Marc Andreessen: The World Is More Malleable Than You Think (Transcript)

I wasn't expecting to start here. I wanted to talk about why you were consuming so much caffeine that you noticed that your heart was skipping a beat.

So I love caffeine. For a very long time, I always said that the ultimate day—the perfect day—was 12 hours of caffeine followed by four hours of alcohol. Like, that's just the ultimate. I did cut out, at least for now, I've got to cut out the four hours of alcohol. But yeah, caffeine is just one of nature's most marvelous things. But it turns out you can't overdo it. And so a while ago, I was drinking so much coffee at work that I was sitting in a meeting a couple years ago and I started to feel just a little bit... something felt off. I just took my pulse and realized I was skipping about every 10th heartbeat. So, I had an existential crisis because I'm like, "All right, you know, I need to call 911. Am I about to have a heart attack? Am I about to die?" And so, I go under the table and I Google and I'm like, "Is this a problem?" And before Dr. Google said, "No, it's okay. It's fine. You just might want to cut back a little bit on the caffeine."

You said something that I love and I never hear other entrepreneurs think about or talk about, but I think it's super important: that you don't have any levels of introspection.

Yes. Zero. As little as possible.

Why?

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

So I've read obviously 400—I think now 410—biographies of historical entrepreneurs, and that was one of the most surprising things. Like, what's the most surprising thing that you've learned from this? It's like, oh, they have little or zero introspection.

Yeah, like Sam Walton didn't wake up thinking about his internal self. He just woke up like, "I like building Walmart. I'm going to keep building Walmart. I'm going to make more Walmarts," and just kept doing it over and over again. And you probably know, if you go back 100 years ago, it never would have occurred to anybody to be introspective. The whole idea of just all of the modern conceptions around introspection and therapy and all the things that kind of result from that are kind of manufactured in the 1910s, 1920s.

Say more about that.

Great men of history didn't sit around doing this stuff at any prior point. Right. It's all a new construct. It was—well, so first Western civilization had to kind of invent the concept of the individual, right, which was a new concept several hundred years ago. And then for a long time, it was, "All right, the individual runs," right? And like does all these things and builds things and builds empires and builds companies and builds technology. And then this kind of guilt-based whammy showed up from Europe—a lot of it from Vienna in the 1910s, 1920s, Freud and all that entire movement—and kind of turned all that inward and said, "Okay, now we need to second-guess the individual. We need to criticize the individual. The individual needs to self-criticize, right? The individual needs to feel guilt, needs to look backwards, needs to, you know, dwell on the past." It never resonated with me.

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

Yeah. Generally, although in fairness, the introspection is probably linked to the personality trait of neuroticism, right? So a lot of the best founders are, I think, at like 0% neuroticism. Like, they just don't get emotionally phased by things that happen, which is a superpower when you're an entrepreneur. But having said that, some of the great entrepreneurs are, in fact, very neurotic. That's also the case. It's maybe a nice-to-have to be low-neuroticism, but not necessary. And so there are some that kind of get wrapped around the axle on personal issues. You know, these days sometimes that then kind of turns into use of psychedelics of different kinds and hallucinogenic drugs. That's one very interesting kind of trajectory for the culture of the country and the culture of the world, and we'll see where that goes.

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

So to be clear, I've never have, I'm never going to. The problem is I already have tons of horror stories from people I know or know of that kind of came out the other side. My deepest conversation on this was with Huberman, and I was describing this phenomenon we see in Silicon Valley where these guys get under pressure and they kind of feel anxious or whatever, and they decide—somebody tells them about psychedelics—and they try it. And they kind of come out the other end as a changed person and they kind of come out much more at peace, but then they also tend to like quit their companies. They like move to Indonesia to become a surf instructor. Like, they're just like, "Peace out," right? They're just done. There's been a whole bunch of examples of this.

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

I think that's true. I think it's certainly true for Daniel. Yeah, who's a great case study of that. Having said that, I always kind of wonder about intrinsic versus extrinsic motivations. Impact strikes me a little bit as an extrinsic motivation—there's impact, money, fame. And by the way, I think extrinsic motivations are fantastic and I think they can be very motivating, and the people who get the great rewards for building great things deserve them. But at least what I found is it's the intrinsic motivations that get people up in the morning. And there's where you're dangerously close to straying into introspection.

What's that for you?

Oh, that would require introspection.

I'll let other people speculate.

No, you have to.

