Marc Andreessen and Ben Horowitz
episode 17
Broadcast date: 13 January 2018
The Moonshots Podcast starts the new year with the diving into the thinking of the best venture capitalists of Silicon Valley - Marc Andreessen and Ben Horowitz. We'll discover how to succeed in the world of technology and what's next.
INTERVIEWS
BOOK RECOMMENDATION
The Hard Thing About Hard Things by Ben Horowitz
FURTHER READING
Andreessen Horowitz
TRANSCRIPT
Hello and welcome to the moonshots podcast. It's Wednesday, January 10 of a brand new year, 2018. And here we are at episode 17. I'm your co-host Mike Parsons. And as usual, the man in Brooklyn himself, I'm joined by Mr. Chad Owen. Welcome to 2018, Mike. I know it's already hot and steamy and Sydney. How is your 2018 Chad?
Well, while you're having record highs in Sydney, it's been quite cold here, but so far I think, uh, productivity has been high in 2018. I've kept my intentions. So, uh, I'm pretty happy so far. Nice. I like it. That sounds very, very good. And we need to warm you up there on the East coast of the USA. How are we going to get kickoff 2018?
Who are we going to focus on in this show? Chad, we are continuing our profile of investors in, in Silicon Valley and across the globe who are whose job it is to find. The best innovators out there and to invest in them. And so today we're tackling the dynamic duo of, uh, Ben Horowitz and Marc Andreessen of Andreessen Horowitz.
And, um, They're kind of the name in venture capital and Silicon Valley, wouldn't you say? Um, yeah, I think that, uh, apart from the fact that they've invested these two Airbnb Facebook, Buzzfeed get hub magically, Lyft, Oculus, Pinterest, Skype, et cetera, et cetera, et cetera. What's also very powerful. As a combination.
These two guys are amazing. Marc Andreessen was the founder of Netscape, which was. In history will be one of the most instrumental companies in the world of the internet. And on the other side, Ben Horowitz, who worked a lot with Mark throughout his career prior to starting their own VC firm, he is a fantastic, uh, thinker around business and entrepreneurship, and he loves to give it very Frank.
And honest view and he speaks to the truth of just how hard starting a companies. And he has a very popular book called the hard thing about hard things. So they're quite a combination Mark and Jason is this fast toking, super geek. Ben Horowitz is this sort of entrepreneurial, hip hop, rap loving, uh, anecdotes storyteller.
So we're in for quiet today. Yeah, I don't know of any other. Headline partners at a VC firm that have both, you know, founded and sold such successful companies. And I think that their trials and tribulations as founders themselves is one thing that has set them apart in the VC community. And, um, many of the clips that we're going to share with you on the show today.
What kind of help explain how that, that history has, you know, influenced their philosophy and how they, they choose to invest. Yeah. So I think their, their advantage is as investors that they have traveled the hero's journey of starting companies prior to doing that. So I think they're very empathetic towards.
Founders. I think they understand the business at both a macro and micro scale. I think we're in for quite a treat, whether we, whether we're talking about entrepreneurship talent and getting the best out of people or really how to innovate, it's all in front of us for this show. So I I'm really excited to get into some of this stuff.
Yeah. And this, this first clip we have is really just the two of them in their own words, uh, explaining a little bit why they decided to start their own fund together. We saw the opportunity to create the venture capital firm that we would have wanted to take money from headed existed. And so it's sort of the classic case of we were a customer of venture capital for 15 years.
So while we hadn't been VCs, we had a very good idea of what it was like to be on the other side of the table and to actually be the consumer of the product, if you will, founders. Make the best CEO's. And that was like at the time, like really counter-programming and that we had looked at all the really great companies and they were typically run by their founders.
Uh, and we really believed there was a reason for that. Having been entrepreneurs that the founder has the knowledge they've got the commitment they've got the passion. Um, that's very hard to implant into the company. And then we design the firm rather than being a firm for a, uh, to replace a founder with a professional CEO.
We became the firm to teach the founder how to be the CEO and enable the founder to be the CEO. So what's really interesting is what they are embodying our good friend, Richard Branson. They, they were turning frustrations that they had on the, as customers of VCs. They channeled that in order to create the company.
And I think that's, it's such a simple technique in innovating that we can all learn from the things that bother you. I mean, they spent, as they said, over a decade, being a customer of venture capitalists, and they're like, there's a ton we can do here. Yeah, I think there was like a history of 30 years of venture capital, at least in Silicon Valley, you know, with three or four top players.
And there was kind of tried and true old boys' network of how you got the money and how that money was dispersed and kind of what you were held accountable to as a founder. And. They came up in the software and in the internet days. And you know, they're just like, we don't want to do it the way it was done before we had trouble when we were, you know, running Netscape and Opsware, so we're actually just going to create the VC company that we wish existed.
And, um, I, I think that's, you're exactly right. And it's hearkening back to Richard and just, you know, build a company around your frustrations and you can do very well. And, and what they talked about there and what the, what actually, uh, Ben Horowitz talks about in this next clip is how disruptive it was to that kind of traditional, very non transparent industry of.
Venture capital and they came in and really shook it up. So let's have a listen to Ben Horowitz talking about exactly what they did and what he, like if you've studied venture capital. There is when we started, there were, I think 800 venture capital firms is a lot less now. Um, but all the returns went to not only like five firms every year, but the same five firms for like 30 years.
