How the New Administration Will Impact Crypto, AI & Tech Globally w/ Ben Horowitz & Salim Ismail | EP #145

30:33You know, so this brings me to one of the questions that was the most asked question on X. And so let's talk about this because you know the majority of entrepreneurs out there who see some incredible moonshot success story this person or gal does incredible thing and they don't realize the hundreds of failures on the way. Oh, you know I call them an overnight success after 11 years of hard work. Yeah. Yeah, you built some amazing companies and you invested in extraordinary companies. Yeah, how do you think about this? Yeah, so it's a very, you know, particularly when like the real, the very large ideas.

31:18So first of all, like it's really important that the person building it,

31:28really have difference to how hard it is to make the product work. And so like we have people come in and there's, you know, it's a 20 person company and eight of them are vice presidents. You know, because they're going to manage this big thing that they don't have. And by the way, that never works. It never works. Yeah, you need engineers. Yeah, so you need to have engineers and also be just committed to keeping the company the right size until you actually kind of can see daylight and see the thing work. And then you know the fundraising for moonshot ideas is like an order of magnitude more difficult than normal fundraising because One way more things go wrong.

32:22So there's going to be a round that you have to do when everything is a wreck. And so if you look at the guys who have built the really, really, really, really big ones, Elon Musk and Sam Altman, Palmer Lecky, these guys are unbelievable. They can raise money when there's no reason to give them money. And that just ends up being, I think, very, very important to be able to do because you're going to hit that point. So you've got the right -to -wing Ben? What is that? Well, I think it's a combination of who they are, like the depth and the color of their vision, their ability to tell a narrative.

33:06of the kind of depth of that narrative, so that when you go into the company, you really see it all there. I mean, this is the thing that Elon has. And the death of their conviction, right? And the death of the nation. And the death of the nation will stop them for this. Yeah, yeah. And then nobody write Elon, who's the greatest moonshot entrepreneur of our era. Nobody would question whether you could stop him from reaching his goal. I mean, like he, Never leave the bowl. Never. Never bet against you long. Yeah. Yeah. Well, that was by the way that was when I Speak to my friends who are very sad about the election I just say like why did you guys pick on him?

33:49Like of all the people To harass for no reason The most competent person in the world You're gonna pick on it like that's not gonna end well for you. Don't do that Everybody in Silicon Valley knows don't do that. But if I drill into this, if I drill into this a bit, then somebody comes in with a vision, right? They have to be half crazy to even have the vision. So now you're dealing with a 50 % rational. Right. It sounds crazy. Right. And so now you have to you have limited data on which to gauge whether this person has the the aura, the charisma, the chemistry, the diligence, the fortitude to get it through.

34:28So it's the amount of kind of viable candidates to shrink it quickly. How do you make that judgment call? That's the hard part, I think. Yeah, so, you know, I, you know, you've done it repeatedly successfully, which is amazing. Yeah, they really have to be, and look, we get it wrong a lot too. Kanye is that kind of prototype. He's a super fricken genius, but he, he, there is time for he won't do what's logical for the business, just because he's overly creative. So those people show up in tech too.

35:05And that's hard to make work because it's sometimes a point they just drive everybody in a company and sing. The other one is they're so charismatic that they end up being sloppy. And you guys have probably seen this where it's kind of like the kid who's so charming that he doesn't have to study. Just gives the teacher an apple and smiles at her and like Bang, he's got a, like though there are entrepreneurs like that that are so good at storytelling and so charismatic and they can get the whole thing going but the detailed work, you know, that they don't want to do like every CEO has that something he really don't want to deal with but you have to.

35:47They don't end up dealing with and then it falls apart because these ideas are really complex and require like a great amount of precision at some point. Let me hit you on on something. So my fun bull capital recently made investment in figure AI and you know, you know, you know, Breton cock and figure, yes, one of the right. Yeah, I know, yeah, yeah. And yeah. And so the reason we made the investment. So here's Brett, no background in the robotics field. But he had built archer aviation, right, the EV tall. And so there's one question about the entrepreneur coming in, do they have a track record of actually having done hard things?

