email me at Shane atfs.blog.

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