Ben Horowitz - Backing America’s Future - [Invest Like the Best, EP.457]

0:02 And welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at Colossus.com. Mm. Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Some.

0:36 This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc. Um My guest today is Ben Horowitz, the co-founder of Andreessen Horowitz. Since its founding in 2009, A16Z has grown into one of the most influential firms in venture capital, reshaping how technology companies are funded and how power and ideas move through Silicon Valley and around the world. This conversation focuses on sides of Ben stories you don't often hear. Ben reflects on the state of America, the people who shaped him, including Nas, Andy Grove, and his father, and shares why he chose to personally fund new technology for the Las Vegas Police Department.

1:22 We also talk about how he thinks about A sixteen z's responsibility in shaping the trajectory of America. The scale of his ambition for the firm, and what he sees as the biggest risk factor facing the country. Please enjoy this great conversation with Ben Horowitz. I think a fun place to begin, Ben, would be your take on the state of the country. What does it feel like to you in twenty twenty-six? I know part of your mission is to like directly impact the trajectory of the country. We'll talk about that a lot.

1:50 But begin with, what does the landscape, the playing field feel like to you today? I think the tech sector is very, very healthy. America's competitiveness is very, very good. The entrepreneurship culture is outstanding. Yeah, and that's the main thing I look at from my lens. If you look at Then I go kinda all over

2:06 The world and everybody wants Silicon Valley. Like how can we have Silicon Valley in the UK? How can we have it in France? So they have a lot of the ingredients, right? They have great talent. They've got great universities. They

2:19 Have like a definitely a worse regulatory environment and EU increasingly bad regulatory environment. For entrepreneurship, but There's a cultural challenge where succeeding, doing something larger than yourself, making the world a better place, like those aren't things that Young people.

2:36 feel like society values and so the likelihood If you're building a company of getting people Two work for you and dedicate their life to a mission like that is just not that great. Whereas in the US it's amazing. I think the economy is in

2:50 Much better shape than People realise We've done a lot of kind of things to Stimulated. We've got lower energy prices. We've got much less regulation. We've got more user friendly tax code. And that's all

3:04 Starting to kick in now. From our perspective, I think the bigger thing is AI is Can impact everything. There's almost no problem you can think of that you can't go Well we have a real shot at solving that with AI.

3:17 What were the big problems in the US? Auto deaths. Well, we got an AI solution for that. Cancer. We have an AI solution for that. The fact that we've got a technology where we can address Everything. Is a real new phenomenon. And all that's

3:31 I think gonna kick in like in a fairly major way over the next twelve to twenty four months. Why do you think twelve, twenty four months is is a time frame worth mentioning that Some of this stuff will start to be felt more broadly. It's Oh

3:45 Starting to take effect now. You know, it's gotta roll out, get deployed. Deployments of technology in particular in the past have taken a long time, but You had to build out the infrastructure to do it. For cars you needed things like roads. Traffic lights and all that kind of thing.

3:59 And for the internet you needed fiber in the ground and people to have smartphones and You needed to do a lot just to get going. The internet is here. So if you want to use AI, if you want to apply it to your business, you just do it. There is no infrastructure that needs to be built to adopt the thing.

4:16 What could most interrupt? This good trajectory that America is on, where we are building solutions using technology, like what are the biggest risks? A bad government.

4:30 No matter how many smart people you have, no matter how great a culture you have, no matter how Great the country is. Can ruin the whole thing. Venezuela was the fourth richest country in the world. And

4:40 Then communism and that's that. If you look at how little comes out of so many of these countries in Europe that have so many smart people and then, you know, and then the ones that went into communism and there's so many genius Romanian entrepreneurs. John von Neumann and the number of great genius scientists that came out of Hungary, like this little country.

5:02 And then it was just gone once the communists took over as Completely. Like nothing from Inventing everything. Two

5:10 Nothing. Overnight. And I think that that Can absolutely happen here. We could outlaw AI. There were like pretty aggressive proposals. The last Biden administration Executive order.

5:23 Said that you could not sell A GPU. Without federal government approval. That was a real executive order and I got reversed, but like we were that close. To being basically out of the

5:36 Global chip game. It is fragile. Technology solutions. work much better than policy solutions. That's the other thing. Like policy solutions, it's very hard to make anything work. So if you think about

5:48 Covid. We could tell everybody to stay in their house. Well That's got some like extremely bad side effects. Turned out not to work that well. Or we could Invent a drug that cures it or like a vaccine that works. It's just hard to have or a policy solution like you know, all the policy stuff on climate change. And Europe actually reduced emissions and all that, but it didn't do anything'cause China didn't reduce emissions.

6:12 But if you build a technology. Safe nuclear efficient or nuclear fusion facility. That would have a big effect. And I think in general that's true. Defund the police did not

6:23 Make Anybody safer. But technology does. If you really want to change the world, if you really want to make it a better place, I think you can build A solution for darn near anything.

