Marc Andreessen: disagreement

Transcript context

…What we definitely don't do is the speculation side, we just don't do that. And I mean that very specifically, we're not running a hedge fund. What we do is we apply the classic venture capital 101 playbook to crypto. And we do that the exact same way that we do with every other venture sector that we invest in, which is to say we're trying to back new ventures. In crypto that venture might be a new company, or it might be a new network, or it might be a hybrid of the two and we're completely agnostic as to which way that goes. When we write our crypto term sheets, even when we're backing a crypto C Corp, we always write in the term sheet that they can flip it into being a tokenized network anytime they want to. We don't distinguish between companies and networks. But we approach it with a Venture Capital 101 playbook, which is — we're looking for really sharp founders who have a vision and the determination to go after it. Where there's some reason to believe that there's some sort of deep level of technological economic change happening, which is what you need for a new startup to wedge into a market. And that there's a reason for it to exist, that there's a market for what they're building and they're gonna build a product, and there's gonna be an intersection between product and market, and there's gonna be a way to make money and you know, the core playbook. We go into every crypto investment with the same timeframe as we go into venture investing. So we go in with at least a five to 10 year timeframe, if not a 15 to 20 year timeframe. That's what we do, the reason that's not necessarily the norm in crypto is an artifact of the fact that — especially anything with crypto tokens, there is this thing where they tend to publicly float a lot sooner than startup equity floats. Let's say we're backing a new crypto network, it goes ahead and floats a token as sort of one of the first steps of what it does. It has a liquid thing years in advance of when a corresponding normal C Corp would. There’s one thing in behavioral economics where when something has a daily price signal and where you can trade it, people tend to obsess on the daily price signal and they tend to trade it too much. There's all this literature on this that kind of shows how this happens. It's part of the human experience, we can't help ourselves, it's like moths to a flame. If I can trade the stock every day, I trade the stock every day. Almost every investor in almost every asset class trades too often in a way that damages their returns. And then as a consequence of that, what's happened is a lot of the investment firms that invest in crypto startups are actually hedge funds. They're structured as hedge funds, they have trading desks, they trade frequently, they have the equivalent of what's called a public book in hedge fund land. crypto startups are actually hedge funds. They're structured as hedge funds, they have trading desks, they trade frequently, they have the equivalent of what's called a public book in hedge fund land. They've got these crypto assets they're trading frequently, and then they'll back a startup and then they'll trade that startup's token just like they trade Bitcoin or Ethereum. But in our view that's the wrong way. And by the way there's an incentive issue, which is they pay themselves on a hedge fund model, they pay themselves annually. So they're paying themselves annually based on the market for projects that might still be years away from realization of ultimate underlying value. And then there's this big issue of misalignment between them and their LPs. And so that's all led to this thing where the tokens for these crypto projects are traded too aggressively. In our model they just shouldn't be, they're just not ready for that yet. And so we anchor hard on the venture capital model, we treat these investments the exact same way as if we're investing in venture capital equity, we basically buy and hold for as long as we can. And have a real focus on the underlying intrinsic value of the product and technology that's being developed. If by speculation you mean daily trading and trying to look at prices and charts and all that stuff, we don’t do that. Or separately, another category would be things that are basically the equivalent of baseball cards, where there's no real good or service that's being created. It is something that you think might be valuable in the future but not because the GDP has gone up.…

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