WEBVTT 00:00:00.160 --> 00:00:03.037 What each of the top venture capitalists of all time has in common is each of 00:00:03.120 --> 00:00:05.997 them missed almost all of the great deals of their generation. And we see 00:00:06.080 --> 00:00:08.317 this a lot. We do performance reviews, right? We do performance reviews. And so 00:00:08.400 --> 00:00:11.117 it's like, well, they've made 10 investments and, you know, one of them 00:00:11.200 --> 00:00:13.997 is this this just this huge success and the other nine are like, you know, 00:00:14.080 --> 00:00:17.437 sucking wind. And it's like, okay, is this a good venture capitalist or a bad 00:00:17.520 --> 00:00:21.357 venture capitalist? And it's like, well, in any domain that's not probabilistic, 00:00:21.440 --> 00:00:22.717 you say this person's terrible, right? 00:00:22.800 --> 00:00:25.037 You know, it's batting average of like a hundred, you know, out of a thousand. 00:00:25.120 --> 00:00:27.677 It's like, this person's awful. Um, and and there's always the temptation to 00:00:27.760 --> 00:00:30.317 say, well, this one thing that's working is it's like it's a fluke, right? And 00:00:30.400 --> 00:00:33.197 so, who knows whether they'll ever get it again. And it's at that point where I 00:00:33.280 --> 00:00:35.597 put my head up and I say, we're in the fluke business. The whole point of this 00:00:35.680 --> 00:00:39.117 is to get the flukes. You don't have to score 100%. And and not having to score 00:00:39.200 --> 00:00:42.497 100% basically means you can take chances. 00:00:42.580 --> 00:00:44.600 [music] 00:00:48.470 --> 00:00:50.490 [music] 00:00:55.670 --> 00:00:59.437 >> [music] >> Welcome to the Knowledge Project 00:00:59.520 --> 00:01:02.237 podcast. I'm your host, Shane Parish. 00:01:02.320 --> 00:01:04.877 The goal of this show is to master the best of [music] what other people have 00:01:04.960 --> 00:01:08.317 already figured out so that you can unlock your potential. We interview 00:01:08.400 --> 00:01:11.677 worldclass [music] doers and thinkers so you can better analyze problems, seize 00:01:11.760 --> 00:01:15.517 opportunities, and live a more meaningful life. Every episode is packed 00:01:15.600 --> 00:01:19.997 with lessons and insights that never expire. If you're listening to this, 00:01:20.080 --> 00:01:23.597 you're missing out. If you'd like special member onlyly episodes, access 00:01:23.680 --> 00:01:25.837 before [music] anyone else, transcripts, 00:01:25.920 --> 00:01:27.677 and other member onlyly content, you can 00:01:27.760 --> 00:01:30.717 join at fs.blog/membership. 00:01:30.800 --> 00:01:33.517 Check out the show notes for a link. 00:01:33.600 --> 00:01:37.997 Mark Andre is here today. Mark is co-founder and general partner of the 00:01:38.080 --> 00:01:41.997 venture capital firm Andre [music] Horowits. He's an innovator and creator 00:01:42.080 --> 00:01:46.077 and one of the few to pioneer an entire software category used by more than a 00:01:46.160 --> 00:01:50.157 billion people [music] and one of the few to establish multiple multi-billion 00:01:50.240 --> 00:01:54.317 dollar companies. Mark co-created the highly influential Mosaic internet 00:01:54.400 --> 00:01:58.557 browser and co-founded [music] Netscape which any of you over 30 will remember. 00:01:58.640 --> 00:02:01.597 I've been wanting to talk to Mark for a long time [music] and this conversation 00:02:01.680 --> 00:02:05.917 does not disappoint. We explore why he studies history to see the future. His 00:02:06.000 --> 00:02:07.917 optimistic and pessimistic [music] view 00:02:08.000 --> 00:02:13.037 of the future. How A16Z makes decisions and specifically what Mark knows about 00:02:13.120 --> 00:02:16.477 decision-m that most [music] people miss. Our largely dysfunctional 00:02:16.560 --> 00:02:18.477 education system, assessing the judgment 00:02:18.560 --> 00:02:21.837 of founders, and so much more. It's time 00:02:21.920 --> 00:02:26.120 to listen [music] and learn. 00:02:30.320 --> 00:02:33.277 What are you obsessed with right now? 00:02:33.360 --> 00:02:36.637 So there's a lot going on. So the the full answer to that question would 00:02:36.720 --> 00:02:39.997 probably take [laughter] take the entire podcast. But you know I would say 00:02:40.080 --> 00:02:43.677 probably two big buckets of things. You know my my day job is you know being 00:02:43.760 --> 00:02:47.997 obsessed by all of the sort of changing you know technologies. Um and then you 00:02:48.080 --> 00:02:51.357 know the the the sort of impact that all all the all the new technologies are 00:02:51.440 --> 00:02:54.637 having on on the you know on on different industries and on the world 00:02:54.720 --> 00:02:58.237 broadly. Um and then the other thing I've just you know really I've gotten 00:02:58.320 --> 00:03:02.797 just sort of extremely curious about I would describe you know like a lot of 00:03:02.880 --> 00:03:06.317 people um a lot of my assumptions about how you know the world worked and about 00:03:06.400 --> 00:03:09.997 how the US worked and about how politics worked and about how society worked were 00:03:10.080 --> 00:03:14.557 kind of upended you know kind of sometime between 2008 and you know 2015 00:03:14.640 --> 00:03:18.717 um you know and then for sure heading into the last five years um and and and 00:03:18.800 --> 00:03:21.437 so I've I've become somewhat obsessed with kind of reading my way back and 00:03:21.520 --> 00:03:23.597 basically trying to figure out essentially [laughter] 00:03:23.680 --> 00:03:27.277 what the hell is going on. Um, you know, back to my my my kind of day job, which 00:03:27.360 --> 00:03:31.197 is as society changes and as technologies change society, um, and as 00:03:31.280 --> 00:03:33.117 you know, frankly, also society changes 00:03:33.200 --> 00:03:35.597 technologies. Um, how much of what we 00:03:35.680 --> 00:03:40.877 experience as new is actually new, um, versus how much is old, right? How many 00:03:40.960 --> 00:03:43.757 of the sort of behavior patterns or societal changes do we, you know, do we 00:03:43.840 --> 00:03:45.997 kind of experience this brand new that actually turn out to be quite old 00:03:46.080 --> 00:03:49.037 patterns? what what I find generally is if I don't understand something, I I try 00:03:49.120 --> 00:03:51.997 to read backwards and and and kind of the further back back I read, the more 00:03:52.080 --> 00:03:54.797 universal themes I find and the more things that I think are kind of 00:03:54.880 --> 00:03:57.837 remarkable and unique to our era actually turn out to be quite universal. 00:03:57.920 --> 00:04:01.517 Um and and I don't know, at least for me, that's a calming experience. Um 00:04:01.600 --> 00:04:04.477 because it makes me feel less less like the world is sort of spinning, you know, 00:04:04.560 --> 00:04:07.437 in a in a in a different direction and more just that we're, you know, we're 00:04:07.520 --> 00:04:10.237 we're playing out patterns that are kind of deeply rooted in in in humanity, 00:04:10.320 --> 00:04:13.597 which is what I mostly believe. So anyway, that's the that's the current thing. 00:04:13.680 --> 00:04:17.837 >> Can you talk to me a little bit about those patterns? What what comes to mind 00:04:17.920 --> 00:04:21.197 when you think of an example that you're you're surprised by? 00:04:21.280 --> 00:04:24.957 >> I mean, you take almost anything, but I mean, I'll just give you the the most 00:04:25.040 --> 00:04:29.197 basic one. So, the most basic one is is societal reaction to new technology, 00:04:29.280 --> 00:04:32.957 right? Um, and so there are, you know, there are these new technologies of our 00:04:33.040 --> 00:04:35.677 era. You know, we could go, you know, make, you know, whatever list we want. 00:04:35.760 --> 00:04:38.397 Um, you know, and it could, you know, everything from, you know, social media 00:04:38.480 --> 00:04:42.157 and internet to, you know, many other things, automation, robots, uh, and so 00:04:42.240 --> 00:04:45.037 forth. And then there's, you know, the sort of the societal reaction. There's 00:04:45.120 --> 00:04:47.597 sort of the, you know, the reaction in the press, there's the reaction from 00:04:47.680 --> 00:04:50.477 politicians. Um, you know, there's the reaction from different political 00:04:50.560 --> 00:04:52.877 movements. You know, political candidates, right, are now, you know, 00:04:52.960 --> 00:04:56.077 taking, you know, kind of major stands on these things. Um, you know, both in 00:04:56.160 --> 00:04:59.037 the US and around the world. You hear it a lot like around the kid, like what 00:04:59.120 --> 00:05:01.677 technology does to kids, right? It's sort of the go-to thing, which is, you 00:05:01.760 --> 00:05:04.157 know, that, you know, sort of this technology is going to ruin the new 00:05:04.240 --> 00:05:07.197 generation of kids. And then you just kind of, you know, ask yourself, well, 00:05:07.280 --> 00:05:10.397 is this the is this the first generation of technology for which they have made 00:05:10.480 --> 00:05:13.997 those claims, right? or or in fact, have those claims been made for basically 00:05:14.080 --> 00:05:16.877 prior generations of technology? And then of course the the next question is 00:05:16.960 --> 00:05:20.477 like okay are were the claims different in the past or were they actually the 00:05:20.560 --> 00:05:23.517 same claims? Right? And then to the extent that they were the same claims, 00:05:23.600 --> 00:05:26.237 you could ask like okay are you know how are they playing out differently this 00:05:26.320 --> 00:05:29.677 time? Um and and are they playing out differently this time? And there's 00:05:29.760 --> 00:05:32.477 there's actually quite rich literature both on the history of technology and on 00:05:32.560 --> 00:05:36.717 the sociology of technology. you know, prior generations of sociologists who I 00:05:36.800 --> 00:05:39.917 think were actually more more kind of interesting than the current generation, 00:05:40.000 --> 00:05:43.357 you know, actually grappled with these questions a lot, right? Um, and um, I 00:05:43.440 --> 00:05:46.237 mean, even like Marxism itself is like, you know, heavily based on the impact of 00:05:46.320 --> 00:05:50.317 technology on society or at least on Marxist theories on it. Um, uh, and so I 00:05:50.400 --> 00:05:53.757 found this just like fantastic book that I just really highly recommend. That's a 00:05:53.840 --> 00:05:58.317 great example of this. Uh, it's a book written by an MIT professor 50 years a 00:05:58.400 --> 00:06:02.717 50-y year reissue of the book. So, it's a book that it's very I can state very 00:06:02.800 --> 00:06:06.477 confidently it's a book written before the internet [laughter] before any of 00:06:06.560 --> 00:06:09.757 the things people, you know, people are mad about today, right? Um, and it's 00:06:09.840 --> 00:06:12.477 it's this great book with this great kind of, you know, title from, you know, 00:06:12.560 --> 00:06:17.197 kind of the 1950s, 19 early 1960s called it's called Men Machines and Modernity. 00:06:17.280 --> 00:06:20.397 I'll have to look it up, but it's Elton Morrison is the uh is the title, but I 00:06:20.480 --> 00:06:23.357 think it's Men Machines and Modernity, you know, but but it's this it's 00:06:23.440 --> 00:06:26.237 basically it's a short little book and it goes through basically it goes 00:06:26.320 --> 00:06:29.837 through this history of like how new technologies are sort of received. um in 00:06:29.920 --> 00:06:33.357 society and it it it just briefly it proposes this basically three-step 00:06:33.440 --> 00:06:38.477 process um and sort of uh you know step one is basically just like flatout 00:06:38.560 --> 00:06:41.517 ignore right new technologies are just like dismissed all all the experts and 00:06:41.600 --> 00:06:43.997 all the people who are kind of in power you know just kind of say okay this 00:06:44.080 --> 00:06:46.637 thing is not going to matter it's not going to not going to be a thing step 00:06:46.720 --> 00:06:50.077 two is rational counterargument right which is sort of the status quo 00:06:50.160 --> 00:06:53.277 assembles all of the different arguments as to why this thing can't possibly work 00:06:53.360 --> 00:06:55.997 and won't possibly be important but like they really get into the argument in 00:06:56.080 --> 00:06:59.357 step two and they really like try to try to reason it through Um, and then he 00:06:59.440 --> 00:07:03.597 says step three is he says step three is when the name calling begins, which is 00:07:03.680 --> 00:07:07.517 to say step three is when the status quo basically goes bananas. Um, and gets 00:07:07.600 --> 00:07:11.997 like super emotional and super irate and and kind of goes on tilt, right? And and 00:07:12.080 --> 00:07:14.557 and starts name calling and starts accusing the sort of proponents of the 00:07:14.640 --> 00:07:18.637 new technology of sort of all these evil kind of moral crimes. Um, and and and 00:07:18.720 --> 00:07:21.197 basically the reason he says it goes through this three-step process is 00:07:21.280 --> 00:07:25.517 because he says what what people think of as technological change is actually 00:07:25.600 --> 00:07:29.517 societal change. and specifically societal change of the form of a of a 00:07:29.600 --> 00:07:33.197 reordering of the power and status structure. Right? And so all of the 00:07:33.280 --> 00:07:36.077 people who have achieved positions of power and authority in the world based 00:07:36.160 --> 00:07:39.597 on prior generations of technology are inherently threatened by new technology 00:07:39.680 --> 00:07:42.317 because new technology will upend the power and status structures and then a 00:07:42.400 --> 00:07:45.757 new set of people will you know come to the foreground and and take the power. 00:07:45.840 --> 00:07:49.437 Um and and of course you know in in in in human society power and status 00:07:49.520 --> 00:07:51.917 battles are the core battles like that you know they are they are the most 00:07:52.000 --> 00:07:55.837 vicious fights. And so basically what happens is a lot of technologists kind 00:07:55.920 --> 00:07:58.557 of start out by assuming that they've built a better mousetrap and of course 00:07:58.640 --> 00:08:00.797 like you know people should appreciate them for it and then they find out that 00:08:00.880 --> 00:08:03.917 everybody hates them for it and basically that's the reason why and and 00:08:04.000 --> 00:08:07.517 that this is a persistent pattern through history that this is in fact not new. 00:08:07.600 --> 00:08:11.357 >> Can you walk me through how you sort of see some of these technological changes 00:08:11.440 --> 00:08:13.677 and how they'll impact sort of this 00:08:13.760 --> 00:08:16.397 social hierarchy or how people um get 00:08:16.480 --> 00:08:18.797 into positions of power? So, so the 00:08:18.880 --> 00:08:21.997 really big one is um uh is uh you know 00:08:22.080 --> 00:08:25.917 basically hierarchy versus network. Um right or you could kind of say 00:08:26.000 --> 00:08:30.317 institutions versus network. Um and so the and by the way for people interested 00:08:30.400 --> 00:08:33.757 in this um Neil Ferguson actually wrote he [snorts] wrote a really interesting 00:08:33.840 --> 00:08:35.997 book called The Square in the Tower that goes through this in some detail 00:08:36.080 --> 00:08:38.477 recently that's very you know kind of historically informed. Another great 00:08:38.560 --> 00:08:42.157 source on this um I should say I agree a lot with like the first twothirds of the 00:08:42.240 --> 00:08:44.797 book and then I kind of take the polar opposite view of him on the last third 00:08:44.880 --> 00:08:47.677 of the book. [laughter] So, it's funny. The last third of the 00:08:47.760 --> 00:08:51.997 book made me very mad. Um, and of course, the reason it made me mad is 00:08:52.080 --> 00:08:54.957 because he mounts sort of a rising defense of the old power structure. 00:08:55.040 --> 00:08:57.837 Sorry, rousing defense of the old power structure, right? Whereas, of course, 00:08:57.920 --> 00:08:59.997 I'm I'm on the side of the new power structure. So, of course, that would 00:09:00.080 --> 00:09:02.957 make me mad. It's kind of the reverse of that, right? I'm mad by the resistance. 