Marc Andreessen: the test

More from Marc Andreessen’s brilliant interview on The Moment with Brian Koppelman. This time: how breaking into the network in order to get funding isn’t so much a symptom of cronyism as a test of fundamental attributes that a fundraiser will need to be successful.

Marc: In the financing business, like, we are dying to finance the next great startup. Like, people talk about like venture capitalists; it’s you gotta run on these gauntlets to do it or like it’s so, you know, they fund all this…you know, we’re dying to fund the next Google. Like, we can’t wait. So just for god’s sake, figure out a way to build it and bring it to us. Please!

Brian: Right. Though, to get to you, somebody has to be credibly recommended to you.

Marc: Okay, so then this gets to a concept that I talked… So this goes directly what we’re talking about. So you described the process of getting you to read somebody’s screenplay. And basically it’s they have to be a referral. There should be some sort of warm referral.

Brian: Either a referral, or the only other way is over a period of time, you’ve impressed me somehow yourself.

Marc: Yeah, exactly right, independent of this specific thing that you’re trying to create. So, it’s sort of a very similar thing in venture, which is, I mean, there are certain people where it’s just like, the reputation precedes them, and they want to come in to pitch us, we’re gonna take the pitch. And some of those people, by the way, you discover on Twitter. Like, so that’s a real thing.

But more generally, it’s a referral business. And I figured this out early on, when we were starting, I talked to friends of mine at one of the top firms in the industry that’s now a 50-year-old venture firm, one of these legendary firms and they said, in the entire history of the venture firm, they funded exactly one startup pitch that came in cold, right, over 50 years. Now, they funded like a thousand that came in warm and they funded one that came in cold.

And so anyway, so that’s like, okay, well, again, isn’t that unfair? Like, okay.

So that’s why I get into what I call the test, with a capital T, The Test. And The Test is basically, the test to get to us, to get into VC is can you get one warm introduction? Just one. And in our world, you know, your world is agents or whatever or other creatives — in our world it’s an angel investor, it’s a seed funder, it’s a professor, it’s a manager at one of the big existing tech companies, right?

Brian: Someone you think is smart.

Marc: Yeah, somebody I think is smart.

Brian: And knows people.

Marc: But there are thousands of those people out there who I will take that call for.

Brian: Like, I could call you and tell you, but somebody… By the way, I won’t. Let me just say, clearly, I will not!! <laughs> But you have this world…

Marc: You could. Somebody, like, if a director of — I don’t know, there’s like, 1,000 executives at Facebook; Facebook is like a 40,000-person company, it has like, 1,000 executives at Facebook in decision-making capacity — if any one of the thousand calls up and says, “I got this kid I think you should meet.” It’s like, “Yes, I’ll take that meeting.” So it’s like, and again, it’s just one, right?

And so the test is, can you get one person to refer you, right? And it’s like, okay, like… think of the number of ways you could get one person to refer you, you could go get a job and you could go impress a manager and then that manager makes the call.

Brian: That is an incredibly good test, by the way.

Marc: And if you can’t pass the test, The Test, to get a warm inbound referral into a venture firm, then what that indicates is, you are gonna have a hell of a time as an entrepreneur. You are gonna hate being an entrepreneur because guess what you have to do, once you raise money. We’re the easy — I always say like, we’re the easy part of the process.

Once you raise money from us is when the pain begins. And the pain is trying to get other people to say yes to you. The pain specifically is trying to get people to work for you. And they all have choices, right? And so you got to convince them to come work for instead of somebody else; to try to get a customer to buy a product, and the customers are overwhelmed with new products they could buy… and so to actually sell something to somebody. And then at some point, you’re gonna have to raise money again, right? And you raise money from new people each round. At some point you’re gonna have to go get somebody else to say yes.

And so, if you can’t get a warm inbound to us, how are you possibly going to be able to function in the environment in which you’re now gonna be operating, where you’re gonna have to get all these other people to do stuff for you. And so that’s the thing.

Marc Andreessen and Brian Koppelman

Resources: Software is eating the world

WTF?! In San Francisco, Uber has 3x the revenue of the entire prior taxi and limousine industry.

WTF?! Without owning a single room, Airbnb has more rooms on offer than some of the largest hotel groups in the world. Airbnb has 800 employees, while Hilton has 152,000.

WTF?! Top Kickstarters raise tens of millions of dollars from tens of thousands of individual backers, amounts of capital that once required top-tier investment firms.

WTF?! What happens to all those Uber drivers when the cars start driving themselves? AIs are flying planes, driving cars, advising doctors on the best treatments, writing sports and financial news, and telling us all, in real time, the fastest way to get to work. They are also telling human workers when to show up and when to go home, based on real-time measurement of demand. The algorithm is the new shift boss.

