Monopolies vs Oligopolies in AI

26:53I thought I had a cybersecurity policy course. And the thing with the internet is you have these very specific examples of new types of attacks that impacted nation states. Like critical infrastructure would go down. You'd have things like the Morris where I'm like, you know, I mean, you'd have these really significant examples. And that kind of kicked off this large discussion on how you handle it. And it was so significant at the time that at the nation state level, we started thinking that we have to actually change our doctrine. You know, we're kind of this cold war era, mutually -shrug destruction.

27:36We had to change it to this notion of like, defense asymmetry, which meant that more we relied on these things, the more vulnerable we were, right, as opposed to like a country that didn't rely on them because you can be attacked. And then of course, kind of the whole terrorist information warfare stuff. And so the implications were so absolute and you had so many proof points and you could articulate them incredibly well. And so if you look at the AI stuff, I mean for every computer system, you have security considerations. But we've got this 30, 40 year very robust discourse around this that we can draw from and use from.

28:14And the thing that I don't understand is how So all of a sudden we've decided that these are not computer systems. They don't obey the same laws and we have to kind of throw out everything that we've learned and kind of like revisit the discourse, even though we don't even have the same proof points. I mean, like nobody can make a strong argument on asymmetry or need a shift to doctrine. And if they can, let's go ahead and have that discussion. I still have yet to see the dramatic new attack. It's going to come for sure, but we haven't seen it yet. And so I just feel like the discourse around this is not in line with the reality.

28:50It's not in line with historical precedence. And so we should absolutely take these things seriously, but we should draw on the information that we've learned from in the past and the approaches we've taken in the past. The last thing I'll say to you is the biggest difference this time is in the past, The people created the technology were kind of protect and the people that were like selling security solutions were like the fear mongers, right? So you'd have somebody create like the internet and they're like, this is safe, it's great for everybody, but then you'd have somebody create a firewall and they go, the internet's dangerous.

29:28Every sociopath is your next door neighbor. So you had both the same voices, but in two different bodies based on interests. The interesting thing this time is they're in the same body. So the person that's creating the thing is also like, like, oh, this thing is very dangerous. I don't recall the last time we had something like that, but it's created a dynamic that's just been very confusing for everyone. Do you not think open source increases the opportunity set for hostile actors like China and Russia to harm us? I mean, I think it's totalologically true. Like I think totalologically, you can say, do you believe computers and available of computers increase their ability to harm us.

30:12And I'd say absolutely computers and availability of computers do. I would say. The right to see the open source over close source. So I think that right now, open source is most dangerous because China is better at it than we are. And as a result of that, we're seeing a proliferation of Chinese open source models everywhere. Now unfortunately we don't have control over Chinese regulation. And so I would say the answer is yes because of China, not because of us. And the right way for us to respond is to fuel our open source efforts against that. So let me just be very specific. So like I think Chinese open source can be a national security issue for sure.

31:02And any of the software that produced by a nation's that we view quasi adversarially. The way that we combat that is we also are incredibly open and we also do a proliferation of technology. What do you think we can learn from China's regulatory wise that would enable us to have the same or better open source ecosystem -stash environments? To me, the United States is a long history of being pro -innovation, pro -innovation for national security, pro -innovation for national defense. I think we should be funding this stuff like crazy. I think we should get the national labs involved. We should get academia involved.

31:43We should make this a national priority, just like China does, and we should just, you know, a full -throated endorsement of all of this stuff. I think we should do close stuff. I think we should do open stuff. And we've done this forever. You know, my first job out of college, this is, you know, like, team 99, was working at Lawrence Livermore National Labs in the ASCII program. And what were we doing then? We were, I mean, the broad program was stipulating nuclear weapons. I mean, this is what it was. And a lot of the concerns we have today, where concerns we have then around compute, I mean, we actually stopped Saddam Hussein from like importing play stations because we were worried about, you know, using them for simulation.

32:19We put expert controls on the hardware. And we'd say the same things like, oh, you know, computers out there like computers, you know, they're going to enable, you know, you know, you know, the enemies and all sorts of stuff. And this is like nuclear weapons. This isn't like some abstract AI thing. This is like actual, actual on the ground weapons. The posture that we took at the time, the conclusion is we're just gonna be the leaders and all of this stuff. And we funded academia and we funded the labs and we won. And we were able to control like the technical discourse of the planet going forward.

32:56And this time instead we wanna put our head in the sand and let somebody else do it. So like they're going to learn from our, you know, our success and somehow, you know, we're not do Trump's cuts to universities research labs, not impact your ability to do what you just said, you're not actively going against what you should be doing. I am very pro investing in, And I am very pro investing in academia and in the national labs. I think there's always a political shift in money depending on what they view is in line with administration politics. Like I still, I can't tell you, you know, I did my PhD at Stanford, I've done a bunch of NSF grants, I don't remember ever somebody saying we like indirect costs.