00:09:03.040 --> 00:09:05.197 And so, anyway, the big battle is sort of you could call it kind of 00:09:05.280 --> 00:09:08.477 institutions versus versus networks. You could call it kind of top down hierarchy 00:09:08.560 --> 00:09:13.037 versus sort of lateral, you know, kind of network building. Um, and so start by 00:09:13.120 --> 00:09:16.477 saying top down institutions. So top down institution building is kind of how 00:09:16.560 --> 00:09:19.997 the west you know and you know it's a certain true of some other cultures as 00:09:20.080 --> 00:09:22.077 well but let's just you know I'm most familiar with the west so I'll just 00:09:22.160 --> 00:09:25.917 focus on that is sort of how the west was one was we got really good at 00:09:26.000 --> 00:09:29.517 building these basically these giant hierarchies like we got really good and 00:09:29.600 --> 00:09:33.037 in particular right in the um you know kind of in the in the late 19th early 00:09:33.120 --> 00:09:35.837 20th century you know we with the rise of sort of the second industrial 00:09:35.920 --> 00:09:39.277 revolution you know we sort of had all these masscale technologies of that era 00:09:39.360 --> 00:09:43.037 right so mass manufacturing right um and then you know mass transportation and 00:09:43.120 --> 00:09:47.277 then mass media rather than mass government. Um, and so we we got really 00:09:47.360 --> 00:09:51.997 good kind of between call it 1880 and 19, you know, basically, you know, I 00:09:52.080 --> 00:09:55.677 don't know, 1939 or something. We got really good at building, you know, giant 00:09:55.760 --> 00:09:58.797 industrial companies, right? You know, General Motors and General Electric and, 00:09:58.880 --> 00:10:01.597 you know, all these companies. We got really good at building um, you know, 00:10:01.680 --> 00:10:04.477 giant government, you know, the sort of, you know, FDR, you know, the New Deal 00:10:04.560 --> 00:10:07.677 and sort of this massive expansion of state power, you know, that kind of hit, 00:10:07.760 --> 00:10:10.157 you know, after after, you know, after the 1930s that, you know, that that's 00:10:10.240 --> 00:10:13.357 only, you know, it's only accelerated since. Um and then we got really good at 00:10:13.440 --> 00:10:16.717 like mass media, mass communication, right? Radio and television and so 00:10:16.800 --> 00:10:20.077 forth. Um and then also right therefore, you know, mass politics, right? So this 00:10:20.160 --> 00:10:23.517 kind of absolute dominance of these two, you know, major political parties. Um 00:10:23.600 --> 00:10:26.797 and then of course, you know, even like to the extent that you consider America, 00:10:26.880 --> 00:10:29.517 you know, kind of in that era kind of as, you know, growing empire, we got 00:10:29.600 --> 00:10:32.317 really good at kind of building the American empire, right? And and and of 00:10:32.400 --> 00:10:34.797 course the American empire kind of, you know, continues to this day as, you 00:10:34.880 --> 00:10:38.397 know, not as a not as a literal empire in the old sense, but as a as sort of a, 00:10:38.480 --> 00:10:42.317 you know, a modern empire, right? which is to say, you know, cultural uh and 00:10:42.400 --> 00:10:46.157 intellectual, right? And and and a societal empire, you know, that somehow, 00:10:46.240 --> 00:10:49.117 by the way, we still have 800 foreign military bases, but you know, for the 00:10:49.200 --> 00:10:53.117 most part, sort of a soft soft power empire. So, so we just we got really 00:10:53.200 --> 00:10:56.397 good at these giant kind of top down things. And then we we lived in this 00:10:56.480 --> 00:10:59.837 world for 50 or 60 years in which basically these giant top-down 00:10:59.920 --> 00:11:02.237 institutions just kind of ruled everything and we just kind of got used 00:11:02.320 --> 00:11:04.957 to it. And you know there are these famous books from that era you know the 00:11:05.040 --> 00:11:08.397 the organization man is probably you know the key book kind of of that era 00:11:08.480 --> 00:11:11.437 that kind of described there's this great line in the organization man where 00:11:11.520 --> 00:11:15.437 he says um you know the the you know in sort of this era of all these these mass 00:11:15.520 --> 00:11:19.197 systems uh he said you know the route to he said the route to power leaves you 00:11:19.280 --> 00:11:21.437 know inevitably uh leads through the 00:11:21.520 --> 00:11:26.717 conference room right it's like right the the the the way that power has been 00:11:26.800 --> 00:11:29.437 exercised in our society kind of through the through these decades of mass 00:11:29.520 --> 00:11:32.157 systems has been basically people in conference rooms arguing with each other 00:11:32.240 --> 00:11:35.437 over control, you know, basically of the of these mass mechanisms, right? Over 00:11:35.520 --> 00:11:37.997 control of what the ad campaign's going to be, over control of what the, you 00:11:38.080 --> 00:11:40.397 know, the new car model is going to be next year, over control of, you know, 00:11:40.480 --> 00:11:42.877 which which, you know, which candidate is going to be the, you know, Democratic 00:11:42.960 --> 00:11:45.437 Republican presidential nominee or whatever. You know, it's these people at 00:11:45.520 --> 00:11:49.277 the top of a hierarchy kind of battling at conference rooms. Um, and and by the 00:11:49.360 --> 00:11:51.997 way, it's also right as a consequence, it's like, you know, all these 00:11:52.080 --> 00:11:55.197 institutions over time kind of end up run by lawyers, right, of one form or 00:11:55.280 --> 00:11:57.917 another, right? There's sort of, you know, people who kind of deal in words, 00:11:58.000 --> 00:12:00.797 right? People who deal in kind of symbolic manipulation at the at the word 00:12:00.880 --> 00:12:04.477 level. uh you know sort of the the sort of non non-quantitative conceptual 00:12:04.560 --> 00:12:08.797 level. Um and and you know it looked by the you know kind of 80s or 90s like 00:12:08.880 --> 00:12:10.637 that was just going to be how it was. Um 00:12:10.720 --> 00:12:13.357 and then you know this internet thing 00:12:13.440 --> 00:12:17.917 comes along. [snorts] Um and you know the the core technological foundation of 00:12:18.000 --> 00:12:21.357 the internet of course is you know it's a it's a it's not that right it's not a 00:12:21.440 --> 00:12:25.837 top- down institutional thing. It's a by definition it's a lateral peer-to-peer 00:12:25.920 --> 00:12:27.997 right that you know the core architecture right famously the internet 00:12:28.080 --> 00:12:28.957 has survived a nuclear strike. 00:12:29.040 --> 00:12:31.677 Therefore, there is no central node, right? Therefore, you're able to route 00:12:31.760 --> 00:12:34.317 around damage, right? Therefore, you're able to sort of expand the network 00:12:34.400 --> 00:12:37.517 laterally. Anybody can plug in. Anybody can build whatever whatever app they 00:12:37.600 --> 00:12:40.557 want. Anybody can build whatever website they want. They can, you know, put on 00:12:40.640 --> 00:12:44.797 any information they want. They can organize any movement they want, right? 00:12:44.880 --> 00:12:48.157 Um, and so you have this introduction of this like fundamentally disruptive 00:12:48.240 --> 00:12:51.917 lateral networkbased technology at sort of the precise time when it looked like 00:12:52.000 --> 00:12:55.357 we were going to have sort of peak centralization. Um, and so I think what 00:12:55.440 --> 00:12:58.237 we have now is kind of at the at the sort of deepest level, what we have is 00:12:58.320 --> 00:13:01.277 kind of this big fight between people who want to use the internet to 00:13:01.360 --> 00:13:05.517 basically reinforce top down power, uh, versus people who want to use it to 00:13:05.600 --> 00:13:08.717 disrupt top down power. My analysis is basically that's what's happened to our 00:13:08.800 --> 00:13:12.797 politics right on both the left and the right which is the internet is both the 00:13:12.880 --> 00:13:15.677 enabler for traditional political movements and parties to try to 00:13:15.760 --> 00:13:19.437 establish a right as sort of permanent enduring advantage but it's also the 00:13:19.520 --> 00:13:22.317 enabling technology for disruptive movements whether you know on the left 00:13:22.400 --> 00:13:25.437 in the form of whether it's democratic socialism or you know these kind of more 00:13:25.520 --> 00:13:29.117 energetic you know kind of forms of leftism or you know on the right the tea 00:13:29.200 --> 00:13:32.477 party and then the Trump movement and you know mega and you know the the new 00:13:32.560 --> 00:13:35.037 right and all the all the sort of new disruptive movements on the right and so 00:13:35.120 --> 00:13:37.277 there again you see the same you you know, the same fundamental battle 00:13:37.360 --> 00:13:40.237 between basically institutions and and networks. 00:13:40.320 --> 00:13:44.157 >> When you need to build up your team to handle the growing chaos at work, use 00:13:44.240 --> 00:13:47.917 Indeed [music] sponsor jobs. It gives your job post the boost it needs to be 00:13:48.000 --> 00:13:51.837 seen and helps reach people with the right skills, certifications, and more. 00:13:51.920 --> 00:13:55.277 Spend less time searching and more time actually interviewing candidates [music] 00:13:55.360 --> 00:13:59.677 who check all your boxes. Listeners of this show will get a $75 sponsor job 00:13:59.760 --> 00:14:01.597 credit at indeed.com/mpodcast. 00:14:01.680 --> 00:14:04.237 [music] That's indeed.com/mpodcast. 00:14:04.320 --> 00:14:08.077 Terms and conditions apply. Need a hiring hero? This is a job for Indeed 00:14:08.160 --> 00:14:10.797 sponsored jobs. >> Hey, it's Ryan Reynolds here from Mint 00:14:10.880 --> 00:14:14.797 Mobile. Now, I was looking for fun ways to tell you [music] that Mint's offer of 00:14:14.880 --> 00:14:17.117 unlimited premium wireless for $15 a 00:14:17.200 --> 00:14:19.277 month is back. So, I [music] thought it 00:14:19.360 --> 00:14:22.477 would be fun if we made $15 bills, but 00:14:22.560 --> 00:14:27.357 it turns out that's very illegal. Uh, so there goes my big idea for the 00:14:27.440 --> 00:14:30.717 commercial. Give it a try at midmobile.com/switch. 00:14:30.800 --> 00:14:34.077 >> Upront payment of $45 for 3 months, [music] $90 for 6 months, or $180 for 12 00:14:34.160 --> 00:14:36.557 month plan required. $15 per month equivalent. Taxes and fees extra. 00:14:36.640 --> 00:14:38.937 Initial plan term only. Greater than 50 gigabytes. Me slow when network is busy. 00:14:39.020 --> 00:14:41.757 [music] C terms. >> I think that's fascinating. And one of 00:14:41.840 --> 00:14:45.917 the things that that I sort of see is it's permissionless. I don't need 00:14:46.000 --> 00:14:49.117 anybody in the boardroom saying that I can go talk to people now. I can just 00:14:49.200 --> 00:14:53.437 put my ideas out there and let other people be the judge of those ideas. 00:14:53.520 --> 00:14:56.477 >> Yeah, that's right. And there's this huge tension. So there's this thing. 00:14:56.560 --> 00:14:58.957 Well, so let's take mobile, you know, because the smartphone is kind of the 00:14:59.040 --> 00:15:01.917 key revolutionary technology in terms of, you know, sort of access to all this 00:15:02.000 --> 00:15:03.997 stuff. It was not that long ago. As 00:15:04.080 --> 00:15:05.997 recently as 2006, right, which was only 00:15:06.080 --> 00:15:11.117 15 years ago. Um, as recently as 2006, exactly to your point, if I wanted to, I 00:15:11.200 --> 00:15:14.637 could actually build smartphone apps in 2006. I could build an app that did 00:15:14.720 --> 00:15:16.797 whatever I wanted on a on a phone. But 00:15:16.880 --> 00:15:21.757 to get it distributed, um, uh, to get it actually onto the phone for people to 00:15:21.840 --> 00:15:26.317 use, I literally had to go to the headquarters of Verizon or AT&T, right, 00:15:26.400 --> 00:15:30.477 or one of the big telecom companies, um, and I had to basically apply, right? And 00:15:30.560 --> 00:15:34.317 literally I had to go into a conference room. Um you know >> you had a gatekeeper. 00:15:34.400 --> 00:15:37.677 >> Absolutely 100%. And if if and it was it was famously the term in those days it 00:15:37.760 --> 00:15:40.637 was called the deck. And the deck basically it was basically the home 00:15:40.720 --> 00:15:44.237 screen or like the UI on the phone. And if if if you wanted your app in the deck 00:15:44.320 --> 00:15:47.757 um you went in and you started negotiating in a conference room right 00:15:47.840 --> 00:15:51.677 with you know men in suits. Um and you know the opening you know the opening 00:15:51.760 --> 00:15:56.237 you know the opening bid was you know 40 or 50% of your thing. Um and and then 00:15:56.320 --> 00:15:58.957 they could basically dictate like if it does this or that like whatever 00:15:59.040 --> 00:16:02.397 whatever. And then by the way, you know, to this day, like, you know, Apple, you 00:16:02.480 --> 00:16:04.957 know, opening up the iPhone and the App Store was a big step forward, but of 00:16:05.040 --> 00:16:07.597 course, even Apple, right, continues to exercise a fair amount of control. I 00:16:07.680 --> 00:16:10.557 mean, they're far more open than than Verizon was in those days, you know, but 00:16:10.640 --> 00:16:13.357 even still, like, you know, Apple bans entire categories of apps and of course, 00:16:13.440 --> 00:16:16.717 they extract their 30% economics. And so, even still, like there's still kind 00:16:16.800 --> 00:16:20.957 of a legacy holdover of that level of control. Um, right, but in but in stark 00:16:21.040 --> 00:16:24.077 contrast, right? And and I think this is a good news story, right? In stark 00:16:24.160 --> 00:16:28.317 contrast, you know, the web like the web has never had that property. uh the web 00:16:28.400 --> 00:16:29.597 didn't have that property on day one. 00:16:29.680 --> 00:16:32.077 The web didn't have that property in 2006 and the web in fact doesn't have 00:16:32.160 --> 00:16:36.877 that property today. And you know it's like you know you there's a compromise 00:16:36.960 --> 00:16:39.117 like especially on smartphones like there's a compromise for building a 00:16:39.200 --> 00:16:42.237 mobile website versus building an app and you know there are issues involved 00:16:42.320 --> 00:16:44.797 in that but the you know the fact remains like you can still build 00:16:44.880 --> 00:16:47.837 whatever website you want. You can put whatever information you want on it. Um 00:16:47.920 --> 00:16:52.397 and and just from a historical standpoint that's just such a change. I 00:16:52.480 --> 00:16:55.277 mean the most dramatic the most dramatic way of thinking about how big of a 00:16:55.360 --> 00:16:59.357 change that is as sort of a global kind of macro level um is that you know the 00:16:59.440 --> 00:17:02.317 the Soviet Union you know there was this there was this dissident movement inside 00:17:02.400 --> 00:17:06.077 the Soviet Union in the 1980s right and you know they they didn't know that they 00:17:06.160 --> 00:17:08.957 were going to win like up until I think the very last minute like they you know 00:17:09.040 --> 00:17:12.477 they didn't know the USSR would ever fall u but you know they they tried and 00:17:12.560 --> 00:17:15.357 there were some very brave people behind the iron curtain in in Russia and the 00:17:15.440 --> 00:17:17.677 other you know kind of east block countries that you know that that 00:17:17.760 --> 00:17:21.597 battled for a long time and so they you know they had this concept of samazdot 00:17:21.680 --> 00:17:24.317 right, which was was was basically bas you know was basically you know 00:17:24.400 --> 00:17:28.237 information free information right about like you know open criticism of the 00:17:28.320 --> 00:17:32.557 Soviet regime um and it was necessarily an underground phenomenon because if you 00:17:32.640 --> 00:17:37.197 were caught with it right you would get shot um and so they had uh and so then 00:17:37.280 --> 00:17:40.157 there's this sort of practical question of like how do you produce samosat and 00:17:40.240 --> 00:17:44.957 the answer in those days was you produce samosat by mimograph machine right which 00:17:45.040 --> 00:17:48.317 is sort of the you know the for for k for kids listening to this this was 00:17:48.400 --> 00:17:51.997 photocopers before photocopers um you know so these were sort you know, pretty 00:17:52.080 --> 00:17:55.197 expensive, complex kind of, you know, basically basement. You put put one of 00:17:55.280 --> 00:17:57.437 these in your basement or your office and you could do you make copies of 00:17:57.520 --> 00:18:01.037 paper, you know, kind of invaluable. Um, and you know, sure enough, like there 00:18:01.120 --> 00:18:03.997 was like a whole thing involving smuggling mimograph machines into Russia 00:18:04.080 --> 00:18:07.197 into so into the Soviet Union and then if you were caught with a mimograph 00:18:07.280 --> 00:18:12.237 machine, you were shot. Um, and so just the level of overhead involved in even 00:18:12.320 --> 00:18:15.037 getting, you know, information that contradicted sort of centralized power 00:18:15.120 --> 00:18:19.677 out, you know, was still really hard, you know, even at that point. Um, and 00:18:19.760 --> 00:18:21.917 then, you know, the internet kind of popped. You know, it's kind of 00:18:22.000 --> 00:18:25.357 interesting. It's like, could you ever have another Soviet Union, like in the 00:18:25.440 --> 00:18:28.157 era of the internet, um, you know, North 00:18:28.240 --> 00:18:32.477 Korea is doing their damnedest to try to maintain that model, you know, but 00:18:32.560 --> 00:18:36.077 without going full North Korea, like I'm not sure you can. I I mean, I guess I'm 00:18:36.160 --> 00:18:38.957 an optimist on this point. Like, I tend to think open access to information 00:18:39.040 --> 00:18:40.877 basically makes a lot of these historical things, you know, 00:18:40.960 --> 00:18:44.477 fundamentally impossible. not you know not nec you know not not all centralized 00:18:44.560 --> 00:18:48.957 institutions get get torn down on day one but like over time um if people are 00:18:49.040 --> 00:18:51.837 able to actually like debate things people are actually able to see you know 00:18:51.920 --> 00:18:55.117 alternate viewpoints people are actually able to point out flaws you know kind of 00:18:55.200 --> 00:18:58.157 in the systems that are ruling them like o over time you know I don't think 00:18:58.240 --> 00:19:01.037 people will put up with the kind of draconian kind of top down control that 00:19:01.120 --> 00:19:04.077 that that that you know that we used to have to put up with you know before 00:19:04.160 --> 00:19:08.157 these technologies existed. >> Can you give me both sides of the next 00:19:08.240 --> 00:19:11.997 10 years? So, I'm interested in hearing your most optimistic scenario and your 00:19:12.080 --> 00:19:15.917 most pessimistic scenario. >> Look, optimism is just like it's 00:19:16.000 --> 00:19:19.837 basically the Morrison book, right? It's basically you have you have all these 00:19:19.920 --> 00:19:22.237 kits, right? So, you have kind of the world as it is. You have the status quo, 00:19:22.320 --> 00:19:24.957 you have the power structures, you have the hierarchies, and whatever. They work 00:19:25.040 --> 00:19:29.117 as well as they do and so forth. And then you basically have all these kids. 00:19:29.200 --> 00:19:32.397 Um, and and this is kind of one of the things in my day job that's just always 00:19:32.480 --> 00:19:34.957 so interesting is like because these kids like walk in the door and they're 00:19:35.040 --> 00:19:37.917 just they're and they walk in the door from all over the world, right? from 00:19:38.000 --> 00:19:41.677 every walk of life, from every possible background. Um, and they walk in with, 00:19:41.760 --> 00:19:45.837 you know, an idea and a skill set. And, you know, I would say the ideas are 00:19:45.920 --> 00:19:48.797 getting to be kind of increasingly, I think, profound and the skill sets are 00:19:48.880 --> 00:19:51.917 getting increasingly advanced. And part of it is, you know, kids now are growing 00:19:52.000 --> 00:19:54.717 up on on the internet in some fundamental way. And so, you know, we we 00:19:54.800 --> 00:19:57.917 see kids now from all over the world who walk in and they're they are like far 00:19:58.000 --> 00:20:01.517 more educated, right, and and skilled already to be able to do, you know, a 00:20:01.600 --> 00:20:04.877 startup or