Tim O’Reilly –The WTF Economy

This phrase comes from a 2011 Marc Andreessen article in the New York Times, which you can read here. In it he describes how software was – and is, and will continue to – take over the economy. Here are a few more WTF illustrations:

  • The world’s largest bookstore is a software company
  • Two of the world’s three biggest retailers are software companies
  • Five of the U.S.’s eight biggest companies are software companies (Alphabet/Google, Apple, Microsoft, Amazon, Facebook)… some of them even make and sell software.
  • The world’s biggest Encyclopedia is mainly software… and not even a company

Conclusion / Questions:

  • How are you using software in your non-software organisation?
  • What would it enable if you thought of your organisation as a software company?

See Also: WTF? Technology and you

Marc Andreesen: Scenius

Here’s another highlight from Brian Koppelman’s interview with Marc Andreessen on The Moment.

This time they’re talking about the importance of ‘scenes’ – groups of people working on similar ideas, sharing inspiration, encouraging each other and pushing boundaries and promoting each other’s work.

This seems to be true in art, technology and politics, and I think it’s true of sciences and other research communities. There’s huge value in a network of colleagues sharing work, building on each other’s ideas and cheering each other on.

See also Where’s the scene?

This extract is from a little after five minutes into the podcast. You can listen to the episode here, download it here or read the transcript here.

Marc: So, Brian Eno has a term, you may have heard, called “scenius”, have you heard this term?

Brian: No, but I love Eno’s work.

Marc: Okay. So Brian Eno has this term called sceners. Kevin Kelly and Stewart Brand and others have talked about this at length and I think it’s right, which is, it’s this… Let’s start with it is it’s an amazing coincidence. It’s an amazing coincidence how when there’s a major new artistic movement, it’s an amazing how there’s a scene. There’s quite literally a scene. And so Hemingway was part of a scene… There’s an example —

Brian: Patti Smith’s book talks about this, right? “Just Kids” talks about it in a great way, being in New York at that time.

Marc: I mean, one great example, you know, I’ve spent a lot of time with our friend Michael Ovitz over the years understanding kind of how this has worked and how creativity works in entertainment, and he says, basically, he says 100% of the time it’s a scene. So for example, he cites the great scene in comedy, when he was coming up was “Saturday Night Live”, you know, The Second City/ Saturday Night Live phenomenon in the mid 70s. And it was it was this, you know, Saturday Night Live shows up on TV in, you know, 1975 and people are like, Oh my… you know, this is like a brand new thing. Like, where did this come from? And it turns out, it was all these people. It was, you know, Chevy Chase, and Gilda Radner, and Bill Murray, and, you know, John Belushi, and all these… Lorne Michaels —

Brian: And the Canadians, the SCTV scene —

Marc: Yes, the Canadians, the SCTV scene, exactly right. And like, they all knew each other; they all knew each other coming up. And basically you find this — like, comedy is actually a great example of this, you just see this — inevitably, like, there was the Judd Apatow scene, like, there was a set of those people; there’s like the Seth Rogen, you know, kind of they’re at the center of these networks. And then these people then spin off and they do their own work and they became become very successful. Um you know, most recently like the Tina Fey, Amy Poehler kind of thing was a scene. <Brian: Sure. Absolutely.> Upright Citizens Brigade [Theater] and Second City. And so, it’s this… these are clearly creative geniuses on their own, but like, they weren’t out in the wilderness somewhere.

Brian: Well, what I took from the article — I didn’t read the study but I saw the Times article about it — was that artists will recognize other… Part of what happens, this amplifying effect is that, if you’re good… if you’re really good at this stuff, don’t necessarily think about people, always think about the buyer. People are always like, “How can I get an agent? How can I get a buyer?” As opposed to, “How can I show my work to other artists who can help platform it?”

And that’s what I took from that article was that, there are, that in fact, … The best way to get an agent is to have some artist who thinks you’re great, who’s represented by that agent, tell that agent, right? Do you think systems thinking — because like, if you look at Dylan as an example, just to try to put it in my world a bit, right — he did come here, come to New York and then enter and take over this scene that existed. Do you think someone has to calculate that stuff… or do you think there are people who just naturally do it?

Marc: So I think it’s a complex adaptive system. It has feedback loops, what are called feedback loops. You know, and some people get in the position of the feedback loop starts to hit. It’s almost a little bit… feedback loops are funny things… There’s this concept in economics actually derived from something out of the Christian Bible called the Matthew Effect, right? It’s sort of like, in a lot of these fields, recognition begets recognition, success begets success, reputation begets reputation, right? So it’s a positive feedback loop. And you see this when kind of people are on the rise in their careers, right?

