Marc Andreessen: The World Is More Malleable Than You Think

I wasn't expecting to start here. I

wanted to talk about why you were consuming so much caffeine that you noticed that your heart was skipping a beat.

So I love caffeine. So for for a very long time I always said that the ultimate day like the perfect day was 12 hours of caffeine followed by four hours of alcohol. Like like that's just like

of alcohol. Like like that's just like the ultimate. I did I did I did I did

the ultimate. I did I did I did I did cut out at least for now. I've got to cut out the four hours of alcohol. But

um yeah, caffeine is just like one of one of nature's most most marvelous things. But it turns out you can't

things. But it turns out you can't overdo it. And so, uh, yeah, a while

overdo it. And so, uh, yeah, a while ago, I was drinking, uh, so much coffee at work that, um, I was sitting in a meeting a couple years ago and I started to feel just a little bit something felt off and I just took my pulse and I was

realized I was skipping about every 10th heartbeat. So, I I had like existential

heartbeat. So, I I had like existential crisis because I'm like, "All right, you know, I need to call 911. Is this like am I about to have a heart attack? Am I

about to die?" And so, I go under the table and I Google and I'm like, "Is this a problem?" And and before Dr. Google said, "No, it's okay. It's fine.

You just might want to cut back a little bit on the caffeine." You said something that I love and I never hear other entrepreneurs think about uh talk about but I think it's super important that you don't have any levels of introspection.

>> Yes. Zero. As little as possible.

>> Why?

>> Move forward. Go.

>> Yeah. I don't I don't know. I've just I found people who dwell in the past get stuck in the past. It's it's just it's a real problem and it's it's a problem at work and it's a problem at home.

>> So I've read obviously 4 I think now 10 biographies of fish case entrepreneurs and that was one of the most surprising things like what's the most surprising thing that you've learned from this is like oh they have little or zero introspection. Yeah,

introspection. Yeah, >> like Sam Walton didn't wake up thinking about his internal self. He just woke up like I like building Walmart. I'm going

to keep building Walmart. I'm going to make more Walmarts and just kept doing it over and over again.

>> And you probably know if you go back 100 years ago, it never it never would have occurred to anybody to be introspective.

Like it's the whole idea of I mean just all of the modern conceptions around introspection and therapy and all the things that kind of result from that are, you know, kind of manufactured in the 1910s, 1920s.

>> Say more about that.

>> Great men of history didn't sit around doing this stuff at any prior point.

Right. It's all it's it's it's it's all a new construct. It was it was you know well so first western civilization had to kind of invent the concept of the individual right which was like a new concept you know several hundred years ago and then and then you know for a

long time it was all right the individual runs right and like does does all these things and builds things and you know builds empires and builds companies and builds technology does all these things and then you know kind of this kind of guilt-based whammy you know

kind of showed up uh from eur from Europe uh a lot of it from Vienna in the 1910s 1920s Freud and all all that that entire movement and and kind of turned all that inward and basically said okay now we need to you know, basically

second guess the individual. We need to criticize the individual. The individual

needs to selfcriticize, right? The

individual needs needs to feel guilt needs to look backwards, needs to, you know, dwell on the past. It never

resonated with me.

>> Do you find a lot of the greatest founders that you've spent time with and backed and partnered with or have low introspection?

>> Yeah. Generally, although in fairness, um, you know, the the the introspection is probably linked to the the personality trait of neur neuroticism, right? Um, so you know, a lot of a lot

right? Um, so you know, a lot of a lot of the best founders are, you know, I think at like 0% neuroticism. like they

they just don't get emotionally phased by things that happen which is a superpower when you're an entrepreneur.

But having said that some of the great entrepreneurs are in fact very neurotic like it it you know that's also the case. It it's it's not a you know it's

case. It it's it's not a you know it's not it's it's maybe it's a nice to have to be low neuroticism but but not necessary and so you know there are some that kind of get wrapped around the axle um on on kind of personal issues. Um you

know as you know you know these days sometimes that then you know kind of turns into use of you know psychedelics you know of different kinds and hallucinogenic drugs you know that's like one very interesting kind of trajectory for you know kind of the culture of the country culture of the

world and you know we'll we'll see where that goes.

>> So we've recorded I don't know like a dozen of these so far most of them with some of the greatest you know founders living for the show. I can't believe how many how many times on almost every episode psychedelics pops up and they're like you should try them. I'm like I'm

not doing any drugs. So to be clear, I'm not I've never have I'm never going to like I I I have hor I have t you know the problem is I already have like tons of horror stories from people I know or know of that you know kind of came out the other side like well I actually I

had a my deepest conversation this was with actually was actually with with Huberman um and um you know and I was describing this phenomenon where we see in Silicon Valley where you know kind of there these guys get under pressure and you know they kind of feel anxious or

whatever and they decide they you know somebody tells them about psychedelics and they try it and and they kind of come out the other end as a changed person and and they kind of come out like much more at peace but then they also tend to like quit their companies.

They like moved to Indonesia to become a surface director. Like they're there

surface director. Like they're there just like peace out, right? They're

they're just done. There's been a whole bunch of examples of this. And I and I was complaining to Hubberman about this.

And in in true Huberman kind of wise Yoda style, he's like, well, you know, how do you know they're not happier?

Like like maybe that was the positive outcome. Like maybe the thing that was

outcome. Like maybe the thing that was driving them to be a great entrepreneur was a fundamental level of insecurity, right? And kind of this, you know, this

right? And kind of this, you know, this kind of unsatisfied, you know, kind of neurotic impulse. Um and now they're

neurotic impulse. Um and now they're just now they're just satisfied. now

they're just, you know, whatever the serotonin levels or whatever have been recalibrated that they're just kind of satisfied sitting on the beach and being a surf instructor. Um, you know, maybe they're better off. And I'm like, yeah, but their company it's failing. Um, and

so anyway, yeah, so it there's a possibility that there's a better version of you or me on the other side of, you know, IA, but I'm not willing to find out.

>> I'm not either. Daniel E has the greatest way to put this, like he thinks the best entrepreneurs are not optimizing for happiness, they're optimizing for impact.

>> I think that's true. I think that's true. I think it's certainly true for

true. I think it's certainly true for Daniel. Yeah. Who's, you know, kind of a

Daniel. Yeah. Who's, you know, kind of a great case study of that. You know,

having said that, you know, I always kind of wonder is that well, intrinsic versus extrinsic motivations. Impact

strikes me a little bit as an extrinsic motivation. You know, there's like

motivation. You know, there's like impact, money, fame, you know, and by the way, I think extrinsic motivations are fantastic and I think, you know, they can be very motivating and the people who get kind of get the great rewards for building great things, you

know, deserve them. But at least what I found is it's the intrinsic motivations that actually get people up in the morning. Um, and and and and there's

morning. Um, and and and and there's where you you know, you're dangerously close to straying into introspection.

But, you know, it's like, okay, like what you know, what what is the thing that causes somebody who's now, you know, extremely materially wealthy, extremely successful, you know, to get up in the morning and continue to, you know, kind of punch away at the world. I

think those those tend to be interior.

>> What's that for you?

>> Oh, I mean that that would require introspection.

>> I'll let other people speculate.

>> No, you have to.

>> It's a lot more fun to speculate about other people's other people's >> But I am curious about you because like what you have you have a series of quotes that I absolutely love. I save on my phone. I reread from time to time.

my phone. I reread from time to time.

One of them I'll butcher it, but it's like, you know, the world is way more malleable than you think. And if you just pursue something with a lot of maximum effort, drive, and energy, the world will recalibrate around you easier than you think.

>> And I actually reread that this morning before I came over here, and I was like, what is that for Mark like today? Like,

what are you waking up trying to change in the world? Yeah, there's there's a lot that we're actually trying to do.

I'm suspicious that that's my actual underlying motivation just because like I like I don't think external impact is enough to keep people going or at least I've seen way too many people who had a high level of external impact and then at some point they just stop.

>> Okay.

>> Well, here's the problem with external impact. It's like okay it's 4 in the

impact. It's like okay it's 4 in the morning you're staring at the ceiling.

>> Like is that enough? Right? Like

external impact is stuff that's happening to other people, right? It's

like all right, what what what is it about you? The the the story I like to

about you? The the the story I like to tell myself is that I'm competing with myself, right? the the story I like to

myself, right? the the story I like to tell myself as I'm getting up in the morning because I'm trying to become a better version of myself. I'm trying to become, you know, smarter and better informed and, you know, have, you know, reach better conclusions and, you know, and, you know, be be better at what I

do. Um, and continue to expand my

do. Um, and continue to expand my skills, but, you know, again, to to to actually analyze that properly require a level of therapy that I'm not willing to engage in. Um,

engage in. Um, so anyway, so yes, the much more the much more comfortable conversation is the Yeah. What what are you trying to do

the Yeah. What what are you trying to do in the world, which I would love to talk about.

>> I have almost no introspection either, so like I understand that. Uh, all

right. So, tell me what you're trying to do in the world now.

>> Yeah. I mean look uh we just we have had this it's actually fairly amazing that it's become a controversial you know kind of thing but we just have this like fundamental view that technology is like on balance an enormously powerful force in the world and basically that the big problem with the world is that there's

you know there's not enough technology there's not enough information there's not enough intelligence um and you know we have this opportunity we have these special sets of technologies that let us fundamentally improve things um and and then there's this very special you know

kind of personality type to the entrepreneur um who's able to build the product and then and then able to build the company and build a phenomenon um and and and really make an impact on things and and so you know when I look at the world I'm just like okay this is just like this is a very the world we

live in is just a very primitive and crude place as compared to what it should be um and what it could be um and so the whole thing that we've been trying to do you know for 17 years at our firm is you know build kind of the ideal partner to the founders that are

you know trying to do that based on our own experiences of having been founders that were trying to do that overall the world especially the western world is just it's just stagnant like that you know the the overall kind of theme of things is just everything is stagnative

and we we could you know We could talk a lot about about that, but you know, every once in a while you have somebody that comes along. It's just like, "All right, no, I actually have an idea how to make things like fundamentally better, and I have a way to build a build a business around that and build a

company, build an empire around that."

Um, and that, you know, and and and those people, you know, include ourselves in this. But, you know, those of us that are trying to do that, um, you know, we're like a movement basically against stagnation. But like,

you know, without us there's nothing but stagnation. Well, it's actually really

stagnation. Well, it's actually really funny. They always there's always this

funny. They always there's always this kind of criticism that you get from you know whatever the you know kind of the the say the corporate press or or or kind of outside critics which is like oh you know you VCs are finding the wrong things or you entrepreneurs are building the wrong things. It's like, well,

nobody like licensed us to do any of this. Like, we didn't like apply for a

this. Like, we didn't like apply for a permit, right? Like get like judged by somebody

right? Like get like judged by somebody ahead of time and told, "Yes, you get to do this. You don't get to do this."

do this. You don't get to do this."

Like, many people could be trying to do do this. Anybody can do this. Anybody

do this. Anybody can do this. Anybody

can anybody can, you know, start build a product, start a company, you know, start, even try to be a VC. Like, it

it's these are all completely open fields. And it's just it it's shocking

fields. And it's just it it's shocking to me how few people actually give it a shot. and and you know and you know the

shot. and and you know and you know the the fate of the world over the next 1500 years is riding on the people who actually want to give it a shot.

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>> So when you started the firm 17 years ago, was your thesis exactly the same as it is today?

>> So I'd say the core thesis is the same.

Um the the specifics have, you know, varied have changed enormously. Um, you

know, we can talk, you know, about both parts of that, but yeah, no, the the core thesis was kind of the the startup, the entrepreneur, you know, the founder is going to be the core the core engine of progress in the world. And I think that, you know, I think that's more true

than ever. In fact, when we started it

than ever. In fact, when we started it was still controversial the idea that a founder would run their own company.

>> Even in 2008, 2009, >> yeah, it was still very well it was very controversial. In fact, and in fact, you

controversial. In fact, and in fact, you know, they were high-profile companies at the time that were getting heavily criticized for, you know, basically having these little kids running around running these companies.

>> Okay. So, you you have this like encyclopedic knowledge of the history of Silicon Valley in your head. I probably

read I don't know 30 to 40 books on it.

So I have some level but not that you do. I remember reading a book on Nolan

do. I remember reading a book on Nolan Bushnell front of Atari. He was like 27 at the time and it was excessively rare.

It talks about that in his story. It's

like excessively rare for him not to be replaced once Atari started growing with you know CEO like an older CEO.

>> Yeah.

>> Like were there other examples that before him?

>> Well so Christopher Columbus >> Alexander the Great. Right. So, so the the the throughout history, most of the, you know, Thomas Jefferson, throughout history, most of the great things that

have been built have been built by this kind of super charismatic founder type, you know, will of power founder type who, you know, basically built and run something to hold on.

>> Henry Ford, >> hold on. I love that you went here because you don't remember this, but we had dinner in Miami with Jared Kushner like a year ago or something, and me and you would wrestle because I was so excited to to talk to you and I was trying to get out of you like, you know,

cuz I think about history first all day.

Like, this is what I do seven days a week. Like, who Who are these

week. Like, who Who are these entrepreneurs from history that you like? These are naming country founders.

like? These are naming country founders.

True.

>> Exactly. There's this like recency bias, right? Which is like the the world that

right? Which is like the the world that we live in today is the normal state of the world and like everything that happened in the past is like weird and different and those people were like dumber than we are and like all screwed up and it's like well maybe or or maybe the world worked a certain

way for thousands of years and we're in the weird time like maybe we're in a time that's just like really unusual from a historical, you know, from from a historical standpoint. And I I think

historical standpoint. And I I think this this is one of those dimensions in which that's true. It just it never would have occurred to anybody 100 200 300 years ago that if somebody was going to like you know start something that they weren't going to be the person who ran it like obviously it was just

obviously the case. The book that I always recommend on this topic is called the Machavelians uh which is a sort of famous book from the 1940s uh by this guy James Burn who's like one of the great geniuses of the 20th century and

he describes it basically is he said look there have been two like fundamental modes of like business organization over the course of like basically the history of capitalism. Um

there's what he what he calls bajgeoa capitalism which basically is like founder runs the company name on the door and the the classic archetype for bajgeoa capitalism was Henry Ford you know in the 1920s and today it's Elon Musk right it's just like that that's

you and by the way in the old days it was Ford Motor Company you know it's not Musk motor company but you know everybody knows Tesla and SpaceX like you know these are Elon >> and and and again that maps to this historical thing which is that's also how countries ran and that's also how

you know cities ran and like all these things you just religions by the way like you know basically everything you founders led the That's the historical norm. And then he said, what he basically says in this book is he goes through and he says that

the there there's this new basically model that basically is a artifact again it's an artifact of kind of this weird period of time between the 1880s and 1920s where kind of the modern world you know as we know it today kind of formed.