or, you know, create new software or do any of these things um, 00:20:04.960 --> 00:20:07.597 you know, than I was at their age. uh because they've they've learned on the 00:20:07.680 --> 00:20:09.517 internet like they've gone online, they've read, you know, they've read 00:20:09.600 --> 00:20:11.837 everything, they've they've watched everything. They they you know, it's 00:20:11.920 --> 00:20:15.197 just kind of their their depth of sort of technological knowledge and business 00:20:15.280 --> 00:20:18.237 knowledge and finance knowledge and cultural knowledge is just like 00:20:18.320 --> 00:20:21.837 incredibly broad. And so these kids walk in and they and you know like like kids 00:20:21.920 --> 00:20:24.317 you know like like like any you know generation of kids they're they're 00:20:24.400 --> 00:20:27.197 idealists and they've got all these new ideas and they kind of have an intuitive 00:20:27.280 --> 00:20:30.317 sense of how new technologies could be harnessed to you know improve the world 00:20:30.400 --> 00:20:32.877 in some way and they actually have the power to do it and then you know and 00:20:32.960 --> 00:20:35.517 then you know brag a little bit on us you know we're in a position to be able 00:20:35.600 --> 00:20:36.637 to support them and help them do that. 00:20:36.720 --> 00:20:39.357 So there's you know there's a system kind of waiting for them. you know, 00:20:39.440 --> 00:20:42.317 basically it's that we're just going to see this sort and you see it now, but 00:20:42.400 --> 00:20:46.557 you're just going to see this sort of continuous kind of movement um of all of 00:20:46.640 --> 00:20:49.597 these new ideas and all these new ways of doing things. And you and you know, 00:20:49.680 --> 00:20:52.717 look it, you know, they're not all going to work. It's a rebel alliance versus an 00:20:52.800 --> 00:20:57.357 empire. It's asymmetric, right? The the the empire has to win 100% of the time, 00:20:57.440 --> 00:21:00.157 right? They have to defend against all attackers, right? Whereas, you know, the 00:21:00.240 --> 00:21:02.317 attack, you know, so you can have many different attackers who kind of keep 00:21:02.400 --> 00:21:07.277 coming. Um and so we're just going to see in sector after sector just better 00:21:07.360 --> 00:21:10.717 and better ways of doing things, better ways of organizing, better ways of of 00:21:10.800 --> 00:21:14.237 you know better ways of organizing the economy and you know productive activity 00:21:14.320 --> 00:21:18.477 and creating you know job opportunities for people and education and and um you 00:21:18.560 --> 00:21:21.757 know how the you know how you know just like all aspects of how people live and 00:21:21.840 --> 00:21:24.877 work you know just like more and more choice more and more options more and 00:21:24.960 --> 00:21:28.077 more better ways of doing things. Um and you know the incumbents will you know 00:21:28.160 --> 00:21:30.557 they'll they'll go through the three stages right every time and you you see 00:21:30.640 --> 00:21:33.597 it you know it's like I said it's either denial it's sort of rational you know 00:21:33.680 --> 00:21:37.517 counterargument or it's name calling I is that inherent to even the winners 00:21:37.600 --> 00:21:40.797 today like Google is now an incumbent right 00:21:40.880 --> 00:21:44.317 >> so so this is one of the funny things I talk a lot to our founders about um and 00:21:44.400 --> 00:21:47.197 this is not a you know what's what's so useful I think of this view is this is 00:21:47.280 --> 00:21:50.397 not a criticism of any individual person right or any criticism of any individual 00:21:50.480 --> 00:21:53.197 company this this is why I try to get to the broader trends right because like 00:21:53.280 --> 00:21:56.557 the broader trends like are impersonal in the sense of okay if If you see this 00:21:56.640 --> 00:21:59.917 pattern over and over again, then it's not just you. Like when I, you know, 00:22:00.000 --> 00:22:02.557 when I tell somebody you're doing X, it's not like a criticism of you're 00:22:02.640 --> 00:22:05.357 doing X. It's more an observation of, you know, you're doing X just like 00:22:05.440 --> 00:22:09.277 everybody else who's ever been in your situation has done X. And, you know, at 00:22:09.360 --> 00:22:11.837 the very least be aware of it, if not, you know, decide to make a conscious 00:22:11.920 --> 00:22:15.277 choice not to be like that. You know, if you don't like that. Um, but one of the 00:22:15.360 --> 00:22:17.677 things I talk to our founders about all the time is it's actually funny. A 00:22:17.760 --> 00:22:22.077 successful company has about five years, a successful startup has about five 00:22:22.160 --> 00:22:24.637 years until they become a new incumbent. 00:22:24.720 --> 00:22:27.677 um and and they actually start to behave like an incumbent. That's rational. Like 00:22:27.760 --> 00:22:30.477 of course that's rational. Like they've now built something worth defending, 00:22:30.560 --> 00:22:33.117 right? And they've like they've now established power in the world, right? 00:22:33.200 --> 00:22:36.237 They've established a position for themselves. Um you know, they've built 00:22:36.320 --> 00:22:39.117 something of value. Um and now they have something worth protecting. And of 00:22:39.200 --> 00:22:41.677 course the next, you know, the next thing comes along very quickly. You 00:22:41.760 --> 00:22:44.237 know, the next kid comes along five years later. You know, and a lot of 00:22:44.320 --> 00:22:46.317 times it's really funny because it's like, you know, the new incumbent's run 00:22:46.400 --> 00:22:49.537 by like a 26-y old, right? And then and then the new disruptor is like a 21 00:22:49.620 --> 00:22:53.197 [laughter] year old, right? So it's like you know it's sort of like one kid 00:22:53.280 --> 00:22:55.997 really mad about the other one [snorts] and it's like yeah well you know that 00:22:56.080 --> 00:22:59.997 was you five years ago right like so you know this is the way of the world and so 00:23:00.080 --> 00:23:03.517 yeah so yeah no look so this is actually a really big question actually Peter you 00:23:03.600 --> 00:23:06.717 know my my friend Peter T has talked a lot about this in public and he he's 00:23:06.800 --> 00:23:10.157 much more I would say kind of hardcore on this than I am but Peter sort of 00:23:10.240 --> 00:23:13.597 characterizes Google as as no longer a tech company Peter now just flat out 00:23:13.680 --> 00:23:17.357 calls them they're an anti-tech company in his view it's an enemy of enemy of 00:23:17.440 --> 00:23:20.877 innovation like they're a blockade of innovation they're no longer doing 00:23:20.960 --> 00:23:23.837 anything sort of you know disruptive. Um instead what they've done is they've 00:23:23.920 --> 00:23:26.237 established you know a new monopoly in search and they're using that monopoly 00:23:26.320 --> 00:23:29.357 in search to try to basically prevent new you know new new new technologies 00:23:29.440 --> 00:23:32.797 from coming to market from from from you know including new competitors but also 00:23:32.880 --> 00:23:35.677 just more generally you know a lot a lot of new technologies and you know they 00:23:35.760 --> 00:23:38.317 become very you know draconian and heavy-handed in terms of what goes in 00:23:38.400 --> 00:23:40.957 the search engine and they become very sensorious and they ban a lot of things 00:23:41.040 --> 00:23:43.917 and you know a lot of people get kicked off YouTube every day and so forth. So 00:23:44.000 --> 00:23:46.957 so they become kind of anti-change. Now I would say that that's Peter's view 00:23:47.040 --> 00:23:49.277 it's a it's a very you know strong view. 00:23:49.360 --> 00:23:52.477 I I would I would not say that about Google. I would just say more generally 00:23:52.560 --> 00:23:55.037 like that is the incumbent temptation. 00:23:55.120 --> 00:23:59.037 Um is is basically go is basically go from attack mode to defend mode, right? 00:23:59.120 --> 00:24:02.077 Go from being the pirate to being the navy. Go from being the you know rebel 00:24:02.160 --> 00:24:06.717 the the rebel to being the empire. Um and so yeah, it it is a it is a thing 00:24:06.800 --> 00:24:09.517 that happens. I I think you know there you could probably just fairly say 00:24:09.600 --> 00:24:12.157 companies like that are caught in some sort of intermediate state, you know, 00:24:12.240 --> 00:24:13.837 where they still have elements of both. 00:24:13.920 --> 00:24:16.877 Um and um you know it's kind of probably their lot in life to kind of figure out 00:24:16.960 --> 00:24:18.477 which side of that they want to follow. 00:24:18.560 --> 00:24:22.077 >> And what's sort of the most pessimistic scenario you can come up with with how 00:24:22.160 --> 00:24:26.477 technology plays out? Do the incumbent start using it to squash free speech? 00:24:26.560 --> 00:24:27.997 Like how do how do you think about this? 00:24:28.080 --> 00:24:31.037 >> Yeah, I think you could paint Yeah, you could paint maybe two two pessimistic 00:24:31.120 --> 00:24:33.357 scenarios. So pessimistic scenario number one would be the one you just 00:24:33.440 --> 00:24:36.157 alluded to and it basically is like okay 00:24:36.240 --> 00:24:40.557 um this technology had the potential uh to be to be revolutionary and to kind of 00:24:40.640 --> 00:24:44.637 disrupt all these hierarchies and institutions. Um but in fact it turned 00:24:44.720 --> 00:24:47.757 out that it was you know fundamentally enabling technology for top down 00:24:47.840 --> 00:24:51.437 control. There's 1984 which basically is the pessimistic view which is like 00:24:51.520 --> 00:24:55.357 technology is used by the state you know kind of the full the full kind of you 00:24:55.440 --> 00:24:59.517 know I don't know what the Hegelian like you know world state dominant like 00:24:59.600 --> 00:25:04.157 totalitarian regime Soviet Union kind of thing. Um you know technology is used to 00:25:04.240 --> 00:25:07.597 basically control the populace in sort of this very overt kind of top down way. 00:25:07.680 --> 00:25:11.997 Um there's this other really wonderful book um called Orwell's Revenge written 00:25:12.080 --> 00:25:14.557 by this guy Peter Huber. Um, and in 00:25:14.640 --> 00:25:19.117 Orwell's Revenge, he actually does a rewrite of 1984. Um, and he does a 00:25:19.200 --> 00:25:22.717 rewrite of 1984 through the optimistic lens, you know, sort of your optimistic 00:25:22.800 --> 00:25:25.757 scenario. And and the optimistic lens, the the twist that he puts in the plot 00:25:25.840 --> 00:25:28.637 of 1984 is he basically just makes the telescreens, you know, the sort of 00:25:28.720 --> 00:25:31.837 technology 1984, these telescreens, interactive sort of interactive TV 00:25:31.920 --> 00:25:36.157 thing. Um, he basically he makes the telescreens two-way, you know, like like 00:25:36.240 --> 00:25:38.637 the internet. And of course, then he he elaborates out kind of the implication 00:25:38.720 --> 00:25:42.317 of that in the story. And of course in in Oral's Revenge, right, the the rebels 00:25:42.400 --> 00:25:45.437 win, right? that the totalitarian system is overturned because, you know, because 00:25:45.520 --> 00:25:48.637 people are able to organize and and and and and hear the truth and so forth 00:25:48.720 --> 00:25:51.757 through through the two-way system. And so anyway, yeah, the pessimistic view 00:25:51.840 --> 00:25:56.877 would be the 1984 model um contra the the the Orwell's revenge model that we 00:25:56.960 --> 00:25:59.837 kind of talked about earlier. Um and then look, there there is another 00:25:59.920 --> 00:26:03.997 pessimistic view and this is the Martin Guri view. Uh if you've read so his 00:26:04.080 --> 00:26:06.637 book, the is it the um was it the revolt 00:26:06.720 --> 00:26:11.357 to the public? The Martin Gur thesis basically is yes. Um, and I can hear 00:26:11.440 --> 00:26:14.637 him, by the way, talking to me about this right now in his in his in his 00:26:14.720 --> 00:26:18.557 wonderful Cuban accent. Um, you know, yes, smart guy. Um, you know, the 00:26:18.640 --> 00:26:22.877 internet is very good at tearing down, um, uh, you know, at tearing down these 00:26:22.960 --> 00:26:25.517 hierarchies. Um, but the internet has 00:26:25.600 --> 00:26:30.157 not yet proven its ability to build governance systems, right? And so um it 00:26:30.240 --> 00:26:33.677 it has not it yes you can build these new peer-to-p peer networks but can 00:26:33.760 --> 00:26:38.477 these peer-to-p peer networks actually take power and actually serve the 00:26:38.560 --> 00:26:42.157 productive roles that the hierarchies used to serve right and so can you 00:26:42.240 --> 00:26:46.397 actually have for example a functioning democracy right if what you have 00:26:46.480 --> 00:26:49.597 basically is basically people arguing with each other in this peer-to-p peer 00:26:49.680 --> 00:26:52.797 network like all the time right and never basically forming instruments of 00:26:52.880 --> 00:26:56.957 state power um you know or if you have you know this you know if if all of your 00:26:57.040 --> 00:26:59.197 finance goes peer-to-peer and you don't have any banks anymore and there's 00:26:59.280 --> 00:27:01.837 nobody to call when your money goes away, right? Or, you know, whatever the 00:27:01.920 --> 00:27:04.237 version of that might be, right? That they're that they're basically that 00:27:04.320 --> 00:27:09.277 these networks are not in fact basically um sufficient substitutes for for for 00:27:09.360 --> 00:27:13.277 the institutions that they're displacing. Um, and he describes this as 00:27:13.360 --> 00:27:17.277 the scenario of sort of nihilism um which is basically that the peer-to-p 00:27:17.360 --> 00:27:20.477 peer networks are good at destroying um but they're not necessarily good at 00:27:20.560 --> 00:27:25.517 building. Um, and so he he's he's fairly pessimistic and and I think this is why 00:27:25.600 --> 00:27:28.157 this is what Neil Ferguson also is reacting to in his book, which is I 00:27:28.240 --> 00:27:30.637 think this is also kind of his latent fear. He kind of describes it 00:27:30.720 --> 00:27:33.677 differently, but also his his kind of late fear that if the institutions are 00:27:33.760 --> 00:27:37.037 torn down that that there's no guarantee that productive things will be built on 00:27:37.120 --> 00:27:40.157 the other side. Um, so this probably that that would be the other the other 00:27:40.240 --> 00:27:42.237 kind of really pessimistic scenario. 00:27:42.320 --> 00:27:44.237 >> A lot of people get scar tissue. They're 00:27:44.320 --> 00:27:47.517 still sort of like fighting the last war. You've been around the first 00:27:47.600 --> 00:27:51.757 internet uh big wave in the late 1990s and the failures that happened there. 00:27:51.840 --> 00:27:56.477 How does that affect your thinking? Like web van for example failed but the same 00:27:56.560 --> 00:27:58.637 thing today might be a resounding 00:27:58.720 --> 00:28:01.917 success. How do you switch your mind to 00:28:02.000 --> 00:28:06.077 um not getting burned? >> Yeah. So this is really Yeah. So this is 00:28:06.160 --> 00:28:09.517 really fun. This is one of these things again I've just realized is actually 00:28:09.600 --> 00:28:13.117 really fundamental to human nature. Um, and by the way, why I think they're why 00:28:13.200 --> 00:28:15.997 I think you have to ask questions about whether life extension technologies are 00:28:16.080 --> 00:28:19.837 actually going to be a good idea. I think they are, but I think there's a 00:28:19.920 --> 00:28:22.957 real question about that from a from a broader counterultural societal 00:28:23.040 --> 00:28:26.397 standpoint, which is right, it's the most it's the to your point, it's the 00:28:26.480 --> 00:28:31.277 most natural thing in the world to try to learn from experience, right? And so 00:28:31.360 --> 00:28:34.317 I, you know, we all go through this, right? You touch the hot stove, it 00:28:34.400 --> 00:28:37.037 burns, we don't touch the hot stove again, right? And that happens at like 00:28:37.120 --> 00:28:40.317 age three or whatever. And then like from from then on basically like one way 00:28:40.400 --> 00:28:43.037 of just viewing like our trajectory through life is it's just touching hot 00:28:43.120 --> 00:28:45.757 stove after hot stove after hot stove and learning don't do that don't do that 00:28:45.840 --> 00:28:49.037 don't do that you know so it's or it's like you know don't act out of work you 00:28:49.120 --> 00:28:51.917 know you know you learn all these things and then one of the things you learn is 00:28:52.000 --> 00:28:55.517 like okay like you know what actually what a lot of people learn is what what 00:28:55.600 --> 00:28:58.237 a lot of people learn is they they they work at a startup the startup doesn't 00:28:58.320 --> 00:29:00.797 work you know the one that they're in doesn't work and so the lesson is don't 00:29:00.880 --> 00:29:04.477 work at startups right um right or by the way the other lesson right the other 00:29:04.560 --> 00:29:06.957 lesson is a lot of people went through in the last 50 years this thing where 00:29:07.040 --> 00:29:09.517 they thought they had lifetime employment, right, at some big company 00:29:09.600 --> 00:29:12.157 and then they got laid off at some point and then they're and then they and then 00:29:12.240 --> 00:29:14.397 sort of the lesson is well don't work at big companies because you can't trust 00:29:14.480 --> 00:29:16.637 them and they don't care about you and they'll, you know, they'll lay you off. 00:29:16.720 --> 00:29:19.037 And so anyway, it's like it's like the most natural thing in the world to like 00:29:19.120 --> 00:29:21.757 sort of sort of learn from these mistakes. And so what happens is it's 00:29:21.840 --> 00:29:25.037 it's absolutely like scar tissue. What happens is you just as you age, you just 00:29:25.120 --> 00:29:27.997 naturally build up all of this all of this sort of psychic scar tissue and you 00:29:28.080 --> 00:29:30.877 have all these cautionary lessons in your in your head all the time and you 00:29:30.960 --> 00:29:34.477 just and and therefore as a consequence, right, your your aperture of what you're 00:29:34.560 --> 00:29:36.237 willing to explore as you get older just 00:29:36.320 --> 00:29:39.117 shrinks. Um, and it's just it's just an 00:29:39.200 --> 00:29:41.757 incredibly natural thing to have happen. 