36:31So that's one bucket to evaluate. The second bucket, which was really the most interesting evaluation criteria for me making the go to invest was the people he had pulled in over the first six months. The people would have voted with their feet. Yeah, yeah, no, that's definitely a real sign. Like can they put together that kind of team? And which is right, the people working for them, this is a question I ask myself by the way on these kinds of ones like what I work for this company. Like what I'd be excited about going could work for this company, or would I go, wow, I could help that entrepreneur build it.

37:15Like if it's a ladder, then I'm like, okay, we should not put money in. because they have to be able to attract the highest level of talent to build something that hard. So that's a really, really good measure. And then I would say there's another thing about the team that's important, which is also true about how the entrepreneur picks their investor, which is because it's a moonshot, there's going to be really bad times, or they're very likely to be very bad times. And so you wanna have a team that isn't already, like a lot of times it's a great team by resume, but they're already rich and successful.

38:02And when things go wrong, they literally call and rich. They're like, oh, this is too hard. I'm not gonna help you get out of this hole. Come on, they're rich, that's hilarious. Yeah. And so like, I do think it's important about the team be kind of the right kind of mission super hungry. And often like this is got like they need this to work. You know, they did not want it to work, but need it to work. Yeah. Well, this is Elon circuit 2008 when the third Falcon one had blown up and he was borrowing money and everything's on the line. Yeah. Yeah. Yeah. And you need your best people to be like, I will go through the trauma of maybe I don't even have a job.

38:49And like, this is everybody thinks we're idiots and all that kind of thing. That's a tough, it's a very tough point to be in a company because like when you're at a company like SpaceX or you're at one of these things that's very visible, when it gets in trouble, the press just goes crazy on you. Everybody's your friends or family or like, should you really be working there? I mean, like you absolutely get those questions. And you know, if you're not, if you're not totally committed, you're gonna go. And then then the whole thing is a train wreck with. This is why we have this massive transformative purpose idea that if you're not all bought into the overall vision, then you will call in richer, call in sick, or devote the poor to find another job.

39:35But if you've got a big enough vision that everybody is aligned to, then that provides the cohesive sticking power. Yeah, it's got to be cohesive even when it looks like the vision is wrong. That's the key because when it looks like the vision is right, everybody's there. You've been another criteria is if the founding team are best friends, because you're far unlikely to ditch the company when the tough, you know, it gets difficult if your best buddies are there with you. Right. If they haven't just met, yeah. A lot of times the founding team is newly acquainted. And you haven't to get into that.

40:12Yeah. Let me ask two questions on this evaluation. Because again, I want to, this is important for everybody watching who's, you're wanting to build a moonshot company. How important, how important is early revenue? And, you know, and the timeline and not having to insert miracle here when you're hearing this presentation. Well, so I think early revenue is, and ends up being really important as much as a discipline, you know, as an indicator of, you know, like investing. So like not so much from a, okay, we want to understand everything about the business model early, but more of that, oh, we hit a real milestone.

41:06Like, we've got all these smart people, we're building this thing and, you know, it's not just a platform, like there in Silicon Valley, there have been a lot of platforms in the sky, so to speak. There was a phenomenal company years ago. You probably remember it, microunity, which was, you know, all the, you know, the greatest this people in the field in it. And it just never, you know, you got to get to a product, you got to get to something that somebody wants. Or like if you're in the wilderness too long, it's something happens to the culture of the company, something, you know, that's degenerative where you could be very much on the wrong track.

41:53General magic was another one. Yeah, I remember General Magic for sure. Yeah, with phenomenal. like those two companies had talent levels that I would say rival SpaceX Tesla open AI any of them right? An amazing vision. But the revenue you're revenue -winning I think is that discipline that they didn't quite have. So when you get like brilliant people together, they want to build a perfect product that that can lead to a really over engineered system. Yeah. Moving us forward, I'm just gonna point out, when I look at the Twitter sphere, then you don't tweet very much, but Mark tweets all the time.