It's a lot more fun to speculate about other people's... but I am curious about you because you have a series of quotes that I absolutely love and save on my phone and reread from time to time. One of them—I'll butcher it—but it's like, "The world is way more malleable than you think. And if you just pursue something with a lot of maximum effort, drive, and energy, the world will recalibrate around you easier than you think." And I reread that this morning before I came over here, and I was like, what is that for Marc today? Like, what are you waking up trying to change in the world?

Yeah, there's a lot that we're trying to do. I'm suspicious that's my actual underlying motivation just because I don't think external impact is enough to keep people going—or at least I've seen way too many people who had a high level of external impact and then at some point they just stop. Well, here's the problem with external impact: it's like, okay, it's 4:00 in the morning and you're staring at the ceiling. Like, is that enough? Right? External impact is stuff that's happening to other people, right? It's like, all right, what is it about you?

I have almost no introspection either, so I understand that. All right. So, tell me what you're trying to do in the world now.

Yeah. Look, we just have this—it's fairly amazing that it's become a controversial kind of thing—but we just have this fundamental view that technology is, on balance, an enormously powerful force in the world. And that the big problem with the world is that there's not enough technology, there's not enough information, there's not enough intelligence. And we have this opportunity, we have these special sets of technologies that let us fundamentally improve things. And then there's this very special kind of personality type—the entrepreneur who's able to build the product and then build the company and build a phenomenon and really make an impact on things.

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So I'd say the core thesis is the same. The specifics have changed enormously. We can talk about both parts of that, but yeah, the core thesis was kind of the startup, the entrepreneur, the founder is going to be the core engine of progress in the world. And I think that's more true than ever. In fact, when we started, it was still controversial—the idea that a founder would run their own company.

Even in 2008, 2009?

Yeah, it was still very controversial. In fact, there were high-profile companies at the time that were getting heavily criticized for having these "little kids" running around running these companies.

Okay. So, you have this encyclopedic knowledge of the history of Silicon Valley in your head. I've probably read, I don't know, 30 to 40 books on it, so I have some level, but not what you do. I remember reading a book on Nolan Bushnell, founder of Atari. He was like 27 at the time and it was excessively rare—it talks about that in his story—it was excessively rare for him not to be replaced once Atari started growing with an older CEO. Like, were there other examples before him?

Well, so Christopher Columbus... Alexander the Great. Right? Throughout history, most of the great things that have been built—Thomas Jefferson—have been built by this kind of super charismatic founder type, will-of-power founder type who built and ran something. Henry Ford...

Hold on. I love that you went here because you don't remember this, but we had dinner in Miami with Jared Kushner like a year ago or something, and me and you were wrestling because I was so excited to talk to you and I was trying to get out of you... because I think about history first all day. Like, this is what I do seven days a week. Like, who are these entrepreneurs from history that you like? These are country founders.

True. Exactly. There's this recency bias, right? Which is like the world that we live in today is the normal state of the world, and everything that happened in the past is weird and different, and those people were dumber than we are and all screwed up. And it's like, well, maybe. Or maybe the world worked a certain way for thousands of years and we're in the weird time. Maybe we're in a time that's just really unusual from a historical standpoint. And I think this is one of those dimensions in which that's true. It just never would have occurred to anybody 100, 200, 300 years ago that if somebody was going to start something, they weren't going to be the person who ran it. Obviously, it was just obviously the case.

And the founder can just learn how to run things at scale.

Well, that's the theory, and that's a big part of our theory. Yeah, the founders can learn how to do this. And look, this is still a controversial topic. It still comes up because—

Is it controversial?

Well, it is because founders aren't necessarily—especially founders on day one—are not good at doing this. Let's talk about tech specifically. In tech, the founder tends to have been in a lab, literally or metaphorically, for 20 years before they start their company. They've been probably working by themselves or with a small team. They've been building technology. They haven't been running things. They haven't been managing large organizations, they haven't been running public companies. And so there is a missing skill set, right? On day one, they don't know how to do that. And so they do need to be willing to learn how to do that, and then by the way, they do need to be capable of doing that, because some of them can and some of them can't.

You think a vast minority of people agree with you.

Look, it's becoming more common when you get Elon Musk and Steve Jobs—when you get these kind of archetypal examples—it's a lot easier to sell it. Mark Zuckerberg, who we were talking about earlier, like he's a now a great case study of this, right? When Mark started Facebook, he had never had a job before. Okay? Not only had he not managed people, he had not worked for anybody. Right? So he started with zero. And his learning curve—which by the way happened fully in the public eye—his learning curve was vertical. And by the way, it's still vertical. He spends an enormous amount of time learning how to become better at running these things at large scale. He's still the founder and he's still the innovator and he's still a fountain of ideas on what to do. So he's that double thread. He's like the classic example of the double thread. And then what happens is other founders look at that and they're like, "Oh, I could do that." Right.