Uh, and the reason is, um, or the reason was that, uh, the best entrepreneurs would only take money from the best venture capital firms, an awesome business model, because it was self perpetuating. Like as long as you are at the top, you are very likely to stay at the top. We were able to kind of. Crack that open by doing something that was really unconventional at the time, which is not unconventional at all anymore, which was marketing.
So we were sort of the first venture capital firm to super aggressively market itself. And we had, so we had a unique position and a very aggressive marketing idea and that sort of opened it up to say, well, like they may have a much longer track record than us, but we will tell you exactly. Exactly. How we think about building a company, like everything from like how you hire, how you conduct a layoff, like how you think about capital raising, like everything.
We were going to lay it all out in great detail. And up to that point, um, the industry was just super opaque. Like you didn't know, it was all like the man behind the curtain, um, which was actually a very good strategy for the people who are winning. It was just a bad strategy for new firms, but new firms tended to just adopt.
What the old firms were doing. So that was the big breakthrough. Mm. Yeah. Transparency, I think is really what helped them break through that and kind of, as he jokingly says, you know, adding marketing to the, to the playbook on how to succeed, but it's, it's interesting that. In, in such a like defensible industry, like venture capital, uh, something as simple as being transparent with both kind of your limited partners that you're bringing on.
And also the founders you're investing in, how something as simple as that can actually take you from a initial $300 million fund, you know, to over a four or $5 billion fund and just a matter of a few years. Yeah, absolutely. And I think what we can also learn from this. Is when you know something, when you are an expert or an authority on something, the best thing you can do is to share the secret sauce.
Don't hold it back. You know, you remember pre-internet the world was built on. Intellectual property building was having your own thing and not sharing it. That's your, your sustainable advantage? Well, now we're in an era where if you know something and you want to build authority, you do it through sharing and, and, and by the very active, just being transparent, as you said, they created a huge momentum for themselves against the establishment.
And I think this really speaks to. How anyone listening, who is launching a new product or company should think about what can I share with the world? What do I know? How can I help people by sharing that? And frankly, chat. I think that's kind of exactly what we're doing together here. We're going on a journey we're decoding, we're learning and we're sharing it with everyone.
Yeah, I wouldn't put us in the same league as a, these innovators, but our best to learn as much as we can from them. And like you said, not keep it to ourselves. I think I love the metaphors of rising tide lifts, all boats and growing the pie as opposed to, you know, dividing up the pie and, um, I think that that attitude of, of abundance is, is becoming more and more, you know, I think it used to kind of be in the world of the new age-y kumbaya set, but I think everyone's been beginning to understand that that abundance mindset is better for everyone instead of that scarcity.
Mindset. Yes. You know, here we have an example in a 16 Z, which is Andreessen Horowitz just for our listeners. And we may refer to it either as Andreessen Horowitz, or a 16 Z. Yeah, it's, it's, it's been really, it's been really encouraging to me to see more people opening up, sharing what they know and teaching.
Yeah. I think that it really is, uh, something born of the openness of the internet, which has created a whole shift towards sharing. Uh, you know, we've obviously seen open source and so forth, but I think it really only works if you've got a story worth telling. And I think, uh, these guys, both Marc Andreessen and Ben Horowitz have a lot of shop thinking around innovation, talent, building teams and so forth.
Don't you think they're all the people we've listened to. They've really both got some very sharp end broad thinking about business and innovation success. Yeah. And I think it's the combination of their success as founders and their companies. And then now I think they said they see something like 2000 pitches from companies that have been warmly introduced to them, meaning someone they know has brought that company to their attention.
And, you know, they're being pitched 2000 times. In a given year. Um, so all of that two different companies and what they're doing, and then working with all their PO portfolio teams gives them a very interesting, uh, vantage point. And this next clip from Mark, he's kind of giving all of us, you know, three, you know, best practices and tips for startup success.
So the general criteria for a successful high-tech startup. Um, in my view, there's you see different sort of rules of thumb from different people, but the three big things you always come back to are is, is, is there a big market? And by the way, that comes in two parts, is there a big existing market that you think you can go after and sort of displace incumbents?
Or is it. Or do you believe there'll be a new market that will be big, so big market. Um, is there a fundamental technology or economic change that causes you to basically justify having a new company? Um, and that's really important. Um, so, you know, in a way I always think about that is, is there a 10 X change happening in the technology landscape?
Um, it's something 10 X faster are 10 X cheaper or 10 X better. Um, and then the third is team has, is the team outstanding. And if you think about this as an entrepreneur, it becomes a question of the founding team. Um, you know, w if, you know, some companies are solo founders and they can work, but generally, you know, most of us like myself, where human beings are mortal, um, you know, you want to have a founding team of, uh, of, uh, of complimentary skill sets.
And so you want to have at least one superstar technologist, um, quite possibly more than one. Um, and so we sort of look at market product and team, um, and you know, the reality is you need all three. Um, I would say, interestingly, if you're going to compromise as an investor, if we're going to compromise on one of those, it would actually be the product.
And the reason I say that is because. A great market is a lot easier to make up for, with iterative product execution, um, than a poor market, because they're probably the poor market, a small market is even if you do a great job on the product, there just aren't that many customers. So what, uh, I mean, there it is.
You've got a guy who's with couple of billion, he's invested in so many of the leading startups of our world, but then he gives it. Now. Now I'm just going into super student mode here for me. Are the essentials, is there a market? For what you're trying to do, are you leveraging technology to do something 10 times better?
