Ben Horowitz: America's got to rebuild its entire infrastructure like right now. We don't have enough rare earth minerals. We don't have enough electricity. We don't have enough manufacturing capacity.

Host: The China graph is like this and the US graph is like that. How do we make this seem less scary?

Ben Horowitz: The history of technology is things have always gotten better. Humans are kind of unbelievable in their ability to come up with new things that they need. that now 8 billion people that might have an idea in their head can get it out of their head.

Ben Horowitz: I do think what's going to happen is so you've been doing this for a long time. Um and uh I thought maybe I'd start off and it's funny we actually didn't rehearse this at all because I thought that way it would be more more real, right? More unique. Let's talk about, you know, you have this book where you talked about, you know, how hard it is to be a CEO and everything that you went through at LoudCloud and Opsware. Um, that was a giant shift where it's like the market kind of collapsed. The financial market collapsed.

Host: Um, and you had to really pivot and just change the company. And what do you think there there are new age companies that are popping up right now, AI first, it's like they hopefully have their together. they're off to the races building something new. But like a you know a legacy company or f five or 10 years ago where there's this great opportunity but also great challenge like what does a five or 10 yearear-old CEO do where it's like they they're preai.

Ben Horowitz: Yeah.

Host: So they got to they got to figure out what they do.

Host: Financial markets hate them.

Host: Yes. Yes. So there's the financial market who you are. Yes.

Ben Horowitz: So I don't know may maybe riff on that. I'd love to hear your thoughts.

Ben Horowitz: Yeah. Well, I I think the first thing you have to recognize um in a kind of huge dislocation like this is the like some very basic axiomatic like laws of physics are different. And the two that are really different uh with AI compared to how companies have been built in kind of technology forever is one um it used to be very well known that you cannot throw money at the problem. So, for example, if I had a product and I was two years behind, I could not hire a thousand engineers and catch my competitor. Like, it's a mythical man month. Nine women can't have a baby in a month. Everybody knows that. Um, it never works. No problem. That's no longer true. Um, you can throw money at the problem. if you have enough money uh and some good data, you can buy enough GPUs and solve basically anything in software. So like that's gone. Um the second thing that we knew for sure is like in software, you know, possession is nine10en of the law. So if you have the customer, you have multiple lockins. You have like the migration pane lock in. You've got the data lock in, you've got the user interface lock in. Those are pretty much gone, right? So, it's very easy to replicate the code. It's very easy to move the data. And then it's not even going to be a human talking to your software. It's going to be an AI. And you know, AIs are really flexible on how they use user interfaces. So, that mode is gone. So I think that's just like the first thing you have to recognize as a CEO that like okay that's going away. So then what is it uh you know where is your value what are you delivering and there it turns out there are many things uh that are of value. Um but like if you're trying to get like good pricing through any of those things you're going to be under tremendous pressure. you know, your your price has to be a function of some other value that's much more distinct that you provide.

Host: Got it. Um, and the other thing that's we we've talked about this a lot internally as a firm is that once upon a time like you would just have maybe if you have a good product, you might have 10 years to run with that product, maybe five years, and now it might be like five weeks. Well, we we also talk about this like in terms of going public. So, companies are staying private a lot longer. Mhm.

Host: Um, which probably is good if you're going through an existential crisis. You'd much rather do that as a private company than a public company. But also, the reason why the SAS apocalypse is happening is because there are doubts on terminal value.

Ben Horowitz: Yeah.

Host: Right. So, everybody who starts a company, they're doing it because they want to create val economic value. They're capitalists. They're trying to actually benefit from this this equation financially. But if you wait too long, maybe your company is worth zero. That's kind of scary. And that that was always a risk, but it would play out over decades.

Ben Horowitz: Yeah, it's not as fast a risk.

Host: So I guess what what do you if you were I mean Loud cloud's around today. You're the CEO and again bad bad example. Sorry. Sorry to give you

Ben Horowitz: very scary. I know. I know.