00:29:41.840 --> 00:29:45.277 Um, and so I so I would say the the the 00:29:45.360 --> 00:29:49.517 the the good news or you know kind of the escape hatch for that is is being in 00:29:49.600 --> 00:29:52.957 my day job. My my day job is an incredible teacher that that's a bad 00:29:53.040 --> 00:29:56.957 idea. U right? Because what happens in my day job right is you know basically 00:29:57.040 --> 00:30:00.237 you know I've now been you know kind of doing startups first as an entrepreneur 00:30:00.320 --> 00:30:04.077 for 15 years now as a VC coming up 15 years you know coming up 15 years. And 00:30:04.160 --> 00:30:06.877 basically what you see if you kind of swim in in in you know in kind of this 00:30:06.960 --> 00:30:10.397 this pond for long enough is basically you see you know your web van example 00:30:10.480 --> 00:30:14.317 you see example after example of startups that tried something and failed 00:30:14.400 --> 00:30:18.157 and then you basically you know you draw the experience from that. Okay well we 00:30:18.240 --> 00:30:22.237 know that's never going to work right because it failed. Um and you see kind 00:30:22.320 --> 00:30:26.077 of a lot of people around you kind of going through the same process. Um, and 00:30:26.160 --> 00:30:29.997 then you just see example after example of basically what happens next, which is 00:30:30.080 --> 00:30:34.397 some kid shows up with that same idea five or 10 or 15 or 20 years later and 00:30:34.480 --> 00:30:38.877 they take another swing at it and it becomes a gigantic success, right? Um, 00:30:38.960 --> 00:30:43.117 and so, you know, exactly your point like web van doesn't work and now we've 00:30:43.200 --> 00:30:46.477 now today you've got these just giant successful companies in food delivery, 00:30:46.560 --> 00:30:50.077 right? Um, that are like huge successes and so like that idea absolutely works. 00:30:50.160 --> 00:30:54.637 Let let's hone in on that just a little bit more in the sense that the the wrong 00:30:54.720 --> 00:30:57.037 lesson to extract from that experience 00:30:57.120 --> 00:31:01.677 is this idea will never work. How is it that we extract the right lesson from an 00:31:01.760 --> 00:31:05.677 experience? >> Yeah. So let's let's say I I think this 00:31:05.760 --> 00:31:08.237 goes to I think you want to really 00:31:08.320 --> 00:31:09.837 understand the domain in which you're 00:31:09.920 --> 00:31:15.277 operating, right? So, so the the domain that I'm talking about 00:31:15.360 --> 00:31:18.397 like the domain of startups is representative of sort of a a domain 00:31:18.480 --> 00:31:23.517 that you might call sort of probabilistic um it's a probabistic domain right so so 00:31:23.600 --> 00:31:26.637 you know it's sort of inherent to the venture capital startup process which is 00:31:26.720 --> 00:31:29.837 you know basically I just give you the numbers like for top-end venture right 00:31:29.920 --> 00:31:34.637 for top end venture back startups um about half the companies in any given 00:31:34.720 --> 00:31:37.677 period work and sort of generate positive returns and about half of them 00:31:37.760 --> 00:31:41.997 don't right and so so we we start out like every new fund knowing that half 00:31:42.080 --> 00:31:44.877 the companies that we invest in are probably going to fail, right? And and 00:31:44.960 --> 00:31:46.797 by the way, they're going to fail for a bunch of reasons. Like a lot of the 00:31:46.880 --> 00:31:49.917 failures are idiosyncratic, right? That you know, the team, you know, breaks up 00:31:50.000 --> 00:31:52.317 or whatever, you know, something, you know, specific to the startup. But like 00:31:52.400 --> 00:31:54.477 in a lot of cases, it literally is like they're going to fail because they're 00:31:54.560 --> 00:31:56.557 just like flat out too early, right? 00:31:56.640 --> 00:31:58.717 It's it's going to be, you know, it's going to be the web van of its time, not 00:31:58.800 --> 00:32:03.357 you know, whatever, you know, what the new companies. Um, and so a lot of it's 00:32:03.440 --> 00:32:04.797 just like just simply flatout timing. 00:32:04.880 --> 00:32:07.917 And so but but you can see what I'm saying is like you're thinking 00:32:08.000 --> 00:32:11.837 probabilistically like you're right we're not trying to score a 100 on the 00:32:11.920 --> 00:32:14.637 exam right and this is maybe a thing that is like a big difference right 00:32:14.720 --> 00:32:17.757 between the education system and the real world right is you know in the 00:32:17.840 --> 00:32:20.637 education system it's like we're supposed to get 100 on every test right 00:32:20.720 --> 00:32:23.837 it's sort of this deterministic realm right in which we're you know there is a 00:32:23.920 --> 00:32:26.317 way to kind of achieve perfection we're kind of going for the 4.0 know, grade 00:32:26.400 --> 00:32:30.877 average or whatever. Um, you know, in quote unquote real life, right, which is 00:32:30.960 --> 00:32:32.717 starting businesses or, you know, 00:32:32.800 --> 00:32:35.837 writing books, right, or composing music 00:32:35.920 --> 00:32:40.077 or playing basketball or playing poker, right? Or basically doing anything 00:32:40.160 --> 00:32:43.437 interesting. We're in a probabilistic domain, right? And in the probabilistic 00:32:43.520 --> 00:32:45.837 domain, it's just like we're not going to we're not going to score 100%. We're 00:32:45.920 --> 00:32:48.717 going to score, you know, most of the probabilistic domains we're going to 00:32:48.800 --> 00:32:53.437 score, you know, if world class is like 60%. Right? I don't know what the 00:32:53.520 --> 00:32:55.437 numbers are for basketball, but it's like if you look at I don't know 00:32:55.520 --> 00:32:58.237 whatever it was like Kobe Bryant or LeBron's like lifetime record and it's 00:32:58.320 --> 00:33:01.437 like they've scored all these baskets and then the other fascinating thing to 00:33:01.520 --> 00:33:03.997 look at is just you know the the ranking of the basketball players who have 00:33:04.080 --> 00:33:07.837 missed the most baskets, right? And it turns out like it's the it's the same 00:33:07.920 --> 00:33:10.637 people. >> Yeah, >> right. [laughter] Like Kobe's Kobe's 00:33:10.720 --> 00:33:13.917 Kobe might be number one on the list of like total missed baskets. That is what 00:33:14.000 --> 00:33:18.157 it is, right? uh was it Annie Duke has this great great term uh she she used 00:33:18.240 --> 00:33:21.037 brought up for the world of poker um in her book thinking it best and she she 00:33:21.120 --> 00:33:24.637 calls this she says what a lot of people do is is they basically when some when 00:33:24.720 --> 00:33:27.997 they're in a probabilistic listen if they're in a deterministic domain and 00:33:28.080 --> 00:33:30.637 they get less than 100% then there's then they can self-critique and they can 00:33:30.720 --> 00:33:34.157 say why didn't I get 100% I should have gotten 100% and I did something wrong 00:33:34.240 --> 00:33:37.437 right and and that is a correct analysis like you could have gotten 100% of that 00:33:37.520 --> 00:33:39.677 test you probably didn't you know you didn't study hard enough you didn't read 00:33:39.760 --> 00:33:43.837 all the material or whatever right >> in a probabilistic domain um I it didn't 00:33:43.920 --> 00:33:46.477 work Okay, it's again the scar tissue. 00:33:46.560 --> 00:33:49.357 It's now now I do what she calls resulting, right? Which is basically now 00:33:49.440 --> 00:33:53.597 I now I need an explanation for the result, right? And the explanation for 00:33:53.680 --> 00:33:55.917 the result is, you know, I don't know, I should have this or that or I should 00:33:56.000 --> 00:33:58.637 have bluffed or not bluffed or done this or done that or not started this company 00:33:58.720 --> 00:34:02.157 or waited five years or, you know, whatever, whatever. Um, and and she's 00:34:02.240 --> 00:34:03.597 like, look, it's a probabistic domain. 00:34:03.680 --> 00:34:06.477 Like some percentage of them are simply going to fail. If you if you try to 00:34:06.560 --> 00:34:09.597 explain what fundamentally is kind of the result of randomness, right, through 00:34:09.680 --> 00:34:11.837 a narrative, like you're basically fooling yourself like you're making 00:34:11.920 --> 00:34:14.637 you're making yourself, ironically, you're making yourself miserable in a 00:34:14.720 --> 00:34:18.077 counterproductive way, right? And and and the right thing to do, right, if in 00:34:18.160 --> 00:34:21.117 poker, the right thing to do is to like play the next hand of poker, right? With 00:34:21.200 --> 00:34:23.677 the exact same way you play the previous hand, right? Because you're you're 00:34:23.760 --> 00:34:26.397 operating in this in this domain of probability. The right thing to do if 00:34:26.480 --> 00:34:29.757 you're Kobe Bryant is to is to shoot the next, you know, the next basket. The 00:34:29.840 --> 00:34:32.637 right thing to do as an entrepreneur is to start the next company, right? The 00:34:32.720 --> 00:34:35.597 right thing to do as a venture capitalist is to fund the next to fund 00:34:35.680 --> 00:34:39.117 the next startup, right? Even in a space where you've already tried and failed 00:34:39.200 --> 00:34:43.197 before and and then I I would apply in tech. I would say I I believe in the 00:34:43.280 --> 00:34:46.397 strong version of this. I I used to kind of say this to try to kind of exaggerate 00:34:46.480 --> 00:34:49.037 to make the point, but now I don't think I'm exaggerating, which is I no longer 00:34:49.120 --> 00:34:52.957 think there are any bad ideas. I I no longer think there are any qualified 00:34:53.040 --> 00:34:55.597 people starting tech companies that actually have bad ideas. I think all the 00:34:55.680 --> 00:34:59.037 ideas are good ideas. Um I think it's just a I think it's just a question of 00:34:59.120 --> 00:35:02.397 timing and execution. We we try really hard to say, "Oh, this idea is stupid. 00:35:02.480 --> 00:35:05.837 This will never work." Right? like we try really hard to never do that. 00:35:05.920 --> 00:35:09.917 Instead, we try to just say, "Okay, this idea, if this is a smart enough person 00:35:10.000 --> 00:35:14.477 and they put enough work into it, um then this idea is probably a good idea, 00:35:14.560 --> 00:35:17.597 it is likely to work at some point." And then we just have a very specific 00:35:17.680 --> 00:35:20.557 question which is like, is this the right person to bet on? Is now the right 00:35:20.640 --> 00:35:23.917 time to make the bet? And then and then as as evidence of my strong view, I 00:35:24.000 --> 00:35:27.117 basically I basically say you can go through the entire I think at this point 00:35:27.200 --> 00:35:31.517 catalog of all of the failed.com ideas of the late 1990s and I believe they've 00:35:31.600 --> 00:35:35.517 now all worked. How do you assess the judgment of founders? If you're not 00:35:35.600 --> 00:35:37.997 assessing the idea, how do you assess the judgment? 00:35:38.080 --> 00:35:39.517 >> Yeah. So, say there's two two categories 00:35:39.600 --> 00:35:42.317 of two categories of founders to two two ways to do this. So, there's sort of, 00:35:42.400 --> 00:35:45.277 you know, there's sort of there's the ones who've done it before, right? Um, 00:35:45.360 --> 00:35:48.237 and so the ones, you know, the ones where this is their second or third or 00:35:48.320 --> 00:35:51.357 fourth time starting a company. Um, you know, with them you have this just 00:35:51.440 --> 00:35:54.557 obviously enormous advantage which is you can basically look at the work that 00:35:54.640 --> 00:35:56.637 they've done. You know, it's like anybody else who's done, you know, who 00:35:56.720 --> 00:35:59.437 now has a track record. You can look at the work that they've done. And again on 00:35:59.520 --> 00:36:02.157 this it's not that you're necessarily looking for the track record of like the 00:36:02.240 --> 00:36:07.357 level of success per se, right? Although you know as Nap was it Napoleon you'd 00:36:07.440 --> 00:36:10.797 rather you'd rather have a lucky general than a smart general. So like you know 00:36:10.880 --> 00:36:13.757 somebody who's had a highly successful company once right has has you know 00:36:13.840 --> 00:36:16.237 people has an enormous benefit of the doubt when they walk in the door for for 00:36:16.320 --> 00:36:19.677 obvious reasons. Um but you know but even people who haven't had a big 00:36:19.760 --> 00:36:23.437 success before it's like okay you can look at kind of how they did the work 00:36:23.520 --> 00:36:26.397 right and so you can look at like you know h you know how did they prosecute 00:36:26.480 --> 00:36:29.357 the opportunity you know the previous time you know and you can talk to the 00:36:29.440 --> 00:36:32.077 people right who they worked with it's like okay you know how were they under 00:36:32.160 --> 00:36:34.877 pressure how were they on in terms of like inventiveness how were they in 00:36:34.960 --> 00:36:38.077 terms of you know you know persistence you know how did how did they make the 00:36:38.160 --> 00:36:41.357 decision about when to give up right u you know or when something just you know 00:36:41.440 --> 00:36:43.757 simply wasn't going to work and so forth and so you you can kind of you know you 00:36:43.840 --> 00:36:46.557 can you can kind of learn from their experience you know the harder one is 00:36:46.640 --> 00:36:49.037 somebody brand new, right? The harder one is somebody shows up, you know, 00:36:49.120 --> 00:36:52.157 right out of college or something or, you know, or or you know, these days, 00:36:52.240 --> 00:36:55.117 right, the ultimate golden credential is they got admitted to a top end school 00:36:55.200 --> 00:36:59.997 and then dropped out after one day. Um, right. [laughter] So, so um you know, 00:37:00.080 --> 00:37:02.877 it's sort of the kid, right? And of course, you know, I say kid because I I 00:37:02.960 --> 00:37:05.437 you know, part I think of myself because, you know, this was me at one 00:37:05.520 --> 00:37:09.037 point. And look, a lot of the real breakthrough companies, the a lot of the 00:37:09.120 --> 00:37:12.477 big franchises, you know, Mark Zuckerberg had not had a job before he 00:37:12.560 --> 00:37:16.077 started Facebook, right? like you know the the Google guys came straight out of 00:37:16.160 --> 00:37:19.757 Stanford M you know Stanford the PhD program and so forth and so on you know 00:37:19.840 --> 00:37:23.437 Bill Gates dropped out of college and um and so you know a a lot of times these 00:37:23.520 --> 00:37:25.837 these big breakthrough companies are people that you know they have no track 00:37:25.920 --> 00:37:28.477 record like their track record you know you could ask for their high school to 00:37:28.560 --> 00:37:32.957 you know GPA or something but like there there's no track record right and so 00:37:33.040 --> 00:37:36.877 there you're kind of you know evaluating you know denovo and I think there what 00:37:36.960 --> 00:37:41.517 we do the the cliche is basically right that it's you know some kid with some 00:37:41.600 --> 00:37:44.637 crazy idea and then some crazy VC goes some money and you know some miracle 00:37:44.720 --> 00:37:48.077 happens and oh my god you know what a weird you know non-reproducible thing or 00:37:48.160 --> 00:37:52.877 whatever. Um the reality is the kids that make new things work from scratch 00:37:52.960 --> 00:37:56.557 it actually turns out that they actually have been deep in the domain for a long 00:37:56.640 --> 00:37:59.837 time on almost every case they've been thinking hard about the problem that 00:37:59.920 --> 00:38:04.637 they're trying to solve actually for in a lot of cases for many years. Um and 00:38:04.720 --> 00:38:07.597 and and what that actually means you know this is actually really kind of 00:38:07.680 --> 00:38:10.317 interesting and maybe software is kind of this unique kind of area like this 00:38:10.400 --> 00:38:13.837 but you know as a consequence you like in software you can have a 21-year-old 00:38:13.920 --> 00:38:18.077 who's basically been a professional level programmer for 10 years right >> right 00:38:18.160 --> 00:38:21.197 >> because you know you can trace it back and it's like well you we hear the story 00:38:21.280 --> 00:38:24.637 all the time it's like well the specific story you hear all the time you know I 00:38:24.720 --> 00:38:29.037 really loved video games right um and so therefore right when I was you know 11 00:38:29.120 --> 00:38:33.357 or 12 I you know learned how to code so that I could figure out how to like make 00:38:33.440 --> 00:38:37.277 my own video games based on that. I found it really interesting how, you 00:38:37.360 --> 00:38:41.517 know, for example, clans or tribes form inside games. And so when I was in high 00:38:41.600 --> 00:38:44.797 school, I built this app that, you know, did people matching for whatever World 00:38:44.880 --> 00:38:48.477 of Warcraft, you know, guilds or whatever it is. Um, and then, you know, 00:38:48.560 --> 00:38:51.997 in college, I got a degree in computer science and then I did this project 00:38:52.080 --> 00:38:56.077 which is to do this new kind of social networking app. Um, and now I've been 00:38:56.160 --> 00:38:58.717 thinking about that and building that for the last five years. And now here I 00:38:58.800 --> 00:39:01.837 am. And now you know after 10 years of thinking about this now here's my new 00:39:01.920 --> 00:39:06.077 social networking idea right like that this is not a rare thing and and 00:39:06.160 --> 00:39:08.637 literally they've been thinking about this now for you know think about this 00:39:08.720 --> 00:39:11.917 specific thing for five years and the general kind of pattern for category for 00:39:12.000 --> 00:39:15.357 like 10 years and of course you know for things you know this of course is 00:39:15.440 --> 00:39:18.317 heavily biased towards domains in which kids get to participate right and so 00:39:18.400 --> 00:39:21.517 that this is less true in you know anything involving you know you know 00:39:21.600 --> 00:39:24.237 there's lots of areas you know there's lots of areas of technology where you 00:39:24.320 --> 00:39:27.917 know 11 year olds are not working on it but but there are areas increasingly 00:39:28.000 --> 00:39:32.637 where they Um and so and so basically it's basically we call the idea mace. It's 00:39:32.720 --> 00:39:36.637 basically the backstory. Um it's what have they done in the past to really 00:39:36.720 --> 00:39:39.997 kind of reason their way through and and often and often you literally have 00:39:40.080 --> 00:39:41.997 people who have been like writing prototypes and a lot of the time you 00:39:42.080 --> 00:39:45.197 actually people who have writing code at that point right and then it's like okay 00:39:45.280 --> 00:39:48.077 now now you're dealing with somebody where yes they're on the surface they're 00:39:48.160 --> 00:39:51.277 21 in reality they're already five or 10 years into the journey. Um and you're 00:39:51.360 --> 00:39:53.837 like okay now I get it. Now I have somebody who's like a primal creative 00:39:53.920 --> 00:39:57.117 force who's actually like really thought deeply about this. So it's a so so it's 00:39:57.200 --> 00:39:59.117 it's a it's a much safer bet than it looks. 