#129 Marc Andreessen: Interview with an Icon

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. But 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 one of them is just this huge success. And the other nine are like, you know, sucking wind. And it's like, OK, is this a good venture capitalist or a bad venture capitalist? And it's like, well, in any domain that's not probabilistic, you can say, this person's terrible, right? You know, it's batting average of like 100 out of 1,000. It's like, this person's awful. And there's always a 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

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.blog.com. Check out the show notes for a link.

Mark Andreessen is here today. Mark is co-founder and general partner of the venture capital firm Andreessen 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 the entire podcast. But it's probably two big buckets of things. My day job is being obsessed by all of the sort of changing technologies and then the sort of impact that all the new technologies are having on different industries and on the world broadly.

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 US worked and about how politics worked and about how society worked or kind of upended, you know, kind of sometime between 2008 and 2015, you know, they're 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 to my kind of day job, which is as society changes and as technologies change society, and as, you know, frankly, also as 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 kind of experience as 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 turn 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 spinning in a different direction and more just that we're playing out patterns that are kind of deeply rooted in humanity, which is what I mostly believe. So anyway, 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 the most basic one. 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, 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 societal reaction, there's sort of, you know, the reaction in the press, there's the reaction from politicians, you know, there's reaction from different political movements, you know, political candidates right now, you know, taking, you know, kind of major stands on these things, you know, both in the U.S. and around the world.

You hear a lot like around what technology does to kids, right? It's sort of the go-to thing, which is, 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, 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? 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 interested 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 50 years ago. They just had a 50-year reissue of the book. So it's a book that it's very, I can say very confidently it's a book written before the internet, before any of those 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. I think it's Men, Machines, and Modernity.

You know, but it's 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. 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 in step two and they really 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 starts name calling, 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 he goes through this three-step process is because he says what people think 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 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, you know, they are the most vicious fights. And so basically what happens is a lot of technologists kind of start out by assuming that they built a better mousetrap. And of course, like, you know, 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 the really big one is 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 and another great source of 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 new 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 anyway, the big battle is sort of, you could call it kind of institutions versus networks. You could call it kind of top-down hierarchy versus sort of lateral, you know, kind of network building. And so you start by saying top-down institutions. So top-down institution building is kind of how the West...

you know, in, you know, I'm most familiar with the West, so I'll just 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? So mass manufacturing, right? And then, you know, mass transportation, and then mass media, and then mass government.

um and so we got really good kind of between call it 1880 and 19 you know basically you know 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 um you know giant government you know the sort of you know fdr 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 that's only you know it's only accelerated since um and then we got really good at like mass media mass communication right radio and television and so forth um and then also right therefore you know mass politics right so this kind of absolute dominance of these two 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, you know, great empire, we got really good at kind of building American empire.

Right. And of course, the American empire kind of, you know, continues to this day as, you know, not as a, not as a literal empire in the old sense, but as a, as sort of a, you know, a modern empire, right, which is to say, you know, cultural and intellectual, right. And, and, and, and 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 a soft power, soft power empire. So, 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 that era that kind of described, there's this great line in the organization

systems, he said the route to power lease inevitably leads through the conference room. It's like the way that power has been exercised in our society through these decades of mass systems has been basically people in conference rooms arguing with each other over control of these mass mechanisms, over control of what the ad campaign is going to be, over control of what the new car model is going to be next year, over control of which candidate is going to be the Democratic Republican presidential nominee or whatever. It sees people at the top of the hierarchy battling in conference rooms. And by the way, it's also, as a consequence, it's like 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 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 technological foundation of the internet, of course, is, you know, 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? You know, the core architecture, right? Famously, the internet has survived a 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 app

Anybody can build whatever website they want. They can, you know, put online 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 that it looked like we were going to have sort of 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, right, which is the internet is both the enabler for traditional political movements and parties to try to establish hegemony.

Right. It's sort of permanent enduring advantage, but it's also the enabling technology for disruptive movements, whether, you know, on the left in 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, the new right and all the sort of new disruptive movements on the right. So they're going to see the same, you know, the same fundamental battle between basically institutions and networks. I think that's fascinating. And one of the things that I sort of see is it's permissionless. I don't need anybody in the boardroom saying that I can go talk to people now. 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 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.

