Marc Andreessen on Software program, Immortality, and Bitcoin

Marc Andreessen: Yeah. So, that piece–that was in 2011. That had a few messages in it. There was an express message and an implicit message. The implicit message was–if you bear in mind the time, 2011 was nonetheless through the very darkish days of the financial crash after the worldwide monetary disaster in 2008. So, in 2011, there was an nearly complete pervasive sense of tech pessimism. And, there was a way that mainly tech was over, and that this was one other 2000-style crash, and that these firms had been by no means going to return again, and enterprise capital was useless. Apple on the time was buying and selling at a P/E [price/earnings ratio] of, like, six. , like, I used to say Apple was buying and selling like a metal mill that was within the course of going out of enterprise, as had been all the opposite actually sort of good tech firms. And so, there was simply this pervasive sense of doom and gloom.

And so, one is: I simply needed to place a stake within the floor that really no, tech just isn’t useless. And, in actual fact, tech just isn’t going anyplace. And, in actual fact, there may be truly a giant tech increase coming, which is what occurred.

That follows the express thesis of the piece, which is: We’ve got hit important mass in our period with this type of very magical expertise referred to as software program. I name it a magical expertise. It is fairly actually like alchemy. I examine it to–you know, Isaac Newton spent 20 years making an attempt to develop the so-called thinker’s stone to have the ability to transmute lead into gold and he by no means succeeded at that.

However, now now we have this simply unimaginable expertise the place you’ll be able to sit at a keyboard, you’ll be able to sort in letters and numbers on a keyboard, you’ll be able to press Enter, after which issues change in the true world. Proper? The actual world reorganizes itself in keeping with what some coder has typed right into a software program.

And, there’s apparent examples of this that occurred. It was occurring at the moment with companies like Lyft and Uber. Proper? The coders at Lyft and Uber sort in incantations into the keyboard; they press enter; and impulsively one million vehicles and riders are going completely different locations. There is a thousand different examples of this.

And so, software–I type of level out within the piece–software is type of a magical expertise in financial phrases for transmuting labor into capital. It is a magical expertise for transmuting digital into bodily. It is a magical expertise for transmuting human creativity into motion in the true world. And, then in actual fact, a world of mainly ubiquitous computer systems, everyone having a pc of their pocket as a result of smartphone, which was hitting important mass proper round that point, meant that mainly this magical expertise was going to comb throughout mainly each area of human exercise and be transformative.

And, I’d argue that the final decade has confirmed that. And, then I’d additionally add the method remains to be simply getting began.

Marc Andreessen: That they had two advertising pitches. One advertising pitch was 1,000 songs in your pocket and the opposite advertising pitch, the advert marketing campaign was referred to as Rip, Combine, and Burn.

Marc Andreessen: Proper? Which meant you can rip your music: You would pull your music off of the bodily compact dialogue [CD] and you can transmute it into a combination. You would transmute it into software program and reorganize it in bits after which burn it onto, on the time, a writeable CD. Or you can add it onto your iPod.

Marc Andreessen: Yeah. That is the massive critique that I’d stage in opposition to ourselves. The massive critique I’d stage in opposition to ourselves–which is, you recognize, Silicon Valley, the tech business, enterprise capital, startup founders–the large critique I’d stage in opposition to ourselves is: The entire sectors of the financial system that you simply appropriately point out, those which might be being remodeled by software program, they’re all small. Proper? Should you have a look at a pie chart of gross home product, they’re all small.

After which, in actual fact, what expertise does–technology does one thing very attention-grabbing: Know-how drives down costs. Proper? So, expertise is deflationary within the sectors that it hits.

And so, these sectors, in lots of instances there’s one thing of an impact the place you drop the value, you enhance demand, you enhance market measurement. However by and enormous, what’s occurring is these sectors are shrinking in measurement. Proper?

And, you recognize, the music business has been via this extreme sort of deflation. In truth, newspapers–you talked about newspaper income has been approach down.

So, there’s been this impact the place mainly income in these sectors has shrunk. And so, these sectors are mainly small and shrinking.

However, you may have these different sectors. And by the best way, simply the time period I take advantage of to attempt to preserve these straight is type of the quick sectors are the small ones which have expertise affecting them very straight after which are shrinking. And, I name them the quick sectors as a result of they’re sectors experiencing speedy productiveness progress. Proper? And so, that is the primary set.

You then’ve bought these different sectors. You talked about healthcare, schooling. I’d additionally add housing. I’d additionally add law–law administration paperwork. And, then I’d additionally add authorities.

And so, to me these are the massive 5 that I take into consideration loads.

I name these the sluggish sectors. And, the rationale these are the sluggish sectors is–first of all, they’re very large. They’re the lion’s share of GDP [Gross Domestic Product] in case you have a look at the pie chart.

