Funding Science & Innovation; Remote Work & Future Silicon Valley

Hi everyone, welcome to this week's episode of 16 Minutes, our show where we cover the headlines from our vantage point on tech trends. I'm Sonal, your host, and this week we're covering two timely but also still developing news topics for this holiday break episode. One, that the National Science Foundation could rebrand and get a significant amount of funding, which has implications for US innovation. And two, there's been a whole spate of companies that announced they're going remote, not just during COVID or extending beyond it, but by default. So what are the implications? Note, given all the companies mentioned in this episode, that none of the following should be taken as investment advice. Please be sure to see a16z.com/disclosures for more important information. Okay, so now on to the first segment. Let me quickly summarize the news. There's a bipartisan act called the Endless Frontiers Act that could give the independent government agency NSF up to $100 billion over 5 years. For context, their existing budget is $8 million. And also, among other things, rename them from the National Science Foundation to the National Science and Technology Foundation. They would also focus on 10 areas that could change over time. For now, it includes things like AI, quantum computing, genomics, and others. A Science magazine article on this news jokingly noted that the, quote, Stay Ahead of China Act might be a more accurate moniker. Speaking of, the name of the act actually comes from the title of the famous 1945 Vannevar Bush report, Science: The Endless Frontier, that led to the creation of the NSF in the first place. That was in 50, so it turned 70 this year and has funded lots of foundational research in between. I'll be sure to link to that report as well as some of the news articles in the show notes. Now, let me quickly introduce our expert for this segment, A16Z general partner Martine Pisatto, who's worked the full spectrum from academia to startup to research lab to big company. Martine, I'd love your quick take on funding R&D overall, not just in government agencies, but corporations and the overall landscape. But first, what do you make of this news?

So I am strongly in favor of increased funding for science. Science is uncovering a fundamental truth about the universe. And when you set out to do it, you don't know what you're going to find. And then you find something, it changes our perception of the universe. Not really sure what you're going to do with that. Maybe you do know what you're going to do with it, but that is the motion. Where engineering is, you actually know what the outcome is, and then you apply known techniques to get there. So it's a far more deterministic problem. It's something that we as a civilization have reined in over the millennia. What I don't know is the significance of including the term technology. And in my experience, core ideas come actually fairly often, but being able to implement them is the brunt of the work. And so if there is more of an effort to fund kind of actual implementation to utility, I think this is a huge plus.

To your point about needing more of the quote engineering side of things, they don't quite literally say that, to my understanding in their proposal. But what is interesting is they do draw parallels that NSF could operate more like DARPA, which itself does have a more deadline-based model, much more tangible, making things more concrete. I remember working with a number of Xerox PARC scientists when they had DARPA grants that every poster would have this quadrant showing the implementation, various specific things that you had to show. So it does seem like they're trying to reach in that direction. My question for you then is, is there a tension when you add that engineering kind of component or requirement, does it then undo your ability to do core foundational research?

So I think that this is the core issue with all of this. So I've done core, core, like, you know, science at Lawrence Livermore that was focused in an area that only the government really cared about. I've also done a PhD at Stanford where we were working on something in an applied area, which is computer networks, but we wanted to take an entirely fresh approach to it. So that was less core science, and it was more, can we do something applied that's meaningful? But we were in a bit of an ivory tower, and so we got to rethink things that became software-defined networking. Then I've also done the, okay, let's take an idea and do a startup around that idea and make it practical. And as part of a large company, I've done, can you innovate and do something new? And in my experience, all of those are entirely different exercises and endeavors, and to try and tie them is a huge mistake. I would say that these are very different motions. You should have the scientists do the science. You should have core architects taking science and trying it out in business context, and then you should have business builders build businesses.

The problem, of course, is the disconnect that then occurs. Because, as you know, the traditional model that also doesn't work is where you have pure ivory tower folks come up with things that are so decoupled from the engineering implementation side, and then you have engineering implementation folks who are so decoupled The problem is I don't feel like there's actually a dotted line between science and monetization.