And do you have the right team inside of this? I mean, Chad, I think we could probably do a whole show just on that formula, but very much reoccurring themes are you'll have heard me talk a lot about making things 10 times better. That's what you need to do in order to successfully launch to get traction for your company.
Team big theme of the show last year, having the right team members. I think in a particular angle on startups have the co-founder. I mean, this is just essential stuff. Don't try and do it all by yourself. And I think when you, when you actually sit back what formula he's just given us, there can be applied across all companies, all products and there's.
So many companies that don't succeed because they only had one or two of the three in the formula that Mark just gave us. Yeah. I it's really instructive to me how, like I said, here's someone that sees thousands of startup pitches in any given year. You know, how do you even begin to identify the companies that, you know, we'll, we'll be giving you that 10 X return that you need as a venture capitalist.
And I think the fact that he's kind of boil it down to these three things, I'm pretty sure that's kind of his mental model for evaluating any idea now is. Is there a market is the product 10 times better. And is there a really solid team that's building it. And so I'm thinking in his mind, he's probably giving the, each company a thumbs up or a thumbs down in those.
And if all three aren't thumbs up, then he's not going to be interested. Exactly, exactly. It's exhaustive. It's very similar to what Johann was telling us in Amsterdam. And in fact, this formula. That we just got is not necessarily different to that of the industry. The success comes in knowing how to understand market had to understand if something's 10 times better and had to understand team.
That's probably the great art of venture capital. Um, but it's how they put it into action. Now, just one note here for our listeners. If you're interested in this, I'm going to put in the show notes, a link to a very important article that their firm published called 16 things where they talk about their investment thesis and formula just as they did in this clip.
And then they attached to that, their thought leadership and writing. Around the 16 themes, the 16 things, uh, that they really like as emerging places to exploit this formula. So you can imagine VR machine learning, security, Bitcoin, et cetera. That's all in there. But if you are hungry to dive into this, we have the super link in the show notes@moonshots.io.
Because as, as we said, this is such a big topic. It's full of good stuff. So if you are interested in going next level, deeper, check out the show notes. Okay. So now we've gone deep into, into their formula. We've we've seen what it takes in terms of the cerebral thinking, but we know that none of this can happen.
If people and talent are not in place to, to live the dream, to make it come alive. And just to put in the, the serious, hard work that it takes to launch a successful company. So this next clip that we have for Mark Andreessen, really exploits this idea, and there's probably a mistake that we've all made of hiring someone who's not quite right.
And this has. Serious implications for a company when you don't manage the hiring process and have a clear vision of what a great employee can be. So let's have a listen to Mark Andreessen talking about the law of crappy people. Um, and with a Walker, having people really is, is that, that the capabilities or the competence of the people at any level in your company, as you grow, um, are going to degrade to the worst person at that level in your company.
Um, and so your, um, your vice-presidents, um, over time are all going to be as bad as your worst vice-president. Um, your engineers over time are all going to be as bad as your worst engineer. And the reason is because. Way the pyro decisions get made and the way the promotion decisions get made inside a company is within reference to the people who are already there.
And you basically need to just beat it back with a stick. I mean, you need to be like so determined to not have the staff. It's another term that people use the soft bigotry of low expectations. You need to be absolutely determined to have your definition of good, not be the average of the people we have in the company or the person who was accidentally promoted to a certain level who really shouldn't have been.
And now that he is, that's the definition of the level. Cause, cause he's not part of it. And one of the heuristics, I think you can use to, to, to beat it back is to ask yourself a question on every hire and every promotion. Um, is, are you, are you raising the average? Um, because you're probably either if you're hiring somebody or promoting somebody, you're either going to be raising the average at that level, uh, or for that role in the company or you're going to be lowering the average.
Yeah, this idea of lowering average was really fascinating to me. I've never worked at a company, so I haven't experienced this directly, uh, from kind of the employee side, but I have. Kind of noticed this in choosing the people that I collaborate with and the people that I hire, but it's kind of been subconscious.
And I think the way, the way Mark just calls out and he's like, look, if they're not increasing the average and making you better than you shouldn't be hiring them, um, then in an organization, there will be this tendency to kind of revert back to the average, which if everyone kind of does that, then you're just.
You know, you're diluting the amount of talent that you have available at your disposal. Although I, I want to take you to how this moment as this idea is manifest, and that is what I've seen in companies is that you're looking for somebody you're recruiting for a position and your. Kind of, but not totally satisfied with the candidates you're talking to, but there are deadlines you need to get the hire done and you end up hiring someone who's not quite right, but it was easier than starting again and challenging yourself to go and find the right person.
The same thing happens when people, and he spoke about this, promoting people who are not. Ready or not. Right for the promotion. Both of those two moments that I just mentioned are the lore of crappy people in action. So the learning for me on this is that when we're thinking about who we want to collaborate with, whether as employees or partners on a project, whatever, if you've got that little feeling that it's not quite right, that's the lore of crappy people.
Screaming at you saying don't do this, but sometimes we don't listen to that inner voice, right? Yeah. Sometimes the external pressures are just too great for us to listen to that inner voice that says no, no, wait, wait for the right person. It's definitely come back to bite me before, but you know, this relates directly back to.