6:34 If you want to change the world for the better. It's Never been a better time to be an entrepreneur. I was with a local restaurant tour yesterday here in New York, one of the best. For a couple of hours having him describe to us how he is planning on using AI tooling to improve

6:49 Everything about his restaurant business. How do you think about the way all of this is changing the sort of potentially large of attractive businesses that you want to invest in? Because Many great companies that have been built in and around restaurant software businesses. It seems like this restaurant owner is gonna be able to have his own spun up operating system specific to him, not gonna need any of that stuff. How does this change in the way in which you view investment opportunities?

7:13 On the positive Everything is up for grabs. I think people are kinda overreacting to that in the stock market and so forth, and then if you look uh existing software companies. People think oh they're all dead. Some of these

7:26 Guys are extremely hard targets. It's not that easy to take out Salesforce or SAP. You would be surprised. Even with AI. How much heavy lifting that is.

7:36 Having said that It is true that you know a lot of these things You can just make your own, you can do it yourself. It's gonna be a lot easier. The number of possible interesting companies I think went up a lot.

7:50 The other thing we're seeing is the products work so much better than any technology products we've seen in the past. That revenue growth is so much faster for these AI companies. And there's many such cases of companies. Cursor, which is ostensibly an IDE. Like what's the biggest ID before cursor? I don't know, but it wasn't big. And it took probably twelve or fifteen years to get to that revenue level. And you know, they went over a billion dollars in revenue in no time. So

8:18 That's super interesting. I would say though, from an investing standpoint The laws of physics of company building changed. Which is going to in affect investing in

8:30 What's currently I would say an unknown way. The one thing you knew If you'd ever built a software company is you cannot throw money at the problem. What's a man year, seven hundred IBMers before lunch. That phenomenon everything was built on because you knew if somebody built a great product and it took them three years and they did with a small team.

8:51 Google's not gonna hire two thousand engineers and catch'em. It's just not gonna happen. That was the law of physics. Now If you have the data and you have enough GPUs you can solve damn near anything. And kinda we've seen that

9:08 With Elon catching the big models in No time. He just took a lot of money and a really good data center design and some Smart engineers.

9:18 He got in the game very fast. That would have never happened in the past. The markets are also Seem to be much, much, much bigger than anything we've ever seen. It would cause you to think about valuations and kind of long term value and other sorts of things in a different way.

9:35 than we have in the past. On the one hand Well, when you calculate the long term value, but if this market wasn't Fifty billion dollars. What if it was five trillion dollars? On the other end. What if somebody could catch you these are.

9:48 Concepts we've not dealt with. So how would the conversations feel different to me if I came in, you've got all these great investors working in Andrews and Horowitz? the nature of the conversation amongst your teammates as they're debating this stuff versus four years ago or something. Where does it feel most materially different internally? I would say one of the most different things is

10:07 When you look at AI researchers It is really A different kind of thing. If you haven't Then uh Google or Facebook or OpenAI are anthropic and somebody gave you hundreds of millions of dollars to try and build a giant model and you weren't one of the main people, then you probably don't know how to do it. Because

10:25 You can't learn it in school. You can't learn it in school because it's a little bit Alchemist in nature. It's a little bit of an art. And so if you've never done it before, the chance of on your very first try of building some kind of large model that it's gonna work well. Isn't that great?

10:41 People are coming up to speed more, there's more companies, people are learning it, but That's kind of why you got to this Which from the outside world probably like absolutely bananas that Why Is somebody paying a hundred million dollars?

10:56 for an AI researcher or a billion dollars for an AI researcher like that's the craziest thing I've ever heard. Well what if there are only forty of'em? In the world. Then it kinda Changes the math on it a little bit. And I think that's

11:09 Where we were because it's kind of the first time we've had A need for a technologist that Academia can produce. That Is

11:19 Probably one of the bigger things that changed in the conversation is like who are all these people? Like we track all of them and No what they're doing. But it's very different. Everyone talks in Venture about the power law. The thing underneath the power law is a sort of inequality. It seems like so many of the things that are happening are just massive multipliers on the trend of inequality in every way, the billion dollar researcher, the size of the biggest companies.

11:43 the wealth of the people creating those companies. I would argue that inequality is a feature, not a bug of the American system, but I'm curious for you to riff on like the nature of growing inequality and The good and the bad associated with that. What's happening in AI is

11:58 I would just say an extension of the Cobby Bryan effect, which is You know, a basketball player. There was a limited amount of money you could make'cause you basically played the game in front of the people who could show up for the game. And that was it. That's the whole market. Whereas once you add television and the global audience and these kinds of things.

12:17 You can be LeBron James, you can become a billionaire. And that was not At all possible before. And I think that We kind of first saw that. With the internet where Okay, now I can build a product.

12:29 I can get to global distribution very fast, then all of a sudden I can become like extremely rich. And then AI. Is another layer on top of that and that okay now take that same product And make it just more a valuable thing.

12:44 Whoever invents that is whatever the internet company was plus plus plus and so that's gonna make them even richer. That's the bad part of it. I think the good part of it is it starting out day one completely democratized. Anybody Gets access to the

13:01 Very powerful AI. Most people in the world at this point have smartphones and now you've got super intelligence. in your phone. So that's a big equalizer. Of the opportunity in a lot of ways that I don't think we've ever seen a

13:16 Bigger. Opportunity equalizer than AI. Every child can have like a Super advanced, amazing tutor, teacher. Great education is accessible to all.