U and he said there's sort of a new philosophy of sort of leadership and management which is called managerialism. Sort of the rise of the

managerialism. Sort of the rise of the concept of a manager and specifically a manager as contrasted to a leader. And

so therefore the manager, therefore the idea of a management school, right?

Therefore Harvard and Stanford business schools, right? Therefore the idea of

schools, right? Therefore the idea of the manager who replaces the founder running a company. Um you know therefore the idea of management as a skill set that can be used to run many different kinds of businesses. Um in the 70s this then turned into the conglomerate which

was the idea that it doesn't matter what the company does. If you have a good manager the company should do, you know, 30 30 different things. And so

managerialism is this idea that you have this kind of interchangeable management skill and that that can basically run anything. And actually what Bernham says

anything. And actually what Bernham says is he says look people are going to try to draw a value judgement on this and they're going to try to say this is better or worse than the old name on the door model. But he said the reality of

door model. But he said the reality of the modern world is everything is big like you know for the electrical power grid to get big or the road network to get big or the car industry to get big um large scale systems need to be run by

people who are training how to run large scale systems. And so he said you may or may not and same thing with countries large scale countries are need to be run by people who are good at running large scale things right and and the founding personality type is not the manager personality type. those are different

personality type. those are different and so there's going to be a handoff when things get big and complicated and so that that's the model that Nolan Bushnell talks about and that's the model that dominated the Silicon Valley for 50 years. The problem with his argument is that assumes the managers

are going to do a good job, right? And I

think if there's like one dominant theme that we're seeing in the last, you know, 30 years, you know, in the west for sure is like managers generally, you know, at large are not doing a great job. Or

another way to put it is the managers maybe are good at managing something that's going to be status quo for a long time. Like if it doesn't change, maybe

time. Like if it doesn't change, maybe they, you know, maybe they can run the banks for a long time or they can run the power company for a long time or the car company. And as long as the car is

car company. And as long as the car is the car is the car, you know, or soup soup is soup is soup, it kind of doesn't matter. But the minute things change,

matter. But the minute things change, the manager personality type because it's not the founder personality type, it doesn't know how to deal with change.

Not everything is changing. A lot of things aren't changing. But for the things that are changing, they're changing like really, really quickly. I

mean, SpaceX is like the classic example of this. Imagine being a professionally

of this. Imagine being a professionally trained manager trained at like, you know, a top management school working for a rocket launch company um competing with SpaceX. And the assumption of the

with SpaceX. And the assumption of the entire rocket industry for, you know, the last hundred years has been the rockets are used once and then, you know, that's it. And the economics of launch are dominated by having to build a new rocket every time. And then this like crazy guy in California comes up

with this thing where the rockets fly in their butt and you can't replicate it.

Okay, your management like what good are your management skills at that point.

And I and I think there there's like a whole bunch of interesting areas of human activity where like that shift is happening. And so I think this is where

happening. And so I think this is where Burnham's thesis collapses where it's just like okay the managers actually can't do it. Yes, there's a need to run things at scale but no the managers actually can't do it because they can't adapt >> and the founder can just learn how to run things at scale. Well, that's the

theory and that's that's a big part of our theories. Yeah. The founders can

our theories. Yeah. The founders can actually learn how to do this and and you know and look there there you know this is still a controversial topic.

This you know this still comes up like because >> is it controversial?

>> Well, it is because founders aren't nec especially founders on day one are not good at doing this like okay so in tech let's talk about tech specifically like in tech the founder tends to have been in a lab you know literally or metaphorically for 20 years before they

start their company. Like they've been you know probably working by themselves or in a with a small team. They've been

building technology. they haven't been running things like they haven't been you know man managing large organizations they haven't been you know running public companies and so there there is a missing skill set right and and and on day one they they don't know how to do that and so they they do need

to be willing to learn how to do that and then they and then by the way they do need to be capable of doing that because you know some some of them can and some of them can't but yeah our so this this maybe is like the core thesis behind our firm which is it's you're

much more likely to build something important in the 21st century if you start with the founder and train them on management than you are to start with the manager and try to train them being a founder on creating new things

and I think that this trend is intensifying and so you're because what's happening is all the old edififices all the old incumbent institutions of the last 100 years that are run by managers they're all in some state of fundamental collapse like they're they're they're all collapsing

in like trust and credibility because because they can't adapt. Um and so this issue is becoming more and more acute which is the system that we thought was necessary and sufficient actually just like does not work and if anything good

is going to happen it's going to have to be somebody it's going to have to be Henry Ford Elon Musk type who actually does it.

>> You think it's in a vast maj minority of people agree with you >> look it's becoming more common I mean when you get any Elon Musk and Steve Job when you get these kind of archetypal examples of it it's a lot easier to you know to to you know to sell it. you know

Mark Bar Zuckerberg we were talking about earlier like he you know he's a now a great case study of this right he had you know when Mark started Facebook he has never he had never had a job before okay not only had he not managed

people he had not worked for anybody right so like he had he started with zero and his his learning curve which by the way was happened fully in the public eye right his learning curve was vertical and by the way it's still vertical like he spends like an enormous

amount of time learning how to become better at running running this the these things at large scale he's still the founder and he's still the innovator and he's still like a fountain of ideas on what to do. So he so he's he's he's that double, you know, he's he's like the classic example of the double thread.

And then what happens is other founders look at that and they're like, "Oh, I could do that." Right.

>> Which is exactly what Steve Jobs said when he saw Nolan Bushnell.

>> Exactly.

>> I can run my company.

>> I can do that. Yeah. Exactly. And by the way, you know, it's amazing like how fast this stuff shifted because like you know, Steve famously had this, you know, short period of time where he worked for Hillet Packard and I think I don't know if it's true. The legend is that Jobs pitched his manager at Hulip Packard.

>> No, Waznjak pitched him.

>> Was it Wasak? Okay. Okay. Okay. Was

pitched. There was some other story where where where Jobs went into some meeting with some manager trying to pitch the thing and and and the line from the manager was absolutely not.

This is the dumbest idea I've ever heard. Get your feet off my desk and get

heard. Get your feet off my desk and get out of here, right? You can just imagine Steve with his, you know, >> and they had to be bare feet at that time.

>> My my favorite uh Apple lore is that the first sale in Apple uh in Apple's history was made barefoot when he walked into the bite shop. He was barefoot.

>> What's amazing about that is, you know, yes, so for sure Packard. Everything I'm

describing was Hellet Packard in the 1950s and 1960s that 1940s. That was

also Dave Dave Dave Packard and Bill Hillet were were that founder type and and Dave Packard and Bill Helet ran their company for between the two of them for like 50 years.

>> Do you think and by the way Silicon Valley was built in large part on HP HP was the original Silicon Valley company.

Okay, that's the next run by its founders for 50 years and yet people concluded the founders shouldn't run the companies, right? And so it's it's like

companies, right? And so it's it's like it's one of those things where it's like it's kind of so obvious it was staring everybody in the face and so people had to construct kind of elaborate you know basically you know these these elaborate kind of lattises of like you know theories to basically get around the

fundamental fact that you need somebody who knows what to do actually running the thing.

>> Do you think HP might have been the most influential company in Silicon Valley history?

>> It was for sure the most influential company from 1940 to 1980. Um and then probably after that Intel. Yeah. Well,

well, you go to the founders of Intel and you read biographies of them and they talk about modeling off of HP.

>> Yeah, that's right. That's right. Yeah,

that's right.

>> And then how many founders modeled off of Bob Noise and Intel after the fact, including Steve Jobs, who was we go to Bob Noice's house for dinner.

>> Yeah, that's right. By the way, that's another great example because Bob at least, you know, if you look at photos of Bob No, you're like, "Wow, this guy's like a pillar of society." like he's you know he's very very well dressed and he's kind of very adult and he's very like you know he's famously the the

leader of the traitorous aid you know that you know the the group that left shockly to start Fairchild and then left to start and so Bob was 100% the Steve Jobs of his time >> just in the shortsleeve white dress

shirt and the skinny black tie >> but it was it's again it's it's like the exact same thing and so I I you know I never unfortunately never met Bob but I I could easily imagine Bob and Steve Jobs sitting down and being able to talk for three hours and completely

understanding each other despite the fact that the the look and feel is like completely different.

>> He was almost like a disciplinarian to Steve cuz Steve was, you know, wild and reckless. Like I was also wild and

reckless. Like I was also wild and reckless. You need to mature. And I

reckless. You need to mature. And I

think Bob's wife maybe went to work at Apple early on too. So it was he he talked about this um in his biography.

Uh there's a few great biographies of Bob Noise, but he said that the reason he spent so much time after he was really successful spending time with young entrepreneurs, he said it was uh restocking the stream in which he fished from.

>> Amazing.

>> He thought it was really important and he's like, I learned from all the guys before me. I need to take that that

before me. I need to take that that knowledge I've built up over multiple decades and push it down the generation.

I want to go back to starting the firm though. This is interesting. What was

though. This is interesting. What was

occurring in your life either at that time or before that that you had this observation that this had to be done.

Oh, so so you know we've got all these elaborate theories that the practical reality of it was Ben Ben my partner Ben and I had become very active angel investors. Um and and I'd been an angel

investors. Um and and I'd been an angel investor since like the mid 90s. Um but

then Ben and I started doing it kind of as a you know as a as a real thing. Put

a significant time into it probably starting in you know 2003. Well, I I did it kind of throughout the early 2000s, but in 2003, 2004, it's hard to remember now, but if you go back to like 2003, 2004, there weren't like thousands of

Asian investors. There were like eight.

Asian investors. There were like eight.

It was like a short, you know, was like Ron Conway and you know, a handful of people and then and then Ben and I were running around doing it. And this was very significant in the evolution of the venture capital industry because this was the point at which the traditional VCs got intermediated by angelist and

seed investors who kind of inserted in before the VCs arrived, which was this, you know, fundamental change that that changed the whole industry. But, you

know, we we were part of that. Um so but as a consequence like we were investing in all these new companies you know basically at the point of formation you know we're basically playing playing amateur early stage VC um and and we're getting and we always like we're not going on the board like you know you're

going to raise money for a real venture firm later they're going to go on your board and whatever and work with you and what we just found over and over and over and over again was we ended up getting pulled into these companies um either because there were issues that just like the other people that they

were you know working with or they're you know either they either hadn't raised venture yet or the VCs that they had raised from couldn't couldn't help them with and so we we just kept hold and the reason was we we had been running companies at that point for you

know whatever 20 years um and so you know we we at least had some idea of what we were doing and then the other is we kept getting we kept getting brought into conflict resolution between the founders and the VCs

so that because you know like especially especially because again much more common at that time especially if the VC's fundamental point of view is the founder is not going to run the company and we need to like replace you with a professional manager as fast as possible like the founders are not necessarily

going to like that and they might resist that and by the way even if they're on board with that idea they might not like the person who who the VC wants to bring in. And so we kept ending up in these kind of basically arbitrators in this sort of

you know in theory we were kind of trusted intermediaries because we knew the founders, we knew the VCs and we could kind of help help bridge between that. But literally what happened was

that. But literally what happened was after a while we were like spending like eight hours a day just just doing this and and we're like all right and and it's like weird. It's like you're writing $100,000 check and you're like spending all this time doing it and then to basically arbitrate a dispute with

somebody who wrote a $10 million check and it's it's just like all right like we should probably just write the $10 million check and that was that was that so it was it was I always think like the best the the founders I always one of my theories of like the great founders is

they they tend to be able to operate at kind of the strateg conceptual level and then the practical level at the same time.

>> And so so we had we had a whole theory I could take you through for the evolution of the venture business. Yeah. But but

underneath that was just this actual you know the lived experience of what was actually happening on the ground. The

the big theory of the firm that we that we had at that time was linked to this idea of um was linked to this idea of founders running the show but it was also a structural observation of what was happening in the venture industry which was basically we did was we we

sort of in line with your philosophy we went back and we studied a lot of other businesses that are are have similarities to the venture business.

that we study private equity, venture capital or sorry, private equity, hedge funds, investment banks, law firms, um, management consulting firms, ad agencies, accounting firms, you know, basically anything where the the product

is fundamentally a relationship, you know, a knowledge work, you know, kind of relationship as as compared to something that gets that gets manufactured. And what we observed is

manufactured. And what we observed is basically in in Hollywood talent agencies actually is the one we we've probably talked publicly about the most.

And so that was that was a great case study. The old story

study. The old story >> he was in this studio a few months ago.

>> Fantastic. And so and and he actually and by the way he he gave us you know we make a point of crediting like he gave us a lot a lot of this theory so a lot of this comes from him but well actually I'll tell through through through through through his through his his

experience. So when he started his

experience. So when he started his agency um in uh was it 80 whatever no 7575 >> in the 70s >> in the 70s like in the mid '70s it was actually a very similar it was structurally it was very similar to when

we started uh A16Z in in 2009 which was the configuration of the industry at that point was basically a bunch of essentially service firms a bunch of talent agencies none of which were at very high scale and then each of them

was basically a tribe of of basically solo operators kind of kind of lone wolves um and so so the so the concept in Hollywood was you had an agent and that was your I and that agent knew

whoever that agent knew and had whatever relationships that agent had, but the other agents at your agency were not available to you. And there was no collective benefit to the fact that you were at an agency that had not just your

guy, but like 100 other guys. There was

no collective payoff to that. They ran

that in that way for a very specific reason, which is this kind of this eat what you kill professional services mentality where everybody should have to go build build their own book of business. But but you you end up just

business. But but you you end up just dealing with a guy as opposed to a firm like there there's no firm, there's no no collective thing. And that that was basically the the condition of venture capital in 2009, which is you have and at this at this point we knew all the

VCs really well and we had raised venture and we had worked with all these other companies um that that had raised venture and and and basically all of the sort of legacy venture firms at that point. They were all like that. They

point. They were all like that. They

were all just like tri tribes of lone wolves. And then the thing that we knew

wolves. And then the thing that we knew that was not publicly known was generally speaking inside the firms. They didn't even like each other.

>> Oh, I hear stories like this all the time.