His, his market product team philosophy. And that's, that's the formula that he uses to look at a team. And if he sees a team that's declining in performance, then you know, he knows that that's, that's the reason behind it. Yeah. And, and this is particularly important. When a young company moves out, get out of survival mode, gets into some traction, maybe goes from startup to scale up, you know, Hey, we've got some customers we're paying the bills.
There's potential to really take this somewhere. And you move beyond that inner circle. You're beyond 10 or 15 people. You move to 20, 30, 40. This is when all the degradation. In terms of the quality of people. I think the other interesting thing we can learn from this is to challenge yourself, to always surround yourself and hire people better than yourself, which is a thing that's come up before.
You've got to get people that you can learn from that can challenge you. Getting someone who's clearly a B player is just making the big mistake, uh, in that lore of crappy people. Yeah. Going, you know, a people hire a B people and B people hire C people. It's, uh, I mean, it's kind of crass, but I, I can see how it's very true.
And, um, yeah, but, but I think of it like this, Chad, I think always saying the way to translate a, B or C is the quality of the fit. It's the judgment of that person coming into the context of this team, this company, this organization, how good is the fit? Is it an, a quality fit or a B quality fit? Because the one thing I've seen is I've seen people performing at sea level, in one company, move to another one and light the world on fire.
So we know it's about the context and the fit everyone's going to talent. We're just, not all in the right place at the right time. So I think it's, you know, you can expand this to the degree of fit and if it's not quite right, don't do it. Yeah. No, that's really important. I'm glad you brought that up. And if it could be that they just need to be on a different team.
Uh, within the same company, um, under a different manager or managing a different group of people, et cetera, this next clip we have from Ben and I, I love kind of going back and forth between. Uh, the two of them, you know, I had so much fun in our last, uh, clips show. This is, this is kind of a little bit of a continuation of that.
Um, so it's, this, this is definitely fun. Ben talks about the P the, or product from the product market team, uh, formula. And, um, he just gives some good advice. Around how to think about, you know, building your first product, uh, when you're just starting out as a startup. Startups get really hard when the product gets into market.
And those, those of you who've done it know this, right? Like when you're building the product, it's all good. You know, how's your startup, it's doing fantastic. Now we're building a product. It's going to be great. It's so genius. Like everybody I tell about it, kisses me on the lid. Wonderful. But then you get in market and nobody wants it.
Like then it gets real hard, real fast. Um, so that's like kind of the first psychological trauma. Um, but the, the, the, the initial skill is, can you build a great product? Can you build a product that, um, you know, a lot of people really want, uh, for whatever reason, and that is different. Um, then they're kind of building a great company and.
Uh, but if you can build a great product, doesn't matter if you can build a great company cause you, you don't belong at a startup because if you can't build a great product and never get to the great company, and that was actually a big, uh, error in the nineties, um, and a lot of the lean startup methodology and so forth came out of the mistakes that were made in the nineties where they'd bring in a professional CEO really early on, who didn't know how to build a great product and with, you know, build the company to a giant size and burn up all the cash.
Uh, product, product, product. It's so true. JAG. I got to tell you, like, get the product, right. And there's so many distractions, uh, that, that Horowitz is alluding to fancy business cards, uh, snazzy, uh, trappings of a proper company. Uh, the reality of innovation. And we're learning this from. Not just Silicon Valley Branson had a chalkboard saying, you know, flights for 25 bucks, right.
You have to get a product. Right. And I think the, the, the temptation is to be distracted by all the obvious things around a company, but not the essential things of product. And to me, for what this reminds me of and reinforces to me, Is it product first. And I think when we talk about a product in this context, it deserves a little bit of a focus.
And what we're talking about is a product, a physical product, or a digital service, anything in between something that you have built. And the key thing is that you have, you have validated it with real. Customers, the big opportunity when we talk about product is not like we built something it's that we have built something and we have tested, we have learned from real customers and we know we're not guessing anymore.
We know. They love it. This is what we mean by that. There's an interesting, other part of this interview where Ben is talking about, it's kind of right before here, you can spend 18 months. And, and all of my money as the VC, you know, building this great quote unquote you know, product that actually hasn't seen the light of day.
And then this quote picks up where he says, you know, actually when you put it in the market, that's when it gets hard, because when it's in the market, it's being tested it with dozens or hundreds or thousands, or even millions of customers. And that's. Kind of where the metal and the value, uh, and the success of your company is going to be determined is when it, you know, it hits the ground and, and people actually start, start using it.
Um, it's, it's so true. So this is the big shift he was alluding to that lean has created. It is moving away from guessing that a product is going to be good to knowing. To really knowing that it's going to be good. And if you can do that, then you are on the path to success. And I think for our listeners, this is the big, big takeout is making sure that you're testing and learning your idea that you're not guessing.
I think that's the biggest thing folks can take away from it. I think also. To not be distracted by the VC money or the pressure to hire a shiny new CEO, because all of those things will distract you from building the product. He said, you can't have a product, or he can't have a company without a great product first.
So if you set out to bringing in the right management and C-suite and let the product die on the vine, like you're just, you're not going to have a company and you're going to spend all the money. Yeah, it's really, really true. So already in this show, let's just think about what we've, we've covered.
We've seen how, um, Andreessen Horowitz totally disrupted the VC market by, by thinking about having been customers of the VCs. What the perfect VC firm would look like. They've brought their thinking from being inside to outside and made it much more transparent there. They've got great thing. This essential formula for success, you know, market 10 X, uh, in technology and a great team, and that all of this, uh, starts with building a great product.