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

Exactly.

"I can run my company."

"I can do that." Yeah. Exactly. And by the way, it's amazing how fast this stuff shifted because, you know, Steve famously had this short period of time where he worked for Hewlett-Packard. And the legend, at least, is that—

No, Wozniak pitched him.

Was it Wozniak? Okay. There was some other story where Jobs went into some meeting with some manager trying to pitch the thing, and the line from the manager was, "Absolutely not. This is the dumbest idea I've ever heard. Get your feet off my desk and get out of here," right? You can just imagine Steve with his—

And they had to be bare feet at that time.

My favorite Apple lore is that the first sale in Apple's history was made barefoot when he walked into the Byte Shop. He was barefoot.

What's amazing about that is, yes, everything I'm describing was Hewlett-Packard in the 1950s and 1960s—that 1940s. That was also Dave Packard and Bill Hewlett were that founder type, and Dave Packard and Bill Hewlett ran their company for, between the two of them, like 50 years.

And by the way, Silicon Valley was built in large part on HP. HP was the original Silicon Valley company. Okay, run by its founders for 50 years, and yet people concluded the founders shouldn't run the companies, right? And so it's one of those things where it's kind of so obvious it was staring everybody in the face, and so people had to construct these elaborate lattices of theories to get around the fundamental fact that you need somebody who knows what to do running the thing.

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

It was for sure the most influential company from 1940 to 1980. And then probably after that, Intel.

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

Yeah, that's right.

And then how many founders modeled off of Bob Noyce and Intel after the fact, including Steve Jobs, who would go to Bob Noyce's house for dinner.

Yeah, that's right. By the way, that's another great example because Bob—at least if you look at photos of Bob Noyce, you're like, "Wow, this guy's like a pillar of society." You know, he's very well-dressed and he's kind of very "adult" and he's very... he's famously the leader of the Traitorous Eight, the group that left Shockley to start Fairchild and then left to start Intel. And so Bob was 100% the Steve Jobs of his time.

Just in the short-sleeve white dress shirt and the skinny black tie.

But it's the exact same thing. And so I unfortunately never met Bob, but I could easily imagine Bob and Steve Jobs sitting down and being able to talk for three hours and completely understanding each other, despite the fact that the look and feel is completely different.

He was almost like a disciplinarian to Steve because Steve was wild and reckless. Like, "I was also wild and reckless. You need to mature." And I think Bob's wife maybe went to work at Apple early on, too. There's a few great biographies of Bob Noyce, but he said that the reason he spent so much time, after he was really successful, spending time with young entrepreneurs—he said it was "restocking the stream in which he fished from."

Amazing.

He thought it was really important, and he's like, "I learned from all the guys before me. I need to take that knowledge I've built up over multiple decades and push it down the generations." I want to go back to starting the firm, though. This is interesting. What was occurring in your life, either at that time or before, that you had this observation that this had to be done?

Oh, so we've got all these elaborate theories, but the practical reality of it was Ben—my partner Ben—and I had become very active angel investors. And I'd been an angel investor since the mid-'90s, but then Ben and I started doing it kind of as a real thing. Put significant time into it probably starting in 2003. Well, I did it throughout the early 2000s, but in 2003, 2004—it's hard to remember now, but if you go back to 2003, 2004, there weren't thousands of angel investors. There were like eight. It was like Ron Conway and a handful of people, and then Ben and I were running around doing it.

Michael Ovitz. He was in this studio a few months ago.

Fantastic. And by the way, he gave us—we make a point of crediting him—he gave us a lot of this theory. A lot of this comes from him. But I'll tell it through his experience. When he started his agency in '75, in the mid-'70s, it was structurally very similar to when we started A16Z in 2009. The configuration of the industry at that point was a bunch of essentially service firms, a bunch of talent agencies, none of which were at very high scale. And then each of them was a tribe of solo operators, kind of lone wolves. And so the concept in Hollywood was you had an agent, and that was your guy. And that agent knew whoever that agent knew and had whatever relationships that agent had, but the other agents at your agency were not available to you. There was no collective benefit to the fact that you were at an agency that had not just your guy, but like 100 other guys. There was no collective payoff to that.

Oh, I hear stories like this all the time.

Right. And so it's like, there's Joe and Mary who are partners at a venture firm, and you're working with Joe, and Mary has a key connection that you need access to. So you ask Joe, "Can Mary introduce me to so-and-so?" And what you don't know is they're having a brutal fight where they're trying to destroy each other because of fundamental economics—they're going for a greater slice of the profit pool. And so we saw example after example of a venture firm that was either melting down due to internal strife and conflict or, by the way, the other was generational succession, right? A lot of the dominant venture firms in 2009 had been around for 30 or 40 years, and they were now on their third generation of partners going to their fourth generation, and again, they had been founded by dynamos and then the later generation people were not like that. So we said, "Look, that's not going to last."