>> Right. And so it's like you know whatever there's Joe and Mary you know who are partners at a venture firm and you're working with Joe and Mary has like a key connection that that you need access to and so you ask Joe can Mary introduce me to so and so and what you don't know is they're having like a

brutal fight where you know they're like trying to destroy each other because they're they're because they're fundamentally economics they're going for you know the a greater slice of of the profit pool and so they're really going at it and so we we just we saw example after example a venture firm

that was basically either two things actually one is either melting down due to just internal strife and conflict um or by the way the other was gener generational succession, right? The

other the other issue is a lot of the dominant venture firms in 2009 had been around for 30 or 40 years and they were now on their third generation of partners going to their fourth generation of partners and and and you know and again it's the same thing. They

had been founded by Dynamos and then they were you know the later generation people were were not like that. So we

basically said oh the this is where the the oldest thing comes in is we said look like that that's not going to last.

And so our our theory of it was what we call death of the middle or we sometimes the negative way to frame it is death of the middle. positive way is the barbell.

the middle. positive way is the barbell.

Uh which is what's happened in all these other industries which is basically the the industry gets stretched apart like taffy. Um and and and what you what you

taffy. Um and and and what you what you get is you get this barbell thing and on on one side of the barbell you get early stage angel seed investor who are really like first money in like you know staying very light on their feet writing

a relatively small check but like being involved in companies extremely early on um and taking a lot of risk. And then on the other side you get basically scaled platforms right. So you you know you get

platforms right. So you you know you get large scale enterprises that that have like a lot of throwaway a lot of access very big networks and then access to a lot of money. The other comparison we always make is to retail shopping right which is there used to be department

stores like Sears and J Penney which basically where the the brand promise was pretty good selection of products and pretty good prices right and then now those are dead and what you have instead of boutiques like the Gucci

store the Apple store and then you've got this super scale e-commerce companies like like Walmart and Amazon.

We're to the point where it's just like there's no reason to ever go to a department store because it's got less selection than Walmart and Amazon and it but it doesn't have the quality tier and the special experience of a Gucci or Apple.

>> Well, you had that thought in mind when you started 100%.

>> Yeah. Exactly. Yeah.

>> It was a conceptual leap for venture capital at the time, but the exact same thing had happened in private equity.

The exact same thing had happened in hedge funds. The exact same thing had

hedge funds. The exact same thing had happened in in >> you knew that by what? Just reading

>> reading. So like investment or investment banks is a classic example.

So if if you read about the sort of the original investment banks in the US between like 1880 and 1920 they were all like boutique venture capital firms in the 1970s 1980s in the US like 20 guys and these are more like merchant bankers.

>> Yeah. Well and so the the the classic stories which I love so much. So JP JP Morgan's one of my kind of favorite historical figures and and and JP JP Morgan was an example that the JP Morgan investment bank was like this this basically this had it was very important

but it was like this tiny little operation. It was you know fit in a

operation. It was you know fit in a single office. you know, I don't know,

single office. you know, I don't know, probably 20 principles and some office staff or something. It, you know, it was not it was not large. Um, and and and actually the the the the hidden secret to to to JP Morgan was he was the son.

The the the father was Junius Morgan.

>> Okay. I literally when you were talking I was like wait you you I I was shocking that you would say pick him because I actually found his father more formidable individual than him. He was

so he was which I is almost always the case with any famous public figure as the father is almost always a more interesting story which a lot of examples of that but however yeah so Junius Morgan and then and then JP Morgan has filled a specific economic

role that's gotten lost in history which is basically Junius Morgan the Junius Morgan bank was in London the JP Morgan bank was in New York and and what the Morgan family was doing was they were funneling money from the old slow growth economy of Europe into the new high

growth economy of the US but again it was exactly your point like it was this little boutique family operation The other great thing about that area of history is these these were um they were

all bifrocated by religion.

There were the Protestant investment banks and there were the Jewish investment banks and they did not mix.

>> No, not at all.

>> Completely different worlds. And as a consequence, JP Morgan was the the Protestant banks like like JP Morgan were able to find like the railroads which were considered like the real businesses of the time. Uh but then like all the disreputable stuff like movie companies and like department stores

like that those are all the Jewish investment banks by the way with Jewish almost entirely Jewish founders uh with like and then then Goldman and JP Morgan is the big survivor of that today in the former JP Morgan Chase and then and then on the on the Jewish side it's Goldman

Sachs you know is the great survivor but again if you go back there >> so that's you consider that the the barbell in investment banking you have the the JP Morgan kind of like family partnership and then you have the complete scale of like Goldman Sachs

>> and so what happened was both JP both JP Morgan and Goldman sacks started out 100 years ago they were on the one side of the orund 100 years ago they were actually in the middle they were they were kind of again this sort of you know they were boutiques but they were like

of their time they were like today you call them like mid-market um you know who sometimes called bulge bracket you know kind of thing as opposed to just like a solo operator or something actually the way um uh JFK's father got started was he literally hung out a

shingle in the 1920s which is Joseph P Kennedy banker you know private banker and he like just did deals and he was like an angel investor at the time and so and then you had the big commercial banks but the big commercial banks had interest in issuing loans to these

speculative crazy you know entrepreneurs and so in that time JP Morgan and Goldman Sachs and [ __ ] Lo and Drexel and all these other kind of you know mid-market banks Morgan Stanley um the bank that became Morgan Stanley um were kind of these mid things now what's

happened you know sitting here 100 years later those are now the the scaled players the ones who didn't scale are kind of long forgotten having said that there there's one firm that survives in the old model and that's Allen company and there are other boutique investment

banks study but Allen company was founded in the 1920s and has you know has is uniquely the one that survived in the in the original model of boutique and deliberately being a boutique investment bank and it stayed that way for 100 years and so one way to think

about it is that today that's the barbell in banking which is Allen company on the one side and then JP Morgan and Goldman Sachs on the other side.

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So are you reading about this while you're founding the firm before you're founding the firm? Like you both Ben and I spent about a year and a half planning the firm? Um and part part of it was he

the firm? Um and part part of it was he was in we call industry servitude. He

was working for Hillet Packard after we sold our company to HP. So he he was a he was running a big part of HP at the time. And so we couldn't literally start

time. And so we couldn't literally start a new full-time thing until he got free of that. So we had a year and a half,

of that. So we had a year and a half, you know, to kind of to kind of study and think and work. because you had this this period from 2003 or 2002 when you're doing angel investing you know a lot till you start your company six seven years later you're observing all

of the weaknesses in the model and that's where you have hey why don't we take the CIA I think oitz calls it like the failins where it's like if you have one agent at CIA you have all of us and they would like roll deep I think he

says in his book like they it was like oh my agents coming to the premier no it's like 20 agents are coming and I think they'd be dressed in like the same kind of suit maker and like they were uh intentionally trying to to intimidate

like their competition, >> our mining suits, uh, Sula Shirts was a little shirt maker in, um, uh, in Beverly Hills. Um, and, uh, Sober, you

Beverly Hills. Um, and, uh, Sober, you know, all Sober colors, white shirts, um, and then I think he had a bulk purchase deal, I think, with the local Jaguar dealer. And the legend at least

Jaguar dealer. And the legend at least has it is that the license plates all said CA1, CA2, CA3. And so, like, you'd go to a premiere and there would be like

20 Jags lined up and then 20 guys in identical suits coming out. And yeah,

just this is exactly the thing. It's

just like im now that you know that's that's the Hollywood version but like just imagine the psychological impact of that if you're just like an old school agent this is sort of the you know Michael's a very dear friend you know he he became very controversial over the years and the reason he became so

controversial I think is just cuz he smoked his competition so severely like he pouted them so hard there was no response you're just a guy you're just a guy working for an old agency and you've got your clients and these 20 CA

[ __ ] are showing up and like it's just yeah it's this force and the clients if you talk to by way you know a lot of his clients are you know still still active today, you know, from from the period of you talking to him, it's just like, yeah, it's just a no-brainer.

It's like, do you want to work with a guy or do you want to work with a firm?

It's just obvious. He has I don't know if he told you all these stories. Did he

tell you about this his morning schedule thing?

>> The the getting on the bike doing the for the firm. For the firm for So, this is again something that's specific to Hollywood, but it's it's a great example of the Okay, so the agency business at at the time he started CA,

the agency business is like 90 years old or something, right? It like started out doing vaudeville bookings and like music halls and like it it had been around for like decades and so the people involved in it had had decades to think about like the best way to do it and they had

arrived at a set of practices and one of the practices I I think I'm getting this right. One of the practices was at every

right. One of the practices was at every agency they would have their staff meeting in the morning at 9:00 a.m. Um,

and they would basically share, you know, whatever information was going to get shared in the agency would get shared at that point. And oh, you know, this studio head wants a script to do.

He wants to do a crime thriller and here's the script and whatever. And

then, you know, this is like the point where there would be minimal, you know, whatever minimal handoff existed >> to the other agency. And so this is where everybody would kind of get updated. And so the the staff the staff

updated. And so the the staff the staff meeting would go from like 9:00 a.m. to

10 a.m. And then at 10 a.m. they would

start calling their clients and they'd be like, "Oh, you know, we heard there's a you know, whatever. there's going to be a casting call for, you know, this great new role for this professional thief or whatever, and you should consider doing that. And so, of course, Michael's like, "All right, well, we'll

have our staff meeting at 7 a.m.,

>> we'll be done at 8."

>> Yeah.

>> Between 8 and 9, we'll call the clients.

By the way, we won't just call our clients, we'll call their clients, right? And so, imagine you're whatever,

right? And so, imagine you're whatever, Paul Newman, and you've got some agent you've been working with for 20 years, and he calls you at your agent calls you at 11 o'clock and is like, "I've got this great role." And you say, "Oh, the guys at CA called me about that three

hours ago. and and your agent's like,

hours ago. and and your agent's like, "They don't represent you." And Paul's like, "Yeah, isn't it great? Isn't that

fantastic?" And so you just again, you just like you rinse and repeat that a thousand times and it's just to the client, it's just like completely obvious what to do. Um and and so yeah, so the the the more the reason I go through this, the moral of the story is

again, it's sort of this this idea incumbency, you know, incumbency status quo, like you you just end up you end up with you end up in any business, you just end up with all these embedded assumptions generally and then, you know, 90 years later, right? So that the so the

later, right? So that the so the founders of the agencies were 90 years ago they weren't involved anymore. So

the people who were running competitive agencies were managers not right same thing managers not founders right and so the and the thing a manager never does unless they're under duress is is is reconsider fundamental assumptions like

they hate that like that that like that's not the whole point of running something big is you don't have to do that. You get to run the big thing at

that. You get to run the big thing at scale. You don't have to like go in and

scale. You don't have to like go in and like reinvent it from scratch. Like that

sounds like a nightmare, right? And so

but but anyway, as a consequence of that, you end up with like all these embedded um uh assumptions that are basically just like unspoken. Nobody's

questioning it's not happening. And if

you take the time, you can kind of go in and go back, you know, first principles, you can kind of go in and you can say, okay, well, how do they arrive at that?

And what what we found in just industry, I mean, this is what our founders do every day is just in industry after industry after industry, there's all these embedded assumptions that made sense in 1970 or 1930 or 1880 that just don't make sense anymore.

>> I love that you did that. I always say it's like not what you do, it's how you do it. And if the idea you could take

do it. And if the idea you could take I'm like I'm not running a talent agency but there's so many of these principles that I could apply to venture capital in your blog archive which I absolutely love and I told you I've read like multiple times I did episodes on it. Uh

you would give advice to like young people. It's like my advice is like go

people. It's like my advice is like go work in an industry where that's still the founders of that industry are still working. When I read Oitz's book, the

working. When I read Oitz's book, the way I would summarize his approach because he is in this big stodgy slowmoving, you know, very bureaucratic uh organization is like, oh, mediocrity is always invisible until passion shows

up and exposes it.

>> Oh, interesting. Yes. Right.

>> And that's what he did.

>> Yeah, that's right.

>> He's just like, there's so many things that you guys could be doing better here. I can't do it in the And if I

here. I can't do it in the And if I remember correctly, he took some of these ideas to his boss. Oh,

>> yeah. Yeah.

>> Cuz that guy was his mentor. I can't

remember his name.

>> He famously worked for the CEO of William Morris.

>> Yeah.

>> Yeah. Which was the the biggest of the talent agencies at the time. So were you were you and Ben essentially just designing what you wish you had when you were founders.

>> Yeah, that's right. And and and again that may be a cheat code but yeah if if you've been the customer obviously this this all becomes a lot more obvious and I don't know if you want to answer this question or not but in um Warren Buffet shareholders he has this great line

where it's like really important to pick uh to to play against weak competition.

Did you feel that there was going to be we like that that point in time in venture capital history that that you you were going to be playing against weak or weaker competition?

>> I would say not exactly. We didn't view them as weak. We we view them as basically we view them as running on a status on a status quo set of ideas. Uh

and and so and and to be clear like we we and and part of why we think about this way we had raised money from at the time in in the time were probably the two best fisher firms. Client Perkins in the '90s and I work with John Door very closely for 5 years in escape and then

we we plot we raised money from from benchmark when they were like king of the hill and Andy Rackliff who was one of the founders of the firm and as a you know legendary brilliant VC and so we had worked with we just had you know

accident of history we had worked with two of the whatever top five or whatever people in the field you know for a long time and and and they were and are by the way um brilliant at running on on

the model that that that they that that existed like John was brilliant at thaty's brilliant at that they're brilliantly today. It was less a

brilliantly today. It was less a competition of oh these people are soft or these people aren't smart or it was none of that. It was no they're they're really good at executing against this particular playbook. So and by the way

particular playbook. So and by the way that's why it's okay like if we're going to do this we need to be we need to be playing by by a different playbook.

>> There was no such thing as like scaled venture capital at the time.

>> No at the time no because the firms all hit this they all hit this limit the all fundamentally hit this limit. they all

hit this limit where they just could the the the idea of a of a part like partnership of equals or even even a hierarchical partnership like it just it break it just breaks at some point because there's just too much internal dissension. It is too hard to coordinate

dissension. It is too hard to coordinate and then and then everybody's fighting for slices of what was viewed at the time to be a fixed pie. Um and so they none of the none of the other firms could they they they structurally there was just no way to get to scale.

>> Where else did you take ideas from besides the agent business in Hollywood and like the merchant bank investment banking industry? Oh, I mean it was just

banking industry? Oh, I mean it was just very obvious that it had happened to private equity like you know this this was the this was the time when like it was actually really this was around the time when like KKR and firms like it were hitting their stride with they're actually building like a lot of

operational capabilities in house um they were actually building their own actually investment banks inhouse u one of the things we've never done but has always been on the ideal list is to actually just have an in-house bank um

and and Kare had had actually done that just just build a captive bank uh and so you know they had done a bunch of things like that and so we so we saw it happening which is the mid-tier um private equity firm were collapsing and you either needed a solo, you know, very

light on your feet kind of solo operator on the one side doing small deals or you needed to have a scale platform like KKR. It happened at hedge funds. Um, it

KKR. It happened at hedge funds. Um, it

happened in but I mean it had long actually actually the TV show Madmen.