First and you need good people to get that done, and you need to watch out for that lore of the lower crappy people and just watch out for that big, nasty, and going into markets that have lots of opportunity. Yes. And there is a new one's there it's actually good that you bring that up because there's a nuance there.
Cause he said, Mike says, it's not just about a market that you see. There may be a market that is yet to emerge. And if you, if you think about it, things in that sense, it seems like a world of possibilities in front of us. Um, so that's what we've got already and we're only halfway through the second half of the show.
We are going to go through four amazing clips that really speak to. Entrepreneurship. And it you'll see the signature style of, um, Ben Horowitz in particular exposing what it really takes to be successful. And I think that's, what's going to be so valuable for our audience, but before we do Mike, I think I would like to ask you, because I haven't read.
Ben's book the hard thing about hard things. So why don't you, uh, share kind of maybe some of the biggest learnings that you took from reading it? Yeah. So I think the, the reason this book matters, it's called the hard thing about hard things. We'll have a link to it in the show in the show notes is I think it's so nice for, uh, uh, He Ben Horowitz and Mark they're their poster boys of Silicon Valley and startups yet.
What is so good about Ben Horowitz book? Is he deliberately tells you. How hard it really is. It's a, if you will, a warts and all story where he starts from the point of here, uh, the really nasty, hard, stressful things that happen all the time that nobody talks about. And I found it in both ways, it was refreshing and it made you more aware of what you're getting into.
But on the other side, it's also like, well, once you. Explore the most stressful things and you get almost forensic about them. This book gives you a lot of suggestions on how you can tackle things that in most cases, kill companies and how you can actually get through them and become stronger on it when you're through on the other end.
Yeah, I think. W what's been surprising to me is kind of his bins, uh, candor and vulnerability in the interviews that I've watched with him. And I think both he and Mark and the entire company are genuinely interested in being very open and transparent about the real lives of startups and the real, you know, consequences of doing the hard work to create these companies.
Yeah. Yeah. I it's, it's a really, a distinct tone of voice that they have, which is transparency and openness. You, you get it in full color in, in the book. So it's called the hard thing about hard things by Ben Horowitz. If you just go to moonshots.io, you'll be able to. Get the link to that. And, and really, it's a big recommendation from myself this time.
Um, my first little moonshots book review, Chad, um, and I think that sets us up beautifully. So why don't we, why don't you, Chad? Help us launch into a new series of clips, all about entrepre. No shoot. We've got two great short clips and two longer clips. And when I heard this next quote from Ben in the interview, I immediately thought of Richard Branson.
And so I'm just going to play this clip and see if you, the listeners can figure out why the basis of a good company is to basically figure out something about the world that nobody else knows. And then that, that secret becomes the company. Mike? Yeah, the secret, huh? The secret. How does it relate to, uh, to Branson?
I guess that's my question to you to see if you can pick up, Oh, I'm going to let you tell us, I think you've got something here that you've got much better than either. So why don't you, why don't you break this open? Because I only have some museums it's really, it's actually quite, it's quite simple. I, the simplicity of how Richard Branson comes up with ideas for companies of.
Turn your frustrations into businesses that genius I heard in Ben's quote of take the secrets of the world and turn those into businesses. So, you know, for those of us that are looking for ways to see the world in a new way to come up with ideas of our own, now we have another, you know, Tool in our toolkit to be able to do that.
So, you know, uh, we can journal our frustrations and, you know, or even just, uh, carry around a chalkboard with us and, uh, and create businesses out of our frustrations, like Richard Branson. Um, but now we can, you know, try and uncover, discover secrets in the world, uh, and turn those into businesses. As well, that's why I love this, this clip so much.
Yeah. And, and I, I think we all know that feeling when a secret becomes a company and when you really have a founder telling you the story and you know, like, Oh, my gosh, you, you, it's a thrill. It's a sort of a rush that you get and you're like, Oh, I know the secret they've captured the lightning in a bottle and it's, it's so, so true.
Um, because the secret bit, and this is what I learned from that, and this was kind of where I was going. The secret is. Related to the fact that if it was obvious and not a secret, then everyone would already be been doing it. So it speaks a little bit to the timing that you've decoded a secret way of doing something and the secret in first that nobody knows about it.
So when Uber came out, when, if you look at the explosion of Bitcoin and, uh, blockchain technology, there are secret ways of doing things differently. And when you do it, Amazing things happen, but the secret bit, it's also about the timing doing it in a completely different way when nobody else is thinking about doing that.
And that's why often you'll hear Ben Horowitz talking about that when the best ideas and the best companies are often explained when they're very early stage, a lot of people write them off and don't understand it because they're using a secret that people don't get. People don't understand it because it's a secret.
And they're like, huh, Oh, that's never going to work. And, you know, famously, we had Chris soccer in the last show and we've heard Andreessen Horowitz in clips. Not that we're going to have on the show, but if you have a look, they all admit to just not understanding ideas that have turned out to be really big.
So. Andreessen Horowitz. They invested in Airbnb, but, and our previous show, Chris Sacca didn't invest in it because he didn't get it. Remember he said, sleeping on the cash. It doesn't make any sense to me in the same way. Andreessen Horowitz didn't understand square, which even though they invested in Twitter, which Jack Dorsey did both companies, they didn't get square and they, and they openly admit to be kicking themselves that they didn't do it.
