America's got to rebuild its entire infrastructure like right now. We don't have enough rare earth minerals. We don't have enough electricity. We don't have enough manufacturing capacity. Nvidia will make enough chips, but then we won't have enough memory. Almost everything is the bottleneck.
The China graph is like this and the US graph is like that. How do we make this seem less scary?
The history of technology is things have always gotten better. Humans are kind of unbelievable in their ability to come up with new things that they need. That now 8 billion people that might have an idea in their head can get it out of their head. I do think what's going to happen is...
So, you've been doing this for a long time. and I thought maybe I'd start off—and it's funny, we didn't rehearse this at all because I thought that way it would be more real, right? More unique. Let's talk about... you have this book where you talked about how hard it is to be a CEO and everything that you went through at LoudCloud and Opsware. That was a giant shift where it's like the market kind of collapsed. The financial market collapsed, and you had to really pivot and just change the company.
And what do you think? There are new-age companies that are popping up right now, AI-first; it's like they hopefully have their act together. They're off to the races building something new. But like a legacy company or one from five or 10 years ago, where there's this great opportunity but also great challenge—like what does a five or 10-year-old CEO do where it's like they're pre-AI?
Yeah.
So they got to figure out what they do. Financial markets hate them.
Yes. Yes.
So there's the financial market—who you are. Yes. So I don't know, maybe riff on that. I'd love to hear your thoughts.
Yeah. Well, I think the first thing you have to recognize in a kind of huge dislocation like this is that some very basic axiomatic laws of physics are different. And the two that are really different with AI compared to how companies have been built in technology forever are: one, it used to be very well known that you cannot throw money at the problem. For example, if I had a product and I was two years behind, I could not hire a thousand engineers and catch my competitor. Like, it's the *Mythical Man-Month*. Nine women can't have a baby in a month. Everybody knows that; it never works. No problem. That's no longer true. You *can* throw money at the problem. If you have enough money and some good data, you can buy enough GPUs and solve anything in software. So like, that's gone.
The second thing that we knew for sure is like in software, you know, possession is nine-tenths of the law. So if you have the customer, you have multiple lock-ins. You have the migration pain lock-in. You've got the data lock-in; you've got the user interface lock-in. Those are pretty much gone, right? So, it's very easy to replicate the code. It's very easy to move the data. And then it's not even going to be a human talking to your software; it's going to be an AI. And AIs are really flexible on how they use user interfaces. So, that moat is gone.
So I think that's just the first thing you have to recognize as a CEO—that okay, that's going away. So then what is it? Where is your value? What are you delivering? And there, it turns out there are many things that are of value. But like, if you're trying to get good pricing through any of those things, you're going to be under tremendous pressure. You know, your price has to be a function of some other value that's much more distinct that you provide.
Got it. And the other thing that's—we've talked about this a lot internally as a firm—is that once upon a time, like you would just have maybe if you have a good product, you might have 10 years to run with that product, maybe five years, and now it might be like five weeks. Well, we also talk about this in terms of going public. So, companies are staying private a lot longer, which probably is good if you're going through an existential crisis. You'd much rather do that as a private company than a public company. But also, the reason why the SaaS apocalypse is happening is because there are doubts on terminal value.
Yeah.
Right. So, everybody who starts a company, they're doing it because they want to create economic value. They're capitalists. They're trying to benefit from this equation financially. But if you wait too long, maybe your company is worth zero. That's kind of scary. And that was always a risk, but it would play out over decades.
Yeah, it's not as fast a risk.
So I guess, what do you—if you were LoudCloud around today, you're the CEO... and again, bad example. Sorry. Sorry to give you...
Very scary. I know. I know.
Although Cloud would be like...
Data. Yeah, exactly. You would be very well positioned.
But I guess what is it that a CEO should do potentially differently? Obviously move faster, cut faster, be more efficient, throw money at... like all these things that we've talked about. But it's like, if I go public and I get disrupted, then I have this terrible life of being a penny stock. If I just wait, there's this chance that I get eviscerated. This kind of roadkill-or-success equation is kind of scary, right? It's always scary, but you would have time, and now it feels like you don't.