33:53Every research, every professor, every single one was like indirect costs are terrible. Obama, Obama tried to get rid of indirect costs. He was like, you know what? Universities, they have a tax exempt status. So why don't we just have them, you know, spend 5 % of their endowments, like any other tax exempt organization and you know that will cover a lot of indirect costs and he couldn't get it through. So this is a by kind of partisan issue that is long -standing and I mean I would say that like a change is needed. No, to the extent that you know I think these things are very hard to implement but I would say concretely, yes, we should invest in these things.

34:44Yes, we need a shift in how funding happens. I do think that like indirect costs have gotten way out of hand. And until it was like Trump doing it, everybody that I know in academia totally agreed. But yes, of course, change and shifts in funding will be disruptive. And so I think all things are true. I just want to do, I don't want to do this to a simple like Trump does bad things because I don't think that is the case. And then, you know, funding science is arbitrarily good because I don't think that's the case. I mean, I definitely think we should fund as much or more. I definitely think that you shift in funding and change to the system is needed.

35:19And the, you know, the right path through that is complex. I don't quite know it. You very kindly said that I asked you a question on the reversion back to closed source when we mentioned Alex joining Massa, what it meant for Lama. I said quite zero some wise to your point, we're clearly seeing a movement back towards closed and away from open. How do you see that? And do you disagree with my statement now on the transition? No, I think that's, so I agree on the ground 100 % that I think we're seeing a movement away from open source, but the rhetoric around open sources shifted, right? I mean, we just had the AI, what was the name of the bill that just came out?

35:59That means like the American AI policy and recommendations is a full -throwded endorsement of for open source. So I think discourse wise, there's more support for open source than ever before. I think ecosystem wise, I think you're right. I do think it's quite likely that we're going to see less open source. Now, let's know. Open AI has said that they're going to open source. That would be wonderful. And if they do that, I think that would be very, very positive. Do you think they will? I just have no idea. I hope so. It would be a very rational. I mean, here's a great, maybe here's the, like we say open source, but it's such a misnomer when it comes to AI.

36:35I mean, the standard model of open sourcing AI is you open source the smaller model and you keep the more capable model close source and it's a way that you get distribution and brand recognition, but you don't actually erode your business. This has been very, very successful as a business model and unlike actual software open source, just because you release your model doesn't mean somebody can replicate it. Like to replicate it, you'd have to recreate the data pipeline and the training pipeline. And so I think that there's just like a lot of concern of investing hundreds of millions of dollars or billions of dollars to train something and then just giving all of that away.

37:12But I feel very confident that the business justification is there and behavioral, well, always follow business. And we're going to continue to see open source be a large part of the ecosystem. And remember, historically, open source is only been about 20 % of the total market value. I would say it's much higher than that for AI. So in a way, we're doing better than software has historically. What did you believe about the AI landscape that you now no longer believe? We've touched on so many different elements. My mindset has changed around so many. I mean, the one for me that I've just consistently got wrong is just how fast these coding models advance.

37:49And this is probably just sunk cost fellacy. My entire life, I've just been this nerdy program. I mean, programming since the 90s. I mean, it's like, it's my happy place. And I just never thought that they would advance to the level that they have. I mean, I still develop most evenings. And it's just, you know, instead of watching a sitcom, I just goof off. And mostly writing like old video games or whatever, just for fun. Like, it's silly stuff. And I'm already at the point that I just couldn't, I just couldn't work back to working without them. and I've spent 30 years without them. And it's just their ability to offload all of the shit I didn't wanna learn is remarkable.

38:31The thing that kept me away from code for a while, which is I would kinda dab with it, I would drop it. It's, yeah, just learn all of this. All these weird frameworks and none of the knowledge is foundational. It's just like some fucking random dev came up with some weird way to do something and you've got to kind of learn some poor design decision to do it, and none of it made any fucking sense. And it just felt like you're wasting your brain space on poor decisions made by random open source developers. And that was programming in the past. I probably in the programming. So let me just put it in context.

39:08In the late 90s, programming was you download your IDE, you sit down to your computer, you program something, and then it would turn into a binary, and then you'd run that binary. And so you could really get a lot done just by sitting down and writing code. I would say 2015 or so, writing with something, is like you'd have to fucking download like 50 million packages and to run it, you gotta run some stupid dev server until like actually have anybody else use it, you gotta learn how to host it. And, you know, like, it was a bunch of libraries that were like dealing with incompatibilities for all of us as a weird fucking platform.