13:28 So I think it's an equalizing technology and There's some drive in inequality. There This is another thing I I learned from my father. When I was very young was He said, Look, son, life isn't fair.

13:39 That's extremely good advice because It's just not gonna be fair. No matter what. government or anything tries to do, it's not gonna be fair. And the problem is if you create a system that tries to correct that, it doesn't make things more fair. It just

13:54 Transfers all the power to the person running the system. And that's what happened with Stalin. That's what happened with Ceusescu. That's what happened with Paul Pot. That's what happened with Mao. Not an accident that every single system like that went bad. Because it really ends up just being a power transfer. When you think about Well what do you want?

14:13 You'd like everybody to have a chance. Don't give me no chance. Give me some chance. It may not be as big a chance as the other guy. It may not be A perfect chance. But if I have the desire, if I've got some capability, give me a chance to be something to make my imprint on the world.

14:29 A system like that is Gonna end up with a lot of inequality. By the way, all systems end up with a lot of inequality. But you can Try systematically to give everybody an opportunity.

14:41 I think AI does a really good job of that. One of the memes that's very popular today is that you have a couple of years to get some capital or you're gonna be a part of the permanent underclass is the phrase that used is used on Twitter. And I certainly agree that Now everyone has the best lawyer, accountant, you know, advisor in their pocket and that's amazing. But what do you think about this notion that

15:00 Because of that we need less Labor. it's going to be harder if you don't have some capital to begin with to accumulate capital and break in. I don't necessarily believe that. I'm just curious what you think about the challenges we'll face because of AI.

15:13 Societally. I don't Really think that's right. I don't think the door is gonna close behind you. I think The opportunities tend to multiply.

15:22 When you kind of open up a new door and open up A new way of doing things. So many people Who made money on crypto were like people who literally didn't have much to start with.

15:33 They just got into the technology early. Then they kind of parlate it up. And so if you have something that grows really fast That's actually the opportunity for somebody with a little bit of capital to make a lot of money because It doesn't take much. You know, if you bought bitcoin for a nickel.

15:47 You did really well. And all you needed was a nickel. Bad. The nature of these things that go hyperbolic and you know, particularly if you create something. I also think

15:57 The labor market stuff People Or acting as though it's very predictable and when it's not at all predictable. If you look at kind of the history of the world and automation. And this is what it is. It's a kind of like an automation technology.

16:11 We've been automating things. Since the agricultural days and In those days, I think ninety Five or ninety six percent of all jobs in the US were agriculture. Almost all those jobs have been eliminated. And the jobs we have now

16:28 The people doing agriculture wouldn't even consider jobs. The idea that we could imagine all the Jobs that are going to come sitting here. That AI is gonna Enable I think is low. I think the

16:40 Need for like more creativity jobs. It's gonna go way up. And uh Need for Jobs to process work for the creatives will probably Go down in some ways, but

16:52 I'm not even sure about that. We've had AI going ImageNet was Two thousand twelve, and then natural language stuff and Burton all that was twenty fifteen and then Chat GPT was twenty twenty two and

17:05 Where's all the job destruction? Why hasn't it happened yet? And why are you so fucking sure it's gonna happen next? And why are you so sure no jobs are gonna be created? I don't think it's nearly as predictable as people are Or say. How would you describe the nature and scope of your

17:21 Ambition. Over the next Ten, twenty years. So I had a mentor is a great CEO by the name of Andy Grove.

17:29 And he It was. The CEO of Intel and he famously did the major pivot of them out of the memory business into the microprocessor business. Maybe the greatest. Tex CL we've had. And one of the things that he

17:42 Said that In a way it's very obvious, but I think as Also profound. Is If you're the leader in the industry, then the growth of the

17:52 industry is dependent on you. It's up to you to expand the market. Nobody else is gonna do it. When I think about the firm, I think of it a lot in those terms. The reason America's America, and there's many narratives on this, but the factual one

18:06 Is We won the industrial revolution. We had Henry Ford and we had Thomas Edison. We had like great entrepreneurs. They built great technology. The technology lead led to military lead led to an economic lead led To cultural dominance.

18:20 None of that was by accident. Had we not Had all those inventions, had all those companies. Which led to you know everything from like winning World War Two. We'd be some other thing. We won't be America. So

18:33 We're there again. Like this is the Equivalent change of the industrial revolution in terms of how everything works, governments, societies, businesses and We're either gonna be The

18:46 Leader of that technology, the provider of that technology. Or we're not. And if we're not, we're not gonna be The economic superpower, the military superpower, the cultural influence, the standard of the world that we are now.

19:02 I think that would be bad. I think America's been Good for the world and good for giving people a chance, like we talked about before. And so our role in that. From a policy standpoint, from a funding standpoint, from a helping people build standpoint. to make sure that that next set of great companies comes out of

19:19 America are allied nations, but the core ambition is to do our part in helping that. I wanna ask about some of the ingredients to do that well, but just as quick sidebar on Andy Grove. His book is incredible. Like everyone should read High Output Management. What very specifically did you learn from him? Like what did you see him do that impacted the way that you think or behave? I'm so overly influenced by him, it's hard to even pin it down, but

19:42 I actually wrote the new forward. For it. I actually think that's the best thing I ever wrote was a forward to high output management. But the reason I I wrote that forward was It was my favorite book and I wrote the hard thing about hard things was basically intended to be

19:57 The updated version of it. The thing in high output management The He did so well that I tried to Do my own version of

20:06 Is The concepts of management are easy. You need an eighth grade education, maybe to kind of understand management. It's not like physics. It's it's pretty simple. But the psychological part of it is extremely difficult.

