Andreessen Horowitz’s Marc Andreessen was a guest on Masters in Business hosted by Barry Ritholtz. The content is timeless, so listen with a pen and paper. That way, you can refer back to it from time to time. For transcripts delivered straight to your email, subscribe here. Or for my favorite finance podcasts of the week, subscribe here!
My Three Favorite Exercpts from Marc
1. Was Pets.com a bad idea?
Barry: “Pets.com didn’t make any sense.”
Marc: Being the classic example, right? So it’s actually really striking. All those ideas are working today. I can’t think of a single idea from that era that isn’t working today. The kicker to the Pets.com story is there is company Chewy that sold for over $3 billion out of Florida, which is online pet food sales like two weeks ago. Even online pet food sales turns out to be a gigantic and very successful business. Basically the tech community, the Silicon Valley community, the global community connected to the internet very quickly between 1995 and call it 1998 actually came up with all the ideas.”
2. The depression era baby effect
Marc: So I guess I would say that there’s a theory in economics on this which economists call the depression baby effect. There have been studies and papers about this. If you Google, “depression babies,” it’ll pop up. Investors who were in the stock market in 1929 never went back into the stock market. They stayed out of the stock market for the rest of their lives because 1929 proved definitively that stocks are fundamentally unsafe…So anyway the point is if you live through one of these scarring crashes, you get psychologically marked. You get traumatized, and by the way, the you there is everybody. It’s not just the investors. It’s also everybody who follows the market. It’s also people who write about the market. It’s also the people who work at the companies. Everybody get’s traumatized…I think tech stocks have been undervalued consistently since basically 2002, 2003, and even to this day are probably undervalued to where they should be valued…But then the other thing that’s happening is finally enough time has passed — 17 years since the crash — so now finally we are getting enough kids coming to the Valley who don’t have a memory of the crash.”
3. Barry asks, “How do you figure out who has not just the best idea but the best way to execute it when you are dealing with some really young, inexperienced technologists…”?
Marc: “We call this the volcano movie problem. There’s never just one movie about volcanos. There’s always two or three or four or five or six. There’s never just one giant robot movie. There’s never just one killer meteor movie. There has to be two. That’s the thing. These ideas come in waves and so that’s exactly what happens…One of the ones we dig into hard to try to pull what we call the real founders away from the people who think they have an idea and want to try something — the concept we call the idea maze. One of our partners, Chris Dixon wrote a paper on Balaji Srinivasan’s idea called ‘The Idea Maze.’ So the idea maze is — it appears on the surface, look this is a cool idea and lots of people have this idea — the really good founders have thought about the problem so deeply and for so long that they have worked their way through the logic maze of how to try the idea and what they’re going to try next if it doesn’t work and what the implications would be if they learned something and who are the people they need to bring into the company and how do they segment the market and how do they go acquire the customers — all these details.”
**Bonus: What are Marc’s favorite books?**
Marc: “Favorite books. So I have three quick nominations, and I’m getting the hook here. Poor Charlie’s Almanack, the compendium of Charlie Munger’s speeches, I think is tremendous. Extreme Ownership has been a favorite recent book by a guy named Jocko Willink. He is a former Navy seal commander. One of the best books on leadership I have ever read and a tremendous war story book as well. Then, there are so many. There is a brand new book by Robert Sapolsky I just started on human behavior. It is sort of his magnum opus on human behavior. He’s the great evolutionary theorist, and so that would probably be the third one. That’s the new one but it looks very exciting.”
**Double Bonus: What is it that Marc knows about technology and VC that he wishes he knew 25+ years ago?**
Marc: “There are no bad ideas. There are only early ideas… They’ll all happen. It’ll all happen. I’ve become convinced now it’ll all happen. Every smart person that comes in here with a crazy idea, it’s all going to happen at some point. They will all happen. It’s just a question of when.”