39:48So like 90 % of your time, and nothing to do with code, like 90 % of your time was just dealing with all the environment platform bullshit. And so what's so nice now is you can just focus on your code. So like, now I literally just, I mean, I use cursor and I just have like, I just have the AI, tell me how to host the thing and tell me what package to use and whatever. and I just strictly focus on what I want in the logic. And so it's almost like it's brought coding back. And you can see this across the industry. Like all of, I've got, I grew up in the industry. I know a bunch of very strong developers that have been developing for a very long time that have basically stopped their running companies now or whatever.

40:26And they're all back to programming at night. And I really think that, you know how like there's like the adage of like, I don't know, like the old man that goes into the garage and like makes the train set for like nostalgic reasons. I think like the modern version of it is these old systems programmers like, you know, vibe coding at night just because it's become pleasant again. And so I know you asked about the thing that's kind of surprised me the most, but I really think is such a marvel what these coding models were able to do. And they add very real value. Do you think they make one -accentry is 10x or 10x engine is 100x?

41:0310x engine is 100x would be what I said, but I don't I don't I would actually think it's that. I think they make 10x engineers 2x. I would say every company I work with uses cursor, right? And then if I actually look at, has that increased the velocity of the products coming out, I don't think that much, just because so much. So what's changing then? Because that productivity is going up. So it's the quality of product going up if the product release cadence isn't. I just think the things that are hard remain really hard. And so, you know, like, let's just talk about like creating a model. So, let's say I'm creating a new model, a new frontier model, right?

41:52And to create that new frontier model, I've got to collect data and I've got to run a pipeline and I've got to like sit with my, you know, my Jupyter notebook and I've got to like look at the lost curves, I've got to rerun it. And that's just a lot of kind of experimentation and so forth. There's no coding model that's going to do that for you. But if I wanted to run great tests or a test suite or visualization or write documentation, it's actually really good at that. And so I would say that probably in the long run, having more robust, maintainable code bases with less bugs is just as likely to be the impact as feature velocity.

42:38Because in startups, again, I'm an in -for -guy. This is probably different from the apps. I've always thought apps had no technology to begin with. Every time I look at verticals, I'm like, why don't we even care about the technical team? It's fucking crud. Crud is create, read, update, delete. They all do the same thing. They all just kind of look like a web app, they're all like, who cares about the technology? The technology is simple. These are all these kind of go -to -market things and whatever. But infrastructure is different. Infrastructure is like very real trade -offs in the design space that only some of the understands computer science would know.

43:13So for infrastructure companies, I think it's quite unlikely that AI will really help speed that up because it comes down to something that the developer has to decide on, has to articulate the trade -offs. But I do think it could really help with the development process so you have less bugs and things like that. And so I actually view it more as like a more robust development methodology that necessarily you know speeds up the core product. Given the kind of dev productivity changes that occur because of these tools. How does that impact defensibility within companies today? If time to copy it, which is me sure at five I said this on the show, He's had timed copies basically been reduced to nothing.

43:57To what extent does that change to fansibility for companies? I mean, I still think we should just go back to the split between apps and infrastructure. For apps, how long does it take to copy it anyways? I mean, you know that there are entire companies that they're like their stated purposes, just to copy another, another copy in the apps basis. It's so easy to do. I mean, there is no core technology for random app. I mean, there's no differentiated technology for random app. Let's say that you're creating, I don't know, some healthcare vertical SaaS thing. Like, you could contract and you have been forever the actual app.

44:35I mean, the business is actually the long tail of understanding that domain. So I just don't think it changes that paradigm at all. And then when it comes to core infrastructure, which is when I focus on things like, think like databases, foundation models, there's no way that right now models can just copy. And the reason that there's no way is that, is that the models aren't capable of doing the technology. It's just that there is a long tail of understanding of the trade -offs for the particular use case in domain. And because it's a new market often, then you understand that through market exploration.

45:11And so I just don't feel that, I think these models really help with the software development process for non -deeply technical areas like apps, sure they can help speed it up. But over time, all of these reduced to a long tail understanding of the market. I mean, Aaron Levy said it's so beautiful. I mean, do you know what the average, what do you think the average PR is pull request is for a production code base? Like how many lines of code is the average change that gets accepted? What would you guess for like some production enterprise app? I have no idea. It's two. It's two. Yeah, it's very, very small.

45:53It's actually two, but let's say it's 12, right? And what is that two or 12 line signify? That two or 12 line signify probably some learning in the field or some understanding of what is needed. And so the long tail, the thing that's the hard thing is to understand the specific deployment environment in market you're going to. That's the hard thing. The hard thing isn't the two lines of code. That's actually quite easy. And so in many ways, I would say, you know, the AI is getting rid of the middle, right? So, very new computer science like models, they don't know how to do just because nobody's done it before and that's kind of pushing the state of the art.