20:21 Particularly for a young person to be able to do. It's super confrontational. You're having to look through the conversation you're having to the entire organization. You really have to be Confucian at times, the good of the whole supersedes the good of the individual. And all these things are Complicated to do his big influence on me was

20:43 Me trying to not only absorb that, but then Tell it in a more up to date kind of modern way. I went to visit him. He had this award on the wall. Which was Manager of the year.

20:57 For the Santa Clara facility of Intel. And it was from Nineteen ninety two. I'm like, Andy, you were like the biggest CEO in the world. Why did they give you the Manager of the Year award for the Santa Clara facility? And he goes, Oh man, he's like, You know, Santa Clara It was the lowest quality scores, the lowest

21:17 fucking score on everything at Intel. And so I was just like, I'm going over there and talk to them. So I go over there. And he said I Brought a roll of toilet paper and I put it under my desk. I said

21:30 When are you gonna get This facility up to code. And They just started in with all this Bullshit.

21:39 Bullshit bullshit bullshit bullshit. And I fucking reached under my Chair, put on the toilet paper up and I said. Clean up your bullshit. And tell me when the fuck you're gonna be up to code.

21:52 And in two months they were up to code and they were always the highest rated facility thereafter. So they gave the manager the year for the When did you first experience the lessons that drove his success? This confrontational psychologically difficult. Aspect of management. yourself, how would you encourage other people to like get a taste of it? They can't just read about it, obviously.

22:13 What happens The founders is you invent something. Now I've got to build a company. You don't know what you're doing and you make mistakes. And then

22:22 Those mistakes really cost the company and you lose confidence. Um That lead you to hesitate. That hesitation is what causes the failure mode. So then

22:35 The company is indecisive or they get very open. All these guys got so open to Input from their team and their executives. The team doesn't have the full context. Only the leaders got the context. So even if they're smarter than you You still likely can have better judgment'cause you have

22:52 All the knowledge. But you know, they defer and then if you defer to people who work for you Then that creates a weird political situation because people jump into the vacuum of you're not making the decision, I'll make the decision. And then that feels political to everybody else. So that's the

23:09 Pattern people run into the You really kind of have to Build. Up enough confidence in them. Two

23:16 Have that confrontation. The hardest version of this, by the way, is the reorg. Because reorg is basically you're redistributing power. to make the company work better, to like have communication be better, to not have as much conflict. But what's gonna happen is somebody who's really good, who you've had for a long time is gonna lose power. And they're gonna be fucking pissed.

23:36 So then if you compromise the organization so they can maintain their power Then You've just redistributed power from the people doing all the work to the executives. And that's a catastrophe. So it's always that

23:51 People don't wanna have That confrontation. They don't want to Tell that person, look. The organizations here You helped us still here, but

24:00 You either have to be happy in this new role or it's gonna be a rap. When you're young and inexperienced, you knew it's gonna hurt. Two Tell him that. But I don't know it's gonna help me to do this reorg.

24:12 I'm not experienced enough to know that. I've never done that before. I'm gonna go with the no avoid hurt. To the theoretical avoid hurt. And that's when you wreck your company. You were lucky that when you started Andreessen Horowitz, you and Mark had both had tons of operating experience, both together just building still didn't know what I was doing as CEO though.

24:29 Fair enough. And he didn't know what he was doing either. If you ask Mark about management now, like he's so different than how he actually did it. And it actually makes him mad if you talk about it too much'cause he's like, I got such bad fucking advice, but They told me to hire all these guys.

24:45 Or what do you observe to him to be the most different? Mark is super emotional person. And he's just way more in control of it than he was then. In terms of just like the personality. He used to be like zero or a hundred.

24:58 So he would be like full of motion. What the fuck are we doing? Or like, I'm just not gonna say anything. Nothing in between. about your firm is like the first I don't know what period of time Three days, three months.

25:11 Three years. And I'd love to hear about How you thought about the business right as it was getting started. I'm gonna come back to what it is now and and those ingredients you mentioned.

25:21 For having the impact you want to have. But This is an incredible part of the world. Silicon Valley, Wall Street, these are institutions that make America great. Lots of people listening.

25:31 have ambitions to do this sort of thing. And I'd love to hear like the very, very early primordial case study. Of what it was like and what kinds of conversations you were having and what your initial ideas were. Venture capital, first of all, you kind of have to understand the context of it was

25:48 There hadn't really been new top tier venture capital firms. The last one before we started That you would say is top tier was probably benchmark, which ostensibly started in Nineteen ninety five, but it didn't really,'cause all those guys came from another firm called Merrill Pickard.

26:06 That firm was From the eighties. There hadn't really been a new one from the eighties and if you looked at why Every VC was reputation based. And so to be top tier, you had to have invested in Apple and Cisco and Google that.