42:42Yeah, well I spread all my time trying to control him. You see only the things that don't get us into trouble. You're in Las Vegas. Do you know some friends of mine, Penn and Teller? Oh, yeah, I don't know though, my question over there. Yeah, so Penn is talking all the time and Teller's one who's silent. Yeah, I'm not Teller, right? Yeah, exactly. So I am curious, right? So just as we roll, as we complete the conversations on AI, you know, you said this earlier, and I think, Eric Schmidt has been saying this very loudly. We are in a race with China on AI and we're trying to troll it by chips.

43:28You're not speaking on behalf of Mark, but I am curious your thoughts about all this. Yeah, so like I do think we're in a race in the sense that, well, we are and we aren't, So deep sea, which is the great Chinese model right now, is open source. And by the way, a lot of American companies that were involved with our benefit and greatly from that in the paper they wrote. And it looks like they may have stolen some stuff from OpenAI as well, which is interesting, but just shows how hard it is to win this war by protection or this competition, I should say. Look, the danger, of course, is China is a top -down economy.

44:24They don't believe in things like freedom of speech and a lot of the kind of values of western society. They're a surveillance state in many ways. And so a lot of the things that we like, they don't have. So if they get a much more powerful AI than us, then their way of life could trump our way of life so to speak. Now if you look at okay, then let's get into the details and has it really playing out. So first of all What is trying to get at the advantage they have which is a very clear advantage is They're a private sector and they're a public sector, you know, their government and the private fit companies there's no line between.

45:07Like, they're basically in a lot of ways the same thing. And as a result, the AI technology in China is getting very quickly integrated into the government, which is quite amazing. The way for them. I would inject one thought here. Closing the military, by the way. The way I think about it is China is a corporation. And the companies inside China and China are apps sitting on top of that company. Yeah, I think that's a good way of thinking about it. And so you can think about, well, what's our advantage? Our advantage is we're great at startups, meaning every talented person in America can solve a really hard problem and bring us forward.

45:53And that creativity, because it's not centrally planned, it's kind of distributed, bottoms up, has been historically our whole advantage, right? like that's why we've been a world leader in technology. And so the idea that we're gonna just forfeit that advantage and have it be top down control like the Biden Executive Order imagined is to me the most dangerous thing in the competition, is that okay, if we try and control the way we work, all of our strengths, so we can be more China -like, China's gonna destroy, that they're gonna be way better at being China than we are, because they have all the controls and all the mechanisms in place to do that.

46:36Listen, communism failed under previous systems, but if you've got a single controlling, optimizing AI communism... That would help. Yeah, it does. Celine, what are your thoughts, sir? You know, I kind of don't see this tension as big as others. The reason I don't is... A disruptive innovation means you have to break the rules. And when you have a government that won't allow you to break any rules, you can't do disruptive innovation. You basically have to copy it, absorb it. So they have the fear of what they can bring in as limited because of that. And so I think they are the, there's a structural, there's still no Chinese student that will go, will dare to argue against their professors.

47:24Right. And I just find that a problem culturally for doing anything. And whereas the US has built on that could just keep trolling along doing that. It's messy and it's ugly, but it's very Darwinian, but by far it's the best way of doing. It's design versus evolution. Yeah, and Wilbur and I, I 100 % agree with that. So I think like our, our opportunity is, we'll win. We'll get to the breakthroughs first. We probably won't stop them from stealing them, but at least we'll be even. We'll be on par. Whereas if we don't have the breakthroughs, we're in a lot of trouble. I think we somehow restricted.