Host: Although actually cloud cloud would be like

Ben Horowitz: actually data. Yeah, exactly. You you would be very well positioned. But

Host: But I guess what is it that a CEO should do potentially differently? I mean, obviously get like move faster, cut faster, be more efficient, throw money at like all these things that we've talked about, but it's like if I don't go public, if I go public and I get disrupted, then I have this terrible uh life of I'm going to be a penny stock. If I just wait, there's this chance that I get eviscerated and this kind of like roadkiller success equation is kind of scary, right? I mean, it's always scary, but you would have a you would have time and now it feels like you don't.

Ben Horowitz: Yeah, I think you do have to be honest with yourself on like what it is you have really. And there are like there are companies that get thrown under the bus correctly and ones that don't. And then look, if you take a lot of these ideas to their logical conclusion, then you know

Host: nothing is worth anything because there are no people at companies and if there are no people who's going to buy your shitty software. So like you know da d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d d but but but like like like it is more like subtle and it it just tends to take much longer than uh we think for some of these things to play out. So then the question is are you getting stronger in that meanwhile or are you degenerating? So is what's happening? Nobody's buying, you know, like the money just shifted. The customers are buying other stuff. They're not buying yours. In that case, you have a huge problem. You probably have to, you know, cut deeply and pivot. On the other hand, look, there's

Ben Horowitz: companies that have been slaughtered uh in the valuation game. Um but are pretty strong. So I'm on the board of this company, Nan, right? Like and they're travel. So obviously the SAS apocalypse like they're dead. like no way you're doing travel. But then you look under the covers and you go well it actually is a little more complicated than that because um on travel like you actually need explicit relationships to you know if I'm providing your travel and you're any kind of company that's important at all you need to travel globally. So now I need a relationship with every single airline in the world, every single hotel in the world, every every train, every everything. You got to deal with that. You've got to kind of connect back to their budgeting systems and all these things. And then the second thing that's like nobody wants to do, including OpenAI or Anthropic, is sell to the damn travel manager. Like nobody has a channel to the travel manager. It's just not some like and you you can't even imagine that being a good idea. You know, you want to keep advancing. you want to kind of do the things that Intuitit is doing where like okay like turn ourselves into more of an AI company. Uh and then like kind of hold the customer and and by the way like the AI like the agentic travel experience turns out to be much more complicated than one would think. Um and you know I don't know if it stays that way but like that's the way it is today. Uh so I think it's very company dependent. Like I don't think it's all one thing, but I do think Brave New World and if you keep looking at it like the old world and it's got completely different laws of physics, you are definitely going to die.

Host: Yeah. Um well, maybe let's talk about venture capital.

Ben Horowitz: There's a lot of cope going on now too. So like you got to be careful with that.

Host: Well, that's the thing. It's like there are some things that really are features and before it would take a long time to build a feature. So you might as well, you know, it's comparative advantage. David Ricardo,

Ben Horowitz: I could weld my own steel. I could grow my own food, but I'm just going to not do that

Host: because I can do things that actually produce more economic value for me. But now it's just becoming not that hard to go create features, but features are not products or not companies. And we've always had this distinction. There's feature, product, company. But it's a little bit confusing figuring out which one is which right now just because the ability to create a feature and create a product and even get all of the data. uh

Ben Horowitz: you know you know my favorite saying the best companies have hostages not customers like even get some of the data out of the hostage company.

Host: Yeah. So it's like it's just it's a very very confusing world in terms of figuring out which one is which which is you know kind of maybe a good segue to to venture capital land of how do you think I mean when you started this firm in 2009 uh big financial crisis actually very very big financial crisis global financial crisis going on the biggest um

Ben Horowitz: the world has changed a lot since then I

Host: mean how much of what's happening today kind of fits within the mental model of back then and how much is kind of brave new

Ben Horowitz: Um maybe maybe riff on that a little bit.