46:31And then in the app space, all of the hard stuff is the business anyways, right? And this is why the changes are very small and you learn everything through good market, which the models don't know just because you're exploring a new market. And it's all the bullshit in the middle that they're helping us with. And so, you know, for me, it's just kind of netacreative. Do you think that CS holds the same weight as a study and education discipline that it always did and you would always recommend it? Or does that change in a world that's partly more democratized in terms of creation like we discussed?

47:04I mean, I feel very strongly that like, if you care about building systems at a computer, you have to understand how they work. What do you think we do today, Martin, that we will look back on in five or ten years' time, and you're like, I can't believe we did that. It could be prompting, it could be choose the model that we're working on. I find it ridiculous that we are supposed to choose which model. Like, GROCK 3, GROCK 4, GROCK 5, GROCK Shopping, GROCK weather. What the fuck? Just figure it out. Well, I'm just taking it from a programmer's view. I mean, I just think hopefully we'll just stop worrying about frameworks altogether.

47:44And maybe even languages, maybe even like a proto -language evolves. And we can just focus on logic and fundamental trade -offs. I mean, we've gotten this very backwards world where these days programmers think about all the non -fundamental stuff and they don't think about the fundamental stuff. Let me give you an example. So I always worry, this is going to be this weird philosophical rant. But I always worried, you know, while I was doing grad school and when I was doing research that we kind of entered a space where there's so much research that's been done over the years that you never know if you're doing something new.

48:19Like you just couldn't do the literature research there's so much and so like the entire industry just spent all of its time re -doing research, you know, it's like it's like you're like cleaning a room and you're trying to like sweep out the but rather than sweep it out the door, you're just kind of moving it. Like you'd move it to the bed or you'd move it to the wall. And then like that's all you do. You just kind of sweep the dust around, but you never actually get it out of the house. That's what research felt to me. It was like we're in this mad delusion. And on top of that, it also felt like many of the most important problems were kind of between disciplines.

48:52And so like in order to even solve them, you just have to know too many things and we couldn't do that. And so I just felt like there's all, like the entire scientific industrial establishment which was just kind of redoing the same stuff. And so in a way, I think AI has the ability to pull out of this mass craziness, this mass ineffectiveness, which A, it's very good at telling you if you've done it before, right? You know, it's very good at that. It actually knows all the literature, knows all the history. And it's also very good at tying different disciplines, right? It is an expert in all of these things.

49:22And so I think we've been stuck in this morass. And it's a bit of a liberator so we can actually focus on the new problems and overdoing new things. And so I've got this very optimistic view of where it's pulling us. And so I know it's more of a philosophical answer to the question that you asked. But in a way, I think it needed to happen to get to the next level of problems that we need to solve. In terms of like the size of implications that, I mean, the worst question ever is like, all the job displacement question. But I am intrigued. Because in the one hand, I see intense job displacement happening faster than ever.

49:58And then I'm also very aware of Brad Feldrode of Berlin Post, where he basically said every single cycle, every time we've always said, Oh, what are we going to do? Calculators, what are we going to do? Computers, what are we going to do? AI now? What are we going to do? To what extent does this actually require the what are we going to do versus another for fuck's sake? Don't we see the pattern? Yeah. So I'm very sympathetic to concerns around job displacement. And I think we should take them very seriously as a society. Like I'm in no way libertarian. I think that this is kind of where governments do step in and we do help out.

50:34But first we have to understand and it's actually very unclear. So let me tell you just a quick anecdote. So I, you know, my cousins are all pretty like, I think high ends the wrong term, but they're pretty established translators. And they have been for a long time, multiple languages, and they visited recently. This is a husband and wife pair, and they're like, listen, we have to change jobs, because translation is all going to AI. And I asked, I said, so the jobs are going away, and they said, well, no, they're shifting. And now, instead, we've got to like spot check these AI's, and the only way we can hold it up to our standards if we rewrite the entire thing, but they won't pay for that.

51:19And I don't, by the way, these are Italians, so they speak this way, but they're like, you know, I can't work on something without a soul, right? And I think that their dilemma is a good microcosm for the broader dilemma, which is, one thing that's very unique about AI is that it actually requires today a human handler. I mean, they're just so unpredictable, you know? I mean most of the use cases that we know, all the monetized use cases have a human on the other side of it. Right? I mean coding, you've got a professional coder, all the creative stuff, you've got somebody like doing all of the creation.

51:57I mean these are, it's kind of an enabler and that's a tool, but the nature of what you do does shift. And that's very different than for example, electricity where like it doesn't require a human. like it's like either you light the fire or like there's no fire to light and so You know, I think we as a society need to understand the level of displacement We have to understand I think it's very important that we do I think these are things that government should get involved in I do just have to turn to your venture investing Just before we do a quick fire. Do you enjoy it as much as you did before?

