Ben Horowitz: belief

Transcript context

…I'm going to bring us back to AI. Something that a lot of people are talking about right now while we're recording this is this potential huge bubble we're in with AI. Sam Altman said, "We're in a big bubble," which is, that's saying a lot. I'm curious just how you that it- What is it saying? First of all, I should qualify this by saying I am an investor and Sam's a CEO. So CEOs have to have much more purpose when they talk. Investors just have to be entertained. So you got to give Sam credit for what is it in his interest to say it? Well, if it's a bubble, then the one thing you should invest in is him and not all these guys chasing after him. I would say that's very smart. And then the other thing that's smart about it is there's nothing that you can say to the press that will make them love you more than saying, "All investors and entrepreneurs chasing this are idiots." They love them. The press are generally haters, and so it's just red meat for the haters, which was also super clever. So I think whether even he believes that or not, that was a super smart thing to say. So I'll just put it there. Whereas what I'm going to say won't be as smart, but it will... I don't really have an ax to grind here. I mean, I could have an ax to grind and say, "Okay, let's get all the other investors out. " I'll say, "It's a massive bubble." But what I would say about that is, so the first thing, the one thing about bubbles is anytime everybody thinks it's a bubble, it's not a bubble because in order for it to bubble, you need capitulation. In that you need everybody to believe it's not a bubble, because then the prices really go out of control. But as long as there's people who think it's a bubble, then it's hard for that to happen. And it's funny, I had this debate in The Economist, I think with Steve Blank in like 2011 or '12 when everybody thought it was a tech bubble, if you can imagine that, which it absolutely was not. But because there were 1,400 articles saying that we were in a tech bubble, and I mean where prices were then compared to where they are now. But I knew because everybody was saying it was a bubble, it wasn't a bubble. I knew that. The prices were higher, but the reason the prices were higher was we're getting to a global market. AI prices are higher than prior prices, but if you look at the revenue growth and numbers, we had not seen anything like it. Sam's product worked so amazingly, we'd never seen that before. Not even Google, not anybody. And so that's real. And we have companies that went from zero to 800 million in a year and that kind of thing. I would say there's a basis for the prices going up, first of all. I think the thing that's right about what Sam is saying is the landscape is early, really early. The technology is very immature. As amazingly as it works, there's a long way to go to improve it. So it's very possible when you have that much technological change, that the positions that these companies have achieved with their high revenue isn't sustainable, and that there'll be a competitive change that either lowers prices or a new number one emerges or that kind of thing. Yeah, that's possible. s have achieved with their high revenue isn't sustainable, and that there'll be a competitive change that either lowers prices or a new number one emerges or that kind of thing. Yeah, that's possible. But I wouldn't characterize that as being a financial bubble in that if you go back to the great dot-com bubble that everybody is always waiting for it to happen again, which I was CEO during. The thing that happened there was very different, which is it was the internet and every smart investor knew that the internet was a big deal. How could you not fucking know that the internet was, of course it's a big deal. But if you go back to 1996, at Netscape, we had 90% browser share and we had 50 million users. So there were 55 million people on the internet in total, and half of those were on dial-up. And then to build a product like Evite, the greeting card company, had 300 engineers. That's how hard it was to build this stuff. And so the math didn't work, and the math didn't work on any of those ideas, but the investors kept pouring money in. And then eventually everybody went bankrupt because there was no revenue coming in. And when they figured that out, then nobody would invest in anything. And of course then everybody realized, well, the internet was actually real and Paul Krugman didn't know what he's talking about, and like it was going to be a big thing. And then Facebook and Google and all these things emerged. But the thing that made it a bubble was the unit economics didn't work, the businesses didn't work. These businesses are all working, and they're being priced appropriately for how they're growing. So that's not in effect. The thing that you could say is, "They're not going to keep growing like that," and so forth. And I'm not sure about that. The products, like I said, are working so much better than any technology product that we've ever built has worked. It's just mind-blowing how good this stuff is. And so, I don't know, if I had to bet, I would bet not a bubble. I think there'll be some dislocation. I think always in venture capital, if you've got a run like this, then the great company and the crap company both get funded. But that's just venture capital. That's not a bubble.…

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