Yeah, I think you do have to be honest with yourself on like what it is you have really. And there are companies that get thrown under the bus correctly and ones that don't. And then look, if you take a lot of these ideas to their logical conclusion, then nothing is worth anything because there are no people at companies, and if there are no people, who's going to buy your shitty software? So like, da-da-da-da... but like, it is more subtle, and it just tends to take much longer than we think for some of these things to play out. So then the question is, are you getting stronger in that meanwhile or are you degenerating?
So, is what's happening that nobody's buying? Like, the money just shifted. The customers are buying other stuff; they're not buying yours. In that case, you have a huge problem. You probably have to cut deeply and pivot. On the other hand, look, there's companies that have been slaughtered in the valuation game but are pretty strong. So I'm on the board of this company, Navan, right? And they're travel. So obviously, the SaaS apocalypse... like, they're dead. Like, no way you're doing travel.
But then you look under the covers and you go, well, it is a little more complicated than that because on travel, you need explicit relationships. If I'm providing your travel and you're any kind of company that's important at all, you need to travel globally. So now I need a relationship with every single airline in the world, every single hotel in the world, every train, every everything. You got to deal with that. You've got to kind of connect back to their budgeting systems and all these things.
And then the second thing that like nobody wants to do, including OpenAI or Anthropic, is sell to the damn travel manager. Like, nobody has a channel to the travel manager. It's just not some... and you can't even imagine that being a good idea. You know, you want to keep advancing. You want to kind of do the things that Intuit is doing where, like, okay, turn ourselves into more of an AI company and then like kind of hold the customer. And by the way, like the AI... like the agentic travel experience turns out to be much more complicated than one would think. And I don't know if it stays that way, but like that's the way it is today. So I think it's very company dependent. Like, I don't think it's all one thing, but I do think Brave New World—and if you keep looking at it like the old world and it's got completely different laws of physics, you are definitely going to die.
Yeah. Well, maybe let's talk about venture capital.
There's a lot of "cope" going on now, too. So like, you got to be careful with that.
Well, that's the thing. It's like there are some things that really are features, and before it would take a long time to build a feature. So you might as well... it's comparative advantage. David Ricardo. I could weld my own steel; I could grow my own food, but I'm just going to not do that because I can do things that produce more economic value for me. But now it's just becoming not that hard to go create features. But features are not products or not companies. And we've always had this distinction. There's feature, product, company. But it's a little bit confusing figuring out which one is which right now just because the ability to create a feature and create a product and even get all of the data... my favorite saying: the best companies have hostages, not customers. Like, even get some of the data out of the hostage company.
Yeah.
So it's like, it's just a very, very confusing world in terms of figuring out which one is which. It's kind of maybe a good segue to venture capital land. How do you think—when you started this firm in 2009, big financial crisis, very, very big financial crisis, global financial crisis going on, the biggest... the world has changed a lot since then. I mean, how much of what's happening today kind of fits within the mental model of back then, and how much is kind of Brave New World? Maybe riff on that a little bit.
Yeah. So it's really different. So our first fund was $300 million, and we raised it from all the traditional kind of LPs: endowments, charitable foundations, etc., fund of funds. We just raised $15 billion for four of the seven funds. Four of the seven funds. So like, not even the whole complex. And we raised it from very, very different kinds of investors. So, like none of our LP base was international when we started, and we're at like 35% international money and it's from all kinds of places.
And just tech has gotten so much more important. I think that we have to think in terms of the world in a way that we just didn't before. So, for example, like with "Why'd you raise so much money?" which by the way, I'm kind of mad at myself because I don't even think I articulated internally well enough because we could have raised even more money next time.
Don't worry.
Yeah, we had more money on the table. But the way I was thinking about it is: look, America's got to rebuild its entire infrastructure like right now. Because we don't have enough rare earth minerals. We don't have enough electricity. We don't have enough manufacturing capacity. We have the wrong chips. Like, they take way too much damn power; they were built for games. We don't have enough of anything kind of to be in this future world. And somebody's got to fund it. And clearly, that's going to take a lot of money. So all that is brand new, and I would say it's like fairly overwhelming in a sense, but like it is really, really important. Like, we're pretty much out of electricity now in the United States. Like, not 12 months from now, like right now.