Um, you know, you had a gatekeeper. Absolutely. A hundred percent. And if it was, it was famously determined 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, um, you went in and you started negotiating in a conference room, right. With, you know, men in suits. Um, and you know, the opening, you know, the opening, you know, the opening bed was, you know, 40 or 50% of your thing. Um, and, 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, of course, they extract their 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, especially on 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 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 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, 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 in the other, you know, kind of East Black countries that, you know, battled for a long time. And so, you know, they had this concept of samizdat, right? Which 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, and so then there's this sort of practical question of like, how do you produce Samozdat? And the answer in those days was you produce Samozdat 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 make copies of paper, you know, kind of in value. 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 information that contradicted sort of centralized power out was still really hard, even at that point. And then the internet kind of popped. It's kind of interesting. It's like, could you ever have another Soviet Union in the era of the internet? North Korea is doing their damnedest to try to maintain that model. But without going full North Korea, I'm not sure you can. I mean, I guess I'm an optimist on this point. I tend to think open access information basically makes a lot of these historical things fundamentally impossible. Not all centralized institutions get torn down on day one, but 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 a kind of preconion kind of top-down control that, you know, that we used to have to put up with, you know, before these technologies existed. 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's ideas, 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 is like, cause 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. 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 skilled already to be able to do, you know, a startup or, you know, creating 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 everything, they've watched everything. They, you know, it's just kind of 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, like kids, you know, like, like, like any generation of kids, they're, 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 honest to, you know, improve the world in some way. And they actually have the power to do it. And then, you know, and then, you know, brag a little bit on us, you know, we're in a position to be able to support them and help them 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

of all of these new ideas and all these new ways of doing things. And, you know, look, 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, right? Whereas, 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 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 choice, 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, like I said, it's either denial, it's sort of rational, you know, counter argument, 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, in this view is this is not a criticism of any individual person, right, or any criticism of any individual company. This is why I try to get some 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 in your situation has done X. And, you know, at the very least be aware of it. If not, you know, decide to make your conscious choice not to be like that, you know, if you don't like that. But one of the things I talk to 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 company.

And they actually start to behave like an incumbent. That's rational. Of course, that's rational. They've now built something worth defending. And they've now established power in the world. They've established a position for themselves. They've built something of value. And now they have something worth protecting. And of course, the next thing comes along very quickly. The next kid comes along five years later. And a lot of times, it's really funny because it's like the new incumbent's run by a 26-year-old. And then the new disruptor's like a 21-year-old.

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 Thiel 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 not just a lot of calls that they're an anti-tech company. In his view, it's their enemy of innovation, like they're a blockade.

They're no longer doing anything disruptive. Instead, what they've done is they've established a monopoly in search, and they're using that monopoly in search to try to basically prevent new technologies from coming to market, including new competitors, but also just more generally a lot of new technologies. And they become very draconian and heavy-handed in terms of what goes in the search engine, and they become very censorious, and they ban a lot of things. And a lot of people get kicked off YouTube every day and so forth. So they become kind of anti-changed. Now, I would say that's Peter's view. It's a very strong view. I would not say that about Google. I would just say more generally, that is the incumbent temptation.

is basically go from attack mode to defend mode, right? Go from being a pirate to being the Navy, go from being 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 their 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 come up with with how technology plays out? Do the incumbents 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,

This technology had the potential to be revolutionary and to kind of disrupt all these hierarchies and institutions. But in fact, it turned out that it was, you know, 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 kind of, you know, I don't know, the Hegelian, like, you know, world state dominant, like totalitarian regime, Soviet Union 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.

In Orwell's Revenge, he actually does a rewrite in 1984. And he does a rewrite in 1984 through the optimistic lens, sort of your optimistic scenario. And the optimistic lens, the twist that he puts the plot in 1984 is he basically just makes the telescreens, the sort of technology in 1984, these telescreens interactive, sort of interactive TV thing. He basically makes the telescreens two-way, like the internet. And of course, he elaborates out kind of the implication of that in the story. And of course, in Orwell's Revenge, the rebels win, the totalitarian system is overturned 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 his book, 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. Yes, smart guy, the internet is very good at 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 instruments of state power, you know, or if you have, 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 that might be, right? That they're basically, these networks are not in fact basically sufficient substitutes for the institutions that they're displacing. And he describes this as the scenario 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 is, I think this is also kind of his latent fear. He kind of describes it differently, but also his kind of latent fear that if the institutions are torn down, that there's no guarantee that productive things will be built on the other side. So there's probably that, 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 Webven, 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 fun. This is one of these things, again, I've just realized it's actually really fundamental to human nature. And by the way, why I think they're, why I think you have to ask questions about whether life expansion 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, it's the, 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. You touch 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, from then on, basically like one way of just viewing like our trajectory through life is it's just touching hot stove after hot stove after hot stove and learning, don't do that, don't do that