26:21 Yahoo and all the great companies and you can't From a standing start get to that. And then if you're not top tier in V C You're not gonna last. Because In a super hot period, everybody makes money, but

26:33 The best entrepreneurs will only work with the top tier firms. Because that's how you're gonna recruit great engineers. That's how you're gonna get follow on money. Like everything comes out of that. So you'd never take money from a tier two. And so that's

26:47 Why the tier ones always have better returns. So we knew we had to be tier one, but we had that problem. The Idea that we had was Venture capital.

26:57 Is it great product for LPs? But it's not a great product for entrepreneurs. And so if we could build a better product for entrepreneurs. We could win. And that was the original Framework. And the idea that we had for the product for entrepreneurs was because we had been entrepreneurs was around what you and I had been talking about, which is

27:16 If you're a founder who wants to run their own company You're not getting much. You need so much. You don't have the confidence. You don't have the knowledge. You don't have the know how. You don't have the network. What if we build a firm that was designed To give you enough

27:32 Confidence, power. Network reach. Advice. That you could actually be a CEO. And so that was the whole idea behind the firm originally.

27:43 The second idea we had V Cs ever market themselves at all. Because if you're all Based on your investing track record.

27:53 It's best that it's just magic. Why say anything? Like keep that a secret. And They weren't talking. And so when we went out and talked Everybody covered it.

28:02 Instantly everybody knew we had this product. Where did the germ of that specific idea come from? Like let's be fairly loud relative to what others do from the very beginning. Well it's funny'cause, you know, Mark and I were talking about it. He said to me Why don't VCs market?

28:18 The original thing went all the way back to kind of the first Class of V Cs The industrial revolution V Cs were JP Morgan, Rothschild, Goldman Sachs, et cetera.

28:30 They were the ones financing these things. And it turned out that These guys were financing both sides of World War Two. So they really didn't want any publicity,'cause that would have been like an extremely fucking bad thing. To a large extent that just carried over all the way through Arthur Rock.

28:48 And then The reputation thing clicked in and it was working, so there was no need to do it. And we got a lot of criticism when we did it. Uh

28:55 L Peace. Would say, you know, like the other VC say you guys are egomaniacs. You name the firm after yourself, you're marketing it like this. And it was so funny because The reason we named the firm after ourselves is We raised money in two thousand and nine, which is right on the edge of the financial crisis. And the big objection from LPs was

29:13 You guys are like really good entrepreneurs. You're just gonna leave this thing and go build another company and then we're gonna be stuck with the fun. And We couldn't get them off of that. So then I had the idea, why don't we just name it with our names and then they know we're and that works.

29:30 If you think about the period of takeoff of the firm in two thousand nine. Up until You reach let's call it like cruising altitude. When was cruising altitude?

29:39 And what was the most difficult part about getting it from takeoff to that point? The first thing is we really didn't know that much about investing. Mark and I had done some angel investing, but neither of us had any venture capital experience. Credit to Sequoia, credit to Greylock and Kleiner and all the guys who were around at that time.

29:57 They just had years and years. Of doing it. We made more than our Fair share of investing. Mistakes.

30:05 Missing things we should have done. And Doing things that we shouldn't have done. But missing things that we should have done was probably the bigger one. And then the other thing is How we thought about the profile of the investor was wrong.

30:17 We so over indexed on our idea that We had to help the founder. Become a CEO That we made it a requirement that you couldn't be an investor at Andreessen Horowitz if you hadn't Found and or run.

30:33 A company. And that was a very good attitude and it set the culture of the firm in a lot of ways and had Good things that came from it, but Most CEOs

30:43 aren't as interested in investing as they think they are. Also, most CEOs aren't as good at Helping somebody else learn the job. So those two things ended up Bing.

30:54 Not quite correct. So we made some adjustments. Fun one just went really well because we, you know, we hit the scene hard. It was a small fun. We did Skype. We did Slack. We did Arta.

31:06 Stripe it was in there. There are just too many good things in a three hundred million dollar fund for that thing not to blow the doors off. Fun two wasn't as good as one. By the time we got to three, that's when we had contention among like, oh, we really don't have

31:22 The right profile for G P here. And there was a while where we thought that was gonna be a terrible fun. It ended up being a great fund'cause we had Coinbase and Databricks and Lift and GitHub. But That one was scary for a while, but coming out of that we kinda knew

31:36 What the firm needed to be. So I think it was settled down after that. Wasn't such a like startup. We got across that chasm. The bigger thing was

31:46 We always had this idea about software is eating the world. Mark articulated really well in his two thousand eleven piece. We always felt venture capital firms Needed to be able to scale.

32:00 And uh The other firms would have trouble scaling because of the way they worked, the way they shared control. So that could be an opportunity for us. But we hadn't figured out how to do it yet. And then I'd say Starting with the bio and the crypto fund. I started to get to the organizational picture of how we would be able to address every market of technology.

32:20 But with Investing teams that weren't twenty people. That doesn't work. So you need an investing team of four or five people. You can't address the whole technology market with five people. So you have to have multiple teams

32:34 Having multiple teams. in a venture capital firm it was a little bit of a novel. idea, particularly when each team has A platform that helps the founder build the company. We began it.