Brian: I was with people from Twitter the other day and they were talking about this too, about one of the challenges at Twitter in terms of growing it, right, is that the people who are verified and have a good following are able to very quickly make their following bigger. <Marc: Yah> But for someone who’s just starting, it’s really hard now to amass an audience.

Marc: Just like, by the way, it’s very hard to become a new recognized painter, it’s very hard to write a screenplay that gets made, right? It’s a… these are so-called nonlinear dynamical systems, technically, and they have these feedback loops.

And a lot of this goes back to kind of the human attitude of the people involved in doing the work, it’s like, there’s two ways to look at that. One is, oh my god, life isn’t fair. And like, this is just fundamentally, you know, horrible. And we should figure out a way to, like, reform these systems so there’s a much more equal distribution of, you know, returns and results. Another way to look at it is, it os the human system, it is humanity, it is how… we are social animals, we do care what other people think. To your point, we care what the other experts think. We do care what our friends think. And we respond to those things. And part of what makes a creative project valuable is the fact that people appreciate it. And, just the nature of it is people are gonna tend to appreciate the things that other people are appreciating.

And so it is what it is, and therefore, if you’re going to be a creative professional, you should lean into that you should. You should take that seriously and you should consider that part of the challenge. Because I think that… the alternate path is bitterness. And we see this in the Valley, one of these billion programmers. They’ve been working for 10 years on some project and like they’ve got the code running. It’s all working and like nobody — you know, it’s not out there, nobody appreciates it, it’s sitting on a shelf in a lab somewhere — and they’re just furious, right?

And it’s like, “Well, what have you done to try to inject this into the world?” “Well, nothing.” “Why not?” “Well, because my work is genius and people should appreciate it. And it’s their fault if they don’t.” As an individual, that will poison you, right?, <Yes!> that will destroy you.

And so that’s… why you have to be really careful in these things whether you’re talking about society or whether you’re talking about the individual. Because from a societal standpoint, you can level all kinds of accusations about unfairness. From an individual level, you really want, in my view… individually, you wanna think, “I can do this. I can go change the world. I can go affect things.” It’s going it be real —

Brian: And you’re saying, you shouldn’t just rely on the fact that your work alone privately will do it, you should be proactive in trying to get it out there.

Marc: And part of it is you should get into a scene. So this is part of it. By the way, this also goes to another kind of view of unfairness right now which is like, okay, why do all the great movies and TV shows get made… why do the vast majority get made in LA.? Like, that’s so unfair to people. There are people who, like, try to make movies in San Francisco, and they’ll tell you like, “It’s so unfair. Like, it’s just so much easier to do this in LA. Like, it should be easy to do this…” We get this in the startup world, like, why are a disproportionate number of startups built in Silicon Valley? Isn’t it unfair that you don’t have equal odds of doing this if you’re in Topeka?

Well, that’s one way of looking at it. The other way of looking at it is, if I’m the indiv– you know, I grew up in rural Wisconsin — like, if the job is to get enmeshed into the system, right, into the network, then basically, what you wanna do as an individual is you wanna get yourself into the scene.

Brian: Yah Tony Hsieh calls them “collision spaces”.

Marc: Yeah. You gotta get in the mix, right. And if you’re not willing to get in the mix, it’s not their fault. It’s your fault, right?

Marc Andreesen: Edison vs Tesla (“Whose fault was that?”)

Brian: How do you talk to people though who have that chip on their shoulder, like, they look at someone like Elon as like, “Well, hey, that guy’s just as a showman!” Do you know what I mean? Like, not him specifically, but they almost feel like it cheapens what they do; like…

Marc: Oh, this is actually interesting. Elon actually used to tell us, it’s the Edison vs. Tesla thing.

So actually, in Edison’s day — so, you know, Edison is credited for phonograph, indoor lighting, all this stuff; and then Tesla was this guy, had all these super genius, like, there’s this huge debate over AC vs DC electricity, and there’s an ultimate power grid that we could have that runs a DC that’s much better, and Tesla had that idea — and there’s this whole thing.

And so there’s this kind of engineer archetype of like Edison was the showman, he was a mediocre engineer but he was the showman. And Tesla was the unappreciated genius. And it’s a perfect example of this. It’s like, okay, well, whose fault was that?

Brian: Right. Right… you’re saying it was Tesla’s fault.

Marc: Like, what kept Nikola Tesla from like — I mean, the stuff Edison did to go promote his stuff, like, it wasn’t that — it’s the same thing; it wasn’t that hard to figure out. There were lots of people in that era that wanted to finance, you know, as an example, Edison raised all this money. There were lots of people who wanted to finance electricity. I mean, talk about like a growth market.