You know, or it's like, you know, don't act out at work. 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 a startup, the startup doesn't work. You know, the one threat 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 in 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 sort of the lesson is, well, don't work at big companies because you can't trust them and they don't care about you and they'll lay you off. And so anyway, 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

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 happen. And so I would say the good news, you know, kind of the escape hatch for that 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 versus entrepreneur for 15 years now as a VC 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 web ad example. You see example after example.

of startups that tried something and failed. And then you basically, you know, you draw the experience in 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?

Um, and so, you know, you've got your point, like web van doesn't work. And now with now today, you've got these just giant successful companies in food delivery, right. Um, 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, 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 always give you the numbers, like, for top-end venture, right, for top-end venture-backed 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? 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

Right. It's going to be, you know, it's going to be web ban at its time, not, you know, whatever, you know, whatever the new companies. And so a lot of it's just like simply flat out timing. And so, but, but you can see what I'm saying. It's like, you're thinking probabilistically, like you're right. We're not trying to score a hundred on the exam. Right. And this is maybe a thing that is like a big difference between the education system and the real world. Right. Is, you know, in the education system, it's like, we're supposed to get a hundred on every test. Right. It's sort of this deterministic realm. Right. In which, you know, there is a way to kind of achieve perfection. We're kind of going for the 4.0 grade average or whatever.

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 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's or LeBron's, like, lifetime record, and it's like they scored all these baskets. And the other fascinating thing to look at is just, you know, the ranking of the basketball players who have missed the most baskets, right?

And it turns out it's the same people. Kobe might be number one on the list of total missed baskets. That is what it is. Annie Duke has this great term. She was writing for the world of poker in her book, Thinking of Best. She says what a lot of people do is they basically, when they're in a probabilistic, if they're in a deterministic domain and they get less than 100%, then they can self-critique and they can say, why didn't I get 100%? I should have got 100% and I did something wrong. And that is a correct analysis. You could have gotten 100% of that test. You probably didn't study hard enough. You didn't read all the material or whatever. In a probabilistic domain, it didn't work. Okay. It's again, 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. 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 played 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 shoot the next, you know, the next

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. This 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? It's not the right time to make the bet. And then as evidence of my strong view, 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 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 I'd say there's two categories of founders, two ways to do this. So there's the ones who've done it before, right? And so the ones where this is their second or third or fourth time starting a company. With them, you have this just obviously enormous advantage, which is you can basically look at the work that they've done. It's like anybody else who's done, who now has a track record. You can look at the work that they've done. And again, it's not that you're necessarily looking for the track record of the level of success per se, right? Although, as 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 has an enormous benefit of the doubt when they walk in the door for obvious reasons. But even people who haven't had a big success before, it's like, OK, you can look at how they did the work. And so you can look at how did they prosecute the opportunity at the previous time. And you can talk to the people who they worked with. It's like, OK, how were they under pressure? How were they in terms of inventiveness? How were they in terms of persistence? How did they make the decision about when to give up? Or when something just wasn't going to work? And so forth. And so you can kind of learn from their experience. The harder one is somebody brand new. The harder one is somebody shows up right out of college or something. Or these days, the ultimate.

Golden credential is they got admitted to a top-end school and dropped out after one day. So, you know, it's sort of a kid, right? And of course, you know, I say kid because I, you know, probably 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 had a PhD program and so forth and so on. Bill Gates dropped out of college.

And so, you know, a lot of times these big breakthrough companies are people, you know, they have a track record. Like their track record, you know, you can ask for their high school GPA or something, but like 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, that some crazy VC kids with some money and, you know, some miracle happens. 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 for a long time. In 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 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 of 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, the general kind of pattern, the 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 in, you know, anything involving, you know, you know, there's

There's lots of various technology where 11-year-olds are not working on it. But there are areas increasingly where they are. And so basically, it's basically what we call 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, you literally have people who have been writing prototypes. And a lot of the time, you're actually people who have running code at that point. And then it's like, OK, now you're dealing with somebody where, yes, on the surface, they're 21. In reality, they're already 5 or 10 years into the journey. And you're like, OK, now I get it. Now I have somebody who's a primal creative force who's actually really thought deeply about this and so on and so on.