So often companies invest in these research centers to do all this great research, but they have no idea of how they can take that into the organization. Maybe it's worth drilling down a little bit more in just companies doing research, because we've seen a whole bunch of these, right? Like the research parks, the T.J. Watsons, the AT&T Bell Labs, and the Microsoft Research. They still exist. They feel very anachronistic. Where you like hire PhDs and they write papers and they kind of do their own thing. The next level is let a thousand flowers bloom. You can go off and do some very bizarre things. And this is kind of more like the Google approach. Like many companies, oh, you can do a hackathon. We'll give you like a week, a month to do something new. And like, they've got like these internal things. Those actually tend to produce very little. And then you have one more level where there are companies that as a company make these very focused bets that have support from the CEO on down that absolutely transforms companies. And in this, you could include AWS from Amazon. There's these few examples that created billion-dollar or multi-billion-dollar businesses. And these in almost every case did not look like research, did not look like these kind of let a thousand flowers blooms, but they're very focused business objectives. There's a number of components that you have to have if you want to do this. The executives have to support it. There's very, very few things that you work on. You can't do a bunch of these. I think the people that staff them must come from product teams. And then you need ring-fenced resources that aren't fungible, that can't go back on older projects. And you need to keep the white blood cells away.

So you mentioned white blood cells, so the immune system of the company doesn't attack it. Classic innovator's dilemma. And in fact, that's supported by research. The most successful ones were the ones that were kept separate to do their own thing. On the flip side, there's also this trend of companies will set up like these corporate venturing arms and sidebar vehicles.

That's a recipe for failure.

Yeah, exactly. So where do you really fall on this idea of how isolated to be and how not isolated to be? Because we don't want to be a sidebar, but nor do you want to have the immune system reject the thing.

Yeah. So I think that the creation, the resource allocation, the strategic direction, the business plan should come from the absolute top centrally. And then once that's off and going, then you need to protect it. These kind of incubator, CTO lab, whatever is the opposite.

So what I'm really hearing there, if I were to oversimplify it, within companies, bottom-up innovation doesn't really ever work. It has to be sort of top-down, bought-in, proposed, supported. But within the broader world, going back to your let a thousand experiments bloom, bottom-up innovation is what you want.

Exactly. So exactly. When it comes to finding practical products and market based on research, there's no way you can beat startups. I mean, it's the most efficient, impressive Darwinistic system.

I was about to say, it's very Darwinian.

I love it. The amount of just chaos and effort and energy and trial, and it's all Brownian motion because, I mean, how often does a startup pivot? 2 or 3 times. So not only are they popping up all the time, but they're moving and mutating and everything.

Okay, so going back to the news, the National Science Foundation, if it does adopt this sort of DARPA-like model, it'll probably bring in sort of program managers One thing I'm very curious about is when you said you need a product person in the room, why that person? Why not any other profile of an engineer or a scientist?

Yeah. So what I was referring to there is, and this is in the context of a company, is who do you ask to come up with the next innovative endeavor? Do you ask the new PhD academic that you hired, or do you ask the grizzled veteran that's been like hacking products and shipping product for the last 5 years. Often the intuition of these big companies is we've got all these PhD researchers, they think big thoughts. I think that you ask the person that's been piped into the product. Here is the issue. It's too difficult to come up with something if you have no accountability. It's fine for you to do core science and improve the breadth of like human knowledge. That is legit. It is also legit to take some idea and try and monetize it. That is legit. I do not think it's legit to say, "Your job is to think of stuff that somebody else can monetize." And so the expectation should be very different. If you sign up for a science project and you come up with nothing, I think that's fine. If you sign up to an engineering task, if you don't finish it, you should be fired.

Right.

So one opportunity that's in these NSF grants— 'cause some people have critiqued this bill as being sort of an offset for private research, but in fact, I think of it as a superpower where if you let those institutions and universities universities do the type of cross-disciplinary, basic, pure research that companies cannot, then the companies can, to your point, really take it and go to the next level. Now, what's your bottom line?