The China graph is like this and the US graph is like that. It's not... the demand for these tokens is straight vertical, but the ability to kind of build that capacity is absolutely not vertical. So we need new everything. We invested in a transformer company—not like an AI transformer, like an actual power transformer company—because you need, you know, kind of better, easier to manufacture, more efficient transformers. And the transformer hasn't changed since really we invented electricity. So like, these kinds of things.
Well, I guess how... so there's an old saying: the cure for high prices is high prices.
Yeah.
But the problem is there's a lot of latency involved. So right now there are computers that show up with no RAM. Like if you go buy a server from Dell, they're like, "Sorry, we don't have any RAM to sell you," because all of that has been gobbled up. Because yeah, they could build a new factory, or you and I could decide to go build a DRAM factory—that would take us five years.
Yep.
So how do you... and we don't believe...
You got to start now.
Yeah, you got to start now. But this is... if you remember, which you obviously do, 1999—it's like, well, we have to build more fiber, right? We have to build more capacity. But it's obviously very different because all the GPUs are hot; they're all lit right now.
And back then, most of the fiber was dark.
Yes.
But how do you get like...
Yeah, well, there were bottlenecks when we were building fiber. The bottlenecks were kind of in different places. So like the servers weren't capable of putting bits out even fast enough to do video, right? And like the software was really... we didn't have load balancers, we didn't have application servers, we didn't have anything. And so you had all this fiber and all this bandwidth, but like you couldn't build the applications. And then most of the end users weren't... it's a network too, so people weren't connected on the other end. So it just didn't work and then we had the dot-com crash and all these things.
So now we're in a little different place because almost everything is a bottleneck. I do think what's going to happen is like, we'll probably have enough chips long before we have enough electricity. So Nvidia will make enough chips, but then we won't have enough memory and we won't have enough electricity. So we're in that kind of situation now. So I think you really have to study where we are at each point in the supply chain and figure out how to alleviate those bottlenecks. And by the way, God bless Elon—the Terrafab, that's the idea. He's going to just go deal with all the bottlenecks himself, which is how he does things, which is why we need him.
Indeed. So, I feel like you're an expert in three things: hip-hop, AI, and crypto. And I don't know anything about hip-hop, but I've heard a lot from you. But let's talk about the other two, in particular crypto and AI. I just wrote about this. I mean, you remember the origins of crypto was hash.
Yeah. Yeah.
And the scariest thing right now from my perspective is that everybody with Claude or with ChatGPT can like go super deep and personalize a phone call, an email. Like, it seems like all communication is going to be completely unusable.
Yep. I 100% agree.
Because it's like, normally I can just delete. I get some email yesterday: "Dear Alan at Index Ventures." It's like, well, I'm not Alan, I don't work at Index Ventures. Delete. And I'm very grateful that this person messed up my name because I could just delete that. Whereas, if I get a thousand emails... like, the best way of thinking about an email inbox is it's a to-do list that has write access for the public.
Yeah.
Right? It's like anybody can get in, and now anybody can personalize. Same thing for phone calls. Like, what do we do? And then it seems like there's a lot behind crypto... and that's why I mentioned hash, because it was originally intended to stop spam.
Yeah. Yeah.
So, do you think there's overlap between AI and crypto? I know you do. So, tell us about that.
Yeah. So, I do think it starts with the problems that AI causes. And one of the first things... I woke up in the middle of the night one day and I was like, "Oh my God, somebody's going to go on a Zoom, it's going to be AI me, and they're going to tell my finance team to wire like $500 million to Nigeria, and that's going to be a problem." So, and then we're like, "Okay, everything's hardware root of access. Don't believe anything from me unless it's got my cryptographic key on it." All that kind of thing. So, I knew these problems were coming. They're coming so fast now.
So I think there's kind of several categories of things. First is just: are you a human or are you a bot? Like, I think everybody is going to really want to know that. Be it social media, a dating app, a Zoom call—like anything, you want to know: "Am I talking to an actual human?" Like, okay, can I prove that I'm a human being? And then can I prove that I'm me? And then can I sign content? Like, how do I know it's true? Like, there needs to be a distinction...
I get so many AI videos sent to me from my family that they think are not AI videos, and they're like, "Did this really happen?" I'm like, "No." You could ask Grok, and it's pretty good at that right now. But I think like, Grok's getting to the point where it can barely figure it out. And I think at some point, it won't be able to figure it out, or AI will not be able to tell what's an AI. So the only way is you're going to have to have some cryptographically strong indication, a signed piece of content that says, "Okay, yeah, I made this," or "This is like really a video of me, Marco Rubio, giving a speech. This isn't something that somebody faked."
