Marc Andreessen: evaluation

Transcript context

…The strong version of this argument is from a guy named Bill Janeway, a legendary VC. Janeway is a great, wonderful guy. If people haven't heard of him, he is a PhD in economics. I think he’s a student of a student of John Maynard Keynes. He comes from a high pedigree in economic theory background. And himself was a legendary venture capitalist in his career. He became a hands-on investor at the firm Warburg Pincus and funded some really interesting companies. And so he's one of these rare people who's both theoretical and practical on this kind of question. He wrote this book, which I really recommend, it's called Doing Capitalism where he goes through this question. The argument that he makes, along the lines of what you're saying, it’s a little bit of a pessimistic argument. The argument he makes is — if you look at the entire history of professional venture capital, which is now a 60 year journey, basically, or maybe even 50 years, from the late 60s, early 70s, in kind of modern form. He said the big category that's worked is computing or computer science. And then he said, the second category that's worked is biotech. And then he said, at least at the time of writing, everything else didn't work. And all the money that people poured into cleantech and da-da-da, all these other areas the venture capitalists tried to fund, they just didn't work from a return standpoint. You just burned the capital. When he wrote the book, he ran the numbers and computer sciences work twice as well as biotech or something like that. And then what he said is this is a direct result of federal research funding over the previous 50 years. Computer science based venture capital was able to productize 50 prior years of basic research in computer science, information science, information theory, communications theory, algorithms, all the stuff that was done in engineering schools from 1940 through like 1990. And so he said — we are productizing that, that's been the big thing. In Biotech we are productizing the work that NIH and others put into basic research in the biological sciences and that was about half as much money, and maybe half as much time. That work really started kicking in in the 60s and 70s, a little bit later. And then he said — Look, the problem is there aren't other sectors that have had these huge investments in basic research. There's just not this huge backlog of basic research into climate science or take your pick of online content, or whatever the other sectors are where people burn a lot of money. And so he says, if you want to predict the future venture capital, you basically just look at where the previous 50 years of basic research, R&D has happened, federal research funding has happened. He has a strong form of it, there's no shortcuts on this. And so if you're trying to do venture capital in a sector that doesn't have this big kind of install base of basic research has already happened, you're basically just tilting at windmills. s on this. And so if you're trying to do venture capital in a sector that doesn't have this big kind of install base of basic research has already happened, you're basically just tilting at windmills. I think there's a lot to his argument. I'm a little more optimistic about a broader spread of categories. A big reason I'm more optimistic about a broader set of categories is because computer science in particular, now applies across more categories. This was sort of the underlying point of the software eats the world thesis, which is that computers used to be just an industry where people made and sold computers. But now you can apply computer science into many other markets, financial services, and healthcare, and many, many others, where it can be a disruptive force. And so I think there's a payoff to computer science and software for sure, that can apply in these sectors. Maybe some of the biological sciences can be stretched into other sectors. There's a lot of smart people in the world, there's niche research efforts all over the place in many fields that are doing interesting work. Maybe you don't get a giant industry out the other end in some new sector, but maybe you get some very special companies. SpaceX is a massive advance in aeronautics, it took advantage of a lot of aeronautics R&D. It’s not like there's some huge aeronautics venture industry. But there is a big winner, at least one, and I think more to come. And so I'm a little bit more optimistic and open minded. Bill would probably say that I'm naive. You mentioned earlier about being able to potentially write 9 or 10 figure checks to companies like SpaceX or Tesla, who might require the capital to do something grand. Last I checked, you guys have $35 billion or something under management. Do we need to add a few more zeros to that as well? Will a16z’s assets under management just keep growing? Or will you cap it at some point.…

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