My notes from Marc Andreessen’s appearance on Tim Ferriss’s podcast.
1/ Read history books. “I got a lot of my education from history. Rather than reading a lot more about the contemporaries I would go back and read about; Ford, Rockefeller, Edison, Morgan.”
Andreessen does mention some modern books he likes – like cofounder Ben Horowitz’s book The Hard Thing about Hard Things, which we’ve touched on – but for the most part he learns mostly from history. David Chang and Ezra Klein both said the same thing. Forget management books, said Chang, “I can learn more from a history book or autobiography about someone that made a ton of mistakes.”
2/ What’s the right shade of grey? “You want to fail fast, but you also want to be determined and can’t give up. How do you possible reconcile those? That’s where you get to strong views weakly held.”
Andreessen is known for the expression “strong views weakly held,” and this mindset is a tool for deciphering spectrum locations.
“No man ever steps in the same river twice, for it’s not the same river and he’s not the same man.” ― Heraclitus
Andreessen provides a switching mechanism. “Strong views weakly held.” We can find our footing in some part of the spectrum, and hold that position until it’s time to flee.
3/ Alternative histories. “Do you have the judgement to make that call, knowing by the way, that either way can be a big mistake. Nobody’s going to tell you that you made the right call. If you change and then succeed, that’s great, but you might have succeeded at the old thing even better.”
We touched on alternative histories in podcast episode #02, but Andreessen points out a challenge. We’ll never be sure about the range or intensity of the different outcomes.
4/ Opportunity cost. “The investors in Friendster were more likely than not, unable and unwilling to invest in Facebook when it came along because they were conflicted.”
Andreessen said investments have three costs; money, time, and opportunity. Of these three, money is the cheapest. When a partner at a16z has to work on a project, it means they can’t work on another. When they choose a drone or cryptocurrency it precludes them from another chance to invest in that sector.
This mindset about choices means the a16z team has to proceed slowly. Daniel Kahneman said, “when things get really big and you’re really not sure, slow down.” Warren Buffett put it this way:
“I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”
Dan Ariely found that we have trouble with the mental accounting of opportunity costs. Andreessen and his team have recognized where it is highest – and presumably move slowly.
5/ Red teaming. “It’s the responsibility of everybody else in the room to stress test the thinking. If necessary we’ll create a red team. We’ll formally create the countervailing force and designate some set of people to counter argue the other side.”
Bob Seawright said much the same thing; “Institutional red teams are not the same thing as real disagreement… you need people to become empowered if they are to become a red team.”
At a16z they do exactly this, Andreessen said, “whenever he (Ben Horowitz) brings in a deal, I’ll trash the shit out of it.”
Stanley McChrystal recalled being in a red team meeting where a commander who was role playing the bad guy used all his forces to attack at once. That won’t happen, someone said. But that’s the whole point, added another. Good red teams – much like the good culture we looked at in the Shane Parrish post strive for an objective understanding of the issue.
6/ Toys are for children. “These things look like cult and fringe activities until they break mainstream.”
Things we think are toys can become much more. Bill Bryson wrote:
“When Henry Ford built his first Model T, Americans had some 2,200 makes of cars to choose from. Every one of those cars was in some sense a toy, a plaything for the well-to-do.”
7/ Competition. “We don’t foreclose the possibility that there will be another mobile killer or social killer app but it’s getting harder and harder and harder because more and more people have figured out that you can do these things and the winners have gotten very established. One of the ways to think about it; first you had Facebook and then Twitter and then Instagram and now Snapchat, and those all became big winners. What would it take to make the fifth one? You only have so many icons on the home screen of your phone. It has to knock one of the other ones off.”
Investor Burton Malkiel said, “The problem is, as the market gets more and more professional, when people are better trained, when people have better sources of information…it’s then harder and harder to actually beat the market.”
Biologist Terrt Burnham wrote, “with high population density comes competition for resources, and with competition comes conflict.”
Auren Hoffman said that investing is such a challenge it can’t be anything but a full time job. Jack Bogle said that Vanguard succeeded because there was no competition. Jim Chanos also found a niche with limited competition. Peter Thiel wrote in Zero to One, “the best place to look for secrets is where no one else is looking…every great business is built around a secret that’s hiding from the outside.”
Thanks for reading, I’m @mikedariano on Twitter. If you liked this post, I’m looking to do more research work like it. Get in touch.