Ben Horowitz: Yeah. So it's really different. So our first fund was $300 million. Um and we raised it from all the traditional kind of uh LPS, endowments, um you know, charitable foundations, etc. Fund of funds. You know, we just raised 15 billion dollars for four of the seven funds. Four of the seven funds. So like not even the whole complex. Um, and you know, we raised it from very, very different kinds of investors. So, we, you know, like basically none of our LP base was international when we started and we're at like 35% international money and it's from all kinds of places. So, and and just tech has gotten more like tech has gotten so much more important. I think that, you know, we have to think in terms of the world uh in in a way that we just didn't before. So, for example, like with, you know, why why' you raise so much money? Um, which by the way, I'm kind of mad at myself because I don't even think I articulated internally well enough because we could have raised even more money next time. Don't worry. Yeah, we we had more money on the table. Uh but the way I was thinking about it is look, America's got to rebuild its entire infrastructure like right now. Um because we don't have enough, you know, we don't have enough rare earth minerals. We don't have enough electricity. We don't have enough manufacturing capacity. We don't have uh we have the wrong chips. Like they take way too much damn power. They were built for games. You know, we don't have the we don't have enough anything uh kind of to be in this future world. And somebody's got to fund it. and you know so and clearly that's going to take a lot of money. So, um, all that is brand new and, uh, I I would say it's like fairly overwhelming in a sense, but like it is really, really important. Like we're pretty much out of electricity now in the United States. Like not not 12 months from now, like right now.

Host: The China graph is like this and the US graph is like that. It's not the demand for for these tokens is straight vertical. Um but the the ability to kind of build that capacity is absolutely not vertical. Um so we need new every I mean like we need we in invested in a transformer company not like a an AI transformer like an actual power transformer company because you need you know kind of better easier to manufacture uh more uh more efficient transformers. Um and the transformer hasn't changed since really we invest you know we invent electricity. So like these kinds of things.

Ben Horowitz: Well, I guess how so there's an old saying, the cure for high prices is high prices.

Host: Yeah.

Ben Horowitz: But the problem is there's a lot of latency involved. So right now, uh there are computers that show up with no RAM.

Host: Like if you buy you go buy a server from Dell, they're like, "Sorry, we don't have any RAM to sell you." Because all of that has been gobbled up. Because yeah, they could build a new factory or you and I could decide to go build a a DRAM factory. That would take us 5 years.

Ben Horowitz: Yep.

Host: So how do you I mean, and we don't believe

Ben Horowitz: you got to start now.

Host: Yeah. you got to start now. But this is this is actually if you remember which you obviously do 1999 it's like well we have to build more fiber right we have to build more capacity but it's obviously very different because all the GPUs are hot they're all lit right now

Ben Horowitz: and back then most of the fiber was dark

Host: yes

Ben Horowitz: um but how do you get like

Host: yes um but how do you get like yeah well there were bottlenecks when we were building fiber the bottlenecks were kind of in different places so you know we like the servers weren't capable of putting like bits out even fast enough to do video, right? And like the software was really we didn't have load balancers, we didn't have application service, we didn't have anything. And so you had all this fiber and all this bandwidth, but like you couldn't actually build the applications and then most of the end users weren't it's a network too. So you know people weren't connected on the other end. So it it just didn't work and then we had the com crash and all these things. So now um we're in a little different place because almost everything is a bottleneck. I do think what's going to happen is like we'll probably have enough chips long before we have enough electricity. So Nvidia will make enough chips. Um but then we won't have enough memory and we won't have enough electricity. So we're we're in that kind of situation now. So I think you really have to study where we are at each point in the supply chain and figure out how to alleviate those bottlenecks. And by the way, you know, God bless Elon, the Terrafab. Um, you know, that's the idea. He's going to just go deal with all the bottlenecks himself. Uh, which is how he does things, which is why we need him.