And then there needs to be a source of that truth. And who are you going to trust for the truth? Are you going to trust Google? Are you going to trust Meta? Are you going to trust the US government? I think you want to trust the kind of mathematical, game-theoretic properties of the blockchain. So I think that's going to be just a very important part of the infrastructure.
And then you get into like fraud and like, how do you verify somebody's a citizen to get them money? Everybody's talking about, "Well, let's do UBI." Well, great, but when we did the stimulus program, we found out that the government is very bad at getting money to people. I don't know, it's like depending on the numbers you read, it's somewhere around $450 billion got stolen. So what you really need is everybody needs an address where you can send them money. And so I think that's a crypto problem.
And then finally, how does an AI become an economic actor? Like, how do I make money as an AI? How does somebody send me money? Like, can I be a merchant, a credit card merchant, if I'm not a human? I don't think so. Like, I think that's kind of hard, and it's probably not the right infrastructure anyway. And so, you need a bearer instrument on the internet. You need internet money for these AIs to be economic actors. And I think that's very likely to be crypto. So I think there are many opportunities in the crypto space that have been generated by AI.
Yeah. Because it feels like it's this old Yogi Berra saying: "It's so crowded nobody goes here anymore." Like, we're kind of entering that era because number one is: are you a real person? But the problem is that Worldcoin is so good right now... or OpenClaw, I just say you are a real person. You *were* a real person, but now your addresses are being used by a machine.
Yeah.
Right. So CAPTCHAs don't make any sense. Like, what is a CAPTCHA? Right. So it feels like the solution lies in kind of economics somehow, and game theory.
Yes. Yeah. And that too, right? Like, are you going to just have to... well, maybe like I think hash is kind of a relevant idea again.
Yeah. No, totally. So maybe why don't we talk about where you think venture capital is going? And I mentioned this because Mark got some crap for saying all the jobs will go away except for one job of venture capital, which was seen as a self-serving comment. But in his defense, I will say it's partially because it's a non-deterministic problem.
Yeah.
Right? It's like, all right, you're betting on an entrepreneur first and foremost, and you want to know that this entrepreneur, as I like to say, can materialize labor, capital, and customers. And you can't just like run an algorithm on... maybe you can, but there's just not a lot of data out there. It's very hard to do. So that's the logic by which... and also just personal relationships in general will probably survive AI. But if there's a venture capitalist, then that kind of assumes there's an entrepreneur job.
Yes. Yes, that is true. It takes... it's kind of hard to be a venture capitalist without somebody. Yeah. If you're very bad, you could just raise money and never allocate it, I guess.
But I guess what do you think the world of venture capital looks like kind of today? We've obviously done a lot of things internally as a firm to try to embrace AI very fully. But now, five years, 10 years from now, just given what's potentially going to happen to white-collar work...
Yeah. It's really tricky because, you know, you kind of go back to the last transition like this, which was the transition to the Industrial Revolution. So kind of the venture capitalists of the railroads and the automobiles and so forth ended up becoming JP Morgan Chase, Goldman Sachs, etc. So they ended up becoming banks. And some of the reason for that was just how fast that materialized. So I think in the '30s, like 20% of American workers worked for the auto industry, which is like spectacular compared to what it is today.
And so, things in the Industrial Revolution kind of started out very much like we are today in venture capital, where there were whatever, 300 auto companies and so forth, and then it consolidated very hard into, in the US, the Big Three and so forth. And then the kind of venture capitalist went upstream with the companies. I think that's one scenario where, like, okay, there's going to be a small number of very gigantic companies and they're going to own everything and so forth.
There's another kind of future where it's like, okay, they got really big and then we've kind of finally hit the asymptote on this intelligence idea, and like they're as smart as they're going to be or whatever, and we're either going to like nationalize the big labs and like their utilities—their electricity plus-plus—like, "FU if you're going to think you're going to collect all the money." And then everybody's just going to build on this utility set of things, and then that's a very different venture capital world.