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

Yeah. Exactly.

It was a conceptual leap for venture capital at the time, but the exact same thing had happened in private equity. The exact same thing had happened in hedge funds. The exact same thing had happened in... you knew that by what? Just reading?

Reading. Investment banks is a classic example. If you read about the original investment banks in the US between 1880 and 1920, they were all like boutique venture capital firms in the 1970s/1980s—like 20 guys—and these were more like merchant bankers.

Yeah. And so the classic stories, which I love so much... JP Morgan is one of my favorite historical figures. The JP Morgan investment bank was this had—it was very important, but it was this tiny little operation. It fit in a single office. I don't know, probably 20 principals and some office staff or something. It was not large. And the hidden secret to JP Morgan was he was the son. The father was Junius Morgan.

Okay. I literally, when you were talking, I was like, wait... it's shocking that you would pick him because I found his father a more formidable individual than him. Which is almost always the case with any famous public figure—the father is almost always a more interesting story. But however, yeah, Junius Morgan... JP Morgan filled a specific economic role that's gotten lost in history: Junius Morgan's bank was in London, JP Morgan's bank was in New York, and what the Morgan family was doing was funneling money from the old slow-growth economy of Europe into the new high-growth economy of the US. But again, it was exactly your point: it was this little boutique family operation.

So you consider that the barbell in investment banking? You have the JP Morgan family partnership and then you have the complete scale of Goldman Sachs.

Well, what happened was both JP Morgan and Goldman Sachs started out 100 years ago in the middle. They were boutiques but of their time—today you'd call them mid-market or bulge bracket—as opposed to just a solo operator. The way JFK's father got started was he literally hung out a shingle in the 1920s: "Joseph P. Kennedy, private banker." And he just did deals and he was like an angel investor at the time. And then you had the big commercial banks, but the big commercial banks had no interest in issuing loans to these speculative crazy entrepreneurs. And so in that time, JP Morgan and Goldman Sachs and Drexel and Morgan Stanley were these mid things. Now, 100 years later, those are now the scaled players. The ones who didn't scale are kind of long forgotten. Having said that, there's one firm that survives in the old model, and that's Allen & Company. There are other boutique investment banks, but Allen & Company was founded in the 1920s and is uniquely the one that survived in the original model of being a boutique investment bank and stayed that way for 100 years. So today, that's the barbell in banking: Allen & Company on one side, and then JP Morgan and Goldman Sachs on the other.

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Both. Ben and I spent about a year and a half planning the firm. Part of it was he was in what we call "industry servitude"—he was working for Hewlett-Packard after we sold our company to HP. He was running a big part of HP at the time. And so we couldn't literally start a new full-time thing until he got free of that. So we had a year and a half to study and think and work.

Because you had this period from 2002 or 2003 when you're doing angel investing a lot until you start your company six or seven years later—you're observing all of the weaknesses in the model. And that's where you have, "Hey, why don't we take the CAA..." I think Michael Ovitz calls it the phalanx, where it's like, "If you have one agent at CAA, you have all of us." And they would roll deep. I think he says in his book they would be like, "Oh, my agent is coming to the premiere." No, 20 agents are coming. And they'd be dressed in the same kind of suit maker, and they were intentionally trying to intimidate their competition.

They wore Manning suits. Sula Shirts was a little shirt maker in Beverly Hills—sober colors, white shirts. And then I think he had a bulk purchase deal with the local Jaguar dealer. And the legend, at least, is that the license plates all said CAA1, CAA2, CAA3. And so, you'd go to a premiere and there would be 20 Jags lined up and then 20 guys in identical suits coming out. Just imagine the psychological impact of that if you're an old-school agent. Michael is a very dear friend. He became very controversial over the years, and the reason he became so controversial, I think, is just because he smoked his competition so severely. He pounded them so hard there was no response. You're just a guy working for an old agency and you've got your clients, and these 20 CAA guys are showing up... it's just this force. And the clients—a lot of his clients are still active today—it's just a no-brainer. It's like, do you want to work with a guy or do you want to work with a firm? It's just obvious. Did he tell you about his morning schedule thing?

The getting on the bike doing the... for the firm?