32:48 Really in earnest with the crypto fund, I think. Around twenty eighteen and then Now the whole firm is kinda organized that way. If we zoom now to today and back to what you said, which is that the scope of your ambition is big as the leader be the Ones that are expanding the market.

33:01 What are the components of doing that? What does the system need that it doesn't currently have that you might be able to provide? One is The Capital markets

33:11 Have changed. Dramatically with Not much. Help. So I went public at eighteen months old.

33:19 With two million dollars in trailing revenue, that wasn't a good idea, but companies used to Go public routinely with fifty million dollars in revenue. It was fine. Now nobody's going public. You get to Go public or something like that. And you're kinda small if you don't.

33:34 Have that. You kinda need a lot more out of the private markets than VCs are built to do. That's one of the things we have to think about. Another one is The companies In the portfolio.

33:46 They'd leave you at a hundred million in revenue. They're going public, they're out to the races. Well, that's not true anymore. What do you need when you Get to be. Two hundred million, three hundred million in revenue. Well, you need to be multi product, you need to be multi channel, you need to be multi geography. So as a venture firm

34:04 We need to help them. Yeah, as a venture industry, we need to help them do that. How do I get to Japan? How do I get to South America? Most venture firms don't provide much along those lines. So we have to step up to those ideas if we're gonna have

34:19 Companies in the portfolio at that stage. Do you hope that over time your firm and maybe some others like it that have become these big institutions and venture go on to be sort of like the Blackstone Apollo type companies that are big publicly traded During businesses. A big huge wave.

34:35 Among venture capitalists. Is Private equity AI roll ups. It's a good business idea. Just like

34:42 The spreadsheet created the original private equity business. AI This creating a new private equity business where you can buy any existing company Optimize it with AI and it'll be more valuable. That's a good idea. It's a good thing to invest in. It's not

34:58 Something we're gonna do. For Two reasons. One. It's like the cultural opposite.

35:04 Of who we are. So we are about the creation of new technology companies. Growth. Believing in the entrepreneur. Price doesn't even matter.

35:16 As long as the thing succeeds, you're gonna do well. Private equity is entry price is Okay. I had a Great dinner with Mark Rowan, who's a super genius.

35:26 Runs Apollo. And he was like, entry price, entry price, entry price. We think about it, but it's not. First and foremost. Thinking about containing costs and this and that and the other. That's just not what a good venture capital frame of mind is.

35:40 culturally I didn't wanna mix those two things. But more than that, like I just didn't wanna Be in a business where the way you make money is you figure out how to optimize an existing thing and Lay off people and that kind of thing. We're about new technology companies building the future, taking things forward. And I'll leave that to The other smart guys in the industry.

36:02 What if any trade offs feel like they might exist at this scale as you continue? people you're trying to serve. Well, the investors internally, the LPs, the founders. Nothing's perfect. What are the

36:15 trade offs to the path that you've chosen. With any scale of organization you really have to overpay attention to culture. Or. The culture will drift.

36:25 We probably spend More work on that than any venture capital firm. I'm like, you're not allowed to join unless you sign the culture document. I spent an hour with every single employee teaching them the culture. We really try to enforce it. Hard when we can.

36:40 We have pretty good consistency, but that is hard to maintain as you grow. Can you teach me more about culture? You've written a book about it. You've studied some very interesting cultures that you wrote about in the book. If you had to teach a seminar or something on what a culture is in the first place and then how to

36:56 Design one. Given what you do and who you are. Then how to make sure it People live by it. Let me give you

37:02 A small but probably the most important insight, which is from Bashido the Way of the Warrior from the Samurai. A culture is not a set of ideas. It's a set of actions. If you define your culture As

37:16 A kind of set of ideas. Integrity. Do the right thing. We have each other's backs, or any corporate values. It's actually just a bunch of fucking platitudes. It doesn't mean anything. The culture has to be defined in terms of the exact behavior that you want.

37:32 That support that idea. What do you have to do? to actually be that thing that you want it. B It's the little things.

37:40 How responsive are you? to your colleagues. S L A on returning a Slack message or an email. Do you show up to meetings on time? Not everybody has those ideas, but if you want that idea

37:53 You've got to manifest it through something else. We have an idea about You have to respect the entrepreneurial What is that? But like

38:01 One. You can't ever be fucking late to a meeting with an entrepreneur. I used to find people ten dollars a minute in the beginning of the firm to Reinforce it. And then you have to get back to an entrepreneur. If you say no, you have to say no. You have to explain why you're not investing. And we're gonna survey that entrepreneur after you Say no to make sure that you said no and that they had a good experience.

38:22 That's a behavior. If you Try to make yourself look good. By making an entrepreneur look bad, you're fired. You get on X and say

38:31 Oh, he's selling dollars for eighty five cents. Uh. No. We're dream builders. We're not dream killers. Fuck that. Somebody wants to do something larger than themselves.