00:39:59.200 --> 00:40:03.197 >> Can you walk me through in detail how you make those bets? Like what is the 00:40:03.280 --> 00:40:07.437 big capital allocation decision-making process that you use at A16Z? 00:40:07.520 --> 00:40:10.077 >> So there's basically there's three tiers. The way we operate is there's 00:40:10.160 --> 00:40:14.557 basically three tiers of bet um sort of small, medium, large. And the small one 00:40:14.640 --> 00:40:16.637 is so-called, you know, seed funding. 00:40:16.720 --> 00:40:19.437 The medium one is soalled venture funding. And then the large ones are 00:40:19.520 --> 00:40:24.957 growth funding. um you know the the seed bets the small ones are you know two you 00:40:25.040 --> 00:40:28.717 know any I don't know anywhere two to5 million dollars on average um which you 00:40:28.800 --> 00:40:31.277 know is a lot of money absolutely speaking but it's it's small in the 00:40:31.360 --> 00:40:34.557 context of you know the you know it's small in the context of the global 00:40:34.640 --> 00:40:37.757 economy it's small in the context of funding new businesses it's small in the 00:40:37.840 --> 00:40:39.677 context of our funds the the venture 00:40:39.760 --> 00:40:44.877 bets are much more serious the venture bets are 10 plus uh million and then for 00:40:44.960 --> 00:40:47.357 the venture bets they're more serious for us because that's when we get really 00:40:47.440 --> 00:40:50.077 involved in the companies like that's when they form a board of directors 00:40:50.160 --> 00:40:52.797 and we have, you know, somebody who goes on the board and we tend to really like 00:40:52.880 --> 00:40:55.677 work hard on the company. And so that that's like a, you know, that's signing 00:40:55.760 --> 00:40:59.277 up from our standpoint to like a 10-year journey with the company, including, you 00:40:59.360 --> 00:41:01.517 know, an obligation to put more money in later rounds and so forth. So that 00:41:01.600 --> 00:41:05.437 that's a that's a more serious bet. It's our sort of size 10 10 million and up. 00:41:05.520 --> 00:41:07.997 Um, and then the growth bets are for companies that have kind of, you know, 00:41:08.080 --> 00:41:10.077 they kind of hit their stride and they have a business that's working and 00:41:10.160 --> 00:41:12.957 they're growing and so it's like expansion capital. So, you know, it's a 00:41:13.040 --> 00:41:15.517 different thing and and you know, the check size there is sort of 50 and up 00:41:15.600 --> 00:41:18.957 and then, you know, on the high side it's 100 or 200 or 300. 00:41:19.040 --> 00:41:21.197 million. So, you know, the amounts of money get large, but at that point, 00:41:21.280 --> 00:41:23.517 you've got a business that's working and you're you're trying to figure out how 00:41:23.600 --> 00:41:28.637 to scale it to, you know, to to kind of to be a global global champion. Um, and 00:41:28.720 --> 00:41:30.557 then there's just there's there's there's different criter, you know, 00:41:30.640 --> 00:41:32.797 there's sort of similarities of the three, you know, we're trying to it's 00:41:32.880 --> 00:41:35.597 the same we're trying to back the same kind of founders and the same kind of 00:41:35.680 --> 00:41:37.597 businesses across the three categories. 00:41:37.680 --> 00:41:40.637 Um, but, you know, there it's very different decision-making process, very 00:41:40.720 --> 00:41:44.637 different criteria depending on the stage. Um, on the seed side, it's almost 00:41:44.720 --> 00:41:47.917 100% a bet on the people. you know, it's a little bit on the idea, but it's 00:41:48.000 --> 00:41:51.197 mostly the people and it's and basically the way you evaluate the idea at that 00:41:51.280 --> 00:41:54.317 point is like you're basically evaluating the idea as a lens to 00:41:54.400 --> 00:41:57.917 evaluate the people, right? So, it's like, you know, it's like it's like it's 00:41:58.000 --> 00:41:59.997 like I was talking about like the 21-year-old comes in with this like 00:42:00.080 --> 00:42:02.477 crazy idea, something they've been thinking about working on. They have a 00:42:02.560 --> 00:42:05.437 college project or something and they want to start a company. Um, and it's 00:42:05.520 --> 00:42:07.757 like you're you're evaluating the idea, but really what you're doing is it's 00:42:07.840 --> 00:42:11.517 like, okay, is this person capable of doing this kind of thing? and then 00:42:11.600 --> 00:42:14.157 you're evaluating the idea and the work they've done so far to kind of just draw 00:42:14.240 --> 00:42:17.997 a beat on how good the person is as opposed to saying oh you know we've been 00:42:18.080 --> 00:42:21.917 waiting to back this idea at the venture stage there's the people component but 00:42:22.000 --> 00:42:24.797 there's also this other really important thing which is you have to have some 00:42:24.880 --> 00:42:27.997 reason to believe that this thing is going to be the one that wins um because 00:42:28.080 --> 00:42:30.637 we we sort of take on this sort of formal conflict at that point we get 00:42:30.720 --> 00:42:33.197 very involved in these companies and we you know we can't invest in in 00:42:33.280 --> 00:42:36.557 competitors after that in that category and so then there's this thing of like 00:42:36.640 --> 00:42:40.157 okay out of all of the different teams both current teams and future teams that 00:42:40.240 --> 00:42:43.437 might pursue this idea um you know, is this really the one that 00:42:43.520 --> 00:42:47.757 has the best chance of going all the way to victory? Um and so that's you know, 00:42:47.840 --> 00:42:50.797 trying to kind of dig in harder kind of competitive advantage and and you know, 00:42:50.880 --> 00:42:54.317 capabilities at a deeper level. And then at the growth side, it's a that you 00:42:54.400 --> 00:42:58.557 know, that's more of a of a of a of a business analysis. The growth side is 00:42:58.640 --> 00:43:02.877 where you start get to start to make the decisions based on numbers. Um, right. 00:43:02.960 --> 00:43:06.397 Um, and so you start to get to evaluate, you know, revenue growth and and market 00:43:06.480 --> 00:43:10.237 size and, you know, profit margins and and uh, you know, then and then by the 00:43:10.320 --> 00:43:12.717 way, but but also you're still evaluating the people, you're still 00:43:12.800 --> 00:43:15.437 evaluating the idea, right? And then you, by the way, at the growth stage, 00:43:15.520 --> 00:43:18.157 you're also still looking for new ideas, right? Where you're you're looking for 00:43:18.240 --> 00:43:22.157 existing businesses that also have new growth opportunities inside them. Um, 00:43:22.240 --> 00:43:26.157 and so you're looking for basically, you know, does is this person so good that 00:43:26.240 --> 00:43:30.317 they have additional kind of venture quality ideas that they haven't even 00:43:30.400 --> 00:43:33.197 gotten to yet? And so, you know, the best case scenario is you make this 00:43:33.280 --> 00:43:35.997 investment in a company that's doing X and then over the course of the next 00:43:36.080 --> 00:43:39.997 five or 10 years, they also do Y and Z and A and B and C and they just keep 00:43:40.080 --> 00:43:42.797 layering in all these new things and then you get this kind of multiplicative 00:43:42.880 --> 00:43:44.637 effect. >> Is there a challenge function 00:43:44.720 --> 00:43:47.437 internally? Like how do you decide in in 00:43:47.520 --> 00:43:50.797 terms of making the actual decision? 00:43:50.880 --> 00:43:54.957 >> Yeah. So, there's there's a there are if you kind of pull top- end venture firms 00:43:55.040 --> 00:43:58.797 on this, you'll get actually every possible answer. Um and so there there 00:43:58.880 --> 00:44:02.797 are some firms that run on a a unanimous vote model um where they they literally 00:44:02.880 --> 00:44:05.037 need unonymity. Um you know there are 00:44:05.120 --> 00:44:09.997 other firms that have a um you know they have a majority thing um or they need a 00:44:10.080 --> 00:44:12.957 certain number of people to get critical mass. There are some firms that run a 00:44:13.040 --> 00:44:16.157 top down so-called investment committee where you you know young the younger 00:44:16.240 --> 00:44:19.117 partners in the firm get to propose ideas and then there's sort of a council 00:44:19.200 --> 00:44:23.117 of elders you know that either you know does the does the glad gladiator wine 00:44:23.200 --> 00:44:24.717 phoenix thing you know thumb thumbs up 00:44:24.800 --> 00:44:28.157 or thumbs down. We have optimized very 00:44:28.240 --> 00:44:31.917 strongly towards what we consider to be kind of the most aggressive and most you 00:44:32.000 --> 00:44:35.357 know you might say contrarian model. So our model is what what we call single 00:44:35.440 --> 00:44:39.517 trigger puller. There's no vote. There's no investment committee. There's no 00:44:39.600 --> 00:44:43.677 override. There's no like I don't you know I formally sign off on you know Ben 00:44:43.760 --> 00:44:46.717 and I formally sign off on all the investments but like I don't I don't 00:44:46.800 --> 00:44:50.237 like evaluate the investment proposal and then basically do thumbs up thumbs 00:44:50.320 --> 00:44:53.997 down. Like that's not like I don't do that at all. Um, instead what we do 00:44:54.080 --> 00:44:57.517 basically is we basically we basically delegate budgets like so the the 00:44:57.600 --> 00:45:00.717 governance mechanism is is budgetary. So we basically we raise a fund we have a 00:45:00.800 --> 00:45:01.917 certain number of investment partners. 00:45:02.000 --> 00:45:05.197 We we delegate the budget down to those partners and then basically if you're a 00:45:05.280 --> 00:45:09.597 partner at our firm um within your budget envelope you could make whatever 00:45:09.680 --> 00:45:12.797 investments you want. There are expectations around how you're going to 00:45:12.880 --> 00:45:15.757 do that right and so there's an expectation you're going to do the work 00:45:15.840 --> 00:45:18.637 right by which it's going to be like you're going to go in like really deep. 00:45:18.720 --> 00:45:20.317 You're going to like you know talk to all the people. You're going to really 00:45:20.400 --> 00:45:23.597 investigate everything. We don't mind an investment that doesn't work. What we do 00:45:23.680 --> 00:45:27.117 mind is like we're we're in the wrong one and the right one was out there. 00:45:27.200 --> 00:45:30.077 Like the winner in the category was out there and we didn't even know about it. 00:45:30.160 --> 00:45:33.277 Like that that that in our firm is like a big problem. And so you're expected to 00:45:33.360 --> 00:45:35.757 do the work and we you know we have we have you know we have a whole kind of 00:45:35.840 --> 00:45:38.877 system for that. Um and then there you know there is you're expected to like 00:45:38.960 --> 00:45:41.197 you have to communicate. Everybody has to know what you're doing. There's no 00:45:41.280 --> 00:45:44.237 secret deals. Um, you have to, you know, and you have to be willing to kind of 00:45:44.320 --> 00:45:47.117 describe it and you have to, you know, be willing to kind of deal with, you 00:45:47.200 --> 00:45:49.517 know, we weigh, you know, everybody weighs in on everybody else's things and 00:45:49.600 --> 00:45:52.717 so you have to be willing to kind of have the conversation, you know, because 00:45:52.800 --> 00:45:55.757 you know that you get to make the decision. You know, you are hopefully 00:45:55.840 --> 00:45:59.677 less defensive than you would normally be when other people say things like, 00:45:59.760 --> 00:46:02.637 "This is really stupid. Why are you doing it?" You know that the peer 00:46:02.720 --> 00:46:05.677 pressure basically doesn't turn into an actual explicit veto. Like you can still 00:46:05.760 --> 00:46:08.237 do the deal and you know that you're at a firm that really prizes that and wants 00:46:08.320 --> 00:46:10.477 wants us to do do investments like that. 00:46:10.560 --> 00:46:13.997 Um and so but but you know you do have to you have to be willing to like sit in 00:46:14.080 --> 00:46:16.157 a room and describe what it is and you have to be willing to like listen to 00:46:16.240 --> 00:46:19.357 people you know crap on it right without 00:46:19.440 --> 00:46:23.197 getting dissuaded. Um and then you know there there is this thing this conflict 00:46:23.280 --> 00:46:26.717 thing right which is it's a big deal for us internally which is is probably our 00:46:26.800 --> 00:46:29.597 biggest limiter our ability to do business as we take on these conflicts. 00:46:29.680 --> 00:46:33.837 So, you know, the stickiest conversation we'll have internally usually is like, 00:46:33.920 --> 00:46:37.757 boy, like it would be like between teams, right? It's like, okay, if one 00:46:37.840 --> 00:46:41.277 team does or if one partner does this investment, then it conflicts the entire 00:46:41.360 --> 00:46:43.437 firm out of the category going forward. 00:46:43.520 --> 00:46:47.357 Um, and so, you know, you can imagine pretty vigorous arguments and debates 00:46:47.440 --> 00:46:51.117 around that. But the result of that is basically it's like I think we're way 00:46:51.200 --> 00:46:53.997 out on the edge of being able to be, you know, sort of creative in the 00:46:54.080 --> 00:46:57.357 investments. Um, we're able to back the entrepreneurs that color outside the 00:46:57.440 --> 00:47:00.317 lines, right? that that basically come in with ideas that sort of, you know, 00:47:00.400 --> 00:47:03.997 break the existing paradigm, you know, that there's no precedent for, you know, 00:47:04.080 --> 00:47:07.277 that just where where at a more structured or formal, you know, firm, it 00:47:07.360 --> 00:47:10.557 might be like, well, I don't even know what box this goes in, right? Like it's 00:47:10.640 --> 00:47:14.077 just this is so weird and like offbeat, like what how do we even classify this? 00:47:14.160 --> 00:47:16.797 And then, you know, if we have to explain this to the council of elders, 00:47:16.880 --> 00:47:19.917 how are they going to ever understand it? Right? And in our firm, it's like we 00:47:20.000 --> 00:47:22.957 can we can make all those bets and and and the history of of venture and new 00:47:23.040 --> 00:47:25.837 technology is those are often the most successful bets. So, that that's why we 00:47:25.920 --> 00:47:29.997 we've optimized that way. And you also get speed. It sounds like a lot of 00:47:30.080 --> 00:47:32.717 velocity with how fast you can make decisions. 00:47:32.800 --> 00:47:34.077 >> Yeah, we have a partner. I won't I won't 00:47:34.160 --> 00:47:37.197 name names, but we have a partner where he was in the he was in he was in the 00:47:37.280 --> 00:47:41.437 west coast office. Um it was in the Palo Alto office of an East Coast firm. Um a 00:47:41.520 --> 00:47:43.597 firm that had historically grown up in the East Coast, very successful 00:47:43.680 --> 00:47:47.677 investment firm. Um but you know, he would have to fly to New York and 00:47:47.760 --> 00:47:50.957 present all of his investment ideas to a group of five senior partners in New 00:47:51.040 --> 00:47:54.397 York. And and by the way, the five senior partners in New York, incredibly 00:47:54.480 --> 00:47:58.077 like established, you know, legendary investors like with incredible track 00:47:58.160 --> 00:48:01.677 records with like absolute moral authority to be able to, you know, make 00:48:01.760 --> 00:48:05.197 such judgments. The problem, exactly to your point, the problem is, yeah, speed 00:48:05.280 --> 00:48:09.517 and then just like, you know, this stuff changes, right? Um, you know, the scar 00:48:09.600 --> 00:48:12.557 tissue thing, um, the scar tissue thing, there's a specific form of the scar 00:48:12.640 --> 00:48:16.317 tissue thing that we see a lot. I I call this sort of the the is it's like the 00:48:16.400 --> 00:48:19.837 idea event horizon or something which is there there's a point a lot of people 00:48:19.920 --> 00:48:23.277 reach where they're just done with new ideas. It's like the general version of 00:48:23.360 --> 00:48:26.317 the problem. It's just like okay like I 00:48:26.400 --> 00:48:28.797 got through the PC, I got through the 00:48:28.880 --> 00:48:31.437 internet. Um I got Facebook. All right, 00:48:31.520 --> 00:48:37.437 I got okay food delivery works but like Tik Tok like really 00:48:37.520 --> 00:48:39.997 >> too much. Yeah, >> it's just too much. is just like, okay, 00:48:40.080 --> 00:48:43.517 this is just at this point the world is getting ridiculous and like I don't want 00:48:43.600 --> 00:48:46.877 to process this anymore. And like almost 00:48:46.960 --> 00:48:48.877 everybody hits that point at some point. 