Host: Indeed. Um, so I feel like you're an expert in three things. Um, hiphop, AI, and crypto. And I don't know anything about hip-hop, but I you know, I've gone to your your uh I I've heard a lot from you, but let's talk about the other two.

Ben Horowitz: Yeah.

Host: In particular, uh, crypto and AI. Um, so I I actually just wrote about this. I mean, you remember the origins of crypto was hash.

Ben Horowitz: Yeah. Yeah.

Host: And the scariest thing right now from my perspective is that everybody with claude or with chat GPT can actually like go super deep and personalize a phone call, an email. Like seems like all communication is going to be completely unusable.

Ben Horowitz: Yep.

Host: I don't know if you agree with me.

Ben Horowitz: I 100% agree.

Host: Because it's like normally I can just delete delete. I get some email yesterday, dear Allen at index ventures. It's like, well, I'm not Allen. I don't work at Index Adventures. Delete. And I'm very grateful that this person messed up my name because I could just delete that. Whereas, if I get a

Ben Horowitz: Yeah.

Host: thousand emails, like the best way of thinking about an email inbox is it's a to-do list that has right access for the public. Yeah. Right. It's like anybody can get in and now anybody can personalize. Same thing for phone calls. Like, what do we do? Um, and then it seems like there's a lot behind crypton. That's that's why I mentioned hash because it was originally intended to stop spam.

Ben Horowitz: Yeah. Yeah.

Host: So, do you think there's overlap between AI and crypto? Um, I know you do. So, te tell us about that.

Ben Horowitz: Yeah. So, I I I do think it starts with the problems that um AI causes. And actually, one of the the first thing I woke up in the middle of the night one day and I was like, "Oh my god, somebody's going to go on a Zoom. They're gonna it's going to be AI me and they're going to tell my finance team to wire like, you know, $500 million to Nigeria and and that's going to be a problem." So, you know, and then we're like, "Okay, everything's hardware root of access. Don't believe anything from me unless it's got my cryptographic key on it." All that kind of thing. So, I I knew these problems were coming. They're coming so fast now. Um, so I think there there's kind of several categories of things. First is just are you a human or are you a bot? Like I I I think everybody is going to really really want to know that. be it social media, a dating app, um a Zoom call, uh like like anything you want to know, am I talking to an actual human? Like, okay, can I prove that I'm a human being? Um and then, you know, can I prove that I'm me? And then can I sign contact? Like, how do I know it's true? like there there needs to be a distinction between u I get so many AI videos sent to me from my family that they think are not AI videos and they're like did this really happen? I'm like no you could actually ask Grock and it's pretty good at that right now. But um but I think you know like Grock's getting to the point where it can barely figure it out. Uh and I think at some point it won't be able to figure it out or AI will not be able to tell what's an AI. Uh so the only way is you're going to have to have um you know something some cryptographically strong indication assigned piece of content that says okay yeah I made this or this is like really a video of me Marco Rubio you know giving a speech. This isn't something that somebody faked. Um and then there need that you know there needs to be a source of that truth. And are you gonna who are you going to trust for the truth? Are you going to trust Google? Are you going to trust Meta? Are you going to trust the US government? I think you want to trust the kind of mathematical game theoretic properties of the blockchain. So I think that's going to be just a very very important part of the infrastructure and then you you know you get into like fraud uh and like what is how do you know somebody's a citizen to get them money? Everybody's talking about well let's do UBI. Well, great. Um, but you know, when we did the stimulus program, we found out that the government is very bad at getting money to people. Um, I don't know, it's like depending on uh the the numbers you read, it's somewhere around $450 billion got stolen. Uh, so what you really need is everybody needs an address where you can send them money. And so I think that's a crypto problem. And then finally, how does an AI, you know, become an economic actor? Like, how do I make money as an AI? How does somebody send me money? Like, can I be a merchant, a credit card merchant if I'm not a human? I don't think so. Like, I think that's actually kind of hard. Um, and you know, and it's probably not the kind of right infrastructure anyway. And so, you need a bare instrument on the internet. You need internet money for these AIs to be economic actors. And I think that's very likely to be crypto. So, so I think it's a there are many opportunities in the crypto space that have been generated by AI.