38:42 Build a company. Make the world a better place. We're for that. We don't give a fuck what the idea is. Or if you're not going to be able to Sequoia funded them or whatever. We'd love that. That's who we are. And so The behavior

38:53 Is the culture. Is the actual thing. Um that gets you the idea, as opposed to the idea and then figure out how you're gonna behave. That's probably the main thing on culture. Can you say more about the influence your dad had on you? You mentioned that lesson of nothing's fair or life isn't fair.

39:09 Tell me about your dad. He was what's known as a red diaper baby. My grandparents were communists. They went to secret meetings. They had cards. My grandfather was fired during the McCarthy era from being uh

39:22 Junior high school teacher. For being a communist. And he grew up a communists and he started out On the left he was editor of a very famous new left magazine called Ramp Arts magazine, which he was editor of and he

39:35 Was involved in The Black Panthers with Huey Newton and you know in the Oakland chapter, Eldridge Cleaver the dropped out of politics and he reemerged. Eight years later on the right. He really understood the ills of communism and socialism, which helped me a lot.

39:49 One of the things that he said to me that always stuck with me, he's like son Go to the library. Pick any book on socialism. There's hundreds of books. And in that book. I guarantee you you will find

40:01 Page upon page, chapter upon chapter of how to divide the wealth. You will not find a single sentence on how to create wealth. And I was like, Oh wow, that's not like a very good system, is it? I learned a lot about systems thinking from that. He wasn't this new age father.

40:19 In the old days, your father, like they wouldn't even talk to you until you got to be like twelve. And you get these little snippets of wisdom. And one of the ones I actually put in the hard thing about hard things, but I had three kids. I was Young and I remember this like a hundred two degrees the air condition was broken. The kids were going crazy. Like one of them poured a whole bottle of apple juice, like a gallon of apple juice into the rug and Apple juice is steaming out of the car, but I'm just sitting there looking like I was gonna die. And my father looks at me and he goes Some

40:48 You know what's cheap? I said what? He goes. Flowers are cheap. I said, Okay. He said, You know it's expensive. I said, No what? He said, Divorce. It had been

40:58 Married four times, so he knew a few. As you look out today in the world, I'm curious what things are captivating you most and maybe even like most inspiring you. You've such an interesting perch you get to see So much. What's going on in coding now is quite phenomenal. We kinda went through this period where

41:17 Okay, AI can write code. Cool. Okay, you can vibe code stuff with a lot of security calls. Fine. But I think over the Winter break. It turned a corner where Really good programmers were going.

41:30 Wow. This helps me. I just became a hundred times more productive. And I can't remember any Technology where like just all of a sudden you wake up and everything, the whole world just changed like that.

41:42 That's happening on a pretty regular basis, I would say. We spent a bunch of time with people in Hollywood who are using AI. I think AI will help you make movies. both better and at much lower costs because You can shoot a scene.

41:57 And then have the AI do a variation of that scene. That's very, very good. If you're an actress, you have to shoot a scene like fifteen or twenty times or something. Wouldn't be nice to shoot it three times and then you just take the pieces you like and make it what you want. It's a little underestimated as a tool for creatives, I think.

42:14 That's true in music too. I was uh young person when hip hop started and the huge criticism of like this is not music. They're just taking music and they're Remixing it.

42:24 And they're rapping over it and it's a bunch of bullshit. It's a novelty. It was postmodern art. And I think we're gonna get into post postmodern art. With what people will be able to do with

42:35 AI and music. And that was one of the most exciting Times and music. The invention of the new art form Yes.

42:43 When it gets really exciting. What people in hip hop. S specific people have had the largest impact on you personally and and how? Nas is a very good friend of mine. He's definitely had a big impact. Just the lens at which

42:58 He sees the world is so Different. And interesting for me. We're both like very big fans of Rakim, who Is kind of like the John Coltrain of R Kim.

43:10 One of his first big song was a song called My Melody. Nas and I are listening to my melody. The first line is turn up the bass, pull up the chair. Hand out a cigar. I'm letting knowledge be born. I'm my name's Har and so he

43:23 puts it on it, hands out a cigar, and he pauses it. And he goes, Ben. Why is he handing out a cigar? Yeah. I don't know.

43:31 Then he plays the next line, I'm Letting Knowledge Be Born and he's like It's a birth, Ben. He's passing out cigars at the birth of knowledge. And I was like, Oh shit I listened to that song a thousand times I never heard That. I can't tell you how many times

43:43 Okay. sees or hears something that's there. That I don't see so Having Somebody did that.

43:50 I can talk to who has just like a completely different perspective of all things in life. And it was interesting, we did the Coinbase deal together. And he had called me like two weeks prior to us really Seeing that.'Cause he wanted to learn about Bitcoin. So you know, I

44:07 Explain to him how it worked. He was very interested in it. When I was talking to Chris Dixon, who was working on the deal I was like, Tell me about the guys and he's like, Well, you know, one of them, Fred, is like really into hip hop. I was like Okay. I brought Nas over to my house. It's like have him come over to my house. There's a boxing match on Saturday, you know, I had Nas come over and that's how we got that deal. But he's a big influence on me personally.