The NSF funding allows people to go out, take big risks, do big science, think large. The mistake is, is when we believe that can happen within a business context. I think it has to be government funding. I don't think we should force science to be businesses, and I don't think we should force businesses to be research institutes.

Well, thank you for joining this segment, Martine.

This was great.

Okay, so for our second segment, we're taking a quick pulse check on the trend of several tech companies announcing they're going remote. To summarize and share just a few examples, Coinbase's CEO announced that they'll be a remote-first company. Square said that moving forward, their employees will be able to work from home permanently, even once offices begin to reopen. Shopify CEO announced on Twitter that they are now a, quote, digital by default company. He also added that office centricity is over. And that's just to mention few from a couple months ago. It's an ongoing trend, but the question is, is this the new normal? So now let me introduce our experts for this segment, a6nz General Partner David Yulovich and Operating Partner for Cultural Leadership Chris Lyons. I'm curious for your guys' quick take on what's the shift here.

COVID has accelerated a change that we've already been seeing in the tech industry. As collaboration tools get better and better, people are able to work more efficiently and effectively. And now we're seeing another shift on the employer side. Where employers who previously thought certain jobs could only be done with butts in seats in the office, well now as a result of sheltering in place, they realize that the aperture of jobs that can be done remotely is just far greater than they previously imagined.

It's a rebalancing of what exactly is Silicon Valley, going from a location to an opportunity that can span all across the country. I grew up right outside of Atlanta. I had to move all the way to Silicon Valley. To develop the network, to understand how the world was working within technology and where everything was happening. And there was always this, whether it was a myth or whether it was the truth, just this universal thought that if you were going to make it, the best place to make it was in Silicon Valley. But there's a lot of barriers to entry, such as the real estate market, networks if you're from outside of the Bay Area. And so for us, especially as we think about having a more inclusive workforce all around the country, how we're thinking about talent. One of the things that's been super important is trying to cultivate a network of designers, business development leads, engineers, or entrepreneurs that are trying to start companies in places like Atlanta or Detroit.

There's all the benefits Chris just mentioned around talent pool. I also remember back when I worked at Cisco, you know, I would meet these people that were really, really talented and had been at Cisco for a long time. And I would often ask, hey, why are you still here? There was actually one reason that would bubble up to the top more often than not, which is that they had to relocate due to family reasons. And Cisco is a company that's very flexible on those things. And so I think companies are going to realize not only do they open the aperture of talent that they get to attract, but the tenure of that talent will actually get much, much longer.

So one thing that was interesting to me about the Stripe announcement, which was more about reporting on their engineering hub, which to be clear, went remote over a year ago. And one of the things they observed to your point, Chris, is that quote, we are tapping pools of candidates we could not reach before. And they also noted that remote-friendly policies help engineers who have family responsibilities as well. So it sort of changes that dynamic.

I think it's going to increasingly become the norm. And so back to your first question of like, is this a new normal? There's so many tailwinds that sort of bolster this idea of having distributed remote-first culture or remote-prioritized culture.

It seems like the next level of innovation within the company's culture is actually going to be within the values itself and how people can really think about those values. Like you mentioned with Cisco, with that being a main reason why somebody would either want to go work for a company versus another option. One of the biggest challenges that people face within a company culture is how do you maintain the intimacy within your organization? How do you make sure that people are having the team spirit and the camaraderie? And so I think the EQ in addition to the IQ of these businesses will start to merge in order to retain people's happiness within the company, but also to increase the overall effectiveness within the business itself.

What I'm basically hearing you both say is it's not just the ability to work anywhere, but that it's also about how you work and not just where you work. So along those lines, do you believe it's possible for a company to be built remote first? Because a lot of these companies have the convenience and benefit of having already built their cultures. What are your thoughts on that?

Yeah, so I absolutely believe that you can build a net new company in a remote-first environment, remote-first culture. What does a remote-first company really look like? Maybe the new normal is actually going to be where you work remote and you do a quarterly onsite. And the onsite isn't about determining the strategy. The onsite is about building trust in those foundations and those relationships. You know, as Ryan said, really building that EQ aspect. To me, the fundamental ingredient for a great high-performing team is a foundation of trust.