52:29It is a much faster landscape the money is much bigger Do you enjoy it as much as you before? I suppose many of you found this night. They said that they didn't think you enjoyed the administrative work that you now have to do with the size and scale of Andreessen. Oh, well, those are two different questions. I love the investment. I mean, the investing is great. It's just the most exciting time in the industry since the late 90s. It's great to be part of a super circle. I love it. Actually, no, I love the... I actually really like the firm building side. It's, you know, frankly, I could do without endless meetings, but I've actually been pretty good at limiting those two.

53:17And so, no, no, I think this is actually the most exciting time to be in the industry and venture. Oh, I can't, I'm not trying to, I'm not trying to bullshit. No, no, no, no, no, no, no, no, I'm a venture investor too. I'm with you and I say the same to our LPs. Is your price elasticity more on deals because of the super cycle entry point that we're in or less because of the risk or uncertainty level that we're in? Philosophically for me, philosophically, I just think the market sets the price. I just don't have the hubris to think I can somehow outsmart the market or like a single deal is going to like bend to my will.

53:54And so I mean philosophically how we think about investing in general is away because of price often. Price no ownership yes. What is the ownership you need? It all depends on the fund, the market, the size of the market, the understanding of risk. Everything comes out of ownership for us, not price. I mean you just can't make for very, very, very, very, very large markets that are obviously very large for very large checks, then we don't care as much. But that tends to be growth territory anyways. For early stage investments, you know, you kind of need to understand what the median outcome is and you have to be able to size the median outcome in a way that at least returns to your fifth of the fund or half of the fund.

54:45Is that not the joy of being at Andreessen? You can take a 5 % ownership on first because you can size up into the nest and size up into the nest is it not my challenge that I have to get as much as possible on the seed or the a. So the way that I viewed as a bit different, which is I think there's I think there's there's two legit ways of investing now that I've emerged. One of them is you're very much a specialist and you've got a special network, special value. You understand a special, sorry, you understand, sorry, you understand a special size of the market like like You're very, very much a specialist.

55:17And that is kind of how you win deals, get the ownership, keep the ownership, and then make your company successful. The other one is, and I wouldn't say it's like an AOM thing, but it's like you have all of the products so that you could be adaptive in the market. Because you know, I've been doing this for 10 years. The strategy that works has shifted this entire time. Sometimes it's early, sometimes it's mid -stage, sometimes it's collaborating with growth. And so if you don't have, honestly, sometimes it's credit. Sometimes we don't have a credit fund, but I can understand why people do it.

55:53And so the market is competitive and everybody's scrambling for deals. And if you don't have the different funds or products to offer, then often that's kind of where people are going to squeeze you out or get alpha, et cetera. So I think that for the game that we play, it's very, very important that you have all of these funds and the ability to enter at all stages for exactly that reason. And so again, I don't think it's a you me thing. I think you play a very different game than we do. Because I do think that on one side, like, you know, you have to go very specialized, very focused very early where for us, you know, we're trying to find out what is the right time to enter.

56:37To, you know, to get the ownership that we need. What's the size of fund that you primarily invest out of day to day? I know you have flexibility. 1 .2 billion. So I run the infrastructure fund, which is 1 .2 billion dollar fund. So my challenge here is your cost of capital is just so much less than mine. Your ability to put a larger check in bluntly with much more confidence is that because I'm investing out of a $275 million series A fund and a $125 million C fund. It's just like much more meaningful dollars for me than it is for you, which will affect my willingness. Yeah, well, my challenge is like, we have to live with these investments forever and conflicts are very, very, very difficult for us to do.

57:18And so we don't enter very often at the stage that you do for this reason. I mean, this respectfully, everyone chastises Andrews and for that complex, and for investing many for conflicting companies. Do you think that's unfair? It's so hard to keep your nose clean on this one because especially with a shift towards AI, companies pivot all the time after you invest. I don't recall intentionally investing in a... In fact, I would say the number one reasons we don't, that's not true. One of the top reasons we don't invest in companies because of conflicts. I mean, we do it. I just did it. Just, I can't say the name of the company.

57:55We didn't invest because it was a hard conflict. And even though, by the way, the portfolio company was not doing the thing, but it was on the roadmap. And the founder called me, he's like, my team, you just can't invest this company. I said, okay. So I think we try our best to keep it. You say, okay, sorry, sorry, just to push back on you. If it's not on the road map, I'm really sorry, founder. I have as much faith in conviction as you as possible. But if it's not on the road, I'm not having you tell me how to do my job. So here's my talk track, and it's evolved over the years. And I stole this from Christixan, which is, I say, listen, you have one mortal enemy.

