Supported by Greenhaven Road Capital, finding value off the beaten path.
Ben Horowitz and Marc Andreessen were interviewed by Stewart Butterfield about their ten years at a16z. We’ll frame three rhetorical questions from the interview.
How to start? Copy
a16z started by copying Michael Ovitz’s model at CAA. Horowitz said, “We probably saved five years by copying his model.”
Recapped in, Who is Michael Ovitz, the idea was to have a team of domain experts serving clients. This was a different model for entertainment and it worked for Ovitz. It was also different for venture capital and it worked there too. But it won’t work for you unless your industry is new.
Andreessen explained that once a company starts, “Then it’s a compounding advantage where you get more and more different from the status quo…why would William Morris copy you (Ovitz)?” The couldn’t because they’d need to take salary cuts. The William Morris executives had too many stakeholders, neé bills, in their lives.
This question gets asked a lot, What’s stopping Company X from doing this? Why can’t Microsoft in the 90’s, Google in the 00’s, Facebook in the 10’s just come in and do this?
The best answer is to say that they can’t. This is what Max Levchin did with Affirm. And it’s not unique to startups. Competitors need to think about where their opponent’s weaknesses lie and head for those. That was the CAA and a16z agency model. Take some salary money and create services.
What’s going to happen next? No one knows.
Andreessen lived through this with the Netscape browser and has seen the internet, mobile, and social trends. He said, “People don’t think these things are obvious in the beginning. They are only obvious after the fact.”
When he pitched media companies for investments in Netscape they balked. Those business “knew that normal people wouldn’t use the internet if it didn’t have Time magazine on it because Time would obviously be the killer app for the internet.”
But killer apps require a convergence of this, that, and something else. Andreessen said that “basically everything happens,” but like a solar eclipse, things like markets, technologies, and governments have to line up – or not oppose – first. One example is the book, The One Device.
If no one knows what’s going to happen and anyone can make something happen, even if it’s small, that’s great news. Andreessen is optimistic and recommends the book, How History Gets Things Wrong. The future is flexible! What’s going to happen next is up to you.
How to make mistakes? Probabilistically.
Horowitz likes the way Bezos puts it, “We rate people on the inputs, not the outputs.”
Andreessen elaborated, “We have a very specific philosophy on that (mistake making) and the book I recommend is Thinking in Bets where she (Annie Duke) talks about what is the nature of a mistake in a probabilistic domain.”
Instead of looking at outcomes, look at processes. Sports can provide handy visual examples. We praise Bill Belichick a lot but Chuck Klosterman made this point to Bill Simmons:
In his podcast with Russ Roberts, David Epstein said the same thing, “We have to be really conscious of the fact that a good outcome means we used a good process and vice versa.” Both of Michael Mauboussin’s books, More Than You Know and The Success Equation address this kind of making.
At a16z they use an idea maze. Andreessen explained, “is like a hundred step process to work your way through all the different permutations of the idea before you figure out the real thing.” It’s a way to think of alternative histories, counterfactuals, and possible outcomes. It’s a way to think probabilistically.
One idea maze solution is money. But that’s an idea maze problem too. Stewart said, “Having a whole bunch of money takes away a critical forcing function.”
Constraints like this can help. David Lynch wrote that more money means less thinking. Interviewer extraordinaire Terri Gross said that daily interviews make her a better interviewer.
Thanks for reading.