So I'd love to have a quick take on what's the tooling that's here and that supports this. Like, what's the technology piece of this puzzle? And then where do you see things still missing or where there are opportunities?

Everyone's familiar with like schedule the calendar meeting and you get a Zoom or Hangout link. And like, those are for the very structured, like scheduled meetings. But there's these tools that lend themselves to sort of just ad hoc communication, really sort of reinstantiate that hallway track or sort of water cooler talk. I think those are important. I think tools that enable people to see the chronology and history of a company— you should have a changelog in your HR systems, you should have a changelog in your wikis and your knowledge management system. There's all kinds of things like OKR tools now that rather than just using a spreadsheet, OKR tools that really clarify What's happening at a company? How are we prosecuting against those goals? What's important? Why are we doing what we're doing? But one of the other things I wanted to mention is that communication becomes way more important in a world where you're not just spending time seeing the person you're talking to. I think organizational transparency, no matter what the category is, is sort of the defining element of these new tools.

So what I'm basically hearing is that the organization is now represented as software and there's like a stack of software at multiple levels, horizontally, vertically. There's many, many ways you can configure it. This, and at the end of the day, software in organizations has always been about bringing people together to coordinate and collaborate. But I'd love to hear whether you think this is going to come into other roles besides engineering, and then also whether non-technical companies can be built.

Yeah, look, I mean, there's actually been functions inside of companies that have been distributed for a long time. I mean, field sales by definition is in the field and where field sales was typically close to the customer. Now you can have inside sales that often turns into a pathway towards hybrid sales where you go meet with the customer when necessary. And so you want to be proximate to your customers. So I actually think that it's not just an engineering thing, far from it. In fact, for a lot of software companies, any function in that company can be a remote function.

Just to add to that, if you look at just the ability to go into a physical retail space and purchase something, whether it was like if you're in the beauty industry going and purchasing hair from a stylist. So for example, like a company like Maven that has been able to, especially during this pandemic when there were no salons open, still creating a platform to buy and sell weave and wigs and products that were within that industry. Now with this transition, people are by necessity leaning onto technology platforms, whether or not they're a technologist or not.

What does this mean for the future of Silicon Valley? People have often made, and I myself am included in this, make the argument that you cannot compete with network effects, especially when it comes to second-order network effects for things like hiring people who've done these companies before, who've provide the mentorship networks for those next generations of builders, et cetera. One of the things I thought was very interesting about Coinbase's post is that they described this not just as a practical kind of space limitation post-COVID thing, but a strategic advantage. So what does that mean for the future of Silicon Valley in your views?

Yeah, to me, the future of Silicon Valley goes from a location into an energy. For so long, people viewed Silicon Valley as Sand Hill Road or the city of San Francisco. Now, Silicon Valley is something that can be taken into your communities. The information is now publicly available, the resources, the ability to communicate and connect with people that are previously in Silicon Valley. It's actually one of the greatest potential opportunities now to even promote to those that didn't think that they could even be in technology or didn't think that getting into this industry was even a potential option, that now more than ever you can do that and do it in your own way and then solve real problems that might happen to be within your community that traditionally would not have been something that in Silicon Valley would have been a mainstream idea.

I agree with Chris. By sort of spreading the seeds of what makes Silicon Valley great everywhere, we're going to create more great companies and have more impact across more industries. And, you know, the same way we talk about things like the PayPal Mafia blossoming new startups, I'm hopeful that we'll have geographic sort of mafias creep up and be able to plant the seeds for the next generation of companies in that region. Look, Silicon Valley California is a special place for a lot of reasons, and I still believe the vast majority of the best technology companies are going to be started here, but they're going to be having a workforce that's entirely distributed, that's increasingly nomadic. So I'm excited for all those reasons.

Thank you both for joining this segment of 16 Minutes.

Thank you.

Thank you.