47:58I think so. You know, I find this interesting. We got China creating an $8 billion investment fund while we're talking about hundreds of billions of dollars. I mean, it's a very different ecosystem of financial. But well, we're investable, right? I mean, one of the great things that that has happened, you know, in the change administration is from a technological standpoint, we're a very investable country, whereas China is going the other way on that. They're making themselves uninvestable. You know, I had Kai Fu Lee on this, on a moonshots podcast, I'm talking about. Speaking of a guy, you just moved his, the red domicile of this company.

48:37Yeah, but Kai Fu pointed out something fascinating, which is because they were so restricted on access to GPUs, this is a Darwinian force that got them to be much more efficient on their algorithms. Well, we've seen that, we've seen that with deep -sake. I mean, like it is very close to GPT -4 with way, way less, which smaller, much smaller. They're a bit more. They're a bit more cost -pertokinous so low for those. Yeah, like 100x lower. All right. So, let's, is A16Z invested in humanoid robots, but before then, I have to ask you go question. Do you remember the moment in time when you went from Andrews and Harlowwoods .com to A16z as a you know?

49:26Yeah so yeah I remember very clearly because it was my idea. It was okay. Yeah okay so that was so it's a funny story. So when we went to Race Fund 1 and it was just marking myself in the fun the biggest question we got is well you guys are very like you know kind of well -known entrepreneurs, why aren't you just going to walk away from this fund? And so we're like, well, we should just name it after ourselves so they know we'll be here. And so we got, you know, that's all, but then we're like, nobody in the world can spell Andrews and Horowitz, like we're a screw. And so then, and you all remember, in the old days, when we used to program, there was this, you know, before programming language is evolved a lot.

50:16You used to have to go through a lot of work to internationalize the code and We would abbreviate that work with calling it I 18 and I 18 letters M and so I was like, oh well be a 16 letters Z And all the kind of old school deeks will love us so that that was

50:39Are you investing in humanoid robots? Yes, so we haven't yet made an investment in a hardware company. We've definitely been looking at the space very closely and seen some of the work going on there. It's tricky because the supply chain for robots is almost entirely out of China now. Like so, there's nobody else doing it. There's a German company, but that is actually founded by Chinese nationals. There's not a lot of, so we're trying to understand that. We have great relationships in Japan and are hoping we can kind of help them get some of that going as well. But it's going to be massively important.

51:28And Elon, of course, will do something I think with Tesla. I mean, I believe Optimus and figure in the US are two of the leading players. There's agility and electronic. There's a good dozen solid US players, but China as this next article we're putting up, and if you're listening on your favorite download, let me just read this for people listening at watching, it says humanoid robots will help build iPhone, iPhones at Fox tax confactories. And the notion here is, I mean China succeeded as a dominant tech player because of its low labor rate and its massive workforce population. And one child policy and aging populations make it uncompetitive.

52:16So it has to have robots to survive. Same with Japan, if they don't robotize their economy, they won't survive. GDP will collapse. and Germany, by the way, in many countries. It does though kind of take away the cheap labor advantage that they have in some ways, because China grew in large work because labor arbitrage. And so now they're saying, okay, we're gonna replace the labor with robots. There's not as much robot arbitrage. I don't think so. I mean, I did think that the calculation, so Optimus and Figure are supposed to sell at $30 ,000 per robot. I'll take two. And if you lease it, that's $3 .00 a month, $10 a day, $0 .40 an hour, I mean, honestly, how many will you have in your backyard?

53:13Yeah, that's a pretty good deal. So, and this is another one, interestingly one, and it's, I'll read it for our listeners versus our viewers, Shanghai rolls out, China's first heterogeneous humanoid robot training ground. And I think you were alluding to this than that, you know, China does one thing really well as a nation state. It creates, it creates some sort of nests for companies. You're a drone. Shen Chen was the original one, right? Like, yeah, yeah. economic what they call it economic opportunity. Yeah, some kind of economic where there's no regulation and you know lots of government encouragement.