But that's what the secret speaks to it. Yeah, I, I think the, the timing part is very important. Mark Andreessen in another interview brings up the Apple Newton as you know, 15, 17 years ahead of its time as a, as a kind of a pong tablet. Uh, form factor computing device. So Apple Apple's known that secret of, you know, the future of, of smartphones and tablets, you know, for many years, but came out too early.
Yes, you were absolutely right. They were too early and let's go even one step deeper. And this is really important for our listeners. Apple created a handheld product called the Apple Newton, which informed factor looks like, uh, at you can easily see the first iPhone in a country, which 15 years later, but why did the iPhone work and the Apple Newton fail.
If you can draw the line between them and say that, you know, the Newton was the predecessor, you know, here's the thing they didn't test and learn. I'm enough. And that's why it was too early because the Apple Newton was competing with a handwritten pen paper note. So you pull out your notepad and you just scroll down an idea of Richard Branson style.
However, the problem was in the lab, the E ink writing technology kind of worked. But once they shifted in a mass market, hugely scaled product, it's simply the Apple mutant handheld recognition technology could not compete anywhere, close to pen and paper. And that's why it failed big time. All of the other thinking and vision around the experience was perfect, but because they didn't get out there and truly test the product, this is exactly what we were talking about around building great product.
First in great means you've test and learn. That was the big learning that we can make is just because it's working good in PowerPoint or in a prototype software and envision until, you know, you can do it in the field in real life. Until, you know, you can do that. You do not have a great product and it, the whole rest of the industry just kind of wrote off that entire product, you know, potential.
And then, uh, we'll just sat on it. And then they saw all of them. You know, the increase in cell data, access and cloud computing and all in touch screens and, you know, high Rez displays. And then re-introduced it with all of that as kind of a multiplying factor. And then, you know, we don't have to tell everyone how successful the iPhone is.
Yeah. So take that idea, Chad, and just think about. That you really need to have a great tested and validated product and underlying that idea of you found a secret way of doing things when it goes wrong. You're no longer in, in a peaceful tranquil world. It's a time of war. And what's really interesting about Ben Horowitz is he talks about all the management philosophies that are out there in the world are all for the peacetime CEO.
Um, good weather situations in Holland. They, they have this great saying of lacquer via Manson, which means good weather people. They only do well in good times and they don't really do well in bad. Well, Ben Horowitz. He actually is a big advocate of being able to work in wartime because that's what it's really like.
That's what we've seen in his book. And that's what we've seen in his transparency. So let's have a listen now to what Ben has to say around peace time versus a wartime CEOs. If you read the in, in the management literature, it's almost entirely written for peacetime CEOs. So like every thing you learn about decision-making and delegation and don't micromanage and all these things are very peace time oriented in the sense that.
In peacetime, you're much more focused on the development of the people and the development of the organization over the long-term and the ability for the organization outside of yourself to make higher quality decisions. And, and then also kind of be creative outside of the mission. And that's kind of.
All affordable. If like you've got, say, you've got Google search and you're just like running steamrolling through the industry, then you, you can do a lot more kind of peacetime sort of things. Um, on the other hand, right? If you're running out of cash or if you're like Apple, when Steve jobs first took over and they had three weeks of cash left and so forth.
Like you can't actually, like that's not affordable in the decision making process. You've got to get to the very accurate decision extremely. And that's when you kind of have like, that's when the wartime techniques come into play and you know, sometimes in war time, you end up doing things that actually do undermine the development of the organization because there's more burden on the CEO to make.
A much larger number of decisions because accuracy is so important. And the CEO by virtue of her position has got more knowledge to make those decisions and, and more authority to, to make them definitive and fast and high quality. I would love to. Soak up all of the wartime CEO strategies that, that Mark and Ben and their firm have it.
He only kind of hints at it here, but, uh, the distinction he makes, I think is an important one because. He kind of frames it in that, you know, peacetime CEO's can focus on building up the company, but wartime CEOs may have to make tough and difficult decisions that, that impact, uh, the business may be in a negative way, you know, to be able to just kind of like to fight that fight and kind of put out the fires that they're dealing with.
Yeah, because a theme that we've seen and we're going to do, and we have to do a show on Paul Graham from Y Combinator, he talks about survival is success and where I'm going with that is in wartime. Sometimes you have to do things that don't really serve. You know the vision and the strategy, but they serve survival.
Right? We exist. We can keep going because particularly decisions with cashflow, which are often deeply neglected. I mean, I've seen this so many times, like manage the cash where I have a great product, great people, but manage the cash for goodness sake. And this is what happens in wartime. When things are challenging, you have to make calls where you forgo your maybe your vision.
Uh, in, in, in a, sort of a content, uh, approach and to say, no, we need to survive. So we need to cut this, do this, pivot, this, and what was really powerful that we can learn from Ben Horowitz is it's wartime much more than you think it, most of the literature and inputs are all about peace time. So go looking for learnings about when it's hard, when it's tough, when you don't know what to do when there's incredible constraints put on you.
And I think that being open to this and knowing that this is going to come is critical for anyone thinking of being a founder or a CEO. Here's the thing. It is not. Easy don't romanticize it. Don't, don't envision yourself driving a Tesla through Silicon Valley. It's hard. You sacrifice more than you can ever imagine.
And it's only through that sacrifice that, that you succeed, because if it was easy, everyone would be doing it. You would have millions of competitors. So, you know, when you hit hard things, you're actually the strangest thing in the world. Is you're actually on track when it gets hard, because that means you're encountering meaningful challenge constraint that most people fail on.