00:48:48.960 --> 00:48:53.357 Um and and so I I just think like the the the the let's see, yeah, I I just 00:48:53.440 --> 00:48:56.717 think that the bad way to do venture um is to have people who have reached that 00:48:56.800 --> 00:48:59.437 point doing sign off on the decisions and and I hope Ben and I have not 00:48:59.520 --> 00:49:02.237 reached that point, but even if we do reach that point at some point, we want 00:49:02.320 --> 00:49:04.637 the firm to continue to be able to make the good investments. What have you 00:49:04.720 --> 00:49:08.877 learned over the years about making exceptional decisions that most people 00:49:08.960 --> 00:49:11.277 miss? >> So quite honestly, I think I think a lot 00:49:11.360 --> 00:49:15.037 of it is embracing the the probabilistic nature of the domain. You know, a lot of 00:49:15.120 --> 00:49:17.997 these questions like venture teaches you they're very direct versions of these 00:49:18.080 --> 00:49:21.677 lessons because it you know what is it that the old submariner slogan is stupid 00:49:21.760 --> 00:49:24.797 will be punished. when when you pass on enough companies that turn out to be 00:49:24.880 --> 00:49:27.837 these giant, you know, kind of global, you know, kind of behemoths, you know, 00:49:27.920 --> 00:49:31.117 at some point you're just like, okay, like obviously I'm not I'm not a super 00:49:31.200 --> 00:49:35.117 like I have to have some level of epistic humility here because I'm not 00:49:35.200 --> 00:49:37.917 making all these decisions properly. And and again, the nature of the domain is 00:49:38.000 --> 00:49:40.797 I'm not going to make all the decisions properly. Like what what each of the top 00:49:40.880 --> 00:49:44.237 venture capital capitalists of all time has in common is they they all each of 00:49:44.320 --> 00:49:47.597 them missed almost all of the great deals of their generation. The the bad 00:49:47.680 --> 00:49:51.277 news is you're going to like make all these mistakes. The the good news is you 00:49:51.360 --> 00:49:54.797 don't have to score 100% and and not having to score 100% basically means you 00:49:54.880 --> 00:49:57.997 can take chances, right? And and and and specifically the way that you 00:49:58.080 --> 00:50:00.877 instrumentalize that is it's basically and this we talk about this a lot inside 00:50:00.960 --> 00:50:05.517 the firm is success or failure is not at the unit of an individual investment, 00:50:05.600 --> 00:50:10.157 right? Success or failure is at the level of a portfolio, right? And so um 00:50:10.240 --> 00:50:13.117 and and and we basically see these portfolio effects everywhere in the 00:50:13.200 --> 00:50:16.077 business. So we see the portfolio effect happens at the level of individ 00:50:16.160 --> 00:50:19.837 individual partner. It happens at the level of a fund. It happens at the level 00:50:19.920 --> 00:50:22.957 of what we call a strategy which is like a basket of investments, you know, in in 00:50:23.040 --> 00:50:26.317 the same theme, right? So, let's say we're we're at our firm and we decide, 00:50:26.400 --> 00:50:28.717 well, I'll give you an example. We have this big gaming push right now, right? 00:50:28.800 --> 00:50:31.357 Um, as we just brought up this this new gaming partner we're very proud of and 00:50:31.440 --> 00:50:34.317 we got this big gaming push and we've been you kind of investing in gaming now 00:50:34.400 --> 00:50:37.117 for a while and it's like, okay, so we want to go out and make whatever, you 00:50:37.200 --> 00:50:39.677 know, we want to go out and make whatever, you know, bets in in new game 00:50:39.760 --> 00:50:42.797 companies. And so we we we literally have a strategy to like back new game 00:50:42.880 --> 00:50:45.997 studios, new new new game new new game companies. And like we go out and we 00:50:46.080 --> 00:50:49.517 invest not in one of them, but we invest in 10 of them, right? And you know, in 00:50:49.600 --> 00:50:50.877 making different kinds of games, right? 00:50:50.960 --> 00:50:53.997 You know, different different kinds of approaches. Um and then we're going to 00:50:54.080 --> 00:50:57.357 evaluate the success of that program not based on any of those individual 00:50:57.440 --> 00:51:00.637 investments, but based on that, you know, the basket as a whole. And so when 00:51:00.720 --> 00:51:03.117 you liberate yourself away from I have 00:51:03.200 --> 00:51:05.517 to get this decision right to I have to 00:51:05.600 --> 00:51:08.157 execute a strategy that is going to 00:51:08.240 --> 00:51:10.957 result in a series of 10 bets um and 00:51:11.040 --> 00:51:15.197 then I'm going to be evaluated not by you know any individual one and by the 00:51:15.280 --> 00:51:18.557 way I'm not even going to get evaluated by the average outcome right I'm going 00:51:18.640 --> 00:51:20.237 to get evaluated by the total 00:51:20.320 --> 00:51:23.117 performance of the basket um and if one 00:51:23.200 --> 00:51:28.717 of those bets um accounts for 99% of the profit of the basket that is a perfectly 00:51:28.800 --> 00:51:32.877 fine outcome Right? We see this a lot. We do performance reviews, right? We do 00:51:32.960 --> 00:51:36.317 performance reviews. And so it's like, okay, we we do performance reviews of a 00:51:36.400 --> 00:51:38.957 of an investment partner here. And it's like, well, they've made 10 investments 00:51:39.040 --> 00:51:42.157 and, you know, one of them is this this just this huge success and the other 00:51:42.240 --> 00:51:44.077 nine are like, you know, sucking wind. 00:51:44.160 --> 00:51:46.637 And it's like, okay, is this a good venture capitalist or a bad venture 00:51:46.720 --> 00:51:49.997 capitalist? And it's like, well, you know, in any domain that's not 00:51:50.080 --> 00:51:52.557 probabilistic, you say, this person is terrible, right? You know, it's batting 00:51:52.640 --> 00:51:55.037 average of like a hundred, you know, out of a thousand, it's like, this person's 00:51:55.120 --> 00:51:58.077 awful. Um, and and there's always a temptation to say, well, this one thing 00:51:58.160 --> 00:52:00.637 that's working is it's like it's a fluke, right? And so, who knows whether 00:52:00.720 --> 00:52:03.437 they'll ever get it again. And it's at that point where I put my head up and I 00:52:03.520 --> 00:52:04.957 say, we're in the fluke business, right? 00:52:05.040 --> 00:52:08.637 Like the whole point of this is to get the flukes. Um, and so, of course, that 00:52:08.720 --> 00:52:12.157 person should get full credit for the fluke, right? And in fact, I hope they 00:52:12.240 --> 00:52:15.517 go make 10 more investments and get another fluke. And so, anyway, it's it's 00:52:15.600 --> 00:52:18.797 basically like it's getting into a domain in which you can basically make 00:52:18.880 --> 00:52:21.917 those risky bets in a way where you know that you're not going to lose everything 00:52:22.000 --> 00:52:25.197 if you don't score 100%. Um and you know 00:52:25.280 --> 00:52:29.277 and look like you know like not all domains are like this like you know the 00:52:29.360 --> 00:52:32.557 person running a nuclear power plant doesn't get to live in this world right 00:52:32.640 --> 00:52:37.757 um but you know put it this way anybody doing anything creative right does live 00:52:37.840 --> 00:52:41.037 in this world um and I you know I think that the creative artists of all kinds 00:52:41.120 --> 00:52:43.997 you know basically live in this world and and and the really good ones are are 00:52:44.080 --> 00:52:46.957 unafraid to take the bets you know because of because because they know 00:52:47.040 --> 00:52:49.357 that this is the domain they operate in. 00:52:49.440 --> 00:52:52.957 We sort of talked about the the probabilistic thinking in terms of the 00:52:53.040 --> 00:52:55.357 magnitude and test taking as it relates 00:52:55.440 --> 00:52:59.997 to the education system. To me, I mean, from the outside looking in, the 00:53:00.080 --> 00:53:04.557 education system seems a bit dysfunctional. Uh, you're a parent. What 00:53:04.640 --> 00:53:08.237 do you think is wrong with it? And how do you go about navigating it? And what 00:53:08.320 --> 00:53:11.997 can we do to fix it? >> So, it's completely unfixable. So, so 00:53:12.080 --> 00:53:15.037 it's it's it's it's like none of the specific point things people are worried 00:53:15.120 --> 00:53:18.557 about are fixable because the whole thing is built in a certain way. Uh so 00:53:18.640 --> 00:53:21.837 it it goes back to this this it goes back to this historical thing we started 00:53:21.920 --> 00:53:26.237 with which is it's it's a it's a mass education system right so it's a mass 00:53:26.320 --> 00:53:30.157 education system that was created in a time and place um and it was created in 00:53:30.240 --> 00:53:32.157 a time and place and you know you probably know the history of this it was 00:53:32.240 --> 00:53:35.197 created in a time and place you know roughly 100 years ago 110 years ago and 00:53:35.280 --> 00:53:37.677 there were a set of you know theoreticians and with names like you 00:53:37.760 --> 00:53:42.157 know John Dwey um and they you know developed a you know a system and and at 00:53:42.240 --> 00:53:45.677 the time by the way at the time it was like a huge advance right because it was 00:53:45.760 --> 00:53:47.917 like we were going from like a nation of farmers 00:53:48.000 --> 00:53:50.957 right into this into you know this sort of second industrial revolution and into 00:53:51.040 --> 00:53:54.317 the 20th century you know most kids didn't have much education in the 19th 00:53:54.400 --> 00:53:58.157 century and you know um you know grew up in farms or whatever and like they they 00:53:58.240 --> 00:54:01.677 knew the theoreticians the experts knew like we need a system to educate all the 00:54:01.760 --> 00:54:05.677 kids um and then and then they built a system the way that you built systems 00:54:05.760 --> 00:54:09.757 you know the way you built systems in 1910 or 1920 um which is you built a 00:54:09.840 --> 00:54:13.277 mass manufacturing system right so you you took all of the same methodologies 00:54:13.360 --> 00:54:17.197 that were being used to make the factory for model T cars and all the same 00:54:17.280 --> 00:54:20.317 methodologies that were being used to do you know radio you know RCA was doing to 00:54:20.400 --> 00:54:23.997 do radio broadcasting to the masses and that the you know that General Motors or 00:54:24.080 --> 00:54:26.397 you know General Electric was using to kind of you know build out the 00:54:26.480 --> 00:54:29.357 electrical grid for the country you know these these it's a mass system you built 00:54:29.440 --> 00:54:34.077 mass a mass education system um and and you built it like a factory right um and 00:54:34.160 --> 00:54:37.197 and that made sense because number one that let you get to massive scale that 00:54:37.280 --> 00:54:40.557 solved the problem they had at that point um but but the other thing was you 00:54:40.640 --> 00:54:43.437 knew that you were training kids fundamentally for the industrial economy 00:54:43.520 --> 00:54:45.997 right and so you were training kids at some fundamental level to work in 00:54:46.080 --> 00:54:49.677 factories right? Or or by the way to work in 00:54:49.760 --> 00:54:53.117 offices and of course the offices in those days were also factories, right? 00:54:53.200 --> 00:54:56.557 They were factories for knowledge work, right? Um and so if you know know the 00:54:56.640 --> 00:54:58.957 history of mass manufacturing, there were all these ideas like time and 00:54:59.040 --> 00:55:02.397 motion studies and all these guys like was it Turner u you know who had these 00:55:02.480 --> 00:55:04.717 you know who optimized mass manufacturing and basically all of the 00:55:04.800 --> 00:55:07.517 leading intellectuals of that era basically said we use that that same 00:55:07.600 --> 00:55:10.237 battery of techniques we use for mass manufacturing we're also going to use 00:55:10.320 --> 00:55:14.077 for mass media or we're else we' use for mass education. Um, and so these are, 00:55:14.160 --> 00:55:17.517 you know, these are factories to these are schools are factories to stamp out 00:55:17.600 --> 00:55:21.117 kids who are optimized to work in either, you know, if they're blueco 00:55:21.200 --> 00:55:24.397 collar to work in a literal factory or if they're white collar to look to work 00:55:24.480 --> 00:55:27.437 at General Motors or General Electric in the, you know, in a conference room, you 00:55:27.520 --> 00:55:31.277 know, in a in a in a giant hierarchy, you know, to to be an organization man. 00:55:31.360 --> 00:55:35.677 Um, and so we built that system and then we set it on autopilot. Um, and it's 00:55:35.760 --> 00:55:39.277 been on autopilot for hundred years and here we are and it doesn't fit at all to 00:55:39.360 --> 00:55:42.317 the world we live in today. Like not even a little bit. And then of course it 00:55:42.400 --> 00:55:46.237 it it it has you know it has suffered the fate of every institution that sort 00:55:46.320 --> 00:55:49.517 of goes across multiple generations which is it has been taken over by a set 00:55:49.600 --> 00:55:52.717 of people right incentives right it has been taken over by a set of people who 00:55:52.800 --> 00:55:56.477 have absolutely no intention to change it right 100% they're not going to 00:55:56.560 --> 00:56:01.037 change it like the people who run this system 100% of their power and status 00:56:01.120 --> 00:56:03.677 and authority in the world and their income and everything else and their 00:56:03.760 --> 00:56:07.677 lifestyle it's 100% you know bought and paid for by this legacy system and of 00:56:07.760 --> 00:56:08.637 course they're not going to change it. 00:56:08.720 --> 00:56:12.637 Um, and so it's not I'll tell you one thing I don't believe in is reform. Like 00:56:12.720 --> 00:56:16.077 I have all these friends that work on like, you know, school reform. God bless 00:56:16.160 --> 00:56:18.717 them. Like they're just the wonder most wonderful, sweetest, well-intentioned 00:56:18.800 --> 00:56:21.757 people in the world and they're just burning huge amounts of money at time on 00:56:21.840 --> 00:56:24.157 trying to reform the system that has absolutely no intention of being 00:56:24.240 --> 00:56:27.117 reformed and and they're they're having no impact whatsoever. Like it's not 00:56:27.200 --> 00:56:29.517 working at all. >> Of course, like we have a biological 00:56:29.600 --> 00:56:33.517 tendency sort of to defend our territory, right? So it it would be it 00:56:33.600 --> 00:56:37.277 would be hard especially with the organized unions and all of this other 00:56:37.360 --> 00:56:40.397 stuff that's involved with the education system to reform it. 00:56:40.480 --> 00:56:44.237 >> Well, it's like the tip off the tip off if they just you know step back and 00:56:44.320 --> 00:56:46.557 think about it for a second. Like you could be pro- union or anti-UN. You have 00:56:46.640 --> 00:56:48.797 whatever people have whatever views and unions they want organized labor, you 00:56:48.880 --> 00:56:51.437 know, big debate for a long time. You can have whatever views you want. But 00:56:51.520 --> 00:56:55.197 the idea of a unions the idea of unions 00:56:55.280 --> 00:56:57.677 of public sector employees, 00:56:57.760 --> 00:57:02.237 right? Like, so you now have people, you have a double 00:57:02.320 --> 00:57:06.477 layer of civil service protections and union protections, 00:57:06.560 --> 00:57:10.637 right? And you're going to reform that system. Like, no, you're not like 00:57:10.720 --> 00:57:12.957 they're going to take your money, laugh at you, and like nothing is going to 00:57:13.040 --> 00:57:17.437 happen. And so, yeah, there there is no on this. There is no fix. There is only 00:57:17.520 --> 00:57:19.037 one thing to do in my my opinion. 00:57:19.120 --> 00:57:21.997 There's only one thing to do, right, which is to build the new system, right? 00:57:22.080 --> 00:57:24.877 And the new system has to get built from scratch. It has to get built the hard 00:57:24.960 --> 00:57:29.277 way, right? um it will probably not look right or sound or smell like you know 00:57:29.360 --> 00:57:31.757 these it probably you know the new system will probably not be a giant 00:57:31.840 --> 00:57:35.197 hierarchy it'll probably be something else >> right it'll look like synthesis or 00:57:35.280 --> 00:57:37.277 something like that >> yeah it'll be or it'll be like it'll be 00:57:37.360 --> 00:57:40.637 distributed you know it'll be uh you know like this I'm just going to I'll 00:57:40.720 --> 00:57:44.397 paint a vague picture of what it might be but it might be you know look the 00:57:44.480 --> 00:57:47.037 country clearly right now and I'm actually we're actually living this with 00:57:47.120 --> 00:57:49.277 our six-year-old right now like there 00:57:49.360 --> 00:57:51.917 needs to be like a homeschooled network 00:57:52.000 --> 00:57:54.157 right there needs to be a whole like 00:57:54.240 --> 00:57:56.637 support structure right? And network um 00:57:56.720 --> 00:57:59.117 and knowledge flow and expertise flow 00:57:59.200 --> 00:58:02.877 and talent hiring pipeline, right? And 00:58:02.960 --> 00:58:05.277 you know, quality standards and and 00:58:05.360 --> 00:58:10.237 resources and activities, right? For for homeschool kids, right? And and for the 00:58:10.320 --> 00:58:12.637 for these like micro schools that are popping up all over the place, right? 00:58:12.720 --> 00:58:15.517 And and you know, and by the way, like now is a perfect time to do that, right? 00:58:15.600 --> 00:58:18.237 Because then the postcoid, you know, all the changes you're well aware of, but 00:58:18.320 --> 00:58:21.277 like you know, there's this massive spike in homeschooling. um there's this 00:58:21.360 --> 00:58:24.077 massive spike in parents who are very unsatisfied with with formal you know 00:58:24.160 --> 00:58:29.197 all are sort of say newly unsatisfied with the the the legacy model um and so 00:58:29.280 --> 00:58:32.077 now is obviously the right time for this and look there are lots of example there 00:58:32.160 --> 00:58:34.957 are lots of people working on this and there are lots of early examples of this 00:58:35.040 --> 00:58:37.197 and so I hope something really takes here 00:58:37.280 --> 00:58:38.957 >> it's also interesting when you look from 00:58:39.040 --> 00:58:42.957 the outside in that there's sort of like no individual to blame right like I feel 00:58:43.040 --> 00:58:47.277 for the teachers in the classroom I feel for the principles I feel for everybody 00:58:47.360 --> 00:58:51.597 involved in the system but the end outcome is just terrible. 