53:57Yeah, Celine, what are you thinking about this? I think it's great because you get what but a thousand by 2027 seems a little small. So this seems more like PR than anything else. And I'd love to see the way in which they go about doing the testing and training. And that you could learn a lot from. So, but - Yeah, the training of the robots is very, very interesting. And also because like the robot, the AI, I don't know what you all have seen, but what we've seen is the model architecture, is a lot of them are like transformers and diffusion models with different kind of data than different training.

54:45And so the training of robots is become like a very interesting field. And they don't, they generalize, but from what I've seen, the training is pretty specific so far. Well, I mean, it has to be, you know, if you have an AI, it's software -based. It doesn't matter if it goes off the rails a bit and starts hallucinating, whatever, Yeah, you don't want your robot going crumbly. Yeah, right? This is going to cause a lot of damage. I saw that movie. I'm very entertaining. Yeah, before we jump into crypto, which we'll close out, I have some questions from our audience on X. I thought we're pretty good.

55:26So Ben, do you and Salim, is yourself as a when will AI agents replace whole employees, teams, and departments at companies? That's from Michael, triple seven, one triple seven. And then when will we see our first AI CEO that A16Z is willing to invest in? Yeah, so that's a great question. The first one is one that we talk about all the time and are trying to figure out. So I think the one conclusion that we have is that will happen in new companies way, way before an older company transforms. I mean, there are already you do have bots doing customer support and lowering the number of support reps you need and that kind of thing.

56:18The whole jobs thing is interesting in that. Some of it is what do you need to do, but like in a place like Google, a lot of it is like, okay, how much money are we bringing in? and how many people do these managers want to manage and that kind of thing. And I necessarily even think that's bad. It's inefficient or whatever, but all those processes, all those things, the have to go like now, we're doing it with AI now is, I think it'd be a lot more gradual than it would need to be if you were just optimizing to it, but for new companies, I think it'll happen. I wonder if that's the equivalency of a DEI type directive, which is a human first directive.

57:07Oh, God help us. I think that's my reaction to it as well. Yeah. I mean, the challenge is going to be companies that, like, I employ humans because it's good for society. Well, they'll be able to business in a year. Yeah. Well, I'd like to build on what Ben said. You know, I think one of the things I remember being part of but automation, AI automation task force with Eric Bernelson and a few of those folks. And they did a great job of saying that a job, a typical job of today is not just a job that somebody does, it's broken down to about 25 different tasks, right? And you may automate like 10 of those, but you still have the other 15, and therefore you'll augment people with AI, but you won't replace them as such.

57:46I think Ben's point is really dead on about new companies because then you can orient functions around what's automatable and have entire verticals that are and you completely create a new type of organization. And that's I think will happen first. So let me talk about billion dollar, you know, one employee startups, right? That's right. Yeah. That's right. I think and that will be mostly that's going to happen though. Yeah, that will happen very quickly. Yeah, very quickly. Yeah. Have you seen anything? Ben that I mean, do you like listen?

58:21I've got CEO is the most aggressive in talking about that. We haven't seen a company that does that yet. So we did have one instance of the AI CEO, so to speak. So we fund these AI researchers who kind of do things, models without RLHF and kind of trained on different things and so forth. And one of our researchers, Andy, built this bot truth terminal that was trained on memes and French philosophers and things like that. And he gets on the internet, gets obsessed with this meme, the Goatsy meme, and decides it needs, which is a token meme from 2004. And he needed money to promote the meme. That was his first thing.

59:12And my partner Mark gave him $50 ,000. something, yeah. Yeah, Bitcoin. And then somebody else created a coin, the goat coin, and the bot went crazy, and the coin went to like a $500 million market cap on its peak, and then the bot made $10 million. So that was our first instance of an AI making money like that, and the funniest way possible. One of the tokens I invested in is skating in your awake AI 16Z. Yeah, yeah, yeah, yeah, baby. Those guys. And it's done well. It's been. I know everybody in a firm is like, Ben, and when are we going to launch a coat token at that one? It's worth a billion dollars.