After which, to your level: they are not being affected by expertise to the identical extent. In truth, arguably, in case you go into the main points, most likely what you’d discover is at the least a few of them are literally experiencing unfavorable productiveness progress. Proper? And, you’ll be able to see that by simply administrative bloat. Proper? You see this in larger ed, proper? The variety of directors has, like, ballooned out massively within the final 30 years whereas the variety of professors truly hasn’t modified very a lot.

The identical factor is going on in healthcare. Proper? We’re type of drowning in administrative prices.

And so, this so-called sluggish sector, sluggish productiveness progress, sluggish adoption of latest expertise, most likely unfavorable productiveness progress, after which as a consequence of all of that, rising costs. Proper? And so, all of these sectors have the characteristic–housing costs preserve rising, healthcare costs preserve rising. Healthcare, you recognize properly, however healthcare now could be a fifth of the American economy–right?–and nonetheless rising. After which, after all, schooling. The worth of a four-year personal school diploma in america goes to achieve one million {dollars}. And, it should attain one million {dollars} in, like, the time horizon of these of us who’ve younger children.

And so, it is this story of two cities. There is a lengthy dialogue available, after all. And there is whole fields of examine round mainly what’s incorrect with these sluggish sectors.

And, there’s a lot of points of regulatory seize and authorities entanglement and cartels and monopolies and oblique fee and so forth and so forth. However, there’s additionally only a actually large expertise issue, which is: these sectors are usually not absorbing expertise very quick.

One of many large alternatives in my world is to go after these sectors. Is to inject new expertise into these sectors in the identical approach that we have injected new expertise into media, leisure, retail, and so forth.

Optimistically, what I’d say is there’s a chance to mainly crack the value curve. There’s a chance to take these sectors and switch them from sluggish sectors into quick sectors. If we do this, we must always be capable of crack the value curve. Proper? We should always be capable of over time–you know, tilt the value curves within the different direction–which I believe could be overwhelmingly a constructive factor for all of us. However, boy, there’s a variety of work concerned to try this.

Marc Andreessen: Yeah. Nicely, there’s this–I all the time level on the market’s this superb factor in antitrust law–antitrust cases–where, mainly, irrespective of how an organization costs its merchandise, it is in hassle. Proper? Excessive costs are gouging. Low costs are predatory. And, the identical costs are collusion. Proper? And, all three are unlawful.

A really related factor occurs, truly, in these sectors. Like, healthcare, you talked about, which mainly is: If you consider what are individuals mad about? Individuals are mad about, for example–like, each reporter, each newspaper journalist on the earth is absolutely mad in regards to the collapse of pricing and, you recognize, info. They’re actually mad in regards to the quickly falling–basically the collapse of the pricing of the media business. They’re very indignant at tax–

So, there you may have a constituency that basically hates falling costs and really a lot needs that costs would rise.

On the opposite side–on the healthcare facet, proper?–that similar individual goes to their physician and experiences spiraling healthcare costs and is absolutely mad that the costs are rising. And, very a lot needs that one thing would occur that may appropriate these value curves and trigger these costs to fall. After all, the physician is within the actual reverse state of affairs. She or he loves the rising healthcare costs, or very a lot would really like the knowledge to proceed to get cheaper.

So, there is–this is mainly the best way that I decode a variety of the type of anti-tech sort of sentiment that you simply see operating round within the final decade, which is: One set of persons are actually mad at us for the impact that we’re having on the quick sectors and one other set of persons are actually mad at us for the impact that we’re not having on the sluggish sectors.

Marc Andreessen: Now, I occur to know the place I believe the world ought to go, nevertheless it will be the case that as this stuff–this is now main league stuff, proper? We’re not speaking simply, you recognize, video video games or no matter, anymore. We’re speaking about all the financial system.

And so, sort of, these results and folks’s perceptions of these items and the different–to your point–the completely different constituencies, the completely different strain teams, the completely different business teams, their views, the political capture–like, all that stuff is changing into very major.

And, by the best way, we see that in our firms. We simply have an increasing number of firms on a regular basis which might be getting embroiled or injecting themselves into regulatory and political affairs that may’ve been inconceivable even 10 years in the past.

Marc Andreessen: I believe it’s–you know–I believe you are proper. I would add to that, it is a fear-driven, comfort-driven factor. There’s an important instance, which is, proper?–surveys, polling reveals on a regular basis individuals completely hate Congress. Proper? Congress can have a ten% approval ranking and folks love their Congressmen. Incumbent reelection is, like, 90%.

My interpretation of healthcare is mainly individuals hate the healthcare system, however they love their physician. And, that is an emotional response. Proper? It is an emotional response on each sides–which is: you hate the healthcare system as a result of it feels large and scary and bureaucratic and prefer it’s a variety of instances out to kill you. You’re keen on your physician as a result of she or he is the one who’s making an attempt to avoid wasting your life. So, there’s that.