So 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 A16C? So there's basically, there's three tiers. The way we operate is there's basically three tiers of bet, sort of small, medium, large. And the small one is so-called seed 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 $5 million 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 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 companies. Like that's when they form a board of directors and we have, you know, somebody who goes to the board. We tend to really like work hard at the company. So that's like a, you know, that's signing up from our standpoint to like a 10 year journey.

with the company, including, you know, an obligation to put more money in later rounds and so forth. So that's a more serious bet. The sort of size 10 million and up. And then the growth bets are for companies that are kind of, you know, they kind of hit their stride and they have a business that's 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 100 or 200 or 300. So a million. So, you know, there must be money at 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, you know, to kind of be a global champion. And then there's just, there's different, 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

But it's a 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. It's a little bit on the idea, but it's mostly the people. And basically, the way you evaluate the idea at that point is you're basically evaluating the idea as a lens to evaluate the people. So it's like I was talking about. If a 21-year-old comes in with this crazy idea, something they've been thinking about, we're not going to 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 it's like, OK, is this person capable of doing this kind of thing? And then you're evaluating the idea, and they're worth it so far to kind of just draw a beat on how good the person is, as opposed to saying, oh, 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 can't invest in competitors after that, in that category. So then there's this thing of like, OK, out of all of the different teams, both current teams and future teams that might pursue this idea, is this really the one that has the best chance of going all the way to victory? And so that's trying to kind of dig in harder, kind of competitive advantage and capabilities at a deeper level.

And then the growth side is, you know, that's more of a business analysis. The growth side is where you start 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, 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 10 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, the 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 you, you know, the younger partners in the firm get to propose ideas and then there's sort of a council of elders, you know, that either, you know, 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, many would 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 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 out of 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 the 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

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, you know, 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, you have to be willing to kind of describe it and you have to 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 defensive 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 actually supposed to be, you know, like you can still do the deal and you know that you're in a

And so, but, you know, you do have to, you have to be willing to like sit in the room and 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 probably our biggest limit on 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, you know, 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 going to 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.

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 won't name names. We have a partner where he was in the West Coast office. He was in the Palo Alto office of an East Coast firm, a firm that had historically grown up in the 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 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, right? 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 gets that point at some point. And so I just think like the,

I just think that the bad way to do venture is to have people who have reached that point doing sign-off on their decisions. And I hope Ben and I have not reached that point. But even if we do reach that point at some point, we'll 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 the very direct version of these lessons because, you know.

What is it? The old Submariner 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 behemoths, 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 here 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 capitalists of 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 this is what we talk about this last time, the firm is.

Success or failure is not at the 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 at the level of an individual partner. It happens at the level of a fund. It happens at 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 at our firm and we decide, well, I'll give you an example. We have this big gaming push right now, right? Because we just brought up a gaming partner. We're very proud of that. We've been 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 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, making different kinds of games, right? You know, 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, 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...

you know, 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? But we see this a lot. We do performance reviews, right? We do performance reviews. And so it's like, OK, 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, OK, 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 can say, this person's terrible, right? You know, it's a batting average of like 100 out of 1,000. It's like, this person's awful.

And there's always a 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 fluke. 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, put it this way. Anybody doing anything creative?

does live in this world. And I think the creative artists of all kinds basically live in this world, and the really good ones are unafraid to take the bets 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 outside 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 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 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 a 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, you know, this sort of second industrial revolution into the 20th century. You know, most kids didn't have much education in the 19th century, you know, urban farms or whatever. And, like, 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 going to do radio broadcasting to the masses and that 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, these 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 scale. That's all the problem they had at that point. But, 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? They were factories for knowledge work, right? And so if you don't know the history of mass manufacturing, there were all these ideas like time and motion studies and all these guys like Elizabeth 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. These are schools are factories to stamp out kids that are optimized to work in either, you know, if they're blue-collared to work in a literal factory or if they're white-collared to work at General Motors or General Electric in the, you know, in a conference room, you know, in a giant hierarchy, you know, to be an organization now. And so we built that system and then we set it on autopilot.

and it's been on 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, you know, 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. Like, 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%, you know, 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. Like, I have all these friends that work on, like, you know, school reform.