00:58:51.680 --> 00:58:55.437 >> Yeah. Charlie Mer has this great thing I really like which he says look if if you 00:58:55.520 --> 00:58:58.477 often in the world this is a great example you often have a system and the 00:58:58.560 --> 00:59:02.637 system has incentives and this and the incentives result in terrible behavior 00:59:02.720 --> 00:59:05.757 and then you have a choice which is do you blame the people who are exhibiting 00:59:05.840 --> 00:59:09.677 the terrible behavior or do you blame the people who created the incentives 00:59:09.760 --> 00:59:13.037 right and and and he he believes and I agree on this I I think 100% you blame 00:59:13.120 --> 00:59:15.437 the people who create the incentives right I think I think you're right like 00:59:15.520 --> 00:59:17.917 I I think when you take human beings and you put them in a system where they have 00:59:18.000 --> 00:59:21.117 bad incentives and you get bad results like at at some level it's not their 00:59:21.200 --> 00:59:23.997 fault you know, you could say maybe they should resign a principle or something 00:59:24.080 --> 00:59:26.477 like that, but like most people need to live their lives and they need to like, 00:59:26.560 --> 00:59:29.197 you know, put food on the table for their families and so forth. And so like 00:59:29.280 --> 00:59:32.877 I just don't have expectations of like mass revolt um against people's 00:59:32.960 --> 00:59:36.157 self-interest. Um and so yeah, no, I I totally agree with that and so therefore 00:59:36.240 --> 00:59:39.197 I think you have to look at incentives um and then you have to look at the 00:59:39.280 --> 00:59:42.717 people who are putting the incentives in place um and you and you have to judge 00:59:42.800 --> 00:59:46.237 them and and and that's the that's the thing with this thing is like the people 00:59:46.320 --> 00:59:50.077 who put these incentives in place are dead. Like they're gone, right? like we 00:59:50.160 --> 00:59:53.277 we can you know I can I can sit here and yell at John Dewey all day long. It 00:59:53.360 --> 00:59:58.477 doesn't matter like he's you know he's he's gone. Um and and the people who are 00:59:58.560 --> 01:00:01.597 running these institutions now are just basically at some fundamental level 01:00:01.680 --> 01:00:05.357 executing scripts that were developed 100 years ago. And like it it to some 01:00:05.440 --> 01:00:08.797 extent it's like not their fault. And then look, you know, there is 01:00:08.880 --> 01:00:11.997 corruption, right? I mean, like the level to which a lot of these legacy 01:00:12.080 --> 01:00:14.877 systems are intertwined with the political system, you know, up to the 01:00:14.960 --> 01:00:18.237 level of just overt corruption, like at some point you're you're in this like 01:00:18.320 --> 01:00:22.157 really sleazy zone where, you know, politicians have just be bought off to, 01:00:22.240 --> 01:00:24.477 you know, to basically preserve a system that's obviously, you know, 01:00:24.560 --> 01:00:27.677 dysfunctional and corrosive. And so anyway, you you can certainly, you know, 01:00:27.760 --> 01:00:30.877 I don't I don't mean to let everybody off the hook, but but yeah, look, the 01:00:30.960 --> 01:00:35.437 the key thing at the core of it is yes, how was the system constructed? Um, and 01:00:35.520 --> 01:00:38.317 then um and then and then what are the what are the incentives for for its 01:00:38.400 --> 01:00:41.517 continuity? Um, and and again, that's why I said like I'm not that's why I 01:00:41.600 --> 01:00:44.397 think reform is impossible. Like there's no way at this point to go in and change 01:00:44.480 --> 01:00:47.357 the incentives inside one of these systems. Like I it just there's too much 01:00:47.440 --> 01:00:48.957 vested interest. It just can't be done. 01:00:49.040 --> 01:00:53.597 >> What would a political policy platform look like that encourages innovation? 01:00:53.680 --> 01:00:56.477 What are the sort of like key variables that matter? 01:00:56.560 --> 01:00:59.357 >> I don't know if it's too I don't know if it would work um because it's a little 01:00:59.440 --> 01:01:02.717 bit too abstract, but it it it is kind of at the heart it's a little bit at the 01:01:02.800 --> 01:01:05.037 heart of populism. It's a little bit at the heart of actually a lot of the 01:01:05.120 --> 01:01:09.277 leftwing critique um actually a business also. So you you see you see it actually 01:01:09.360 --> 01:01:13.597 there's a critique from both the left and the right and I think the critique 01:01:13.680 --> 01:01:16.717 the way the libertarians to say the libertarians have the answer but the way 01:01:16.800 --> 01:01:20.077 the libertarians would put it is there's a difference between being um pro 01:01:20.160 --> 01:01:23.677 business and pro market right um and so 01:01:23.760 --> 01:01:27.357 and what they mean by that basically is it's like there's one concept of a 01:01:27.440 --> 01:01:30.557 business right or an entity of any kind let's start with a business but we can 01:01:30.640 --> 01:01:34.637 apply the same thing to to other other kinds of institutions down the road like 01:01:34.720 --> 01:01:38.237 um there's one form of business is like actually forc forced to compete in a 01:01:38.320 --> 01:01:41.677 fully competitive market, right? So sort of fully subject to market discipline, 01:01:41.760 --> 01:01:44.557 right? And so like if whatever, you know, and I don't even say like the car 01:01:44.640 --> 01:01:47.517 industry works like this or something, right? Which is or I don't actually the 01:01:47.600 --> 01:01:48.877 car industry gets repeatedly bailed out. 01:01:48.960 --> 01:01:51.677 So they're probably not the right example. I don't know, soft drinks are 01:01:51.760 --> 01:01:54.637 something. It's like, you know, Coke and Pepsi and Dr. Pepper and so forth. Like 01:01:54.720 --> 01:01:58.397 they, you know, every time you, you know, buy a can a soft drink or, you 01:01:58.480 --> 01:02:01.917 know, any any, you know, I went to, you know, was a gas station the other day 01:02:02.000 --> 01:02:04.717 and it's like, you know, there's like 400 different, you know, bottles and 01:02:04.800 --> 01:02:08.077 cans of drinks right on the shelves. you know, those companies are like forced to 01:02:08.160 --> 01:02:12.077 compete every day, right, for for every purchase. And so there there's a there's 01:02:12.160 --> 01:02:13.597 a standards bar that they have to hit. 01:02:13.680 --> 01:02:18.317 Um, and then there's as as and and sort of libertarians are kind of classic free 01:02:18.400 --> 01:02:21.197 market economists are like that. That's that's market economy. Like in the 01:02:21.280 --> 01:02:24.397 market economy, you you you don't want businesses to kind of run untrable. What 01:02:24.480 --> 01:02:27.117 you want them is you want them subject to market discipline. You want them 01:02:27.200 --> 01:02:30.717 forced to compete all the time. And and that's how you you get quality control 01:02:30.800 --> 01:02:34.637 and innovation. Um, and then and then there's there's pro business. And pro 01:02:34.720 --> 01:02:37.437 business basically the problem with pro business is basically what happens is a 01:02:37.520 --> 01:02:41.197 lot of industries over time end up not like that. They end up not being 01:02:41.280 --> 01:02:43.757 actually a fair and free market with market discipline. They end up as 01:02:43.840 --> 01:02:47.277 something else. In the business world what they end up with is either just you 01:02:47.360 --> 01:02:50.957 know one company with a follow-up monopoly or more commonly they end up 01:02:51.040 --> 01:02:52.477 with what's called an oligopoly, right? 01:02:52.560 --> 01:02:55.837 They end up with a small number of companies that sort of dominate the 01:02:55.920 --> 01:03:00.157 entire sector. Um and then what you get and you know you see this over and over 01:03:00.240 --> 01:03:02.797 in the economy. It's like, you know, three car companies, um, you know, for a 01:03:02.880 --> 01:03:05.677 very long time. It's, you know, four movie studios. It's three accounting 01:03:05.760 --> 01:03:07.677 firms, you know, it's just, you go right 01:03:07.760 --> 01:03:09.357 down the list, right? Um, and it's just, 01:03:09.440 --> 01:03:13.117 you know, three big banks. Um, you know, 01:03:13.200 --> 01:03:16.797 um, and so, and these are oligopies and oligopies are not monopolies. Like each 01:03:16.880 --> 01:03:19.117 company doesn't have to, you know, there's no one company that has total 01:03:19.200 --> 01:03:21.917 control, but, you know, now you've only got three companies. And are three 01:03:22.000 --> 01:03:25.197 companies really, is that sufficient competition to really have market 01:03:25.280 --> 01:03:28.637 discipline or do they kind of end up as sort of a cartel? And there's all these 01:03:28.720 --> 01:03:32.317 ways that they like signal to each other to price fix and so forth that sometimes 01:03:32.400 --> 01:03:37.117 verges into overt price fixing. Um and then what happens is the oligopies 01:03:37.200 --> 01:03:40.397 basically they get big and stalifying and then what happens is they basically 01:03:40.480 --> 01:03:43.997 end up sort of colonizing politics right and then this this leads to this concept 01:03:44.080 --> 01:03:47.517 of regulatory capture right where basically the the you know the the 01:03:47.600 --> 01:03:51.197 companies end up basically essentially occupying the government you know 01:03:51.280 --> 01:03:53.677 usually at the same time the government's occupying the companies 01:03:53.760 --> 01:03:57.197 right and so you end up with these like giant regulatory edififices you know 01:03:57.280 --> 01:04:00.237 DoddFrank and all these things u you know you end up with you know these 01:04:00.320 --> 01:04:03.517 bailouts you end up with all these you know intertwining this you know 01:04:03.600 --> 01:04:06.717 revolving more right where you've got these regulators that all know that 01:04:06.800 --> 01:04:08.717 they're going to get you know these really high paying jobs at these 01:04:08.800 --> 01:04:11.437 companies when they when they when they step out of government service or you 01:04:11.520 --> 01:04:15.917 know or you know it's like you know my friends at Goldman Sachs you know like 01:04:16.000 --> 01:04:18.637 the number of people who had like you know Goldman Sachs their business card 01:04:18.720 --> 01:04:22.077 who now work for the federal government is just incredible right like it's just 01:04:22.160 --> 01:04:25.597 this incredible talent flow right um and so you end up with this sort of 01:04:25.680 --> 01:04:29.197 intertwining um of business and government and then of course you know 01:04:29.280 --> 01:04:32.877 we experienced this in a very tangible way which is okay then you know imagine 01:04:32.960 --> 01:04:36.477 being a startup Right? Imagine being a new bank, right, or a new car company or 01:04:36.560 --> 01:04:39.037 a new movie studio or a new whatever going up against, you know, these 01:04:39.120 --> 01:04:42.237 cartels and it's just, you know, it's just like, oh my god, like, you know, 01:04:42.320 --> 01:04:44.637 it's like it's like a mountain that is, you know, for at least for most 01:04:44.720 --> 01:04:47.917 entrepreneurs is almost impossible to conceive of climbing, right? There was 01:04:48.000 --> 01:04:52.797 not a new car company in the US that mattered for 80 years, you know, between 01:04:52.880 --> 01:04:55.437 the establishment of the of the oligopy in the US and then and then the 01:04:55.520 --> 01:04:57.277 emergence of Tesla, right? So that's 01:04:57.360 --> 01:05:00.797 like a eight years is a long time. Um, 01:05:00.880 --> 01:05:02.957 and so, you know, what is that, right? 01:05:03.040 --> 01:05:06.237 It's it's certainly not a free market economy, right? Um it's not company 01:05:06.320 --> 01:05:09.517 subject to market discipline. It's it but but it's also not just like flatout 01:05:09.600 --> 01:05:11.597 top down socialism or communism, right? 01:05:11.680 --> 01:05:15.117 It's something else, right? It's this it's this kind of hybrid mutant, you 01:05:15.200 --> 01:05:19.677 know, kind of entangled thing. Um and then you can generalize this idea to, 01:05:19.760 --> 01:05:20.877 you know, many of these other topics. 01:05:20.960 --> 01:05:24.157 And so it's the same, you know, higher, you know, education, education through 01:05:24.240 --> 01:05:26.317 that lens, education all of a sudden starts to make a lot of sense because 01:05:26.400 --> 01:05:29.597 like what is education? K- through2 is a monopoly, right? It's it's a government 01:05:29.680 --> 01:05:31.917 sponsored and run monopoly. And so, of course, it's going to, you know, it's a 01:05:32.000 --> 01:05:34.717 Soviet it's a Soviet system, right? It's going to it's going to it's it's run 01:05:34.800 --> 01:05:37.597 exactly the same way education was front of the Soviet Union. Of course, it's 01:05:37.680 --> 01:05:40.797 going to generate the exact same results. It's going to generate worse 01:05:40.880 --> 01:05:45.117 results because the Soviets were really good at math and science. Um um and 01:05:45.200 --> 01:05:47.757 then, you know, higher ed is a cartel, 01:05:47.840 --> 01:05:52.157 right? It's it's quite literally a cartel. And the universities form, you 01:05:52.240 --> 01:05:54.797 know, they have an industry group uh they have these industry groups that 01:05:54.880 --> 01:05:58.717 they run then and then they have what's called accreditation. Um, and they 01:05:58.800 --> 01:06:02.077 control the accreditation process and you need to get accredited to get access 01:06:02.160 --> 01:06:04.717 to federal student lending and all and federal research funding and all these 01:06:04.800 --> 01:06:09.997 other things, right? Um, and so it's it's a it's a flat oligopolistic cartel. 01:06:10.080 --> 01:06:12.877 Um, and so of course it's going to be non-innovative and of course prices are 01:06:12.960 --> 01:06:15.437 going to spiral like crazy and of course there's going to be more more government 01:06:15.520 --> 01:06:18.077 subsidies over time and of course the quality is going to collapse over time. 01:06:18.160 --> 01:06:20.637 The sort of intellectual version of the platform would be sort of anti- 01:06:20.720 --> 01:06:24.557 monopoly, anti-oligopoly, anti- concentrated power, anti-government, you 01:06:24.640 --> 01:06:28.877 know, in a government entwining itself in the economy, right? Anti-regulatory 01:06:28.960 --> 01:06:31.757 capture, anti-leacy institutions that are no longer being run by their 01:06:31.840 --> 01:06:36.877 founders, right? Um anti-systems for which there's no competition, right? Um 01:06:36.960 --> 01:06:39.757 anti- anything that basically tries to, you know, do what's called rent 01:06:39.840 --> 01:06:42.637 seeeking, you know, to kind of, you know, extract, you know, basically 01:06:42.720 --> 01:06:46.477 economics from the broader society without competitive alternatives. Like 01:06:46.560 --> 01:06:49.277 that would be the core of it. the the right-wing populist version of that I 01:06:49.360 --> 01:06:51.917 think is sort of very straightforward which is basically you know it's tea 01:06:52.000 --> 01:06:55.197 party right it's basically just like how absurd is it that we have these huge 01:06:55.280 --> 01:06:58.877 things that just keep getting bailed out like what the hell um and then you know 01:06:58.960 --> 01:07:01.677 and by the way you know sort of occupy and tea party actually kind of had the 01:07:01.760 --> 01:07:04.237 same you know in a lot of ways the same argument um you know from the different 01:07:04.320 --> 01:07:08.077 sides of the spectrum and then you know the the modern form of that is you know 01:07:08.160 --> 01:07:11.757 the you know the leftwing version of that is is you know you do hear it and 01:07:11.840 --> 01:07:14.157 and you know the left the left wing people argue more directly for the 01:07:14.240 --> 01:07:17.357 government should just do all this but you know they are on to something I with 01:07:17.440 --> 01:07:21.677 a critique of like look like are these even companies, right? Is is this even 01:07:21.760 --> 01:07:24.557 capitalism, right? And and and is the market actually delivering what the 01:07:24.640 --> 01:07:25.517 market is supposed to deliver? 01:07:25.600 --> 01:07:28.157 >> Well, you got my vote, man. When are you running? [laughter] 01:07:28.240 --> 01:07:31.997 >> Never. Never under any circumstances. 01:07:32.080 --> 01:07:35.357 >> You once said that you had this little I remember this interview. It was like 01:07:35.440 --> 01:07:38.797 several years ago. You had this little mental model of Elon Musk on your 01:07:38.880 --> 01:07:41.837 shoulder. Is that true? And if so, why? 01:07:41.920 --> 01:07:46.077 And who else do you have mental models of? And how do you use them to help you? 01:07:46.160 --> 01:07:48.717 You know, one of the things is you kind of, you know, as you study kind of, you 01:07:48.800 --> 01:07:51.837 know, very very kind of smart people and you people who have like done a lot of 01:07:51.920 --> 01:07:55.517 important things. It's like, you know, they they all had some way of operating. 01:07:55.600 --> 01:07:57.997 You know, they all had some theory, right? Some some some structure 01:07:58.080 --> 01:08:01.037 framework of the world and how it worked and how how to cause things to happen. 