This is again something specific to Hollywood, but it's a great example. So, the agency business at the time he started CAA was 90 years old, right? It started out doing vaudeville bookings and music halls. It had been around for decades, and so the people involved in it had decades to think about the best way to do it and had arrived at a set of practices. One of the practices was that at every agency, they would have their staff meeting in the morning at 9:00 AM, and they would share whatever information was going to get shared. "Oh, this studio head wants a script to do a crime thriller." And this is the point where minimal handoff existed between agents. This is where everybody would kind of get updated. And so the staff meeting would go from 9:00 AM to 10:00 AM. And then at 10:00 AM, they would start calling their clients and they'd be like, "Oh, we heard there's going to be a casting call for this great new role, and you should consider doing that."

I love that you did that. I always say it's not what you do, it's how you do it. There are so many of these principles that could apply to venture capital. In your blog archive, you would give advice to young people: "Go work in an industry where the founders of that industry are still working." When I read Ovitz's book, the way I would summarize his approach—because he was in this big, stodgy, slow-moving, very bureaucratic organization—is like, "Mediocrity is always invisible until passion shows up and exposes it."

Oh, interesting. Yes.

And that's what he did. He's just like, "There's so many things that you guys could be doing better here." And if I remember correctly, he took some of these ideas to his boss, who was his mentor... I can't remember his name.

He famously worked for the CEO of William Morris, which was the biggest of the talent agencies at the time.

So were you and Ben essentially just designing what you wish you had when you were founders?

Yeah, that's right. And again, that may be a cheat code, but if you've been the customer, this all becomes a lot more obvious.

In Warren Buffett's shareholder letters, he has this great line where it's really important to "play against weak competition." Did you feel that, at that point in venture capital history, you were going to be playing against weaker competition?

I would say not exactly. We didn't view them as weak. We viewed them as running on a status quo set of ideas. And to be clear, we had raised money from what were probably the two best venture firms: Kleiner Perkins in the '90s—I worked with John Doerr very closely for five years at Netscape—and then we raised money from Benchmark when they were like king of the hill, and Andy Rachleff, who was one of the founders of the firm and a legendary, brilliant VC. So we had worked with two of the top five people in the field for a long time, and they were, and are, brilliant at running the model that existed. It was less a competition of "these people are soft" or "these people aren't smart"—it was none of that. It was that they're really good at executing against this particular playbook. So if we're going to do this, we need to be playing by a different playbook.

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

No, because the firms all hit this limit. The idea of a partnership of equals, or even a hierarchical partnership... it just breaks at some point because there's too much internal dissension. It's too hard to coordinate, and then everybody's fighting for slices of what was viewed at the time to be a fixed pie. So none of the other firms could structurally get to scale.

Where else did you take ideas from besides the talent agency business and merchant banking?

It was just very obvious that it had happened to private equity. This was around the time when KKR and firms like it were hitting their stride, building a lot of operational capabilities in-house and building their own in-house investment banks. One of the things we've never done, but has always been on the idea list, is just having an in-house bank. KKR had done that. And so we saw it happening—the mid-tier private equity firms were collapsing, and you either needed a solo, very light-on-your-feet operator or a scale platform like KKR. It happened at hedge funds. It happened in... the TV show *Mad Men*. *Mad Men* tells the structural story of this happening in the advertising field in the '60s and '70s. A big part of the arc of *Mad Men* is Sterling Cooper, a classic mid-market ad agency. In the third season, they sell it to McCann, which was the scale player at the time. They showed you all the pros and cons because McCann's this giant machine and Don Draper is used to making all the creative decisions, and now he's just in this conference room arguing with people until he just gets up and walks out. But then Don Draper and Roger Sterling start their own startup, Sterling Cooper Draper Price, which starts out as a true boutique startup and they have a year and a half of just hell because they're too small, they're subscale.

But was the scale changing at the time you founded the firm?

We had a pretty good idea. I've been involved in Facebook informally since inception and formally on the board since 2007. And so I saw when that thing hit the knee in the curve—it was just very clear. We didn't know how big it was going to get, but it was going to get much bigger than the Internet 1.0 companies had gotten. It was also around the time Apple was directly entering the cell phone market. Silicon Valley didn't used to make cell phones; they were made by giant industrial companies like Sony and Nokia and Motorola. And of course Steve was like, "No, screw that, we're just going to make the phone." There were these signals that it was happening. And the other thing was just the internet itself was maturing. At that point, the consumer internet was 15 years in and we had seen every part of that. Probably around that time global internet penetration was crossing a billion users on its way to five billion.

Yeah, you have a very interesting lived experience where you were there at the very beginning of the internet. One thing that I'm fascinated by—and this was going to be the first question for you because I've never heard you speak about this on a podcast—is your partnership and relationship with Jim Clark. You were what, 22, when you met him?