Host: Yeah. Because it feels like it's this old Yogi Bar saying it's so crowded nobody goes here anymore. Like we're we're kind of we're entering that era because number one is are you a real person?

Ben Horowitz: But the problem is that you know co-work is so good right now that or you know open claw I just say you are a real person. You were a real person, but now your your addresses are being used by a machine.

Host: Yeah.

Ben Horowitz: Right. So captures don't make any saptism. Like what is a capture? Right. So it feels like the solution lies in in kind of economics somehow. Um and and game theory. So

Host: yes. Yeah. And that too, right? Right. Right. Like are you going to just have to Well, maybe like I think hash is kind of a relevant idea again.

Ben Horowitz: Yeah. No, totally. Um, so maybe why don't we talk about where you think venture capital is going? And I mentioned this because uh Mark got some crap for saying, you know, all the jobs will go away except for one job of venture capital. Um, which which was seen as a self-s erving comment. But in his defense, I will say it's partially because it's a non-deterministic problem.

Host: Yeah.

Ben Horowitz: Right. But it's like all right, you're betting on an entrepreneur first and foremost and you want to know that this entrepreneur as I like to say can materialize labor capital and customers and you can't just like you know run an algorithm on I mean maybe you can but there's just not a lot of data out there. It's very very hard to do. So that's the logic by which and also just personal relationships in general will probably survive AI

Host: like

Ben Horowitz: but if there's a venture capitalist then that kind of assumes there's an entrepreneur job.

Host: No.

Ben Horowitz: Yes. Yes, that is true. It takes

Host: it's kind of hard to be a venture capitalist without somebody. Yeah. If you're very bad, you could just raise money and never allocate it, I guess. But um but I guess what what do you think the world of venture capital looks like kind of today? We've obviously done a lot of things internally as a firm to try to embrace AI like very very fully. But you know now, five years, 10 years from now just given what's potentially going to happen to white collar work.

Ben Horowitz: Yeah. I it's really tricky because you know you kind of go back to the last transition like this which was kind of the transition to the industrial revolution. So you know kind of the venture capitalists of the railroads and the um automobiles and so forth you know ended up becoming JP Morgan Chase, Goldman Sachs etc. So they they ended up becoming banks and you know some of the reason for that was just how like how fast that materialized. So I think in the 30s like 20% of American workers worked for the auto industry which is like spectacular um compared to what it is today. Uh and so things in the industrial revolution kind of started out very much like we are today in venture capital where there were whatever 300 auto companies and so forth and then it consolidated very hard into you know in the US the big three and so forth and then the kind of venture capitalist went upstream with the companies. Uh I think that's one scenario where like okay there's going to be a small number of very gigantic companies and they're going to own everything and so forth. Um there's another kind of future where it's like okay they got really big and then we've kind of we've kind of finally hit the asmtote on this intelligence idea and like they're as smart as they're going to be or whatever and we're either going to like nationalize the big labs and like like their utilities their electricity plus+ like FU if you're going to think you're going to collect all the money uh and then everybody's just going to build on this utility set of things and then that's a very different venture. capital world. Uh so I I would say you know the as I'll quote Yogi Bara like the problem with uh the future you know the problem with predictions are very hard especially about the future and I think this future is particularly hard because it's so dynamic and it's really hard and then like how does the electricity shortage play into does it make the big companies all powerful because they suck up all the electricity and nobody else can get it and nobody else can get any GPUs or does like that push all the computing out to the edge and then the models just get really good and small and everybody's like well I got enough in my phone and what they're going to charge me for their mega GPU farm is just outrageous and I'm just going to do that or like so so there's many ways it could go. Uh, and um, I don't know. I guess I I don't know, but I I could see venture capital being much bigger and much more exciting because everybody in the world is an entrepreneur. Um, or I could see it being like more like what happened in the industrial revolution and like new companies are just harder.