58:30I choose whoever that mortal enemy is and whoever it is, I'm with you. if we're gonna go kill that mortal enemy together, but you get one. You don't get an arbitrary number of mortal enemies. And so in this case, I'm like, listen, is this it? Is this your one mortal enemy? And the fighter said, yes, this is the one mortal enemy. I'm like, all right, fuck that, let's go kill him. And that's it, that's kind of, now listen, we have a number of companies where they pivot midstream and they start competing after we've invested. It happens all the time. And we also do have the venture and the growth fund and we try to minimize conflicts there, but sometimes they happen.

59:06Just very different stage companies, very different teams working on it. But I would say that we try very, very hard to steer away from conflicts. Given the nature of, as you said that, the volume of pivots that occur today, given your entry point, I always advocate wholeheartedly for being 98 % founder. And then you have wonderfully smart people like E -Lad Gill, wholeheartedly advocate for being market first. How does the pivot frequency and experiences you've had impact your prioritization mechanism around where you spend time? So I don't want to speak for a lot, but that's not my experience working with a lot.

59:45I've done many deals with him a lot. It is very, very focused on the founder. I think the one thing I would say is he's very good with founder market fit. Maybe the best in the industry. I have a huge respect for how a lot invests. I'm back that. Why? How does he do you found a market fit that's the best? He will find a market that he really likes. And sometimes it's like even a fast follow market, right? And then he will find who he thinks is a great founder for that market. And so he's very good at this kind of boy band construction based on the market. The primary point I want to make is very much in his investment cycle, the founders have always mattered.

1:00:31Any of this, he's followed on deals, I've done, I've followed on deals, he's done, we've done a bunch of deals together. I've never gotten the impression. I mean, I've actually always got the impression that they actually, the founders, the primary decision once he's chosen the market. So I would say it's a primary concern for him. When you have misjudged a founder, What did you not see that you should have seen? So can I ask you, can I ask you your previous question? Because you're like, okay, so how do we think about it? So we think about it very, very simply, which is the only sin in investing, and I've sinned so much.

1:01:07The only sin in investing is missing the winner. Like there's no, it's fine to like invest in a category that doesn't work. It's fine to lose money. But if you choose the wrong company, that's not okay. And listen, it's just so hard to get it right all of the time. And so the way that we view it is, we just look for viable, what are viable spaces? And it's determined viable because... Someone said to me the other M. So sorry to interrupt you. That at Andreessen you get killed for choosing the wrong company, but being right about the space, you won't get killed if you were just wrong about the space.

1:01:45Correct, that's exactly right. Yeah, yeah. So the view is like, there's basically no amount of work you can do to determine if a space is going to work or not. I mean, that's just, you know, it's like weather prediction, but given a set of companies, you can actually do the work to understand which one of those is the best. No, we've got it wrong. You think you can? The question is, can you beat the market with that strategy? Yes, I think you can beat the market. No, I do not think that you can equivocally tell the best. Can you beat the expectation of the market by running this strategy? I would say yes.

1:02:20Can you specifically pick the winner every time? Absolutely not. Clearly not. When did you most pointy for you pick the market but pick the wrong horse? I just don't want to. I don't want to call out any specific company. Fair enough. You mentioned SINS there. What was a big sin that comes to your mind when you were? Well, yeah, I mean, I can answer the opposite. There's a bunch of markets that just haven't really worked, right? Like, you know, the entire streaming market has been very, very tough. Like the data streaming market. It's just turned out to be a subset of the analytics batch market.

1:03:04And so, you know, maybe, you know, click houses, Aaron Kessaging Phenomenal and I'm not an investor, but he's doing phenomenal. But that may be the one breakout since Confluent, but that's just been a very, very tough space historically, whether you're at the dashboard layer, you're at the transformation layer, you're at the feature store layer, it's like there's been entire spaces where we played multiple vests where it just didn't work out. And so many, many, many times we'll invest in space where just none of them work. I will tell you, there's definitely been companies who were invested, the time the company was the very, very clear leader and then something happened, and some macroshift, something else happened.

1:03:41And I think that's just how the game goes. And you've probably heard this. I mean, the thing with actually having a strategy like that is if you're trying to scale a venture firm, you just need something that you can articulate and teach other people. I just find it hard that if you pick the right market and the wrong horse, bad, bad Martin, but if you don't pick the right market, fine. To me, some points need to be given for the incitfulness to pick the right market and some forgiveness to be seen for that it's fucking hard to pick the horse. Almost done fire the one who picked the wrong market entirely.

1:04:20Where was your insight at least? Yeah, and this is why you run your own venture. And then you can have whatever strategy you want. Is that more onic of me? No, I know. No, no, no, no, no, no, no, I just think it's philosophically different on the approach, right? And so I actually don't believe you can predict the future of technology adoption. It's a very tough thing, right? I mean, you don't know what a big company is going to do. You can wipe out an entire market. You don't know what an innovation will wipe out entire markets. This happens all the time. I mean, you could argue that AI is really invalidating tons of markets.