01:08:01.120 --> 01:08:03.517 Um, and and there one of the things that's interesting, you know, there 01:08:03.600 --> 01:08:07.277 there are many such frameworks. Even even the same kind of person, you know, 01:08:07.360 --> 01:08:10.797 there many very of the most successful investors generally each of them had 01:08:10.880 --> 01:08:14.157 some unique take on the world and they and they weren't necessarily compatible 01:08:14.240 --> 01:08:17.997 takes, right? and they just they figured out, you know, kind of a a way to do 01:08:18.080 --> 01:08:20.477 things. It's very different than the way a lot of other people did things. And 01:08:20.560 --> 01:08:22.957 the same thing for CEOs and entrepreneurs and, you know, by the way, 01:08:23.040 --> 01:08:25.517 same thing for artists and, you know, any any other kind of, you know, these 01:08:25.600 --> 01:08:31.277 these sort of very sort of successful people. Um, and so like I'm I'm pretty 01:08:31.360 --> 01:08:34.477 convinced there's no way to like synthesize all of their kind of 01:08:34.560 --> 01:08:37.837 different approaches and views and frameworks into a single model. Like 01:08:37.920 --> 01:08:41.117 it's just it's too complicated and it's too contradictory and it it it kind it 01:08:41.200 --> 01:08:46.077 wouldn't really work. At least I I don't think so. Um but what you can do right 01:08:46.160 --> 01:08:49.277 um you know when when you and then what what you do is like you you know as you 01:08:49.360 --> 01:08:51.997 go through life you you know you talk a lot about this in your work and we 01:08:52.080 --> 01:08:54.397 talked a lot about this today is you do try to assemble your own kind of 01:08:54.480 --> 01:08:58.237 worldview and your own framework and your own way of of of sort of uh of 01:08:58.320 --> 01:09:02.717 doing things. Um and and by default your your your your kind of framework on that 01:09:02.800 --> 01:09:05.437 will get probably narrower over time because you'll get kind of more locked 01:09:05.520 --> 01:09:10.237 more set in your ways um and you'll get more resistant to new ideas. Um, and so 01:09:10.320 --> 01:09:13.917 like one of the ways to offset that is to like quite literally have like have 01:09:14.000 --> 01:09:17.837 the mental model for how somebody else would think about the same situation, 01:09:17.920 --> 01:09:21.277 right? And and in a way that's like not threatening to you, right? Which is it's 01:09:21.360 --> 01:09:24.317 not like okay, this is like now I have to have an argument with myself, but 01:09:24.400 --> 01:09:27.757 it's more just like okay like if you know I take your pick of who you admire, 01:09:27.840 --> 01:09:31.677 but you know in my case it's like Elon Musk or you know or Steve Jobs or you 01:09:31.760 --> 01:09:34.157 know Andy Grove or Peter Teal, you know 01:09:34.240 --> 01:09:38.797 we're in the room, right? Uh you know what would they say? And you know and by 01:09:38.880 --> 01:09:41.117 and by the way this itself is a daunting challenge because these people are 01:09:41.200 --> 01:09:43.997 incredibly smart and I I don't know that I can even you know kind of replicate 01:09:44.080 --> 01:09:47.597 their thought process. Um but you know I do know you know I I do know a fair 01:09:47.680 --> 01:09:51.757 amount about their thought process and that you know they and you know it it so 01:09:51.840 --> 01:09:54.957 happens that I also have known them but also like you know they they both have 01:09:55.040 --> 01:09:57.197 written they've all written and talked a lot about kind of how they how they 01:09:57.280 --> 01:10:01.117 think about things. Um so then it's like okay what what's my mental model for 01:10:01.200 --> 01:10:04.797 yeah how how would Elon think about this right? And so and so I just get you know 01:10:04.880 --> 01:10:07.997 the simple one like the simple one for this the simple one for Elon and Elon's 01:10:08.080 --> 01:10:11.037 very complex guy but the most simple kind of form of Elon that's useful in 01:10:11.120 --> 01:10:14.797 this way is is what he calls first principles thinking right which is it's 01:10:14.880 --> 01:10:19.037 like okay like basically in Elon's view we all basically just like assume too 01:10:19.120 --> 01:10:22.237 many things from from the way things are and the right thing to do is to kind of 01:10:22.320 --> 01:10:24.797 you know he kind of gets this from physics because he was trained as a 01:10:24.880 --> 01:10:28.397 physicist originally u which is a very different mentality than than the one 01:10:28.480 --> 01:10:32.237 that I come from um and it's basically okay script things all the way down to 01:10:32.320 --> 01:10:35.197 basics again and start and basically start the logical thought process over 01:10:35.280 --> 01:10:39.277 again, right? And so basically, you know, go deeper into the idea to the 01:10:39.360 --> 01:10:42.877 very foundations and then build your way back up. Um, and and you know, just 01:10:42.960 --> 01:10:46.077 going through that process is a way to kind of really catalyze your thinking. 01:10:46.160 --> 01:10:48.957 you know, Peter's form, you know, Peter's kind of core mental model that, 01:10:49.040 --> 01:10:51.837 you know, that I borrow that I've kind of drawn from is, you know, his focus on 01:10:51.920 --> 01:10:55.517 this this philosopher Rene Gerard and, you know, this idea of of sort of, you 01:10:55.600 --> 01:10:58.477 know, mimemetic dynamics and and, you know, people copying, you know, people 01:10:58.560 --> 01:11:01.917 copying behavior between each other and then also, you know, rivalries forming 01:11:02.000 --> 01:11:04.957 and and how that plays out, you know, human dynamics and Gerard had this very 01:11:05.040 --> 01:11:08.157 kind of sweeping whole theory about how that kind of determines how well society 01:11:08.240 --> 01:11:10.877 kind of functions and maybe that's not completely true, but like there's 01:11:10.960 --> 01:11:14.557 there's clearly a lot to that. And then of course there's this scapegoating 01:11:14.640 --> 01:11:19.437 cycle which which does seems to play out every day especially when dealing with 01:11:19.520 --> 01:11:22.637 any of these internet things or systems things networks you know it's a very 01:11:22.720 --> 01:11:25.677 useful framework and so you know being able to kind of have an imaginary debate 01:11:25.760 --> 01:11:29.917 with Peter um and kind of say okay what would the lens on that be um you know 01:11:30.000 --> 01:11:33.117 and then obviously we could go on length but you know Jobs and Groven these guys 01:11:33.200 --> 01:11:36.477 had their own their own views of things um and so it's just it's it's a way to 01:11:36.560 --> 01:11:40.477 kind of keep the actual um you know I don't know keep keep ideas flowing and 01:11:40.560 --> 01:11:44.557 then sort of enable yourself or force yourself to like basically stress test 01:11:44.640 --> 01:11:49.037 your own ideas uh through a lens that's not just your preconceptions I think is 01:11:49.120 --> 01:11:51.597 quite helpful. >> I think you get a different perspective, 01:11:51.680 --> 01:11:54.397 right? Like you see the problem through the lens of somebody else which helps 01:11:54.480 --> 01:11:57.677 you actually understand the problem a little bit better than you do just 01:11:57.760 --> 01:12:01.597 seeing it through your own lens because we can't fully understand a system that 01:12:01.680 --> 01:12:06.077 we're part of. So by assuming somebody else's persona, we get more detailed 01:12:06.160 --> 01:12:09.517 information about what we're missing and we eliminate some of our blind spots. 01:12:09.600 --> 01:12:12.397 And then I also think it's also um I also think a lot about it's like it's 01:12:12.480 --> 01:12:17.437 also keeping a high bar um for yourself and for your work, right? And and and 01:12:17.520 --> 01:12:19.917 this maybe is also something this also has to do another thing that happens 01:12:20.000 --> 01:12:23.357 with kind of age and success is and and we see this actually with founders is 01:12:23.440 --> 01:12:25.837 like at some point there are some founders where they start you know 01:12:25.920 --> 01:12:30.157 company three, four, five, six at some point they get tired of doing the work 01:12:30.240 --> 01:12:33.757 like they get tired of going all the way back to basics. Ben and I had this uh we 01:12:33.840 --> 01:12:36.957 had this we had this uh we talked to Jeff Bezos about this at one point and 01:12:37.040 --> 01:12:40.957 um he asked us why we were starting a venture capital from another company and 01:12:41.040 --> 01:12:44.717 another startup and and and and we asked him well if if Amazon you know for some 01:12:44.800 --> 01:12:48.397 reason Amazon got sold or whatever um and you were a free agent again like 01:12:48.480 --> 01:12:51.597 would you start you know would you start another company and he laughed and he 01:12:51.680 --> 01:12:54.477 said you know not in your life he's like you know he's like that would be going 01:12:54.560 --> 01:12:57.677 back to kindergarten and he's like look don't get me wrong I really liked 01:12:57.760 --> 01:13:01.437 kindergarten >> right >> but like you [laughter] know having 01:13:01.520 --> 01:13:03.677 built Amazon I'm not going back to kindergarten, right? Um, you know, 01:13:03.760 --> 01:13:06.637 having to build Amazon. I'm not starting a company again from scratch. And so, 01:13:06.720 --> 01:13:09.517 you know, and so there's this this like where the first principles thinking 01:13:09.600 --> 01:13:13.517 comes in handy, which is it's like, okay, like what's the bar, right? Like 01:13:13.600 --> 01:13:16.237 what's the bar that you're applying to your own work and to your own thought 01:13:16.320 --> 01:13:19.837 process? And are you actually being as rigorous as you, you know, are you being 01:13:19.920 --> 01:13:24.397 as rigorous at say 50 as you were when you were 25? Um, and are you able to 01:13:24.480 --> 01:13:26.557 actually, you know, because when you're 25 or whatever, you're doing something 01:13:26.640 --> 01:13:29.197 new, like the world is judging you every step of the way, and it's like a harsh, 01:13:29.280 --> 01:13:31.277 you know, it's a harsh environment and, you know, the world corrects you 01:13:31.360 --> 01:13:36.157 quickly. H how do you keep that bar rising, right? And not let success sort 01:13:36.240 --> 01:13:39.597 of turn into complacency. >> You need you need some you need some 01:13:39.680 --> 01:13:43.597 forcing function, right? You need a reason. This is why we always and the 01:13:43.680 --> 01:13:46.077 the smart the smart entrepreneurs all know this, but this is why even 01:13:46.160 --> 01:13:49.037 entrepreneurs starting company number four or five, six, you know, this is why 01:13:49.120 --> 01:13:51.197 they should have like a board of directors and they should have people on 01:13:51.280 --> 01:13:54.237 their board who are actually like very smart and strong willed who will argue 01:13:54.320 --> 01:13:57.197 with them, right? Um as opposed to just them doing whatever it is they're going 01:13:57.280 --> 01:14:00.557 to do on their own is because like they you need no matter how good you need 01:14:00.640 --> 01:14:04.237 some force. Mo most people need some forcing function where they're they're 01:14:04.320 --> 01:14:07.517 sort of forced to fully think things through. They're forced to do all the 01:14:07.600 --> 01:14:10.717 work and they're forced to be able to defend it, right? And if to your point, 01:14:10.800 --> 01:14:13.917 like if they don't do that, it's it turns into complacency and laziness and 01:14:14.000 --> 01:14:16.157 at some point it turns into arrogance and it it just it becomes very 01:14:16.240 --> 01:14:19.117 destructive and then you stop being effective. And so there be some forcing 01:14:19.200 --> 01:14:22.957 function. The the the the Peter Teal on the shoulder thing is is a forcing 01:14:23.040 --> 01:14:26.317 function is how I use it. Um it's like a forcing function of my own thought 01:14:26.400 --> 01:14:29.757 process. It's like, okay, if I were explaining this to Peter or to Elon or 01:14:29.840 --> 01:14:32.717 whatever, like, would they be like, "Oh, that's a good idea." Or they'd be like, 01:14:32.800 --> 01:14:36.157 "Mark, like Elon would say, that's stupid." Peter would say, "I 01:14:36.240 --> 01:14:38.557 don't I don't think you fully thought that through." And, you know, and then 01:14:38.640 --> 01:14:41.357 it's like, "Okay, now I know that I have to go like, "If I'm going to do this 01:14:41.440 --> 01:14:44.077 work, now I know that I have to go back and do it for real." Like, I I have to 01:14:44.160 --> 01:14:48.397 be able to justify this. Um, and and and it's and it's an obligation to myself, 01:14:48.480 --> 01:14:50.877 you know, number one, because like why am I wasting time on something if I'm 01:14:50.960 --> 01:14:53.837 not actually set up to do it right? But then of course it's also an obligation 01:14:53.920 --> 01:14:56.477 for any of us in a position where other people are going to make decisions based 01:14:56.560 --> 01:14:59.277 on what we do right people are going to come to work for us right are going to 01:14:59.360 --> 01:15:02.237 participate in things that we're leading you know then we have a real obligation 01:15:02.320 --> 01:15:05.997 right because like it's you know imagine how unfair it is you know for an 01:15:06.080 --> 01:15:08.157 entrepreneur who gets lazy who doesn't think things through who starts a 01:15:08.240 --> 01:15:11.197 company who hires a bunch of people like that you know that's really unfair to 01:15:11.280 --> 01:15:15.277 those people um and so it's it's a self you know this is the the surface level 01:15:15.360 --> 01:15:18.397 answer to your question but like it has to be a self-imposed standard at a 01:15:18.480 --> 01:15:22.157 certain point um and people either want to people say people either have a 01:15:22.240 --> 01:15:24.317 reason to impose that standard on themselves or at some point they should 01:15:24.400 --> 01:15:26.157 stop trying to do the things that they're doing. 01:15:26.240 --> 01:15:29.117 >> Uh last question. What's the last book you reread? 01:15:29.200 --> 01:15:33.597 >> That's a really good question. Um you know, I'll tell you one book I keep 01:15:33.680 --> 01:15:37.437 coming back to. I keep coming back to um I keep coming back to the the Henrich 01:15:37.520 --> 01:15:41.597 the Joseph Henrich book. Um the weirdest people in the world. Um another book 01:15:41.680 --> 01:15:45.437 that I keep coming back to is a book called the Mack the Machavelians by this 01:15:45.520 --> 01:15:49.437 guy James Burnham. um which I think is probably the best book on politics of 01:15:49.520 --> 01:15:52.557 the 20th century and has been like incredibly helpful to understand what's 01:15:52.640 --> 01:15:54.877 happening right now. Um so those are two 01:15:54.960 --> 01:15:59.757 big ones. Martin Gur's book uh the revolt of the public. We'll put all of 01:15:59.840 --> 01:16:03.197 these in the show notes on the website to make it easy for people to get them. 01:16:03.280 --> 01:16:05.197 >> Oh, I'll give you a fourth one. I'll give you a fourth one. We don't have 01:16:05.280 --> 01:16:08.797 time to talk about it now, but um a fourth one that people haven't a lot of 01:16:08.880 --> 01:16:11.117 people haven't read, but it's had a really big impact on how I think about 01:16:11.200 --> 01:16:16.397 things. Um uh it's a book called The Ancient City and it's written by a uh 01:16:16.480 --> 01:16:20.317 it's a it's from the it's from the 1860s. Um but it's a still a very 01:16:20.400 --> 01:16:23.197 relevant book because it's based entirely on original classical sources, 01:16:23.280 --> 01:16:27.197 Roman and Greek sources. And it's sort of a it's sort of and it the the history 01:16:27.280 --> 01:16:30.637 of it is holding up really well. It's a reconstruction of basically human 01:16:30.720 --> 01:16:35.277 society kind of pre the Romans and Greeks of what it was actually like and 01:16:35.360 --> 01:16:38.237 then sort of how that turned into Roman Greece and then how that turned into our 01:16:38.320 --> 01:16:40.797 world. Um, and it's written by a French 01:16:40.880 --> 01:16:43.517 uh a prominent French academic 150 years 01:16:43.600 --> 01:16:47.917 ago. Um, but it's a it's a really profound and striking book. Um, and if 01:16:48.000 --> 01:16:51.517 you read it, you're like, "Oh, this explains a lot." It in particular, it's 01:16:51.600 --> 01:16:54.637 the best book I've ever found. It's the best book I've ever found on sort of the 01:16:54.720 --> 01:16:57.597 creation of civilization, the sort of prehistory of civilization. And then 01:16:57.680 --> 01:16:58.877 it's the best book I've ever read on 01:16:58.960 --> 01:17:02.077 like basically the role of the cult, 01:17:02.160 --> 01:17:07.357 right? So like why cults exist, um, what they are, um, and what it feels like to 01:17:07.440 --> 01:17:10.557 be in one. Um, and of course, you know, one way of 01:17:10.640 --> 01:17:12.877 looking at the world is the world is just basically this, you know, sort of 01:17:12.960 --> 01:17:16.637 series of cults [laughter] of one form or another. I 01:17:16.720 --> 01:17:19.437 don't know that I would even say that I fully understand it yet, but um, it it 01:17:19.520 --> 01:17:22.397 is it's one of those books. I don't know about you, but like when I there's 01:17:22.480 --> 01:17:25.037 something interesting in a book, I I underline it and then if it's really 01:17:25.120 --> 01:17:29.997 interesting, I I do doggeear the the page uh that it's on. Um, and then 01:17:30.080 --> 01:17:32.877 there's there's a few books that I've read where it's like they they 01:17:32.960 --> 01:17:35.037 destabilize the piles of books because 01:17:35.120 --> 01:17:40.077 I've doggeared like every single page and now the book is like crooked. Um, 01:17:40.160 --> 01:17:42.717 and the books on top of it will like tip over at some point. And this is one of 01:17:42.800 --> 01:17:45.757 those books where like I just I've dogge eared every single page. There's just 01:17:45.840 --> 01:17:48.477 stuff that just jumps right off the page at you and just like bites you like 01:17:48.560 --> 01:17:51.117 right in the nose and it's like, okay, this is like the world has not worked 01:17:51.200 --> 01:17:53.677 the way you thought it did. People are not the way that you thought they were 01:17:53.760 --> 01:17:56.317 and here's all this, you know, here's 4,000 years of history kind of 01:17:56.400 --> 01:17:59.117 explaining why. Um, and so anyway, we maybe we'll talk about that one another 01:17:59.200 --> 01:18:01.907 time, but that one I keep coming back to. 01:18:01.990 --> 01:18:04.010 [music] 01:18:06.080 --> 01:18:08.397 >> Thank you so much for taking the time today, Mark. 01:18:08.480 --> 01:18:10.877 >> Yeah, good chain. A real pleasure and congratulations on everything you've 01:18:10.960 --> 01:18:15.800 been up to. It's it's I'm a I'm a huge fan. [music] 01:18:19.120 --> 01:18:24.157 >> The Knowledge Project is produced by the team at Farnum Street. I'd love to get 01:18:24.240 --> 01:18:28.077 your advice on how to make this [music] the most valuable podcast you listen to. 01:18:28.160 --> 01:18:32.637 Email me at shanefs.blog. [music] 01:18:32.720 --> 01:18:37.277 You can learn more about the show and find past episodes at fs.blog/mpodcast. 01:18:37.360 --> 01:18:41.197 [music] To get a transcript of this episode, go to fs.blog/tribe 01:18:41.280 --> 01:18:45.757 or check out the show notes. Can you do me a small favor? Go online right now 01:18:45.840 --> 01:18:50.237 and share this episode with one friend who you [music] think would love it. 01:18:50.320 --> 01:18:54.967 Thanks for listening and learning with us. Till next time. 01:18:55.050 --> 01:18:57.070 [music]