I was old-fashioned; I graduated from college and got my degree. Very Stone Age concept these days. So that was in 1994. I was probably 22.

So, there's this great book—I don't even think you like the book—written by Michael Lewis, *The New New Thing*. I've read it twice just because, I don't know if anything in there is true, but the portrait he paints of this eccentric character is wildly entertaining to me. But what's shocking to me is when you talk to young founders, I'm like, "This guy was the first person in history to found three separate billion-dollar technology companies."

That's right.

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

I knew exactly who he was. His company, Silicon Graphics—his first company—they were *the* company in the Valley between 1987 and 1994. They were like whatever Google or OpenAI is today. They were the company where the smartest people in the industry all wanted to work. They built the products that were the coolest products you could possibly imagine. They had this incredibly young and vibrant and dynamic culture. And then they hit this cultural moment that was just incredible in '92, which was the turning point in the movie business when computer graphics really kicked in. The two movies back-to-back were *Jurassic Park* and *Terminator 2*. The technology Jim invented made that possible. At the time, I still remember the chills you get seeing dinosaurs on screen. And then there's this company that builds the machines that do this. By the way, the Silicon Graphics computers are in the movie—there's a scene in *Jurassic Park* where the kids are navigating through a 3D interface... that was the SGI software.

Let's talk about that real quick.

Yeah. Now, in fairness, there are two sides to the story, and I wasn't there. So I just reflexively side with Jim Clark, but I'll try to represent both sides. Jim's a true... he's an Elon or Steve Jobs level guy. Incredibly creative, incredibly bright, incredibly charismatic, but volatile. Being around him is incredibly exciting—he always has new ideas. And again, that was in a time where people thought that's the personality type that clearly *can't* run the company. And so the VCs brought in a guy out of Hewlett-Packard who had been trained there. At the time, what happened is he wanted to hire a professional CEO, so they hired a general manager out of either Hewlett-Packard or IBM—those were the training grounds. They brought in a really sharp guy who, by all accounts, was a very good example of this HP general manager type who became a CEO. He took over the company, and in his defense, under him the company scaled enormously. From '87 or '88 until I got to the Valley in '94, the company became huge. Whoever's running the company gets at least some credit for that.

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Yeah. This is like Zuckerberg or Elon deciding to start a company—that was his candle-power wattage in the community at that time. And so you would think the obvious thing would be for people to just say yes. Jim Clark wants to start a company with you? Just say yes. But it was not happening. The crystallized memory is a dinner of 12 of us at this famous Italian restaurant in Palo Alto called **Il Fornaio**. It's where a lot of these companies were formed. There were a dozen technical people he knew. He was constrained—he had a non-solicit agreement with Silicon Graphics, so he couldn't just rip people out. So he needed to reach out to the technical community and find new collaborators. I remember that dinner very precisely for two reasons. Number one, I was the only one of the dozen to say yes. And then the other was it's the first time in my life I drank red wine. I didn't know what to make of it, so I kept sipping it, trying to figure out if I liked it or not. I didn't realize I was getting completely hammered because I had no idea how to calibrate red wine.

I don't know, there's some wild stories in that book. He might have admired you even more. Originally, was it just you and him?

Originally it was him and me. We had long conversations about what to do. The problem he had was the graphics chip idea—Nvidia was essentially a spin-off of SGI, and he didn't want to compete with SGI directly yet. And then the "interactive television" thing... it wasn't time for that yet. It wasn't time for Netflix. It was going to be cost-prohibitive. Time Warner had rolled out this interactive television thing in Orlando, Florida to 500 people. Microsoft and Oracle were involved, but the CAPEX per house was like $50,000 because you had to have a Silicon Graphics workstation in the house. It just wasn't going to work. We went back to Nintendo and almost pulled the trigger on building what today you'd call Xbox Live—an online gaming service for the Nintendo 64 in 1994. We thought it was too early.

Hold on, Marc. "I had worked on the internet"—that's a little bit modest. I think a lot of people listening will know, but you should probably explain how you were working on the internet.

At the time, it was not that big of a deal. A group of us at Illinois did this thing called **Mosaic**, which was the first widely used web browser, and the first one with graphics. Previous web browsers were text-based. There was this nascent concept of the web, but it was text-based terminals. It didn't have graphics, it wasn't point-and-click, it didn't work in the way you expect software to work. And it had no scripting language, no security... none of the capabilities that make the browser a useful thing. So we built the original full browser at Illinois, and we also built the first mainstream web server that had everything people needed. This had been a project in college, and at the time the internet was not viewed as a consumer phenomenon.