1:04:51And I don't think anybody could have seen that happen. But if you have, say, 10 companies that have some traction, and you can talk to the founders, you can diligence the teams, you can diligence the market, you did this the project, you did this the technical approach. I think you could just say something a lot more concrete than, you know, some future innovation going to wipe out this entire market. Do you think it's paradoxical or opposing to believe that both AGI will be dominant and present in a set time period and to at the same time be investing in enterprise SaaS? I don't know. I mean, I would say humans are AGI and we still invest in a process.

1:05:28this. This is the problem is everybody somehow, they somehow think that AGI just means like unlimited powerful and anything I want to disappear in the future disappears. Come on, you're AGI. I'm AGI. We invested in a process. I think to be on a Sam Altman sets the definition of what AGI is. So whatever him and Microsoft decide as AGI will be AGI. Dude, I want to do a quick fire round. So I say short statement, you give me your immediate thoughts. Yeah. Yeah. What's one of the most over hyped AI categories today? ASI.

1:06:08What's one of the worst VC takes on AI you've heard recently? Open source is bad for national security. What one founder would you back in any category? Whatever they did, I just want to widen the money. Michael Trull. Why? Specifically. Where to them for a year? He's remarkable. He's... What makes him remarkable? It's just so rare that I've found a founder who knows... He has three things. He knows what he wants. He's got an intuition that's impeccable and he listens incredibly well and gathers information and has a very, very potent combination. And then of course, he's incredibly smart and he's got great product taste.

1:07:03What's your favorite trait in yourself that has been most impactful to your own success? Deep -seated anxiety from being poor? I'm pat... Seriously, I agree. I mean, I grew up like you name it. Food stamps dirt road. Like, I mean, I come from Montana. So funny people hear the name Martin and they're like, oh, he must be so. And then I was actually born in Spain, so I'm a Spanish citizen. So they're like, you know, he must be some sophisticated European. I'm like, motherfucker, did I group on a dirt road in Montana? Like when there was hunting season, my school shut down. Like I'm like a Western country boy.

1:07:41And so, you know, this night, you know, I mean, I had a great family. I didn't have any of those hardaches. I had a wonderful family and educated family. And so we kind of muddled our way through. But you go through that and you see how hard your parents work and whatever. You just don't take anything for granted. And listen, I sold a very successful outcome for a company and I could retire it on that day. And I still have not taken a day off or I haven't worked since basically forever. Now listen, I'll take like a week off while I have a job, but I've never not had a job in 20 years. It's just...

1:08:26Did that day feel fucking awesome coming from a dirt track and bunny food stamps, as you said? You can retire today. I know you didn't, but didn't feel as good as you thought it would. You know, it's kind of an interesting thing. No, I mean, it was very bittersweet. I think you actually sell in companies it's very bittersweet for any founder, right? It's like, it's a death in a way. I mean, you spend so much time with something and then it shifts. But here's the interesting thing, and maybe this is kind of advice to other founders, which is you always think about, you always think about that thing you'll do when you make the $100 million or whatever.

1:09:07I'm gonna go do that thing, but you only think about that thing in the most stressful times. So my thing was, so my cousins and movie director, his name is Vincenzo Natali, pretty legit guy. And I was like, you know what I'm going to do. As soon as like, you know, the money hits the bank, I'm going to drive down to Hollywood and I'm going to help them make movies and be an actor and just kind of be one of those people. And so, you know, it happened the wire hit and I was driving down the five. and I'm like, what the fuck am I doing? Like, I love technology. I love my job. I don't know, I hate Hollywood.

1:09:46I have nothing in common with these people. You know, I probably got two hours out of town and I just turned my car around and came right on back because I was like, you know, you only have those visions at the most stressful time and when you're not stressed, you realize that there's something that brought you to this place and it's genuine interest and genuine love of it. And so my only advice to other people going through this is just don't use those dreams that you concocted when you were like really in the pressure cooker, like not sleeping, your relationships are falling apart. That whole thing, like that's not the thing that steady state you're going to want to do.

1:10:22Like you're probably where you are because of for the love of and letting that go tends to be pretty disastrous to some people. Was making money or having money what you thought it would be? I had to play all of these tricks. I actually borrowed one which is very helpful, which was, so I just had a hard time spending money just because I, I mean, for me, when I got into the Stanford PhD program, this is so embarrassing, but we always thought 20 dollars was a lot of money growing up. And we'd call it the Yupi Food Stamp because it was like 20 bucks. And I remember I was like, I was gonna go to Bites Cafe and I was gonna pay with $20.