Uh, Madman tells the structural story of this happening in the advertising field in the 60s and 70s. Um, and and I I will ruthlessly spoil Madmen because it's been it's been it's been off the air for like 20 years at this point. But, um,

you know, a big part of the arc of Madmen is those guys are working.

Sterling Sterling Cooper is a classic mid-market ad agency. Um, right. Uh and

and then and then then then whatever the third third season they they sell it to Macan which was the the scale player at the time and and they show you all the pros and they clearly talk to people who had been through this because they showed you all the pros and cons of

working for Macan because Macan's this giant machine and so Don Draper is used to like making all the creative decisions and now he's just in this conference room arguing with people um until he just like gets up and walks out. But then Don Draper and Roger

out. But then Don Draper and Roger Sterling start their own startup. They

start uh Sterling and Cooper Draper Price the that's the second one which starts out as a as a true startup as a true boutique startup and then they have this whatever year and a half just just [ __ ] hell like they can't get

anywhere they can't get clients like cuz because they're too small you know they're subscale and so it kind of and then I think I think in the end I forget it's been too long but I think in the end they end up I think they end up selling it no no no no no sorry I got it

wrong they sell the first one to the British ad ad agency u that just like completely destroys it >> and then they sell the second one of the can so So, so they actually showed that process happening twice. Um, and so that that again to go back to history that

that is what happened in the ad agencies basically between the 40s and the 70s like basically television catalyzed that like when when television emerged advertising became a much bigger deal than it had been before and it just it had to be professionalized in a different way. The other thing happen is

different way. The other thing happen is of course the external environment changes right so so everything we just talked about just has to do with the internal mechanics of how these things run but but the other thing happens is the external environment changes right and so part of what I think what Michael would say I think you would agree with

this part of what made CA possible is at one point basically Hollywood was just movies and then there was like whatever a lower kind of TV division and and by the 70s and 80s the you know Hollywood was becoming much bigger than just

movies right it was movies and TV and advertising and music and sports and you know you know politics and culture and like all kinds of things in fairness to kind of our competitors um you know

Silicon Valley between call it 1950 to 2010 was primarily just in the tools business right primarily the companies that you know starting with Packard the companies that we all backed and built were basically just building tools and you'd build a tool like an operating system or a disc drive or something and

you'd sell it to people and they figure out what to do with it. Um it was right around the time we started our firm that the valley was going from being primarily tools businesses to actually building um uh directly competitive

companies in incumbent industries right and so Airbnb going directly into the hospitality industry right so alternate universe Airbnb is just boutique booking hotel software right for Airbnbs it's a tiny little boutique business building

basically little spreadsheet software but no air Brian Chesky decided brilliantly um we're just going to like go into the hospitality business and compete with hotels directly um Uber andyft in the old world were taxi dispatch software. In the new world,

dispatch software. In the new world, they're full transportation providers.

Uh Tesla in the old world would have just been software for self-driving cars. Tesla in the new world builds, you

cars. Tesla in the new world builds, you know, the entire car. By the way, Facebook, same thing. Prior to Facebook, if you built like online ad, you know, software, you were selling it to the media companies. Mark's like, "No, we're

media companies. Mark's like, "No, we're just going to beat the media company."

Like, we're just going to build the entire thing. And so, this was the other

entire thing. And so, this was the other thing that happened was, you know, for us was that that was right around the pivot point when the valley's ambitions went from just building tools to going directly into incumbent industries. And

and then and then this goes back to the scale thing. It's like, okay, why do you

scale thing. It's like, okay, why do you need to scale a venture firm? It's

because the companies need to scale, right? And and and then of course AI now

right? And and and then of course AI now makes that crystal clear, right? Because

right, the winning AI companies are raising, you know, billions, tens of billions, in some cases, hundreds of billions of dollars, right? The the old world of 10 million or $30 million, $50 million checks, you know, where where VCs tap out is just not a relevant a relevant thing anymore.

>> But did you know the scale was changing at the time you founded the firm?

>> We had pretty good idea. So, I've been I've been involved in Facebook um you know, basically, you know, informally since inception and then formally on the board since 2007. And so, I I saw the when that thing hit the knee and the curve, it was just very clear. It was it

was just like very clear that we didn't know how big it was going to get, but it was going to get much much bigger than the internet 1.0 companies had gotten.

Um and so there was that. What else? It

was also around the time Apple was directly entering the cell phone market, which was another great example of this.

Um Silicon Valley didn't used to make cell phones. The original cell phones

cell phones. The original cell phones weren't made by Silicon Valley. they

were made by these like giant industrial companies like Sony and Nokia and whatever um and Motorola in Illinois or whatever and then Silicon Valley would make the chips that go into them or the software and of course Steve was like yeah no screw that we're just going to

make the phone right there were these signals that it was happening and then the other thing was just the the internet itself was maturing right um and so you know at that point the consumer internet was 15 years in um and and we had you know seen every part of

that and so we you know we I forget what the number was but that was probably around the time the global internet penetration it was like crossing a billion users on its way to five billion >> yeah you have a very interesting lived experience where like you were there at

the very beginning of the internet. One

thing that um I'm fascinated by and that's actually was going to be the first question um for you cuz I've never heard you speak about this at least on a podcast but your partnership and relationship with Jim Clark. You were

what 20 when you met him. How old were you?

>> I was old fashioned. I actually

graduated from college and got my degree. Very stone age concept these

degree. Very stone age concept these days. Um so that was in 1994.

days. Um so that was in 1994.

So I was probably 20 22 22. So, there's

this great book. I don't even think you like the book by written by Michael Lewis, Silicon Valley Story.

>> I've skipped it.

>> I've read it twice just because I don't know if anything's in there is true, but the the the portrait he paints of this very eccentric character is just wildly entertaining to me. But what's shocking to me is when you talk to young

founders, I'm like, "This guy started three I think it was the first person in history just to found three separate billion dollar technology companies."

That's right. And almost no one knows who he is. Can you just talk about how you met him, what it was like working with him?

>> I knew exactly who he was. And the

reason was because uh his company Silicon Graphics his first company they were the company in the valley between like call it 198 call it yeah 87 to94 or something they they were like whatever Google or open AI or whatever you know

comp you want to make like they were like the company and by that I mean like they were the company where the smartest people in the industry all wanted to work there the they built the products that were like the coolest products you could possibly imagine. They had this incredibly young and vibrant and dynamic

culture. Um and then they hit this like

culture. Um and then they hit this like cultural moment that was just incredible in I think '92 which was uh yeah which was the turning point in in the movie business when computer graphics really kicked in and the two movies back toback

were Jurassic Park and Terminator 2 >> run on the machines they made >> build on the machines they was the technology they made technology Jim invented was the technology that made that possible and those movie you know those are still two of the great old time you know movies um and but but at

the time I mean I still remember the chills that you get seeing dinosaurs on screen it's just like this is and then there's this company that builds the machines that do this. By the way, there the silicon graphics computers are

actually in the movie. There's a scene in Jurassic Park where the kids are navigating through Unix. Yeah.

>> And it was actually the uh it was actually the 3D software. It was

actually those those were actually the the silhou they just that was like this moment where they were just like they're just like the absolute IT company of all

time. But by the way, their legacy lives

time. But by the way, their legacy lives on in in Nvidia. like that that Nvidia is silicon graphics basically uh with with one ter it's like a the trader say thing it had to be a new company for

reasons we could describe to to to do the GPUs instead of the work instead of the the workstations and servers Nvidia fundamentally is is based on Jim's ideas that's where that stuff all comes from and so he he was already legendary he

and again he was one of these he was the full deal he was legendary as a innovator in technology because you know he's a PhD in computer science and he actually he actually he himself invented the original forget what they call it I think it was the reality engine the the

original interactive 3D graphics on a chip thing was actually him. I think it was like his PhD thesis. Um and then um and then he started the company and then he ran the company and then and then and then by the way and then the VCs brought

in professional manager and by the way and the reason we know about Nvidia today and not SGI is because of this founder manager issue which we could talk about.

>> No, let's talk about that real quick.

>> Yeah. Yeah. Yeah.

>> Because I don't remember this part of the story.

>> Yeah. Yeah. So now by the way there there there's two sides to the story and and and and and I wasn't there. Um uh uh uh and so I I just reflexively side with Jim Clark, but I I'll I'll try to at

least represent both sides of the story.

So so so Jim I I don't even remember what's in the Louis, but like Jim's like a true Jim's like a true he's like an Elon he's like a true Elon Steve Jobs level guy. Um and so like incredibly

level guy. Um and so like incredibly creative, incredibly bright, incredibly charismatic, but like he's volatile.

Like he's he's he's exciting. Like he's exciting. He's like

exciting. Like he's exciting. He's like

being around him is just like incredibly exciting. There's always something new.

exciting. There's always something new.

he always has new ideas and and again that was in that time where it's just like okay that's the personality type that clearly can't run the company and so the VCs brought in a guy um out of Hulip Packard um who had been trained in Hulip Packard um and because at the time

what happened is he wanted to hire a man a professional CEO he went and hired a general manager out of either Hillet Packard or IBM were the two training grounds uh for for those guys so they brought in a really really sharp guy who by I don't really know I think I met him

once I don't really know by all accounts he was like very he was like a very good example of this kind of HP general manager type who became became a CEO uh he he took over it. He took over the company and and by the way like in his defense under him the company scaled

enormously like I forget when he took it over but it was like 87 or 88 or something and then you know by the time I got to the valley 94 like this company become huge and you know whoever's running the company gets at least some

credit for that. So but but anyway they got in this classic fight like they got in this classic fight and and the classic fight was you know you can just it's it's the same story every time. The

founder is like founder talking CEO and the founder's like to the CEO of like we need to do things completely different and and the CEO is like no like what we're doing is working like stop [ __ ] with stop [ __ ] with everything that's

working and the founder's like no it's working now but it's not going to work in the future and the manager and the the CEO is like well then we'll deal with it in the future and the founder's like you can't wait to deal with it in the future because by the time the future arrives it's going to be too late and the manager is like why are you in

my pants I'm like making you all this money the company's super successful like get out of my shorts right and and you get in this as you see this and that was exactly the deadlock that they got into and Jim Clark basically made two predictions as the founder of Silicon

Graphics. So Silicon Graphics at the

Graphics. So Silicon Graphics at the time was selling their computers basically started list price like $50,000 for a desktop workstation and then scaled up into the millions. And

Jim was like look two things are going to happen. U it's amazing that he and he

to happen. U it's amazing that he and he figured this out by like 1991 or something. He said two things are going

something. He said two things are going to happen. And he said, "Number one,

to happen. And he said, "Number one, everything that we sell today for $50,000 is going to go on a chip and that's going to go on a card and it's going to go on a PC and it's going to cost 300 bucks and either we're the company that's going to make that or we're going to get destroyed, right?"

Which by the way is what happened.

That's Nvidia. Like that's what actually happened, right? So he was completely

happened, right? So he was completely correct about that. The other thing that he had was he's like look these this idea of standalone computers is not going to be the thing. These computers

are all going to getorked together and the network is going to become the important thing. At the time there were

important thing. At the time there were there were different terms. There was people were using terms like information superighway or video on demand or 500 channels. You had all these kind of

channels. You had all these kind of concepts kind of coalesing around what became the internet. Um and even before the internet kind of became a mainstream thing, Jim was just like look, it's just inevitable that this is all going to become connected. And then the function

become connected. And then the function of the computer is no longer going to be mainly what just the computer does. It's

going to be the fact that it can talk to all the other computers and and and and we need to do that. And and to do that, he actually he actually went to Japan.

He actually got this incredible deal.

Nintendo, you know, then and now was like, you know, this giant video game company. So he actually had this deal

company. So he actually had this deal with Nintendo um where number one is and he actually and Silvin Graphics actually did this actually built the original 3D graphics chip for a for a consumer game player the Nintendo 64. So he did that

deal and then he went to Time Warner which at the time was you know this very important media company um doing all kinds of things and and he struck a deal with them to do what was called interactive TV which was basically pre-

internet basically it was like Netflix before Netflix in 1991 right like like amazing foresight right just like amazing foresight but again he and the

CEO got in this conflict and the CEO's like look I we just can't we can't we have to we have to focus on the thing that we're doing we're not going to do these things and so Jim did the classic founder thing and he left and when I met

him basically that was the state that he was in which was okay like you know I Jim I'm like in the prime of my life I know I I have all these ideas I don't know exactly what to do with my next company but I know it should be a software company not hardware company I know it needs to be a company that is

able to anticipate these changes that are happening in the world um and I know that and he was very sad about this Silicon Graphics is not the company that's going to be able to do these things and so I have to build the the new company that's going to do it

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I want to hear more about what it was like working with them. But there was a very astute observation you made in your blog archive because you were trying to, you know, essentially this post was trying to educate founders just like recruiting is the most important thing

you're doing at the very beginning of the company maybe forever and you're you're underestimating how difficult it is and you tell the story of Jim Clark in the blog archive. You're like this guy was a legend. like most famous

person, best entrepreneur and he's like he tried to recruit all these other people and like I don't know it was like 100 people and you're like you were one of one of two or three that actually followed through and took the chance and jumped and started working with him.

>> Yeah. Yeah. And and this again this is like I don't know Zuckerberg or Sergey Bren or Elon or whatever decides to start a company like that was his candle power wattage in the community at that time. And so yeah you would think that

time. And so yeah you would think that the obvious thing people would just like say you know Jim Clark wants to start a company with you. You know just the obvious thing is you just say yes like was not was not happening. And so the the I don't know if I told the story but

the the my the crystallized memory is dinner of 12 of us at this famous Italian restaurant in Palo Alto called.

It's where a lot a lot of these companies were formed. Um, it was Jim's favorite restaurant at the time. And so

Jim had like a dozen of us and us being people who were like in existing companies who were like basically technical people who he knew. Well, this

is the thing. He was he was constrained.

He had an unsolicit agreement with Silicon Graphics. And so he couldn't

Silicon Graphics. And so he couldn't just rip people out. Um, and he didn't want to violate that. And so he needed he needed to basically reach out to the technical community and find new collaborators. So there were like a

collaborators. So there were like a dozen of us in there. And I I remember that I remember that dinner very very um um precisely for for two reasons. Number

one is I was the only one of the dozen to basic to say yes. And then the other was it's the first time in my life I drank red red wine. Um and I didn't know what to make of it. Um and so I kept

sipping it. Um trying to figure out if I

sipping it. Um trying to figure out if I liked it or not. And I didn't realize that I was getting completely hammered because I had no idea how to calibrate red wine. Um and so the true version of

red wine. Um and so the true version of the story is, you know, I leave the dinner and I'm like, "Wow, this is amazing." Like, you know, I'm going to

amazing." Like, you know, I'm going to say yes to this. We're going to do this.