God bless them. Like they're just the 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 of being reformed. 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? 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 step back and think about it for a second, like you could be pro-union or anti-union. You have whatever people have in reviews and you can say, well, organized labor, you know, big debate for a long time. But the idea of unions, the idea of unions of public sector employees.

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, right, which is to build a 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 know, the new system will probably not be a giant pirate. It'll probably be something else. Right, it'll look like synthesis or something like that. Yeah, it'll be, like, it'll be distributed. You know, it'll be, you know, like, 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

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 these micro schools that are popping up all over the place, right? And, you know.

And by the way, like now's the perfect time to do that, right? Because of the post-COVID, you know, all the changes you're well aware of, but like, you know, there's this massive spike in homeschooling. There's this massive spike in parents who are very unsatisfied with, 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, lots of people working on this and there are lots of early examples of this. And so I hope something really takes you. 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, 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, at some level, it's not their fault. You can say maybe they should resign on principle or something like that, but most people need to live their lives and they need to put food to the table for their families and so forth. I just don't have expectations of masterful, 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 have to judge them. And that's the thing with this thing is the people who put these incentives in place are dead. They're gone.

Right? Like, we can, you know, I can sit here and yell at John Dewey all day long. It doesn't matter. Like, he's, you know, he's gone. And the people who are running these institutions now are just basically at some fundamental level executing scripts that were developed 100 years ago. And, like, 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 over corruption. Like, at some point, you're in this, like, really sleazy zone where, you know, politicians are 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 is the system constructed? And then what are the incentives 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. Like it just, there's too much vested interest. It just can't be done. What would 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 of populism. It's a little bit at the heart of actually a lot of the left and critique, actually a business also. So you see, you see it actually, there's a critique from both left and the right. And I think the critique,

The way libertarians would put it is there's a difference between being pro-business and pro-market. And what they mean by that basically is it's like there's one concept of a business or an entity of any kind. Let's start with business, but we can apply the same thing to other kinds of institutions down the road. There's one form of business that's 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 even say like the car industry works like this or something. Right. Which is, I don't know, it'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 buy a can of a soft drink or, you know, any, you know, I went to, you know, 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 trample, but you want them to set the 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 free market with market discipline. They end up as something else. In the business world, what they end up with is either just one company with a follow-up 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 in 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 oligopolies. And oligopolies 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 are 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 over price fixing.

And then what happens is the oligopolies, basically, they get big and saltifying. And then what happens is they basically end up sort of colonizing politics. And then this leads to this concept of regulatory capture, where basically the companies end up basically essentially occupying the government, usually at the same time the government's occupying the companies. So you end up with these giant regulatory edifices, Dodd-Frank and all these things. You end up with these bailouts. You end up with all these intertwining, this revolving door. We've got these regulators that all know that they're going to get these really high-paying jobs at these companies when they step out of government service.

you know, my friends at Goldman Sachs, you know, like the number of people who had like, you know, Goldman Sachs and a business card who did not work 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 business and government. And then, of course, you know, we experienced this in a very tangible way, which is, 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

Right. So that's like yours is a long time. And so, you know, what is that? Right. It's certainly not a free market economy. Right. It's not company subject to market discipline. 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, you know, kind of entangled thing. And then you can generalize this idea to, you know, many of these other topics. And so to say, you know, higher education, education through that lens, education all of a 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 monopoly. And so, of course, it's going to, you know, it's a Soviet it's a Soviet system. It's going to it's going to it's run exactly the same way education in front of the Soviet Union. Of course, it's going to generate the exact same results.