1:11:02Like a $20 bill because that's kind of like some stamp of having money. So I was just so naive to all of these things. And so it was just very hard for me to like, once I made enough generational wealth to do it. And so I talked to a friend of mine who I went for some of the things like you and I did. He said, I came up with, let's call him Brad. I came up with a Brad coin. And the Brad coin, let's say I'm worth 10 times more than an average rich person. So the Brad coin is worth 10 times more. So I buy things in Brad coins. And so if it's, let's say it's a business class flight, that's $10 ,000, but in Brad coins it's only $1 ,000.

1:11:49And $1 ,000 sounds a lot better in 10 ,000, so I feel good. So I actually had to adopt a lot of these mechanisms where I'll make a Martin coin and it's worth this much money. What got worse with money? This is something I have to deal with all the time, but like, maybe my wife forces me to keep it real. I just won't abide by any of the shit. So man, I got three fucking dogs that are crazy. She doesn't like helping the house. Like I drive a fucking Volkswagen. We have three chickens in the back. You know, I'm like fucking schlepping the kid all the time. I mean, like, listen, man, if it were me, I would be living your life, man.

1:12:25and I'll be like 100%. You know, being in the penthouse with the private jet and instead I'm gonna fucking Volkswagen with three dogs in a messy house and no hell. So I just like, yeah. Dude, you're so whipped. You know, it's not even that, right? It's like, you know, like, and this is what marriage is, man. Like, you know. What was your biggest lessons on marriage? From me, I'm 29, I go to great relationship, but not quite that yet. What would you tell me about greatness in marriage? Did I should know? Well, listen, I got it wrong once. I'm not sure I can, I'm the right guy to ask here. Like my start, my start up was really tough.

1:13:10Like, you know, it was, it was really tough. And I think that burns through my first marriage. And she's, if she was great. Yeah, fuck it, I'm the wrong guy to ask. I'm really the wrong guy to ask. I will say something, which is a different question than he asks, but I think it's important, which is, I have found that men in particular that have stable relationships just do a much better job in work. They're just much more stable. I think the best founders I have tend to be, like have families and et cetera. And I do think again, I don't want to make it a gender thing. maybe it's not, it may just my observation that works with a lot of men that families are really, really, really good for men, even though they can be a pain in the ass.

1:13:57And so I just think that only high level view is like it's just, these things are super important. And so like whoever you have and you're working with it, like it's an important thing that kind of, like it really is keeping you grounded. I mean, in my case, listen, like, I mean, you got chickens, baby. I mean, you know, it's like that, what a sort of a Greek say. It's the full catastrophe. I know it's the only way I can do what I do. There's no other way, right? I mean, like the level of pressure is the amount of work that I do. I mean, it probably work all in 80 to 100 hours a week up and doing it for 10 years.

1:14:40I mean, the amount of demands, I just it's very, very hard to do with like, without like, you know, support and grounding. And so, you know, in a way, again, like I'm not the right person to ask her, like how do you treat your wife? Like I just, whatever, like I'm a fucking autistic nerd. Like I have no idea, but I do know that these things are incredibly important for us and you should value them and treat them as such. If you think about Andrews in 10 years time, where do you think Andrews in will be then? Like what does the 10 years ago when you remember it, It was a fucking different from amazing and innovative in its own time But it was from what is now night and day.

1:15:20Yeah, where is the 10 year on Jason in 2035? The most remarkable thing about the firm in my opinion is that it's able to evolve and adapt very aggressively because the way it's structured I mean Mark and Ben Really are the top of the firm they really are and I think it's a feature not a bug and I think it's very I mean It's kind of a historical quirk that VC was created around a partnership model. Like that's the same thing you'd use for a dentist office or a law firm. And I think it's, there's positives in that there's a bunch of different agendas that kind of sit at the same level, but for like decision, velocity and disruptive change, it's death.

1:16:04And so I think that that's a massive benefit to the firm. I'm just delighted that this is the way it is because they can make these big aggressive. So I don't know what it's going to look like in 10 years. I guarantee it's going to look different as it evolves with the landscape. Martin, I so appreciate you, dude. You are fantastic. You open your own. I love the last 15 minutes that out, but I really appreciate you, man. Yeah, likewise. Harriet, always a pleasure. You're the best. Thanks for listening to the A16C podcast. If you enjoyed the episode, Let us know by leaving a review at ratethispodcast .com slash a16z.

1:16:40We've got more great conversations coming your way. See you next time. This information is for educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. This podcast has been produced by a third party and may include pay promotional advertisements, other company references and individuals unaffiliated with a16z. Such advertisements, companies, and individuals are not endorsed by AH Capital Management LLC, A16Z, or any of its affiliates. Information is from sources deemed reliable on the data publication, but A16Z does not guarantee its accuracy.