And I I go to my car in the parking garage in PaloAlto across the street and um my my brand new car, my first, you know, new car I've ever owned, right? My

brand new car. And I and I and I and I got it and I pull it and I rip the entire front end of the car off.

It's like this screaming metal sound. So like the whole front of my car

sound. So like the whole front of my car is just like hanging on the ground and I'm like oh [ __ ] me. So anyway, I parked the car, get out of the car, walk home.

>> No Uber this time.

>> No Uber.

Like no three mile walk at, you know, whatever 11 o'clock at night with, you know, six bottles of red wine.

>> And you're what, 22?

>> No problem.

>> 22. Yeah, exactly. 22.

>> I'm like, I think I probably won't mention this to Jim.

I don't know. There's some wild stories in that book. He might have admired you even more.

>> He might have. Yes. Yes. Yes.

>> How many founders of the companies? Just

you and him.

>> So, originally, yeah, originally it was him and me. Yeah. We we started the company and it we had a long it was again one of these things where we had a we had long conversations about like what to do. Well, okay. So, then the the problem the problem that he had was

there was the idea of doing the graphics chip, but like and again that's what Nvidia did, but Nvidia was a essentially a spin-off of SGI. But like at that time starting a new chip company from scratch would have been tough and he didn't want to compete with SGI uh doing that and

then and then the interactive what it call the interact it's lost to history but this interactive television street like it wasn't time for that yet. It

wasn't actually time for Netflix yet. Um

and so like the the it was going to be cost prohibitive. Uh Time Warner had

cost prohibitive. Uh Time Warner had rolled out this interactive television thing in Orlando, Florida to 500 people.

>> Yeah. And Microsoft was involved.

>> They were doing they were doing a ton and Oracle at the at the time like all the big companies were >> all these Bill Gates photographies.

>> Yeah. Exactly. He talks about that a lot. but the capex per, you know, house

lot. but the capex per, you know, house was like $50,000 or something cuz you had to have like a silicon graphics workstation in the house. And it just it wasn't going to work. And so he couldn't figure that out. Um, and then we we we cycled through a whole bunch of ideas.

We actually went he actually went back to Nintendo and we we almost pulled the trigger on basically building what today you'd call like Xbox Live or what is it called? Play a PlayStation Network or

called? Play a PlayStation Network or Xbox Live like an online gaming service for the Nintendo 64 in 1994, which might have been a good idea. Um, we thought it was too early. uh we almost did that and then what happened literally was the

internet you know I I had worked on the internet in college and then and then you know this is you know fortunately only a few months later but the internet just kept growing like it just >> hold on Mark >> yes you' worked on the internet that's a little bit modest

>> yes well >> I think a lot of people listening to this will know but you should probably explain how you're working on the internet >> so at the time it was not so this is part of the story at the time it was not that big of a deal it's not nearly that

much big of a deal at the time as as it's viewed now so so the internet I I've told the story many times so I won't go into huge detail but yeah so you know a group of us at Illinois did this thing called Mosaic which was the the first I say the first widely used web browser then the first one with

graphics and >> explain what was different about what you made compared to what existed before >> yeah so the like previous web browsers were like text based and so so there was like this nent concept of the web but it was like a tech it was like textbased

terminals um and then it didn't have graphics um it wasn't point andclick um you know it didn't it didn't work in the way that you would like to expect software to work um and then by the way it didn't also have like you know no

scripting language no security you none of the actual capabilities that like make make the browser a useful thing.

And so there there was this like nent idea, but it but it needed to get built into a full thing. And so we we built the original kind of full full thing full browser uh at at Illinois. Um and

then we also built the first kind of mainstream web server like the f the first web server again that kind of had everything that people needed. You know,

this had been a project at at at college and and then this was a and again at the time the internet was not viewed as a consumer phenomenon.

>> Wasn't it illegal to commercialize?

Steve Casease of AOL tells a story that he had to like lobby and get a law changed.

>> That's right. What was

>> Yeah, >> the details there.

>> So the the internet as we know it today um in the 1980s was called the NSFnet.

Uh NSF stands for National Science Foundation which is a branch of the US government that funds research. Um and

uh the National Science Foundation funded funded the internet. Um the

reason I was able to do the work I was able to do at Illinois is because the NSF had actually dumped a ton of money into four four universities around the country to build what were called the supercomputer centers. And then those

supercomputer centers. And then those were also the main hubs for the NSF net and and the and the function of the NSF net was fundamentally to connect the supercomputers to all the people who were going to use them. And so it was it was this government research academic

program and it was like very exciting in the technical field but there was no conception that like ordinary people are ever going to use any of this. Like it

was just not not nobody ever thought that this was a thing that the normies were going to use. Um and and and and so so NSF it's it's taxpayer funding and so the the government at least is not

supposed to be funding businesses directly although sometimes they do. Um

but um there was there was uh there was you know formal legal restrictions on on on on on funding things with with with with commercial applications. And so

what what there was is there was something called the AUP the acceptable use policy. And the acceptable use

use policy. And the acceptable use policy said that that basically the the internet the internet the NSF net turn internet um was for academic and research use and commercial activities were strictly prohibited. Like literally

not allowed and and again it's just like oh as a taxpayer that makes total sense.

Like I'm I'm glad my tax money is not going to fund something you know like that. But like as a user you're just

that. But like as a user you're just like all right that's nuts. Like like

that's clearly crazy right? And and and if you if you took the conceptual leap to say to say no this is going to escape the lab and this is going to be something that normal people are going to use. Um then it just became obvious

to use. Um then it just became obvious that it would have to have commercial activities. Yeah. And then a AOL was one

activities. Yeah. And then a AOL was one of the early pre- internet online services that wanted to connect to the internet. I think they famously

internet. I think they famously connected to the internet in 1993. Do

you know you know about the concept of eternal September?

>> No.

>> Oh, okay. So, so there are two internets. There are two internets.

internets. There are two internets.

There was the internet that existed before 1993 and the internet that existed after 1993. People who were on the internet before 1993 often describe it in utopian terms. Um because it literally was like you take the whatever

million smartest people in the world and you put them on a network together with like no commercial activity, no advertising, no nothing. Just the

million smartest people in the world and you just like let them talk to each other and it's just like amazing. It was

like amazing. Like the there was this the old messaging system was called Usenet and like the discussions on Usenet were just like absolutely spectacular. It was just like this it

spectacular. It was just like this it was like it was amazing. It was like the most pure clean intellectual like vibrant space since like I don't know Athens in you know 500 BC. It was just

like this amazing phenomenon. And then

AOL connected uh AOL AOL had I whatever million or two million uh people at that point and they connected they connected all the AOL users which were just normal people to the internet in September 1993.

And so it became Eternal September uh which is that's the day the the internet changed. And by the way I'm I'm I'm pro

changed. And by the way I'm I'm I'm pro that I'm glad that happened. But like

the pro and the con of that is that took the internet from this like ivory tower you know kind of thing to this basically mainstream consumer ordinary people thing which of course is just a fundamentally different thing. It's you

know obviously right concept of eternal September literally was it was like when when every uh new wave of college graduates like graduated and got their first job and then went online. So so

September is when September is when the new crop of like internet users showed up for a long time. So so the September effect didn't just happen once. It like

happened over and over and over and over and over and over again. And every cycle of internet user would basically be like oh my god this is great but like it's all going to get ruined in September.

>> Yeah.

>> Right. And and so the internet that we live in today is is the result of >> they could only see us now. 30 30 30 September, right? Um but yeah, and by

September, right? Um but yeah, and by the way, there there was cont there was controversy there was controversy at the time about whether the internet whether the acceptable use policy should be revoked. Um there was controversy over

revoked. Um there was controversy over whether normal people should should be on it or not. U there was controversy over whether the kind of content normal people wanted to be on it should be allowed to be on it. Um there was controversy about whether there should

be like there was controversy we got quite a bit of flack at the time for putting images into web pages under the theory that that would like fundamentally make everything worse because you'd have like normie content.

Um that would be bad. Um uh and then you know this said about like e-commerce by the way advertising. Um I remember I remember when the the there was actually a moment there was a guy there was a guy there a guy named Sanford Wallace and he became

known as Spamford Spamford Wallace and and he was literally he sent out the first spam message on on the internet in like 1992 and it was like literally it's like the first internet ad and it was like a spam for I don't know whatever

legal services or something. Um, and he just dropped it on uset and it was like a thermonuclear explosion because it was like, you know, get this commercialized crap out of my out of my out of my newsfeed. Um, and so, so, so like all

newsfeed. Um, and so, so, so like all all of all of these things were like hotly controversial. Um, I was generally

hotly controversial. Um, I was generally on the other side of all these arguments because I was like, look, this thing is great. Obviously, everybody should have

great. Obviously, everybody should have access to this. Obviously, we need to connect everybody to this. Obviously, to

do that, we need these these need to be businesses. There needs to be commerce.

businesses. There needs to be commerce.

There needs to be advertising. Like, all

these things obviously need to happen.

So is that the discussions you and Jim were having where you're like, "Okay, we're going to start an actual company around this."

around this." >> So yeah. So So that's how we got to the conversation Jim and I had which was basically like, "Okay, because that was right at the pivot point is like in early '94. So this is like the AUP had

early '94. So this is like the AUP had just been revoked and it was just and AOL had just done the first September and it was the whole thing was just about to tip. Um and I and I knew that I

knew that because um I was tech support for the browser um personally."

>> Now explain that.

>> Just me. Uh well so if you mosaic at the time was the browser everybody used and so if you use Mosaic there was a you know submit a bug report or whatever you have a question submit it here and that went to an email box and that email box was me and so I became tech support for

the internet for like you know three years and got all the emails. Um uh

>> how many emails were you getting?

>> Well there actually two that was one email box and the other email box was u mosaic was actually created under by it was also funded by the National Science Foundation. Um, so it was actually not

Foundation. Um, so it was actually not leg the original license said it you couldn't be used for commercial use. It

was for academic and research and individual use. And so we had this thing

individual use. And so we had this thing we we did a deliberately ambiguous license and we said if you want uh to use the browser commercially you need to email us to to arrange terms. Now we had no concept at all of what those terms

would be but we just said we we need to you know create this incoming flow. So I

was getting bombarded with tech support requests. And by the way tech support

requests. And by the way tech support for the internet means you're tech support for everything. So, it's like, you know, the old old PCs had um you know, the they had CDROM trays. You

press the button, the CDROM tray comes out, you put put the disc in the thing.

The problem is a lot of people thought that those were cup holders, right? So,

you press the button, the cup holder comes out, you put your cup of coffee down, and then, you know, 10 seconds later, the cup holder retracts back into the PC, spills your coffee all over the place. You're like, how the [ __ ] do I

place. You're like, how the [ __ ] do I keep the cup holder out, right? It's

like man >> let me email Mark.

>> Yeah, let me email Mark. You know, it's like, sir, that's a that's an EC round drive. Um, so there was a lot of that.

drive. Um, so there was a lot of that.

So, so one of the funnier things you can always do in politics they call this focus groups, but you could you user testing if you you see this over and over at tech companies take whatever amazing new thing you have and just put it in a put it in a room with like

normal people and let them try to use it and you just like learn so much about how much of a bubble that you're in about the kind of things that you're familiar with that like normal people are just like I don't know what the hell any of this stuff is. So there there

there was a lot of that, but then I had this other email box which was all the all the commercial licensing requests.

And so so I saw the consumer take off on the one side and then I basically I think that the and then the the commercial request hit like 400 messages of people wanting to like pay money for this thing. And so I basically took

this thing. And so I basically took those to Jim and I was like there's a business.

>> Yeah. Yeah. This this this is going to happen. And then we actually went to my

happen. And then we actually went to my under my my old my old um my my old boss and I at u at NCSA actually had gone to um we actually went to Washington in '93 to try to get NSF funding to staff a

support desk so that it wasn't me answering all answering all the emails and the National Science Foundation people were very nice and they were like yes the National Science Foundation is not in the business of funding customer support desk uh for your for your

software and so I still have the the denied NSF grant um that would have kept the whole thing an academic project. Um,

but yeah, so like at that point it was like, at least to Jim and me, it was just obvious that that was going to be a business. By the way, again, very

business. By the way, again, very controversial. The original press

controversial. The original press coverage on Netscape for the first like year was that these people will never make money. Like this is ridiculous.

make money. Like this is ridiculous.

Like everybody knows the internet's free. Like everybody knows that none of

free. Like everybody knows that none of this is going to work. So, you know, even even >> what did you think the business model >> even then it was controversial >> was just literally licensing it?

>> It was a combination of things. So, it

was it was definitely software licensing and we we we did this thing up front where the browser was free but the server software cost money. And then we and then we out of the gate started building all these we call applications ser serverside applications. So we built like the first publishing system we we

built the first like publishing system for like running a newspaper or magazine online you know content management system. We built the first e-commerce

system. We built the first e-commerce system for selling you know this is pre Amazon. So we built the first e-commerce

Amazon. So we built the first e-commerce system for selling things online. Um so

so so we we we built sold a lot of that software. Um and then um and then we we

software. Um and then um and then we we owned you know the the main website that the browser had as its default homepage.

And so we built the the original internet advertising business was was basically so Netscape was the largest internet advertising company until I think 97.

>> That's incredible. I didn't know that.

>> And yeah passed us. Yeah. Um and so yeah, so we we invented or people at the firm invented at the company invented I I don't know if we I don't exactly who gets credit but like the original ad formats u you know were right around that time and a lot of them rolled out

on uh on our site you know first. And so

it was it was literally it was advertising pre Yahoo. It was um it was uh e-commerce pre Amazon. Um it was uh yeah content pre you know we literally sold I mean we put the Wall Street

Journal online it was our you know that was our software that did that um and a lot of other newspapers magazines all all that stuff and so yeah it was a lot of that and then it was the the web operation uh and again it was again it

all looks obvious in retrospect but like again it was like okay when we started this like I don't know the total number was in like so we started the company April 94 there couldn't have been more than two million people total online

right and and then almost everybody was coming in over dialup this is like free broadband, right? So, everybody's coming

broadband, right? So, everybody's coming in at like 14.4 kilobit modems and we're like hoping that people are going to upgrade to 56 kilobit modems like you know that that would be like super helpful. Computers at that time did not

helpful. Computers at that time did not come with TCP IP installed. Um, so get your PC actually on the internet you needed to you needed to buy a TCP IP stack. Try explaining to a normal human

stack. Try explaining to a normal human being what a TCP IP stack is. Like it

makes no sense at all.