Wasn't it illegal to commercialize? Steve Case of AOL tells a story that he had to lobby and get a law changed.

That's right. The internet as we know it today, in the 1980s, was called the **NSFnet**. NSF stands for National Science Foundation, which funds research. The reason I was able to do the work I did at Illinois is because the NSF had dumped a ton of money into four supercomputer centers. The function of the NSFnet was fundamentally to connect the supercomputers to the people who were going to use them. It was this government research academic program, and there was no conception that ordinary people were ever going to use any of this. It's taxpayer funding, so there were formal legal restrictions on funding things with commercial applications. There was something called the **AUP**—the Acceptable Use Policy. It said the NSFnet was for academic and research use, and commercial activities were strictly prohibited. Literally not allowed. As a user, you're just like, "All right, that's nuts." And if you took the conceptual leap to say this was going to escape the lab and become something normal people use, then it became obvious it would have to have commercial activities.

No.

There were two internets: the internet before 1993 and the internet after 1993. People who were on it before '93 often describe it in utopian terms because it literally was like taking the million smartest people in the world and putting them on a network together with no commercial activity, no advertising, nothing. Just letting them talk to each other. The old messaging system was called **Usenet**, and the discussions on Usenet were absolutely spectacular. It was like the most pure, clean, intellectual space since Athens in 500 BC. And then AOL connected all their users—ordinary people—to the internet in September 1993. It became Eternal September. That's the day the internet changed. I'm pro-that, I'm glad it happened, but it took the internet from this ivory tower kind of thing to this mainstream consumer thing. The concept of Eternal September was that every new wave of college graduates would get their first job and go online in September. So the "September effect" happened over and over again until it just never stopped.

Explain that.

If you used Mosaic at the time, there was a "submit a bug report" or "have a question" link, and that went to an email box that was me. So I became tech support for the internet for like three years and got all the emails. One email box was tech support requests—like people who thought the CD-ROM tray was a cup holder. You press the button, the cup holder comes out, you put your coffee down, and 10 seconds later the tray retracts and spills coffee everywhere. "How do I keep the cup holder out?" "Sir, that's a CD-ROM drive."

What did you think the business model was? Just licensing?

It was a combination. It was software licensing—the browser was free but the server software cost money. And then we started building server-side applications: the first publishing system for newspapers, the first e-commerce system for selling things online (pre-Amazon). And then we owned the main website that was the default homepage for the browser. Netscape was the largest internet advertising company until 1997. We put the *Wall Street Journal* online. It all looks obvious in retrospect, but when we started in April '94, there couldn't have been more than two million people total online. Everybody was on dial-up at 14.4 kilobits. Computers didn't even come with TCP/IP installed. To get on the internet, you had to buy a TCP/IP stack.

They're going to ask if they can put it next to their cup holder.

Exactly. Talking to us was like talking to Martians. Monitors were three feet deep and bathing you in radiation. And again, e-commerce... people were saying, "If you put your credit card number online, hackers are going to steal it."

If you read any books around this time, they're like, "There's no way in hell anybody's ever going to put their credit card on the internet."

The other thing you would never do is put your real name online because it would be immediate identity theft. You had all the panic around kids... Calls for censorship... The *New York Times* kept running stories talking about how the whole thing was fake and the numbers were made up. In retrospect, it's all quaint and sweet, but it was the precursor to all the moral panics around technology.

You pick up on something because you and I have read a bunch of the same books: humans' reaction to something new is consistent throughout history. I heard a podcast with you where you told the story of "bicycle face."

Yes. Every new technology is greeted with a moral panic. Society is going to be ruined, morality is going to be ruined, and especially the children. The bicycle was pre-feminism, so it was also going to ruin women. Plato and Socrates thought written language was a big mistake and that all information transmission should be oral. It's just been this consistent thing. There's a great website called **Pessimists Archive** where they find contemporanous newspaper articles about these things. When I was a kid, it was heavy metal music, *Dungeons & Dragons*. I remember the moral panic around the Walkman because everybody would just be listening to their own music. The calculator was going to destroy education. In the '50s it was comic books. In the '20s it was jazz music and playing cards.

Right. And these things just rip through everything. Music is always a great one... Jimmy Iovine, who is your neighbor, he had to deal with this in the '90s with hip-hop. They called him a mustard gas peddler. They compared what he was doing to genocide.