So that's why you've got to lean into, to the wartime and, and, and go in search of solutions at the end of the tunnel. Yeah. I think the funniest part of that part of the interview was when he's talking about, you know, so I was, I started my company and I read, started reading the literature and it's like, here are all the things that you can do, you know, to keep things from going wrong.
And he's like, well, but I, you know, mess things up in the first week. So now what do I do? Can't meet any of these management books because they're telling me how to prevent things from going around, but it's gone all wrong. It's so true. It's so true. And you know, there's an interesting, uh, thought that that Mark Andreessen has, which is when we're in this situation, we go looking, uh, we, we look high to the skies, uh, for magic to fall into our hands, or we look for what he calls the silver bullets.
Right. And the reality is that life is very different to that. Entrepreneurship. Innovation is very different to that. So let's have a listen now to Mark Andreessen talking not about silver bullets, but lead bullets. The Ben also talks about his book as there's, there's no silver bullet. Like there's the temptation when you get kind of in the shit, it's always like, there's gotta be a way out of this and it's gotta be one thing that there's gotta be some idea, or to your point, some piece of advice.
Right. Or some way to reframe, you know, if I could just reframe the pitch this way, or if I could just hire this person or just get this customer, um, or something, you know, it's gonna fix everything. And we always like to say, there are no silver bullets, there are only lead bullets. Um, and so you just have to kind of do all the work.
Um, and most of the work is just a grinding. It's just, you know, grinding labor, and there's just no substitute for it. Yeah, this resonated with me so much. I think when I'm in the middle of that grind, part of me is tempted to go and search for that silver bullet. You know, I think, Oh, there's there's, there is that one thing that I can do that will make all of my insert problem here, higher rain.
It's just like, it'll make it so much better, but, um, It's good to hear from someone like Mark. That's like, Nope, it's just a lot of grinding and hard work. Yeah. And, and I think that, uh, it's such an important message now because it's never been easier to start a company. Um, but it doesn't make success come at any easier.
So starting is very different too. Really succeeding to build building a thriving growing business that has momentum. And I know that, uh, that for some of our listeners, you might be like, well, you know, Chad and Mike are getting rather stuck. It's part of the show, you know, it's true. The obstacle is the way hardship is the way with entrepreneurship because.
It is more than just building a great product. It's building a great team is building a great business model is building a great story that customers can adopt an advocate and share with the world to me though. This is why I love what we talk about, what we do in our jobs. Why I love it so much the desire to create something 10 times better.
Cause it's so hard and this, this is so challenging. It's almost impossible. I mean, yeah. You know, uh, clay Christiansen, one of the gurus of innovation says that 95% of innovation projects fail. And it's so true of not only products, it's the same, same numbers for companies, very few succeed. And this makes it infinitely interesting and compelling to me because it's so hard.
So it's a lifetime of work is needed to succeed in this space. To me. That's what Mark and bane, uh, highlighting for us in these clips. Yeah. I think my takeaway from, from the lead bullets is just to continue to chip away at your most important work. And that's where the breakthroughs will come from. If you set out to make a big breakthrough, it, that's not really how innovation happens.
It's it's in the weeds, it's doing the work. And I think, especially for us solo entrepreneurs out there, we can really get stuck in our own heads trying to find the solution. And, um, it's, it's all part of. Our collective, you know, I don't want to say suffering, maybe a struggle, you know, to, to persevere and to build the products and the companies that, that we want to.
And I would love to end this show with a clip from Ben Horowitz. Really just kind of elaborating on that in a little bit of real talk around, you know, our journey as entrepreneurs and how it's not. Uh, it's not always a rosy road for us. And, um, so here he is talking about the entrepreneurial struggle.
You've brought all these people and they believed in you, um, things aren't going as sold, uh, and. You know, like you feel that and it's going badly. And then like, it's amplified. If they read that you suck in the press. As they did about me many times, it's like Ben was an idiot. I was like, Oh God, you know?
And it wasn't that like, I didn't care that they said I was an idiot. What bothered me was people who worked for me would go home and their spouse would go, you know, your CEO's an idiot. Like I just read it here in business week. Yeah. You just have to focus your mind on like what you can do, not what you can't do and you can't focus on like what's going on wrong and what that might imply.
And, you know, Peter TL has a great thing in his startup kind of class that he taught, which is, he says like there's people who believe in statistics. And they believe that like there's, you know, probabilities to things happen and all you can do is run a process. And like, it is what it is and the statistics come out.
And then there's people that believe in calculus and they believe there's a right answer. And if you're a startup CEO, you have to believe in calculus, you have to believe you can find the answer and that's all you can focus on. And there's an answer out there somewhere. And trust me, like there's always an answer and hopefully, you know, God willing, you have enough time to get to the answer.
Um, but that's really all there is. I don't think there's not that much comfort out there. Like I talked to entrepreneurs all the time. I try and tell, let me tell you how bad it was for me. It sucked. And they were like, that was then motherfucker. This is now, this is my company. I don't care about you.
Hmm. Yeah. I, I love how he can tell the story of, um, people that work for him would go home. And say, look at how bad your CEO's he's in being totally trashed in business week. Uh, I think it's so good that he talks about that and puts it in perspective because I do not know of any wildly successful company that is not experienced some great valleys of darkness.