59:56Our actual token would be worth more than that. Well, let's go. Let's go there as we close out on our final subject here. A subject that you are not that interested in. Neither of you, but you know, let's talk about this. Yeah, yeah, yeah, fun. So, I mean, are we in for a extraordinary acceleration and reimagination of crypto and Bitcoin and all? You know, this is, please, yeah. Yeah, I would say definitely yes. So it's hard. So one of the things that you only know of your deep in the crypto industry is the effect of the Biden administration was they just for it. most of the American developers out of crypto.

1:00:48So there was nobody developing software in the space. And so it just really, really slowed down over the last four years, really three years. And now it's back, but it's back. And there are very urgent problems that are kind of best solved by crypto that have come into play because of AI. So you have, you know, the first one being proof of human, right? Like, how do you know you're not a bot? Like, that's a crypto problem. Second being deepfakes, you know, how do you know, like, I put this out, you know, that did you want the US government or Google or a company determining what's true and what's real or, you know, the game theoretic mathematical properties of the blockchain?

1:01:37So it's clearly, you know, the right thing for crypto to determine what's true. Thirdly, machine to machine payments. Now you have intelligent machines everywhere. They have to be able to, you know, pay each other for things. That's, you know, another crypto problem. So with these like really important problems out there and we let the developers out of jail, like literally like a jail. Like I think this is going to be an incredible era for the field and it's so important. By the way, the other thing, the other one that's really important that you all understand because, look, back in the days of the internet, I was in charge of, among other things, at Netscape, like, client sites, certificates and we never got them deployed and we never got it to work.

1:02:27But as a result, we have this horrible security architecture on the internet, which AI is exploiting like crazy. They're breaking, you know, these AI programs are breaking into everybody's stuff. So the right answer is that I keep my stuff. We have a PKI infrastructure. I keep my stuff. I have my keys. If you want to know if I'm creditworthy, I give you a zero -knowledge proof. I don't give you my social security number or my bank account, because I know it's going to get stolen. And like we have the answer, and we almost had it deployed with that FT's before the Biden administration hit us with a wrecking ball.

1:03:05So we can get back to that, and we can make the internet secure for consumers. So I'm more fired up about this thing. I'm excited. This is incredible. This is the roaring 20s. How many crypto companies are you invested in these days at A16? There's hundreds where the largest crypto investor in the world, I think, at this point. We also have a crypto startup school to help people get into the field and get it going, which we had to start because if you are a talented developer and you could go into AI or you could go get a Wells notice from the US government for your 10 -person company, like it was not a hard choice.

1:03:49I think this is an absolute boom for crypto. It solves problems, as you said, that we really, really need problem solving for identity amongst others, and I can't wait for some of this infrastructure to an aga world out. And the news item here for those, again, listening is US SEC unveils task force to start work on crypto regulations. The move is welcomed by the industry as Bitcoin hits all time highs. Sleeve, you still sticking with your, was it $250K in 2025 prediction? I'll stick with $250 to $300 for this year. That's my prediction for the next year. Ben, not for attribution of investment.

1:04:29No, I am not allowed. We're on RIA, registered investment third. So I cannot make price predictions. I mean, I'm going to go. Listen, buddy, this has been so much fun. I wanted to just go quick, quick, quick, commendation here. But what you guys did with A16Z, both in crypto and then moving towards being more of an investment bank, I thought was just brilliant. So I could use on that. It's just awesome to watch you guys. Yeah. This was fun. I hope you'll come back and join us for another conversation like this in a quarter or so. Yeah, no, I'd love to. That would be great fun. All right, buddy.

1:05:06Well, listen, thank you. All I can say is we're on a rocket ship ride between what's going on in the crypto world, AI world, robotics world, space world. I mean, it finally feels like the future. Yeah, the future is coming. Yeah. Thank you, Elon. Yeah, thank you, Elon. Thank you. Thank you, Brian. Thank you. Yeah. Thank you. Yeah. Yeah. Yeah.

1:05:35Yeah.