Marc Andreessen on The Moment with Brian Koppelman*

*Full transcript here.

Marc Andreesen on ideas vs execution

… there was a great Dilbert strip where the pony-haired boss says, “You know, I have a great idea for a startup. All I need is for, you know, somebody to actually, like, write the code and do all the work.” And Dilbert says, “The technical term for what you have is, ‘nothing’” … right? Right? [see it here]

… in my world, you actually see this a lot. You’ll see people say, like, “I have an idea, but it’s such a good idea, I can’t tell anybody about it, because they’ll steal my idea”. And at least in our world, like, literally it is, therefore, what you now have is nothing… There’s another great — I forget who said it, there’s another great line somebody said that — “If you have a really, really great idea, like, you can shout it to the rafters and like, still nobody’s gonna take it seriously.”

Like, the world is filled with ideas. Like, there is actually no idea shortage. And in fact, by the way, many people actually have the same ideas. And by the way, many of the ideas are actually reasonably obvious. Like, you know, the iPhone. We’re all carrying around these… Like, what a genius idea was the iPhone. Well, hey, how about a computer you can hold in your hand. Like, how about a computer that you don’t have to carry in a briefcase, you can hold in your hand. …“Star Trek,” freakin “Star Trek”! They had them on “Star Trek” in 1966. Like, yeah, I want a computer I can hold in my hand. Like, the idea alone didn’t get Steve Jobs anywhere. It was everything else that he did to make the idea a reality — and actually get it into people’s hands — that mattered.

Marc Andreessen on The Moment with Brian Koppelman

Podcast recommendation: Marc Andreesen on The Moment with Brian Koppelman

I’ve already shared an extract from this episode about systems thinking here, but the whole interview is fascinating and everyone I’ve recommended it to has thanked me for it.

Marc Andressen more-or-less invented the web-browser as we know it and made Netscape (the biggest internet browser of its day, which was sold for a profit), which seeded the development of Mozilla Firefox, which you might be using right now. These days he’s a really influential venture capitalist, a quick (and very smart) thinker and fast talker.

This interview is full of useful and interesting gems, and Brian Koppelman does a great job of pulling out some interesting applications to art and pop culture. Apart from systems thinking, highlights (to be unpacked in future) include:

  • The importance of networks and scenes (‘scenius’) in fostering and spreading innovation
  • How to make your way, taking as a given that many things of life are unfair or wrong
  • The relative value of ideas versus work
  • Marketing, sales, and how to get your ideas in front of people
  • The Test – the ability to get a ‘warm referral’ to investors or key players not as cronyism but as an excellent test of the qualities needed to be a successful entrepreneur

Highly recommend.

You can listen to the episode here, download it here or read the transcript here.

Machine. Ecosystem. (4) – Marc Andreessen on Systems Thinking

Think about it [systems thinking] through the lens of a new tech product, which is kind of the centre of what we do [at Andreesen Horowitz]… If you’re not a systems thinker basically you say “I’m going to build a really great product, and then I’m going to have a really great product, and it’s going to be great, because it’s a really great product.”

The systems thinking more is that that’s just the first step because it’s not just about the product. It’s about okay, now the product is going to enter into the marketplace, and there are going to be customers that are going to have a point of view on your product, and there are going to be competitors that are going to be trying to take you out with a better product. And you’ll put your product in retail, and the retailers are going to try to gouge you on price, and make your product uneconomic to manufacture, and the press is going to write a review of your product, and maybe the reviewer is going to have a really bad day and he’s going to say horrible, horrible things… and your employees are hard at work and they build the first product, and you assume they’re going to be with you to build the second product, and maybe they will, or maybe they won’t, because maybe someone else will hire them.

And so with any kind of creative endeavor, with anything we do in our world – and this is for products or for companies – they’re launching into technically what is called – there’s actually a mathematical term – a complex adaptive system – the world. And inherently it’s not a predictable system, it’s not a linear system, it doesn’t behave in ways that you can expect, kind of by definition. So they say “complex” because there are many, many dimensions and variables, and then “adaptive”, like it changes. Things change. So the introduction of a new product changes the system and then the system recalibrates around the product.

And so as a consequence, to launch a new tech product and have it succeed you have to have a keen awareness of all the different elements of the system. You have to have a willingness to engage in the entire system, and it’s a gigantic problem generally if you’re in denial about that, if you’re not willing to think in systems terms.

Marc Andreessen on The Moment with Brian Koppelman*

*Full transcript here.