White kids were starting to listen to hip-hop music... he was pushed out of a conglomerate over this. Today hip-hop is so normalized it would never occur to you. In the '50s and '60s, it was Elvis Presley—they wouldn't shoot him from the waist down on TV because he would shake his hips. Jazz in the 1920s and 1930s... jazz music was "corrupting" because kids were going to get together and dance. It's the same story over and over again. It's not that society doesn't change—things *are* different pre- and post-car—but this idea of end-of-the-world moral panic is repeated. It's the obvious way to sell newspapers.

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Yeah, it was very formative for me. Jim was the ultra version of "the world is a malleable place." When he had an idea, and he was right almost all the time, he would just pound the world into adopting it. One thing that was malleable was himself. He calls himself a "self-described loser" at 38 years old. The guy had two PhDs and was a professor, but he just snapped one day with the undeniable urge to achieve something. That's when he goes from academic to founder and rips off company after company. He realized that he is malleable, too. He reinvented himself over and over again.

Who's a great example of that from history? Nicola Tesla?

Well, Tesla versus Edison. I'm an Edison guy. Elon's a Tesla guy, obviously, but Elon himself has become an outstanding manager. I think Elon's more like Edison than he is like Tesla. Tesla had all these ideas but couldn't commercialize them or build big companies based on them. Edison was more of a "grinder." He was less incandescently brilliant but he's like, "We're just going to try a thousand different combinations to get to the filament for the light bulb." But then he built General Electric and the national electric grid. He was funded by JP Morgan as a venture capitalist.

So you think you greatly benefited from the two Jims being polar opposites and showing you how to work together. Did they get along?

They got along great, became very good friends. But it's different disciplines, so there's an oil-and-water aspect. Clark ran the company for the first nine months, and the company was doing a hundred new things. It was amazing, but nothing was being systematized. Barksdale comes in and he's like, "Wow, this inventiveness is great, but we need to start to have systems and schedules and run this thing like a business." As founders do, Clark originally found that frustrating. Clark had a negative reaction to Barksdale saying, "No, we're going to keep doing the thing that's already working." Barksdale asked, "Can I talk to you outside?" They went out back and Clark's like, "The whole reason we're here is because we do these new things. If we don't do them, we're going to destroy the company." And Barksdale looks right at him and says, "Jim, I hear you. This is as serious as dick cancer."

Is there something about your partnership with Ben Horowitz? He's more Barksdale, you're more Clark?

Yeah, although we do mix it up because he has his own edge. Ben's been working with me for 30 years, and I think he would say that I have a pretty strong internal "edit" function. Unedited is really fun and very enjoyable, but it's very disruptive and has to be calibrated. When you're responsible for an organization of 10,000 or 100,000 people, you can't change the plan every day. You'll destroy everybody. There has to be a calibrated middle ground. In tech, change needs to happen, but in a measured way. You either need two people who balance each other—like Steve Jobs and Tim Cook, or Zuckerberg and Sheryl Sandberg—or every once in a while you get that in a single person, like Jensen Huang. Ben and I have a version of that yin and yang.

You said you believe Elon Musk is inventing a new way to manage.

I think he may have figured out the best way to reconcile the two: the fountain of ideas with the systematic builder. Elon's method is this extreme focus on substance and getting to the truth. In any organization with multiple layers, there are "compounding lies." I got this lesson early at IBM at the height of their power. In the mid-'80s, they were 80% of the market capitalization of the entire tech industry. They were run by their founder for 30 years and then the founder's son for 30 years. My favorite IBM story is that Thomas Watson Sr. had been convicted of antitrust crimes before he even started IBM. He'd previously run NCR (National Cash Register). He was a "double dipper" in antitrust court. He used to have a secretary transcribe all executive staff meetings, and the transcripts are just him cursing everybody out like a complete tyrannical psychopath.

Michael Moritz passed on Tesla because he thought there was no way they'd surpass Toyota. Then he credited Elon's pain tolerance.

When Tesla started, there had been no new successful car company in the US for 100 years. There were 2,000 founded from 1900 to 1910, and three survived. The previous real attempt was Tucker Automotive, which was such a disaster they made a movie about it. For a software guy to do this is insane. And he has the rocket company too! I didn't see it—I'm a software guy—but the level of incredulity he was greeted with was uniform. There's that famous photo of young Elon in 2005 crouched down in front of the exploded remains of his third rocket. He'd been funding it personally. Before he started the rocket company, his friends made him watch a compilation of rockets blowing up over and over: "You're literally going to light your fortune on fire."

It's incredible. Marc, we're running out of time. Thank you so much for doing this.

Fantastic. Thank you.

I hope you enjoyed this episode. Please remember to subscribe and leave a review. And make sure you listen to my other podcast, **Founders**. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs. Most of the guests you hear on this show first found me through Founders.