>> Uh, so that >> they're going to ask if they could put it next to their cup holder.

>> Exactly. Yeah. Just like it was just like it was just like talking to Martians, right? Talking to us is like

Martians, right? Talking to us is like talking to Martians. And then, you know, monitors were, you know, like three feet deep and just like bathing you in radiation, you know, just you're kind of hoping that the radiation stays up here and not, you know, everywhere else. In

retrospect, it was it was like super early and it was all very and and then again it was just like, okay, e-commerce like are people going to buy things online? It's like, I don't know, maybe.

online? It's like, I don't know, maybe.

But like the press at that time, it was just like wall to wall like if you put your credit card number online like hackers are going to steal it.

>> I was say if you read any books around this time, they're like there's no way in hell anybody's ever going to put their credit card on the internet. By by

the way, the other thing you would never ever ever ever do is put your real name online because it would be immediate identity theft. Your life would be

identity theft. Your life would be ruined. So, you would never ever do

ruined. So, you would never ever do that. Um, by the way, the other thing

that. Um, by the way, the other thing was right in the beginning, you had all the panic around, you know, kids, you know, this is going to destroy children.

You know, this is a huge risk to children. So, you had all that panic.

children. So, you had all that panic.

Um, and then there was med, you know, there was the beginning of the calls for censorship. You know, there's clearly

censorship. You know, there's clearly all this stuff that you have to take down. The New York Times kept running

down. The New York Times kept running stories talking about how the whole thing was fake. Anyway, they kept saying that like all the numbers were made up and like there actually wasn't anybody online. And it was like a tiny little

online. And it was like a tiny little user base and we were all like inflating the numbers and committing fraud. And so

it was just this it was just this in retrospect it's all like quaint and cute and sweet but it was like the it was the precursor. It was all all the all the

precursor. It was all all the all the all the moral panics around technology that >> you could see nent versions of them back then.

>> You pick up on something that cuz me and you've read a bunch of the same books where it's like humans reaction to something new is just consistent throughout history. And so I heard a

throughout history. And so I heard a podcast with you. I thought it was the only one that would tell the story in private about bicycle face.

>> Bicycle face.

Exactly. Do you want to say what bicycle face is?

>> Bicycle face. Bicycle face. Bicycle

face. Yes. So it basically turns out every new technology is greeted with a what they call a moral panic. Right. So

a moral panic basically is whatever this new technology is or this new form of media is it's going to ruin everything.

It's going to ruin everything. It's

going to ruin specifically it's going to ruin society. It's going to ruin

ruin society. It's going to ruin morality and then especially it's going to ruin the children. Um and and then and then back this bicycle was prefeminism. So it also was it's also

prefeminism. So it also was it's also going to ruin the women very specifically. he's going to ruin the

specifically. he's going to ruin the women which clearly cannot because women clearly in 1880 you know cannot be trusted to use a bicycle without getting into real trouble. I'll explain I'll I'll explain why. So this is this persistent theme and and basically you

go all the way back and this is like you know this is like this famous thing where Plato uh and Socrates thought that like you know basically that they thought that written language was a big mistake that that all information transmission should be oral and they had

this you know whole thing back in 500 BC and then it was just like every you just have to like imagine it's I I always like to hypothesize like you know the first guy brought fire you know it's like down from the mountain >> they probably killed him.

>> Yeah. They're like, "What the [ __ ] is, you know, right?" Exactly. Like, you

know, this thing is horrible. This thing

could burn down the village. Like, this

is awful. This is going to destroy everything. Um, and so it's just been

everything. Um, and so it's just been this this consistent thing and and you there's this great website called Pessimist Archive where he this these guys would go back and they find all these newspaper articles that are contemporaneous to these things, but it's it's everything. And you know, so

when I was a kid and you know, it's like heavy metal music, Dungeons and Dragons, you know, like all this stuff was awful.

I remember the moral panic around the Walkman, the very first cassette portable cassette player with the headphones because it was going to it was going to destroy society because everybody's going to just be listening to their own, you know, their own music.

I remember the moral panic around the calculator was going to destroy education because kids were not going to learn how to do math anymore. Um, and

then you go back and it's like in the 50s it was like comic books and it was, you know, rock and roll music obviously was going to ruin everything. In the

20s, by the way, jazz music was going to ruin everything. Playing cards were

ruin everything. Playing cards were going to ruin everything. Uh, what else?

Uh, novels. uh paperback novels, you know, we're take taking kids kids kids are going to sit around and just read novels all day instead of doing any any real work. So, it was just over and over

real work. So, it was just over and over and over again. It's this constant story. So, the bicycle one is the great

story. So, the bicycle one is the great one. So, the bicycle rolls out in like

one. So, the bicycle rolls out in like 1870, 1880. And so, the the US still at

1870, 1880. And so, the the US still at that point was like, you know, thinly populated, you know, from today and but the west had been settled and so all these little towns and villages scattered all over the place and but, you know, to get from one town to the next was like, you know, 5 10 15 miles

and so people didn't generally walk walk that. Um, and so the bicycle comes out,

that. Um, and so the bicycle comes out, all of a sudden it's easy to go five miles into the next town. And then, you know, young people discover the bicycle and they discover that there are young people who they didn't grow up with who are in the next town over and they're like, you know, they head off to do it.

And and so the specific >> to do it >> to do well to do it. Yes. To do

everything to do whatever it is the young people do. They're going to they're going to head to Yeah. Look,

look, it's just the nature, you know, if you've known the same group of people since you were two, like you're you're going to want Yeah. It's

>> What's over that hill?

>> What's over that hill? Yes. Exactly.

Right. Um I grew up in a small town. I I

I can identify with that. Um and so um so so and and then specifically at that point young you know young men obviously but specifically young women started to do the bicycle and so and this is a big threat. And so like if you're like a guy

threat. And so like if you're like a guy in a town and like all the you know attractive young women are like heading over the hill to the next jail on this bicycle thing like that's a big problem.

Um and so the press at the time created this thing called bicycle face. Uh and

the idea of bicycle face was it was a it was a it was part of the moral lecture that was given to young women in the press at the time. uh which was basically young women should not use bicycles because if you go on a bicycle you have to exert yourself and if you exert yourself in the bicycle you're

going to end up making like a you know an exertion you know exertion face. Um

but the thing was if you did that too much your face would freeze in the bicycle face.

>> They literally thought it would stay that way.

>> It would stay it would stay that way permanently and then you would never find a husband.

>> Right. And so so yeah. So that was that moral panic. Yeah. And so these these

moral panic. Yeah. And so these these things just like rip through every I mean it's just it's well it's incredible. Music is always a great one

incredible. Music is always a great one because it's like, you know, for I don't know this it's over now, but like in the in the in the 90s, 2000s, you know, it was all this moral panic around hip-hop, >> dude. Jimmy I who's your neighbor. Yeah.

>> dude. Jimmy I who's your neighbor. Yeah.

>> He was in here two weeks ago.

>> And he had to deal with they called him a uh >> Yes.

>> like a um chemical gas or mustard gas.

Like they compared him to literally like what he's doing is the same as genocide.

>> Yes.

>> This is funding hip-hop music and white kids are starting to listen to hip-hop music. say about music in the late '

music. say about music in the late ' 80s early >> '90s in front of like congressional hearings on this like the media behind him. He was he was pushed out of a

him. He was he was pushed out of a conglomerate like this wasn't a joke.

>> Yes. That's right. That's right. And and

it's actually funny cuz like we we I'm not in the music business, but like I hip-hop has become so normalized at today. It would just never even occur to

today. It would just never even occur to you. Just like feels like hip-hop is

you. Just like feels like hip-hop is kind of, you know, is a cultural phenomenon is is even kind of fading today. But yeah, no, that was super

today. But yeah, no, that was super intense at the time and then rock and roll that was like super intense in the 50s and 60s. And then the amazing thing is >> Jovis Presley, they would they wouldn't shoot him. They cuz he would shake his

shoot him. They cuz he would shake his hips. So they're like, "No, no, he

hips. So they're like, "No, no, he can't. His waist up on TV from now on."

can't. His waist up on TV from now on."

>> That's right. But here's the one. Here's

the one I love. Jazz. They said all the same things about jazz in the 1920s and 1930s. It was jazz music is corrupting

1930s. It was jazz music is corrupting that the and it was the exact same thing. It's cuz like kids are going to

thing. It's cuz like kids are going to get together and they're going to dance to jazz and then who knows what happens.

And then it was like there's a jazz musician that's like smoking pot and that means all the kids are going to start. It was just so it's the same it's

start. It was just so it's the same it's the same story over and over and over and over again. Um and and and also say by the way in fairness like it's not that society doesn't change like you know many of the technologies that we

just described did did cause society to change like you know things are different pre- and post the bicycle they're different pre and post the car um you know they're different pre and post you know the creation of modern modern culture rock and roll or whatever

but like this like the again this idea of the moral panic this idea of just like outright panic end of the world is just like this repeat it over and over and over again thing and then and then what's what what's happened is like this

this is just this is the obvious way to sell newspapers right Like this is like the meta story of the press which is just like whatever is happening is like horrible and awful and it's going to kill everything you know you know be sure be sure to buy our newspaper

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I want to go back to to Jim Clark real quick.

>> Is there anything that you learned cuz Jim Clark was what like two deck probably 20 years older than you?

>> Yeah, something about that probably. So

like is there anything that you learned work what a [ __ ] education you had to be able to work with that guy in your early 20s.

>> That's right.

>> So is there anything that you learned by working with him back then that you still use today?

>> I mean yeah a lot you know said it was very formative for me. So so a lot of it but yeah I mean you mentioned that the sort of quote earlier about the world is a malleable place. Like Jim was like the ultra version of that. Um and so yeah, he would just like yeah when he had an

idea and he was right. His ideas were correct almost all the time and he would just like pound the world into adopting them into believing them like he was you know the idea being like a complete force of nature. One thing that was

malleable was himself. He has this great quote in that book where he he he calls himself a self-described loser at 38 years old. I mean the guy had like two

years old. I mean the guy had like two PhDs. He was a professor, but he just

PhDs. He was a professor, but he just like I think he'd been in a second or third divorce and he just snapped one day and he's just like I had woke up one day with the undeniable uh urge to achieve something and that's when he

goes from academic to founder and just rips off company after company for like a few decades. I was like oh he's he realized that he is malleable too. He

just reinvented himself over and over and over again.

>> Yeah. And of course he does that not just by like starting a company but like inventing interactive computer graphics >> and like completely changing the field >> you know indirectly like completely changing Hollywood.

>> Was there anything about recruiting or managing or any of the other way that he ran his company?

>> No. So my two mentors at that time actually they were they were in some ways polar opp they always got along but they were kind of polar opposites. They

were both Jim. So Jim Clark and Jim Bartowell. So the Jim Clark side of my

Bartowell. So the Jim Clark side of my personality is like the like will of power like I'm just going to bludge in the world into doing what I want. um you

know and and just and then the idea of just like you know try to be a fountain of creativity like just like there are many there are many new ideas out there and like you you just you need you need to go find them. Um um and then you say

also could put this like a sense of perpetual dissatisfaction like okay like what whatever look this is the other part of the story like a lot of founders would have had a success like selling selling graphics and that would have been it and they would have spent the next whatever whether they were totally

happy with how it turned out or not like they would have spent 30 years just coasting on that right and having a great time and taking credit for it and the whole thing um but Jim you know was always uh you know at least in that part of his life you know dissatisfied in the

productive positive sense of like okay no there's something better there's something bigger you know there's something new that we should do So, you know, there's that side of it. And then

Jim Barcstell was the other um uh was the who just literally was with yesterday uh in in in Jackson, Mississippi. Um Jim Bar's the other side

Mississippi. Um Jim Bar's the other side which was Jim Barcel's like the the manager of managers. So Clark is like the ultimate example of that bgeo capitalist thing I mentioned. So the

Henry Ford Elon Musk type and then Jim Bartow is like the ultimate example of like the super the super manager and Jim had run you know big parts of IBM and AT&T and Federal Express. um and you know came came in you know came in to

run escape and what was interesting was like that's kind of where I got a lot of this from and a lot of my skills from is I I got trained by both of those guys and then kind of both of those guys at the same time and and then was able to like very clearly observe one is just

the difference between those mentalities but then the other is of course how how those concepts converge right because just the fountain of creativity you you can't you can't build you can't build anything big just with that um

just the management you don't you don't do you do it many things >> who's a great example of that from history like would it be like Nicola Tesla found creativity.

>> Oh, that's right. Yeah. Somebody he like a George Westinghouse to commercialize his ideas.

>> Well, so Tesla versus Edison.

>> Uh yeah. So Tesla versus So Tesla versus Edison. So I'm an I'm an Edison guy.

Edison. So I'm an I'm an Edison guy.

This is the thing. So Elon's a Tesla guy is a Tesla guy obviously. But but Elon of course himself has now become like a really outstanding. I mean obviously

really outstanding. I mean obviously become an outstanding manager like in his own you know in his own way. In fact

to the point where I think he's actually inventing an entirely new school of management which we could talk about.

But like >> let's go there next. Yeah, he's maybe the greatest manager of our era despite the fact that nobody thinks of him that way. But um but so I actually think

way. But um but so I actually think Elon's more like Edison than he is like Tesla.

And there was a big war and it was kind of this thing because it's it's every everything kind of turns into these little moral morality plays. And so kind of the this basic story of Tesla and Edison was Tesla had all these ideas but could couldn't couldn't commercialize them, couldn't turn them into companies

ultimately, you know, couldn't couldn't couldn't figure out how to make money on them. Couldn't build like big big big

them. Couldn't build like big big big companies uh you know kind of based on them. And then Edison, you know, it

them. And then Edison, you know, it basically, at least the way the legend goes is he was more of this grinder. He

was less incandescently brilliant and he was more of a grinder and he's just like, we're just going to try a thousand things, you know, so when they invented the filament for the light bulb, they just tried like a thousand different combinations of things to get to the filament and, you know, sort of this brute force approach.

>> But then he built General Electric, right? Like he built the like national

right? Like he built the like national electric grid, you know, and built these giant companies. Um, and then he, you

giant companies. Um, and then he, you know, funded by >> funed funded by funded by JP Morgan as a as a as a as a venture capitalist in his spare time.

>> Yes. Exactly 100%. Um and so uh and then you know Edison also invented the movie projector and then and then literally spent years trying to enforce his patents, right? And

patents, right? And >> photograph >> and the photograph and the photograph >> you tell the story and I knew because I read the book too.