The macro–the sort of the macro-observation that I’d make is that I believe in case you chart–and perhaps we may put up on your listeners however Mark Perry has this chart he retains up to date that he calls the Chart of the Century which reveals the value curves–right?–of these completely different sectors. And, it type of famously reveals healthcare, schooling, housing, these spiraling costs mainly straight to the moon in pink after which these falling costs within the quick sectors in blue. And, in case you simply, you recognize, you simply chart that out, proper, mainly what you see is–you know, going to the very foundation of this dialog, what you see mainly is–the three markers of what at the least in america we name the American Dream, which is to say, a viable, affordable, aspirational middle-class lifestyle–the three markers have and all the time have been: You personal a home, you may have nice medical care, and you’ve got nice schooling on your children.

And, if in case you have these three issues, you obtain the American dream and you’re a profitable, you recognize, supplier for your loved ones. You are in a position to present your children with a greater life than you may have.

And that is kind of–you know, that is the foundational side of life in a type of center class, sort of bourgeois sort of world. And, different nations have their very own articulation of it, nevertheless it’s these three issues over and over.

And, what we have completed, collectively, proper? is, you recognize, by having these be the three sectors which have these simply extremely quickly spiraling upward costs, what we have completed and what we’re doing is pricing the American dream and its equal in different nations out of the attain of lots of people.

And, it is similar to fundamental logic: That is like, okay, what would occur? Should you ran an experiment on politics, and you probably did that on objective and also you had been making an attempt to see what political response you’d generate, the response could be populism.

And, by the best way, the response could be left-wing populism within the type of people that would need the federal government to step in and repair this. And, then the response could be right-wing populism by individuals who would need to overthrow the present system and have a unique method.

And naturally, in our politics, that is precisely what we see.

And so, with my financial hat on, it is like: Oh, that is simply straight apparent trigger and impact. That is societal self-harm. : We should always not do that.

Marc Andreessen: Yeah. And, in actual fact, if you look at–I am going to simply make yet one more level on this as a result of our firms reside this every single day. If you have a look at how the federal government tries to assist in these three sectors, proper, what you see mainly is similar sample in every of the three sectors. And, it has two elements. And, the 2 elements are restriction of provide and subsidies of demand.

Marc Andreessen: Proper. And, the restriction of supply–the restriction of supply–takes the shape mainly of regulatory seize after which monopolies and cartels. Proper?

You may simply take schooling for instance. Schooling may be very simple on this. Okay-12 [Kindergarten through 12th grade] in america is a authorities monopoly. After which the college system is a cartel. And, we all know the college system in america is a cartel as a result of entry to federal funding for a university or college is managed by what’s referred to as accreditation. And, the accreditation companies are run by the present universities. Proper? And so, it is a self-governing cartel–

Marc Andreessen: And, lo and behold–

Marc Andreessen: Hospitals. Similar factor.

Marc Andreessen: After all, skilled associations. New medical doctors, new nurses. Proper.

So, one principle of [inaudible 00:20:45] healthcare is there are nurses, there are additionally nurse practitioners. Perhaps we must always have much more nurse practitioners. The nursing unions go–so yeah.

So, you see this, mainly, this restriction of provide. This, both straight government-directed restriction of provide, or government-enabled and supported. The federal government makes Federal Pupil lending obtainable to the accredited faculties and universities and to not the others though these are usually not authorities companies. And, though the accreditation bureau, the paperwork itself, just isn’t a authorities company. It is type of a de facto extension of the federal government.

So, you simply see this restriction of provide factor over and over.

And, then to your level, the subsidization of demand. You may have, you recognize, trillions of {dollars} of subsidies into residential mortgages and home purchases within the final 60 years. You may have trillions of {dollars} into scholar mortgage funding and all types of different subsidies for universities. And, you may have many trillions of {dollars} in subsidies into healthcare, via Medicare and all these different authorities techniques.

And so, once more, it goes back–it’s like Micro/Econ 101, proper?

Marc Andreessen: Take a market: You limit provide, you subsidize demand, you get costs to the moon.

Marc Andreessen: California, we’re now offering client fuel subsidies. The California authorities despatched out–it’s truly a great–this is such an important instance. So, the California authorities despatched out $400 fuel playing cards as a result of fuel is getting costly. So, they despatched out $400 per automobile that you simply personal. And, so, to begin with, it was nice for me. Like, I personal two vehicles: I bought $800 bucks.

Marc Andreessen: I really want it.

Marc Andreessen: I am not the obvious recipient of presidency assist. And but I bought it. So, congratulations to me.

And, then, you recognize, by the best way, my neighbors–right?–who personal one automobile or personal zero vehicles, as a result of they’re, you recognize, environmentally accountable and so they bike on a regular basis, they bought zero subsidies.

And, then, after all, the twist is, California does every little thing it may to stop new drilling of energy–right?–new oil and fuel extraction.

And so, as soon as once more, it is a case examine: limit provide, subsidize demand, and be absolutely–every single time–completely stunned by the consequence. Proper? We’re like goldfish on this challenge. Like, we’re surprised each single time costs rise.

And so, anyway that is what we’re making an attempt to do.