I should 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 out 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-oligopoly, anti-concentrated power, anti-government, you know, a government entwining itself in the economy, right? Anti-regulatory capture, anti-legacy institutions that are no longer being run by the 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 learners. 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 deep-arty, 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 Tea Party actually kind of had the same, you know, 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, is, you know, you do hear it. And, you know, the left wing people argue more directly for governments to do all this. But, you know, they are onto 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, very kind of smart people and 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, some structure framework of the world and how it works and how to cause things to happen. And one of the things that's interesting, you know, there are many such frameworks, even, even the same kind of person, you know, there are many 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, they figured out, you know, kind of a way to do things. It's very different from the way a lot of people do 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 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 wouldn't really work. At least, I don't think so. But what you can do, right? You know, and then what you do is, like, you know, as you go through life, you know, you talk a lot about this in your work and we talk a lot about this today is you do try to assemble your own kind of worldview.

in 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 in, more set in your ways and you'll get more resistant 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? 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 if we admire, 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, we're 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, you 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 both have written, they've all written and talked a lot about kind of 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, and so I just get, you know, the simple one, like the simple one for Elon, the simple one for Elon, and Elon's a 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 trained as a physicist originally, which is a very different mentality than the one that I come from. It's basically, okay, script things all the way down to basics again 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, this philosopher, René Girard, you know, this idea of sort of, you know, mimetic dynamics and, you know, people copying, you know, people copying behavior between each other. And then also, you know, rivalries forming and how that plays out, you know, human dynamics. And Girard had this very kind of sweeping whole theory about how that kind of determines how well society kind of functions. And maybe that's not completely true, but like there's, there's clearly a lot to that. And then of course there's this scapegoating cycle, which just 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.

Um, and kind of say, okay, what would the lens on that be? Um, you know, then obviously we'd go on a life with, you know, jobs and these guys had their own, their own views of things. Um, and so it's just, it's, it's a way to kind of keep the actual, um, 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. Um, I think it's 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 the 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 was thinking a lot about, it's like, it's also keeping a high bar for yourself and for your work, right? And this maybe is also something that also has to do with 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. Then I had this, we had this, we talked to Jeff Bezos about this at one point. And yes, we were starting 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, I'll be going back to kindergarten. And he's like, look, don't get me wrong. I really like 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 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,

And are you able to actually, you know, because when you're 25 or whenever you're doing something new, like the world is judging you every step of the way. It's like a harsh, you know, it's a harsh environment. 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, strong, well, who will argue with them, right? As opposed to just doing whatever it is they're going to do on their own. It's because like you need, no matter how good you need, some force, most people.

It's 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 they don't do that, it turns into complacency and amazingness. And at some point, it turns into arrogance, and it just becomes very destructive, and then you stop being effective. And so there's going to be some forcing function. The Peter Thiel on the shoulder thing is a forcing function. It's how I use it. It's like a forcing function on my own thought process. It's like, OK, if I were explaining this to Peter or to Elon or whatever, would they be like, oh, that's a good idea? Or they'd be like, Mark. Elon would say, that's fucking stupid. Peter would say, I don't think you fully thought that through. And then it's like, OK, now I know that I have to go. If I'm going to do this work, now I know that I have to go back and do it

And it's an obligation to myself, number one, because 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. People are going to come and work for us. They're going to participate in things that we're leading. Then we have a real obligation. Imagine how unfair it is for an entrepreneur who gets lazy, who doesn't think things through, who starts a company, who hires a bunch of people. That's really unfair to those people. And so it's a self, this is the surface level answer your question, but it has to be a self-imposed standard at a certain point. And people either want to, people either have a reason to impose that standard on themselves or at some point they just stop trying to do the things that they're doing. Last question. What's the last book you reread?

That's a really good question. You know, I'll tell you one book I keep coming back to. 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 incredibly helpful to understand what's happening right now. So those are two big ones. Martin Gurry's book, The Revolt of the Public. We'll put all of these in the show notes on the website to make it easier 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 other 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 on original classical sources, Roman and Greek sources. And it's sort of, the history of it is holding up really well. It's a reconstruction of basically human society kind of pre the Romans and Greeks, 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 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 in sort of the creation of civilization, sort of prehistory of civilization.

And 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, you know, one way of looking at the world is the world is just basically this, you know, 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 doggear 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 doggeared, 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-eared 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 did. People are not the way that you thought they were. Here's all this, you know, here's 4,000 years of history kind of explaining why. And so anyway, maybe we'll talk about that one another time, but that one I keep coming back to. Thank you so much for taking the time today. Yeah, good Shane, 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 at fs.blog.

You can learn more about the show and find past episodes at fs.blog slash podcast. To get a transcript of this episode, go to fs.blog slash tribe or check out the show notes. Can you do me a small favor? Go online right now and share this episode with one friend who you think would love it. Thanks for listening and learning with us. Till next time.