Marc Andreessen: evaluation

Transcript context

…Andreessen Horowitz, right. And then that person owned the business, often 100% of the business, and then that person ran the business. These are the people that communists hated. This is the bourgeois capitalist — Company owner, builder, CEO, as one person with a direct link between ownership and control. The person who owns it controls it, the person who controls it runs it. It's just a thing. There's a proprietor of the business. So that's the old model. And then what he said basically, as of the middle of the 20th century, most of the economy was transitioning, and I think that transition has happened and is basically now complete. Most of the economy transitions to a different mode of operating, a different kind of capitalism called managerial capitalism. In managerial capitalism, you have a separation of ownership and management. Think of a public company, you have one set of owners who are dispersed shareholders, and there's like a million of them for a big company, and who knows where they are, and they're not paying any attention to the company, and they have no ability to run the company. And then you've got a professional managerial class, and they step in and they run the company. What he said is — as a consequence of that the managers end up in control. Even though the managers don't own the company. In a lot of public companies, the managers might own like 1% of the company, but they end up in total control, and then they can do whatever they want. And he actually said — Look, it doesn't even matter if you think this is good or bad, it's just inevitable. And it's inevitable because of scale and complexity. And so the modern industrial and post industrial organizations are going to end up being so big and so complex and so technical, that you're going to need this professional managerial class to run them. And it's just an inevitability that this is how it's gonna go. So I really think this is exactly what's played out. A consequence of that, that I think is pretty obvious, is that managerial capitalism has a big advantage that Burnham identified, which is that the managers are often very good at running things at scale. And we have these giant industries and sectors of the economy and health care and education, all these things that are running at giant levels of scale, which was new in the 20th century. But there's sort of a consequence of that, which is managers don't build new things. They're not trained to do it, they don't have the background to do it, they don't have the personality to do it, they don't have the temperament to do it, and they don't have the incentives to do it. Because the number one job, if you're a manager, is not to upset the applecart. You want to stay in that job for as long as possible, you want to get paid your annual comp for as long as possible, and you don't want to do anything that would introduce risk. And so managers can't and won't build new things. b for as long as possible, you want to get paid your annual comp for as long as possible, and you don't want to do anything that would introduce risk. And so managers can't and won't build new things. And so specifically, to your question, the role of startups, the role of entrepreneurial capitalism, is to basically bring back the old bourgeois capitalist model enough. It's a rump effort, because it's not most of the economy today, but bring back the older model of bourgeois capitalism, or what we call entrepreneurial capitalism, bring it back enough to at least be able to build the new things. So basically what we do is we fund the new bourgeois capitalists, who we call tech founders. And then there's two layers of finance that enable bourgeois capitalism to at least resurface a little bit within this managerial system. Venture capital does that at the point of inception, and then private equity does that at a point when a company needs to actually transform. I view it as — we're an enabling agent for at least enough of a resumption of bourgeois capitalism to be able to get new things built, even if most of the companies that we built ultimately themselves end up being run in the managerial model. And Burnham would say that's just the way of the modern world, that's just how it's gonna work. But you guys get preferred shares and board seats, and rightfully so, but wouldn't Burnham look at this and say — “You're not the owners and you do have some amount of control over your companies.”…

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