So it's not just for those that failed. It's actually those that succeed as well. Look at what Uber has been going through the last year. They were a poster boy, and now they're in big trouble, you know, it's for sure. It's part of the journey and I, and I, I just. Find it reassuring that when we face hardship, we know that, Hey, these guys who are absolutely pioneers and leaders, they had it too.
I mean, it's deeply reassuring, isn't it? Chad? Yeah. I think hearing it from two very experienced, not only startup founders, but also venture capital investors is just a nice, refreshing and very experienced perspective. Um, that we haven't gotten in many of the other innovators that we've decoded here on the show.
Um, I think that, um, the, what they serve so well, both Marc Andreessen and Ben Horowitz is this full spectrum. The thinking, I think what has made them unique in this show is, you know, they talk about the lore of crappy people. So of course you want to hire good people, but I love the fact that Mark's like, no, no, no, no.
This is what happens. When, when you hire a B people, they hire C people and those CPL, they hire a D people and you're like, Oh yeah. And the way in which they call out. The classic mistakes and they talk about the hard things, the challenges. And I think that this is what I've got out of, uh, digging into their content, again, digging into their ideas.
Yeah. It's really, it's sort of, it makes you, gives you fortitude, I think is a good way of describing their thinking. Yeah. And again, I love the clip going and finding secrets and turning those into businesses and also just learning from them how important they see things like transparency to be, which, you know, again, we're, we're, we're seeing more and more going back to Uber.
You know, now that we, the public know what was actually going on in the, we can make better informed decisions about what we want companies. To be held accountable for, Hmm. Let me ask you this question, Chad, if you were to do one thing differently after taking on all this, uh, uh, slightly stoic thinking from Andreessen and Horowitz, what's the one thing you will do differently tomorrow based on what you've heard today.
That's a tough question, but, um, I think. Did it, was it the hardship, um, and stuff, uh, the wartime stuff from Ben Horowitz that, that sparked your mind? Or is it, it sounds like the secret, uh, becoming a company was really compelling for you. Are you maybe going to go and look for the secret that you have or look for a secret that you can apply to storytelling?
Yeah, exactly. I think that, that's what I was trying to say a little earlier is that, you know, now I have this toolkit of looking for frustrations in my own life and, and uncovering secrets, and then maybe use that new perspective to, you know, create new product lines or services, you know, and, and, and what I'm doing, just look looking at at, at the world and us maybe slightly different or new way.
I think, um, on more, uh, if you've got the finding the secrets I'm I love the wartime thinking. I love this, this, this reinforcement for us in the, in the audience, build a great product first and do the hard work of validating and testing that and make sure that you really. Have something and do the hard yards and build a great team before you get too carried away.
And, and I think it's such a great reminder, particularly for a new year at we're starting a new year. And I think it's so important to recognize and to be ready to climb the mountain. And it's a big mountain indeed. Isn't it? Yeah. And there's so many other great. Uh, figures in the VC world that we could talk about, but I would actually, you know, like to maybe choose a different area or kind of go back to our, uh, to the other side of things in, in, you know, find a Silicon Valley or tech startup to, to profile.
In our next episode, do you have any, uh, anything on the, on the radar mic? We can always come back and do Paul Graham and Peter teal, um, another time, but I'm kind of itching to get back into the, into the nitty-gritty of a company. Okay. So are you feeling more entrepreneurial or more product design-y in terms of the themes that you'd like to dig into?
I feel like that's a leading question. Cause I, I know where you're going with it, but I, I, I love, I would love diving into the designy side of things. Cause I know we have some good, uh, potential subjects lined up there. Yeah. Well, I, you know what jumps to my mind, what jumps to my mind is. Two people, Brian Chesky, the design founder of Airbnb, uh, you know, the AirBeam any of the Airbnb guys, there's, I'm, I'm called them in great regard in terms of their, their product.
And, um, I would also say a classic, you know, other than Joe and Brian at Airbnb, particularly Joe, actually, now that I think about it, the other person has to be Johnny ive. Right. I mean, either of those two for the next show, I mean, we could start a whole new chapter of a couple of designers. I would even go as far as Dyson, uh, from the UK.
Um, I hauled all those three guys with tremendous regard, tremendous regard. Cool. Well, I'm excited to, uh, uh, I mean, if you guys, the listeners could see our list, it's, you know, dozens of people like Mike and I will be doing this for, for many months or a lifetime, but, um, I want to give a shout out to all of you listeners and just say, thank you, Mike.
And I had a fantastic time last year, doing all of the research and, and, and discussions, uh, and recordings, um, you know, To hopefully, uh, give us and you the tools and to go out and do some really great work. And, um, you know, we're committed to doing that for you and for ourselves in this new year. Yeah, absolutely.
Um, so I wanted to say Chad, just a big, thank you. Not only. For the whole year, last year, but I just feel we've got so many good things ahead of us this year for this show. I'm really excited about jumping, uh, into the world of design. It's very close to my heart. So I'm super excited about that. I think, um, We did, uh, ourselves and the audio is a great service today in unlocking the thinking of Ben Horowitz and Marc, Andreessen's so much to learn there.
And I, I do think Ben's book, the hard thing about hard things is a must read for anyone. Wishing to start a company. So I feel that at this point, we've, we've got a great road ahead of us. So thank you to you, Chad, to our listeners. And we can't wait for the next show where we jump into the world of design here on the moonshots.
That's rap.