So I would say, the as I'll quote Yogi Berra: "The problem with the future... the problem with predictions is they're very hard, especially about the future." And I think this future is particularly hard because it's so dynamic and it's really hard. And then like, how does the electricity shortage play into it? Does it make the big companies all-powerful because they suck up all the electricity and nobody else can get it, and nobody else can get any GPUs? Or does like that push all the computing out to the edge, and then the models just get really good and small, and everybody's like, "Well, I got enough in my phone, and what they're going to charge me for their mega GPU farm is just outrageous, and I'm just going to do that"? So there's many ways it could go. And I don't know. I guess I don't know, but I could see venture capital being much bigger and much more exciting because everybody in the world is an entrepreneur. Or I could see it being more like what happened in the Industrial Revolution, and like, new companies are just harder.
Yeah. Well, it's kind of a good follow-up or a good parallel question, which is: how do we make this seem less scary? Because I don't know if you saw... it's a lot of change. It is... well, but yes and no. 98% of Americans were farmers in 1789. I'm pretty sure they're not farmers right now. You made this interesting point where if you go to like a third or fourth world—if there is such a thing—country, everybody's an entrepreneur.
100%. Like the guy... "I sell bananas by buying them here and selling them there." Everybody's an entrepreneur; there are organized companies.
Yeah. And the cool thing is that now 8 billion people that might have an idea in their head can get it out of their head. And maybe it's a bad idea. It probably is a bad idea. But there's no longer a gate for them. There's no capital gate. There's no like "idea gate." It's just like boom. And it's not just for code; it's like, "I can write music, right? I can make a movie." Like, this is super exciting. So that feels like a very... if you're trying to make this not look dystopian... I don't know if you saw Bernie Sanders interviewing Claude. Like, this is literally "old man yells at cloud"—no metaphor! Right? It's just like he's yelling at the cloud. And like, that's the dystopian view and it's wrong. I feel very passionately that's wrong, but we need a better narrative.
So the history, kind of... I would say if you look at it from a macro standpoint, right? The history of technology is things have always gotten better. Like, would you like to live in the world before electricity? Probably not. It doesn't sound like... you can if you want, but like, nobody seems to opt into that. And I think we're very much in kind of a period like that, but the transition is always scary because it's a different world. Like the jobs... everybody was a farmer. Everybody was a farmer in like 1750. I think it was like 93 or 94% of America was farmers, and then like almost all those jobs are gone.
And just like, you know, the jobs that we think are jobs, they would have thought were ridiculous. Like, ridiculous! If you were a farmer, you would think what I do is the dumbest thing in the world. Or a product marketing manager... any of this stuff. It's like, that's not a job. You're not making any food. You're not building a house. Like, how could that be a job? So like, I do think it's very hard to see to the other side of that, but I think it's very likely to be like way, way better for everybody. Just like electricity ended up being way better for everybody.
And to me, like the biggest kind of... the most salient wrong idea was from John Maynard Keynes. So he wrote a paper that wasn't that famous, but he was the great economist of the Depression, where he said, look, things are going to be so abundant and everybody's needs are going to be met. Everybody's going to have a house or like a shelter, and everybody's going to have enough food to eat. And then once you have your needs met, like, you're going to work way less—like 15 hours a week max—because your needs are met.
But like, what he didn't realize was, well, we're not just going to need one car. We're going to need a car for every person. We're going to need, you know, computers and television sets and this and that and the other, and awesome vacations and like, food that takes like a chef 10 hours to prep and all this kind of thing, which did not exist then. Like there was no like whatever foodies and tasting menus and all that we have now. But like, that's all a need. Like, that want goes to a need very fast. And humans are kind of unbelievable in their ability to come up with new things that they need. And you know, and then you have to make those and so forth.
And I think it's going to be... look, I think in 15 years, the truth is everybody in America, and probably around the world, is going to live better—from a just luxury, access to information, etc., etc.—than anybody did in 1980. So like, that's a... that's the world that we're almost certainly are going to get to. So you shouldn't be so mad about it, but it is disconcerting.
All right. Well on that...
Especially if you're trying to teach little kids. They're like, "What should I do?" Like, I don't know. That's a hard one.
Well, on that note, Ben Horowitz at Andreessen Horowitz, thank you very much. Really appreciate it.
All right. Thank you. Yes.