44:28 I think he's one of the great Storytellers of all time. Just a super genius on that. Is there a CEO Comparable to Nas where

44:37 There's this class of guys in the nineties where J Z, you know, not just a businessman, I'm a businessman. There were these just massive franchises that got born. These guys all became incredibly successful in the business world. It felt more industrialized almost like the whole process. Even just his album that just came out. It feels

44:54 Like it could have come out then or now it's like this weird timeless quality. He still has that somehow and like premiere, same thing. Do you know anyone else like that in another domain? It seems like such a v unique. person relative to Pierce.

45:10 Maybe Jensen. Jensen has this very Defined. View Who he is, what the company is, and so forth, that's kind of gone.

45:22 Across Erase. But it's still the same thing. It played in gaming. It played in Bitcoin, it plays in AI, but it's still NVIDIA.

45:32 He never thought he had to change the name of the company. He's gotten better over the years. In a weird sense, it never felt like he's trying to be current. No it's never Feels like he's trying to

45:42 Right ahead. Can you tell the story of the work you're doing with the Vegas Police Department? And I'm asking about this one because it's super interesting. But also because it feels like An interesting different kind of example of what the application of this constellation of new technologies might allow for in terms of Improvement efficiencies

46:01 This is such an interesting case study. A couple of things about the Las Vegas police force were intriguing to me. The biggest one was They were different than other police forces in the country because they're a big metropolitan area that's not run by the chief of police, but run by the sheriff. And the reason that's important is The sheriff is an elected official. And does not report to the mayor.

46:23 So they never got caught. in the big political movement and defund the police. One of the only cities that didn't reduce the police budget or anything like that. So they Stayed intact. And they're also, interestingly, the one that I knew that never

46:38 Militarized and they do community policing and you can see it in the numbers. So the murder clearance rate in Las Vegas is the highest. murder clearance rate, meaning they solve the murder. Ninety four percent. San Francisco is like seventy five percent and then Chicago's like in the thirties and the national average is

46:55 Below sixty. And I asked why is your murder clearance rate so high? And the sheriff, Kevin McMahil said Ben. When somebody is murdered. There's always somebody who knows who did it.

47:06 They just don't talk to the police. So, but they talk to us because we're part of the community. They know us. So it's like wow, that's a great environment to see if this new technology worked. And I knew about all the public safety technology'cause we invested in through American dynamism. So I was like, like we're gonna become the highest tech police force.

47:25 In America, hopefully the world. I'm just gonna find it. We've got a drone program and we've got prepared nine one one and we've got Flack Safety, you know, AI cameras. If a nine one one call comes in, or if a gunshot goes off There will be a drone deployed in there within ninety seconds.

47:40 And then that drone. Video feed will be in every police officer's Fun In the Vicinity.

47:48 Instantly. Since we started the program, I think crime is down Over fifty percent. And then Shooting of

47:55 Suspects by police is down. Close to seventy five percent. But everybody's safer, and I think this is the thing that was the most surprising to me. On the technology deployment. Is that

48:06 When you talk to the police, they go, Look. The problem is the descriptions cause half the violent confrontation. So I'm like, Well, what do you mean? So somebody Jack's a car.

48:17 There's a baby in the back seat. We get a description of the car. It's uh Two thousand and four Hyundai. That's blue. Well

48:27 It's really a two thousand eight Hyundai that's green, but we pull a guy over in a two thousand four Hyundai that's blue. That person has had bad experiences with the police. Now he's got a gun in the car. And all of a sudden we've got an incident and like an innocent citizen gets harmed or police gets shot with AI camera. We know that's the car. That's it.

48:47 And we know there's a baby in the car, so we're not sending one guy with a gun to see if that's the guy who we're sending a whole squad and we're apprehending them safely. Policing is inherently dangerous, but intelligence makes it dramatically safer. And so I'm a huge believer in this technology for making everybody safer. Suspects. Criminals, citizens, police, everybody.

49:10 The other knock on effect is it's Put the pride back into policing. We used to have a big problem in Vegas where Because nobody wanted to be a police officer, we were lowering the standard. But now the standard is really high. So between the drone center Which is like super set of the art. And then you have these

49:28 Cyber trucks that look so Amazingly futuristic and cool driving around. Everybody wants to be a police now. Las Vegas happens to have the highest concentration Uh Veterans.

49:39 in the country. Plenty of super qualified people to choose from. They all want to be police. That's all gone really well. The last question I ask everyone is the same. What is the kindest thing that anyone's ever done for you? There is a

49:50 Mentor of mine a a fellow by the name of Kent Coleman, who was the big executive at Silicon Graphics, and when I was A sophomore in college. I got an introduction into him. And he gave me a job as a summer intern. Without that job.

50:05 I don't know that I ever get to Silicon Valley. That was the highest impact. He didn't have to do that. Thing. That anybody did for me.

50:13 It may interest you that that is the most common form of answer across five hundred of these. Someone that like took a bet when they didn't need to. Ben, pleasure to finally do this with you after a couple of years of watching you and and learning from you. So thank you so much for your time. Thank you, Patrick. That's fun. If you enjoyed this episode, visit Colossus.com. You'll find every episode of this podcast complete with hand edited transcripts. You can also subscribe to Colossus, our quarterly print, digital, and private audio publication featuring in-depth profiles of the founders, investors, and companies that we admire most. Learn more at Colossus.com slash subscribe.

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