Host: Yeah. Well, it's kind of a good it's a good followup or a good parallel question which is like how do we make this seem less scary

Ben Horowitz: because I don't know if you saw it's a lot of change you know it is well but yes and no. I mean 98% of Americans were farmers in 1789 um I'm pretty sure they're not farmers right now I mean you made this interesting point where if you go to like a third or fourth world if there is a such thing country everybody's an entrepreneur

Host: 100% like the guy like I sell bananas by buying them here and selling them there everybody's an entrepreneur there are organized companies.

Ben Horowitz: Yeah.

Host: And the cool thing is that now 8 billion people that might have an idea in their head can get it out of their head. And maybe it's a bad idea. It probably is a bad idea. But there's no longer a gate for them. There's no capital gate. There's no like idea. It's just like boom. And it's not just for code. It's

Ben Horowitz: like, you know, I can write music, right? I can make a movie. Like this is super exciting. So that feels like a very, you know, we if you're trying to make this not look dystopian. I don't know if you saw Bernie Sanders interviewing Claude. like this is literally old man yells at cloud

Host: like you know metaphor no metaphor right

Ben Horowitz: it's just like he's yelling at the cloud um and like that's the dystopian view and it's wrong I feel very passionately that that's wrong but we need a better we need a better narrative

Host: so the history kind of

Ben Horowitz: I I would say if you look at it macro standpoint right the history of technology is things have always gotten better like would you like to live in the world before electricity you know probably not um it doesn't sound that you can if you want um but like nobody seems to opt into that and I I think we're very much in kind of a period like that but it is uh the transition is always scary because it's a different world like the jobs everybody was a farmer like everybody was a farmer uh in like 1750 I think it was like 93 or 94% of America was farmers um and then like almost all those jobs are gone on just like you know like the jobs that we think are jobs that they would have thought were ridiculous like ridiculous if you were a farmer you would think what I do is the dumbest thing in the world or a product marketing manager any of this stuff it's like that's not a job you're not making any food like you're not building a house like how could that be a job

Host: uh so like I I do think it's very hard to

Ben Horowitz: see to the other side of that but I I think it's very very likely to be like way way way better for everybody. Um, just like electricity ended up being way better for everybody. And and to me like the biggest kind of the the most salient like wrong idea was from John Maynard and Keane. So he wrote a paper that wasn't that famous but um you know the the the the uh the great economist of the uh of the depression where he said look things are going to be so abundant um and everybody's needs are going to be met. everybody's going to have a house or like a shelter and everybody's going to have enough food to eat. And then once you have your needs met, like you're going to work way less, like 15 hours a week max because your needs are met. But like what he didn't realize was, well, we're not just going to need one car. We're going to need a car for every person. We're going to need, you know, computers and television sets and this and that and the other and and awesome vacations and like food that takes, you know, like a chef 10 hours to prep and all this kind of thing, which did not exist then. Uh, like there was no like whatever um foodies and tasting menus and all that that we have now. But like that's all a need like that that want goes to a need very fast. And you know, humans are kind of unbelievable in their ability to come up with new things that they need. And you know, and then you you have to make those and so forth. And and I think it's going to be, you know, look, I I I think in 15 years, the truth is, everybody is going to in America and probably around the world is going to live better than, you know, the very best life, you know, from a just luxury access to information, etc., etc., than anybody did in 1980. So like that's that's a you know that's the world that we're we almost certainly are going to get to. So you shouldn't be so mad about it but it is disconcerting.

Host: All right. Well on that

Ben Horowitz: especially if you're trying to teach little kids you know they're like what should I do? Like I don't know.

Host: That's a hard one. Well on that note Horowitz at Andre and Horwoods thank you very much. Really appreciate. All right. Thank you. Yes.