>> We should tell people what he thought the photograph was going to be used for.

>> So this this is a bit of a digression but it gets to the personality type. So

one of the things that people look for is just like oh what are the consequences of a new technology going to be? Oh let's go ask the people who

to be? Oh let's go ask the people who invent them because obviously they know.

And so this is what happens when like these a when the AI guy for example the AI guys get you know AI the pioneers of AI get interviewed in the press it's like well tell us the future of AI and it's like you get the like is Jeffrey

Hinton who's like an actual self-declared socialist like he's an actual like he's an actual capital S socialist and people ask him what's the future of AI and of course he says it's going to be rampant unemployment and we need to give UBI to everybody. It's like

what a coincidence. The answer from the socialist is communism. Like like what an amazing coincidence. But people think because he's one of the inventors of AI that he must be the guy who knows. And

so the story I always tell is the Edison story. Thomas Edison was like a he was

story. Thomas Edison was like a he was like a very proper wasp. He was like a wasp. He was a waspy you know

wasp. He was a waspy you know personality type of that era. Extremely

proper gentleman. Always like impeccably dressed very you know kind of very ethical uh you know upstanding you know kind of citizen of of that time. Um and

um and very religious very religiously devout. So for him it was just obvious

devout. So for him it was just obvious that the application of the record player was that everybody would buy a record player and then everybody would buy a cat a library of discs that would be the great sermons religious sermons called the great preachers of the time

and then you get home at night after a long day of work and you turn on the record player and you would listen to a sermon you know with your with your adoring you know wife and kids you know gathered around you and of course the record player drops and immediately of course like it's just it's music it's

just like obviously music and it's like rag time and you swim then it's jazz and and Edison's just like completely horrified >> he didn't know that if you put the photograph in the You know, and you play good music, then you have all these

girls on bicycles coming over the hill with bicycle fists. Exactly. Exactly.

And so this is what I always tell, this is always my thing. It's like if Edison didn't know what the photograph was going to get used for, the idea that, you know, I don't know, whatever Joe AI entrepreneur is going to be able to forecast the economic implic

often like the least qualified people to understand the long-term implications because they're just they're too they're too buried in the specifics of of the here and now. And then and then and then all these other questions, you know, these are all big cultural, social,

economic questions, you know, and by the way, I don't know if there's anybody that can predict big cultural or economic or social trends, but it's certainly not somebody who's been in the lab for 20 years, including myself.

>> So, how this started, you think you greatly benefited from the two gyms essentially like being polar opposites >> basically and showing you, >> but also working very closely together.

>> Did they get along?

>> I don't know if I've told this story publicly, so I should tell this story.

So, um, they got along great, became very good friends. They they both did great and they're both, you know, very responsible for certainly everything that Netscape did and everything that that I've done. But, you know, it's a it's an it's different disciplines, different worldviews, you know, so

there's an oil and a water kind of aspect to that. And so, so, you know, Clark ran Clark ran the company for the first like nine months, which at the time felt like, you know, just like this internet time. It felt like much longer,

internet time. It felt like much longer, but it was like this highly compressed ninemonth period. And and you know, it

ninemonth period. And and you know, it was like we were like doing we were all these new things. We were doing all these new things like the company was just doing like a hundred new things. It

was amazing, but like we nothing was being systematized, right? It was not it was not going to by default it was not going to turn into like a large a large company without the management part. And

so Barcel comes in and he basically is like wow the this inventiveness is great but we need to like actually start to have systems and like schedules and processes and and actually like run this thing run this thing like a business and and and you know as founders do Clark

you know originally you know found that a little bit frustrating because it's like you know whatever is the latest idea is not the thing that we're just going to turn the entire company you know to you know to pursue and this is when Clark was still coming to Jim's

Barcel staff meetings and so um uh Clark got got up got um uh uh he had a negative reaction to Barcel saying no we're not going to do this new we're going to we're going to keep doing the thing that's already working. You know,

it's one of those moments. And Mark

still like, you know, can I talk to you outside? And so that, you know, they

outside? And so that, you know, they went out back and and um and and I heard the story from both of them later. And

you know, Clark's like, you know, look, this is the whole reason we're here is because we do these new things. Um you

know, if we don't do these new things, we're going to destroy the company. And

Bartow looks right at him and says, "Jim, I hear you. This is as serious as dick cancer."

dick cancer." What the deep Mississippi draw, right? and

clerk stares him right in the face and Bur stop laughing and they got along great ever since like like like they just they loved each other ever since basically saying look we can't we we're not going to make

these decisions in a state of kind of superheated passion like we're not going to do that we need to have the full version of this conversation but we're we're going to have it in kind of this this this longer and maybe more dispassionate way >> uh but it was it was to it was to

puncture the stress of the moment >> and so that I I will say I have used that one a few times >> but I could see Clark >> and Clark thought it was hysterical like and nobody had ever talked in that way before so

>> but I could see Clark like oh no here we go this is a replay of what happened at Silicon Graphics so >> I think probably he was probably afraid of that to a certain extent um but um yeah yeah but I would say yeah I don't

want to say anything negative about the SGI guy but um yeah I mean Clark like I said Clark was just like Barcel was just like the was the manager of managers he was like so advanced on this that story notwithstanding Barstdale never took the

position of like no it's time for the new new ideas to stop like but it was always like okay we need to thread the new ideas into a business which which is kind of the hybrid of the two.

>> So I just had this thought while sitting here listening to you speak. Is there

something about your partnership with Ben >> where like you like he's more Barkstdale still you're more Clark.

>> Yeah. Although we we do mix it up a little bit more um because he does have he does have his own edge. Um but um yeah there there is some of that. Yeah.

So like for example our friend he runs the firm um and then I yeah I will I tend to come up with new I you know he comes up with lots of new ideas but I do tend to come up with new ideas and then we we do we do have this kind of discussion you know frequently.

>> So if I was to follow you around without you knowing with a camera what would your day look like then?

>> Are you just like a fountain of ideas or you're like this uncontrolled energy like a Jim Clark back in the day?

>> But I've got both. This is the thing because they both train me. I've got

both parts of it. So I

>> So you're not as un like controllable or unmanageable as >> Yeah. Look, I I think I I believe Ben

>> Yeah. Look, I I think I I believe Ben would tell you, "Yeah, I mean, look, Ben's been working with me now for 30 years, and so I think if this is a real issue, I think, you know, that our partnership would not have lasted, but I think he would say that I have a pretty strong internal edit function.

>> I want to see unedited."

>> Well, unedited is really fun. Um,

unedited is very enjoyable. Um, it it it is very disruptive. Um, and so, yeah, it has to be Yeah, it has to be calibrated.

>> When do you show the unedited side?

>> I don't tend to do it in the spur of the mo. Again, this is the thing and I, you

mo. Again, this is the thing and I, you know, Elon threads this incredibly well, just incredibly well, as does Zuckerberg. Um, is like it it is this

Zuckerberg. Um, is like it it is this thing, and again, this goes back to like the Addison Tesla thing.

When you're responsible for when you're responsible for an organization, when when you're responsible for a team of people that's more than five or 10, if you're going to have an organization, it's like 100 or thousand or 10,000 or 100,000 people, like it you can't change

the client every day. Like, you just can't. You'll just you'll destroy every

can't. You'll just you'll destroy every you'll burn everybody out. You'll

destroy everybody. they'll just see mass confusion. People will quit. It's just

confusion. People will quit. It's just

going to be like you can't do that.

There has to be some calibrated middle ground. There are a handful of examples

ground. There are a handful of examples of like great business successes where it's like one or two or three people, right? And so maybe it's like Bitcoin

right? And so maybe it's like Bitcoin and Minecraft and WhatsApp and Instagram and and then I start running out of examples. But like AI, there will

examples. But like AI, there will probably be more. There will probably be more like single person companies, you know, from here on out. Or or by the way, artists, you know, an artist, a novelist. Let me say this is the

novelist. Let me say this is the difference between like a novelist and a movie maker. A novelist is like you can

movie maker. A novelist is like you can put whatever the [ __ ] you want in your novel. But like if you're a director of

novel. But like if you're a director of a movie, you can't like change the entire plot like on Tuesday while you're shooting the movie or you like there's 300 people who are relying on you to like complete a movie like so so anyway.

So the point being is like intact if you're if you're going to have an organization or or by the way in anything in in any field of activity if you're going to have an organization you you do need to have some calibration titration process like change does need

to happen but it needs to happen in a measured way. Um and so and so you you

measured way. Um and so and so you you can't just like blow it up every day. Um

and so yeah, so so either what you need in that case to to to get kind of the holy grail of the large scale organization that's still innovating either you need two people involved who are able to balance each other and and by the way you could say this is like

Steve Jobs and uh Tim Cook you know would be a canonical example or by the way early on Zuckerberg and Charles Stanber or early on Bill Gates and you know Steve Balmer. you can have that kind of configuration or every once in a while you can get that in a single

person right which is very rare but like Jensen Wang would be a single person example of that uh so you know every now and then you get that um and so I would say Ben and I have like a version of the yin andyang kind of aspect to it but

like I said he's very creative on his own and I have this because I have the bar shell training I have this additional level of sort of most of the time you know sort of self self-governance like I kind I I get it like I'm not but my big thing is like

look if I'm going to walk in and I'm going to like throw a fit and I'm going to like we have to change everything tomorrow and Ben's going to be like [ __ ] you. Like this [ __ ] sucks. I'm like

you. Like this [ __ ] sucks. I'm like

that leaves nowhere good, right? So that

that can't that can't be the thing. And

so I do I yeah I I I do do a lot of of self-editing.

>> You just said something. I think you said you believe Elon is inventing a new way to manage.

>> I think you may have figured out the best way to reconcile the two. The

fountain of ideas with the systematic builder. I think he might have figured

builder. I think he might have figured out a fun I don't know if it's a new way to do it, but I think he might have cracked the code on like how to do that for the next 100 years or something.

>> So break down what you've observed with the way that Elon's managing.

>> Yeah. I just start by saying look Elon's method has been described by people you know before and I and I should say like I I work with him but from the outside so I've not worked in one of his companies so I you know have one layer of indirection but I you know I work

with him quite a bit now and I study him you know very very carefully um it's this extreme focus on substance it's this extreme focus on getting to the truth so one of the things you notice in any organization with multiple layers is that basically there's compounding lies

um and and I got this lesson early because I worked for IBM at the at the point of their kind of maximum size and importance in the world >> can you explain I don't think people understand Yeah.

>> Just how big and powerful and almost monopolistic IBM was.

>> Yeah. So I worked for IBM at the very height of their power right before they fell. Um it's my first job and um uh

fell. Um it's my first job and um uh when I was in college and um they were in the mid 80s they were 80% of the market capitalization of the entire tech industry right there.

>> There's nothing even close, right? So

this is like Google times 10 or something. It's just like or times or

something. It's just like or times or Apple times 10. It's just like it's a level of scale and importance that just nobody had. And by the way, the the TV

nobody had. And by the way, the the TV show actually that does a great job of this is Halt and Catchfire um in the first season has this thing this point where these guys are basically inventing the PC effectively and it's a point where IBM shows up and it gives you a

sense of like it's like the CA story you told earlier. It's like the the

told earlier. It's like the the failance. It's like 20 people in like

failance. It's like 20 people in like blue suits are just here to like completely crush you. Like it was just this overpowering, you know, kind of thing. And and you know, they invented

thing. And and you know, they invented like all kinds of stuff and the industry wouldn't exist today without them. And

they were an incredible company for a very long time. and the and the whole thing. And by the way, run by their

thing. And by the way, run by their founder for 30 years, run by the founder son for 30 30 years. Um, you know, this incredible company, but you know, they're still, you know, they're they're they're not they're not that anymore, but they're still a big and important

company today, you know, whatever 1940 to 80 years later. It's like how many companies survive in tech, you know, 80 years. My f favorite IBM story is Thomas

years. My f favorite IBM story is Thomas Watson senior had been convicted of antitrust um crimes before he started IBM.

>> This is the cash register.

>> The cash register.

And so he had previously run a company called NCR, National Cash Register, and he had been convicted by the federal government of monopolizing the cash register business before he even started IBM. And then and then and then at IBM

IBM. And then and then and then at IBM he he monopolized the mainframe business and then they convicted him again.

He's a double dipper. He got very used to being uh being an antitrust court. So

um he he was incredible. By the way, um there's a Kevin Mania, old old school tech reporter, wrote a book, a biography of Thomas Watson, Senior, which you machine and the man or the man and the machine right?

>> It's one of It's one I'm not sure if it's that one, but it's one of those. I

think it might be that one. Yeah. And

>> he actually went back and this is like, you know, this is we're talking about like 1940s, 1950s, 1960s. And he went back and he got them at the time they they had a they had a secretary transcribing in real time all of the executive staff meetings uh every Monday

morning. And he went back and actually

morning. And he went back and actually got the archives of the transcripts of the executive staff meetings. And it's

just literally Thomas Watson's just like cursing everybody out and just like it's like a complete tyrannical psychopath just like screaming at people and it's all it's all in the records and it's like you know so how much of this stuff

ever changes you know it's like you know whatever I don't know whatever Elon gets accused of or whatever Steve Jobs it's like oh no that guy was >> whatever it is it's a pale version of what that guy was doing. Um but anyway point being is like IBM so by the time I

got involved in IBM was like 60 years later you know yeah six 50 years later after that and so they were kind of peing in their power but what happened was I I remember this because I I was there's intern and I was trying to figure out whether I should I should

work should work there after college and they had a their internet was a mainframe mainframe app and you one of the functions was a um it was a was was the or chart and I calculated there were 12 layers of management between me and

the CEO which meant the following it meant it meant that my boss's boss's boss's boss's boss had a boss boss boss boss boss

before it got to the CEO and then and then really what happened the story of the thing really what happened was B and I saw that I saw this happen I saw this happen up close when I saw this happen was each layer of management was lying to the one above it right and because

each layer wants to wants to look good and wants to you know whatever put a little spin on the ball and like if if one layer lies to the next layer above it maybe that's that's okay but but when that happens two or three times the lies compound that happens six times the lies

really compound if that happens 12 times the CEO has no idea what's happening like absolutely no clue what's going on in the company which was the state of play that that IBM had. They actually

had a term there was actually a term they had a whole vocabulary. I mean this company was like a nation state at the time. Um you could like live your whole

time. Um you could like live your whole life like in Austin, Texas and never meet anybody who didn't work for IBM.

Like it was just like this this incred this incredible thing. They had this concept they called the big gray cloud and it was literally the cloud of men and great businesses who followed the CEO around and prevented him from ever talking to anybody who was ever actually doing the work. And so when he would

come to visit, it was like a state visit. It was like a visit from the king

visit. It was like a visit from the king and it was like the king and the and the traveling court and so the it was completely impervious bubble to get information through and so but I I tell that story because that's the polar opposite of the Elen approach right so

so so and by the way being the CEU IBM in 1989 was a great way to live right because it's just like wow everybody's bringing me good news all the time like like I wake up in the morning and like everything is great

>> and I'm like famous and I am like rich and I am successful and like I've got a chauffeur and I've got a jet and I've got these 80 guys in gray suits who are taking care of everything for me and they don't have to ever talk to engineers and like this is great you

know until you know it's like the turkey on Thanksgiving you know until things change and there's a problem and then you have no idea what to do about it which is what happened to them the Elon approach is the polar opposite of that and the polar opposite of the approach is literally like I'm only going to talk

to engineers right and so when there's an issue I am going to go straight to the source of truth and the source of truth is the engineer who actually knows what's going on and so what Elon literally and I've seen him do this so he literally does he he goes to whatever when when there's an issue one of his

companies he goes to whatever is the engineer who's working on that problem and he sits down the engineer and they solve that problem and like and I can just tell you like the number of CEOs in tech even the great ones who do that like I mean almost nobody ever does that why does nobody ever do that well first

of all it's just like a giant pain in the ass because like your life consists of like having to actually solve all these problems like the whole point of being like big and powerful successful is you pay people to do that and now you're doing it and you're in there at

like 2 in the morning doing it right but like it just this sucks right and so like most people won't do it um and then the other is you have to it means the CEO of the company has to have the skill set to be able to do that. So the the

CEO has to not just be a great CEO, they also have to be like a great technical technologist and not just that they have memories of having been a programmer at one point or whatever, a chip designer, but where they can actually sit down with the chip designer, right, on Thursday night at 2 a.m. in Austin and

they can actually figure out like what's wrong with the chip and and and Elon has that ability and he's like encyclopedia on like every area of technology and is is able to go hands-on with rocket designers and AI designers and

everything in between and almost no CEO has that. And so, but that's literally

has that. And so, but that's literally what he does. And then, and then the way that he thinks the way that he thinks about it, I think, is basically, you know, he runs whatever six six companies he wants or something. And it's like basically any given week in any given week, he thinks about everything as a

production basically production line, you know, production process. It's like

he's actually like an old school industrialist. Um, so everything's like

industrialist. Um, so everything's like the production process and and then any given week there's there's in any production process there's always a bottleneck. So there's always there's

bottleneck. So there's always there's always the thing that is slowing down the process the most and and that's always one thing. So what he does for each of his companies is he identifies what the he starts he literally maps out

the production process and like he literally has these like monitors where he like has the whole thing laid out.

Um, and then he he basically says, "Okay, this is the issue that's holding up production this week." And then he goes and he works. And that's the thing that he goes to work with the engineer on is he goes to fix that bottleneck.

And he does that every week for every company, right? And so think about what

company, right? And so think about what that this is why Tesla is smoking the is is like has been so much dramatically outperforming the rest of the auto industry is because Tesla he's he's fixing the critical production

bottleneck at Tesla 52 times a year himself.

>> Yeah. Like I can tell you what the CEO of the legacy automakers are doing. like

they're not doing that. That is not what's happening, right? And so, and in contrast, like a normal company, it might take six months to solve these problems and anyone's like fixing it like right now, tomorrow. Like, let's go fix it right now. Um, and so he just

like runs this he runs this loop over and over again. Um, he he's just he's absolutely indeitigable. Um, I offered

absolutely indeitigable. Um, I offered he famously for a while he had sold all of his houses. Um, and he was literally couch surfing. Um, you know, he's one of

couch surfing. Um, you know, he's one of the most successful people on the planet. Yeah.

planet. Yeah.

>> Um, and so I have a vacation house and I offered him. I said, "If take a week and

offered him. I said, "If take a week and use the vacation house, whatever, take the kids. Feel free." He'd sit back 5

the kids. Feel free." He'd sit back 5 minutes later, it's like, you know, whatever, 11:00 at night, forward response. I don't take

forward response. I don't take vacations, >> right? Like, which again, it's like,

>> right? Like, which again, it's like, there's no CEO like this.

>> Yeah.

>> U the whole point of being a CEO is you get to you get to go jet around. Um, and

so, so anyway, so he's doing that and then and then, you know, he and then he he turns this into routine. And so, you know, when he does like he'll he'll he does like a day a week at each of his companies and he'll basically do like all day he'll do like a 12 14 hour

stretch where he'll do design reviews um with with but but the way that he does it he with five minutes per engineer, right? And so he does five 60 divided by

right? And so he does five 60 divided by five um um it's been way too long in this podcast. How much is that?

this podcast. How much is that?

>> 12 12 He can do 12 design reviews an hour.

>> Yeah.

>> Uh and then he does 10 hours a day. So

So Elon will do 120 design reviews in the course of in the course of a day.

Are these oneonone?

>> I have not actually sat on these. I I

suspect there are other people around.

Okay. Um, including people, you know, work for him and, you know, probably some some of the leaders of the companies are involved in different ways. Um, but um, it literally is the

ways. Um, but um, it literally is the thing I noticed it's literally a rotating cat. It's it's it's the point

rotating cat. It's it's it's the point engineer on each of the important things coming in and presenting for five minutes. And and then the question is

minutes. And and then the question is like how if it's going great, that's great. If it's not going, what's the

great. If it's not going, what's the problem? And then how does that problem

problem? And then how does that problem rank? Right? Is is that the is that the

rank? Right? Is is that the is that the production bottleneck? Um, and if it is

production bottleneck? Um, and if it is the production bottleneck, then that's the thing that he then fixes. And then

that's when he's there from whatever 8:00 till 2 a.m. working with that engineer to fix that problem. You know,

one way to think about this is the the velocity like in military affairs is called maneuver warfare, right? Um so

just the the the the speed at which he operates is just the the cycle time is just so much faster than anybody running in a traditional method. It's just it's hard to even compare the different. It's

like four hours versus six months. Like

it's it's just this in incredible gap.

And then and then the other part of it is uh somebody I know once went went to work for SpaceX and and and they asked what it was like and he said it's it's like being dropped into a into a zone of shocking uh competence. Um like like

everybody is like ultra competent. And

the reason everybody's ultra competent is because number one if if they're not Elon sniffs it out and fires them. But he knows because he's he's talking to the people actually doing the work. So he and he he you know

at this point in his you know having done this for whatever 25 years he he can he can sniff this out really quickly now. And then the other is the best

now. And then the other is the best engineers in the world want to work for him because he's he's the one CEO like this who's able to work with them as a peer on whatever the technology is. And

as an engineer, you're just like this is like what would be better as an engineer than being able to design a rocket engine with Elon Musk as your engineering partner, right? And so he just has this like incredible positive selection where like the smartest people in the world want to work for him and then anybody who can't cut it gets

fired. The world sees this as like raw

fired. The world sees this as like raw aggression, but it's beyond that, right?

It's a very systematic way of optimizing these companies to be able to take on these like profound challenges and then being able to actually solve all the problems and do these things and at a speed that is just like completely unmatched. The challenge of all of this

unmatched. The challenge of all of this is like okay that all works great if you've got Elon, right? And so so one of my con one of my concepts is um I think we need a metric um uh for um founders

in Silicon Valley called the millet Elon right and so are you how many millons are you right? Are you 10 millons? That

would be great. Are you 100 million Elons? You know that's 10% of an Elon.

Elons? You know that's 10% of an Elon.

Like that'd be fantastic. You know, you know, 500 million Elon's like I'm going to give you all the money, right? Most

people are like 1 millon or.1

millon. The question that falls out of this, which is a question that, you know, bevils us like, okay, like how you know, you can't can't clone him can't you can't bottle the essence. So what

out of that can be transplanted to like normal human beings?

>> And how much of it is predictable or knowable when he's much younger? Because

like the the famous example of this and um is Michael Mort's passing made all his money in PayPal with Elon. Obviously

there was contention there. He got

kicked out and everything else. But then

Elon pitched him Tesla >> and he passed cuz he's like there's no way that you're ever going to surpass Toyota. And then Morris to his credit

Toyota. And then Morris to his credit was just like I drastically underestimated the guy's determination and pain tolerance I think is the term he used.

>> Well, I wasn't there for that. So I

don't know about that. I will say the idea of the idea of being having been a software entrepreneur building a car company okay building a when Tesla started building there had been no new successful car companies in the United States >> for like 100 years

>> like 100 years >> there was like 2,000 of them in 190 founded from like 1900 to 1910 and three that survived.

>> That's right. And the previous real attempt to start a car company in the US before Tesla in in the preceding decades was >> Tucker Tucker Automotive.

>> Yeah. Yeah. Tucker, which was such a disaster that they made a movie called Tucker, which is about what a disaster it was. Um, and so like this obviously

it was. Um, and so like this obviously you don't do. Obviously this is insane and for a software guy to do this is insane. And oh, by the way, this is only

insane. And oh, by the way, this is only one of the things he's doing. He also

has the rocket company.

>> Yeah.

>> Which is also insane, right? And so

yeah, so it's like the the And I wouldn't like by the way, I didn't see it. I didn't I was, you know, I'm a

it. I didn't I was, you know, I'm a software guy and I just I was I don't know whatever he's going to go I guess he's going to go do cars. I don't know anything about cars. Um, so it's not like I saw it, but I'm just saying like it like the the level of incredul that he was greeted with at the time was I

think almost uniform. Um, and you know there's that famous photo, the most famous Elon photo I think or the most the most powerful one is the one where he's it's young Elon probably 2005 or whatever and he's in he's >> in the shorts and the polo and all and

he's like crouched down and there's nothing but the explosion remains of the third rocket, the second or third rocket, >> the one he had been funding personally like >> Yes.

>> Did you ever read Eric Berger's book Liftoff?

>> No, I didn't.

>> Oh, you got to read it. I'm surprised

you haven't. Um, it's the it's only only focuses I like these company histories that focus on like the first like six years and it just stops.

>> Um, it's the first six years history of SpaceX >> and it's there's nothing good in the book. It's just reading one failure

book. It's just reading one failure after another after another and one catastrophe after another after another.

It's a great read.

>> When my kid was five, he loves rockets and so his favorite rocket video was the compilation of all the SpaceX rocket explosions. Do you well Elman talks

explosions. Do you well Elman talks about this that before his friends when after he sold them uh to he had I think he had like 180 I think the story tells like 180 million after taxes he's like I'm going to do this rocket company one

of his I think Ado Rosi or I forgot the friend sat him down and they made him watch all the rocket there was a compilation this is probably preyoutube of just rockets blowing up over and over again like no you're literally going to

light your fortune on fire it's going to explode in the sky >> yeah exactly exactly so I mean obviously it's working right so so so his method obviously is working and it's obviously working like far better than I mean it's certainly working far better than

anybody else's method in cars and certainly working better than anybody else's method in rockets um and then in a bunch of other areas also so like it's clearly working and so it's like okay there you know and then he he just draws because of just who he is and what he's

doing and how he does it you know he just he draws so much heat you know there's just so much the environment is just full of criticism and attacks you know just non-stop and you know you all we all kind of get sucked into these

these narratives but I I think I think the key thing is just the for me it's just Okay, like there there is a method there that he has been working on and refining for, you know, coming out 30 years that has worked better better than any other method. Like I don't know,

like I said, I don't know how many people can do it. Maybe there's just like a fundamental limitation which is you can do it if you're Elon and you can't do it if you're somebody else. Uh

or or maybe you need to be above 30 millons but not below or something like that, right? There maybe there's some

that, right? There maybe there's some threshold where you break through on this. Um but it it is clearly the best

this. Um but it it is clearly the best method like it clearly is generating the best results. Um, and then and then

best results. Um, and then and then again concept con conceptually I like it because it it again it's this bridging of the of the of the founder mentality with the manager mentality because he's not just doing these are not just one-offs. He's scaling every everything

one-offs. He's scaling every everything is scaling. What is it? Starlink just

is scaling. What is it? Starlink just

hit what was the number just hit 10 was it 10 million subscribers.

>> I'm one of them.

>> Something like Yeah, exactly right. You

probably have read about um Idium intelligent.

>> No.

>> Oh okay. Okay. So Ela is not the first guy who said we're going to do satellite based like internet access. Um there

there were there was there was uh there was Bill Gates, Craig Macau. So when M when Microsoft was on top of the world and Craig Macau basically built cellular telefan in the US built what's now AT&T

mobile um uh those guys teamed up in the early 90s and did this thing called Teladic where they put up you know satellite based uh voice and then it was going to be internet internet access complete catastrophe total bankruptcy complete disaster. And then Motorola,

complete disaster. And then Motorola, which used to make all the cell phones in the US, uh had the had another one system is actually still out called Aridium. And again, it's just like this

Aridium. And again, it's just like this classic business school case study of just complete disaster, capital destruction. And so Elon's like, I know

destruction. And so Elon's like, I know I'm going to do number three of those.

We're startling as a side project at the rocket ship company, >> right? Because he's like, I we're and

>> right? Because he's like, I we're and you know, in retrospect is total genius because he's like, we're going to be putting up if the rockets are reusable, we're going to be launching them all the time. And then the question becomes,

time. And then the question becomes, what's going to go in the rockets? And

he's like, I could wait for the customers to come to me with more stuff to put in the rockets or I could just put up my own satellites. What would be the satellite to put up? Oh, it would be consumer grade, you know, consumerpriced internet access. And it's just like,

internet access. And it's just like, okay, anybody who knew anything about the history of flag satellites knew that that was like the, you know, that that's the new craziest idea in the world. And

of course, it's like this like, you know, giant success. It's like the side as like the side project. There's

clearly method. It clearly incorporates invention. It clearly incorporates

invention. It clearly incorporates scale. It it does a brilliant job. Both

scale. It it does a brilliant job. Both

of those. Um it's it's clearly in part the Henry Ford whatever um Alexander the Great method clearly but there's also like real scale and heft to it. SpaceX

now is building you know they got their own city like you know down in Texas right um and so it it it's a formula that that captures most sides of it and it it it may be like the least studied and understood thing I know of in the world right now.

>> It's incredible. Mark, we're running out of time. When I started the show, you

of time. When I started the show, you were at the top of my list for one of the guests I want to talk to. Thank you

so much for doing this. So, I hope you come back in a few months cuz there's a million other things we need to talk about.

>> Good. Awesome. Fantastic. Thank you.

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