Beating the Incumbents with Michael Ovitz on Boss Talk #9

So let's start. So I want to open with a quick question. And I don't know if people realize in the early days when you guys started the firm, Andreessen Horowitz, it was not called Andreessen Horowitz. It was called bfd. So I thought the room would love to hear. I know what it means. But I thought it'd be really cool to warm up the room to share with them the what it means, why you guys called it bfd. And like, how did that work out in the end?

Do you want me to take that one, Mark?

Uh huh. Yep.

Yeah. So it's funny cause we referred to it as bfd. And actually as the firm started to grow, people at the firm thought it meant big effing deal, which it did not. It meant Bedrock Fire Department. And the reason it was called the Bedrock Fire Department is there was an episode of the Flintstones where Barney says, you know, Fred, we should join the Joe Rockhead's volunteer fire department. And Fred's like, we don't know anything about putting out fires. And Barney's like, what are you talking about? There's no fires in Bedrock. Everything's made of stone. This is just a way to get out of the house and go bowling and drink beer and stuff. And so we thought that was an appropriate, appropriate name because Mark and I were in the house all day. We're like, we need some. The Bedrock Fire Department to get us out of the house. That's where the name came from.

That's awesome.

Yeah, it was actually a dividend of my rap career because we had sampled that episode on one of the rap songs called the Bedrock. So anyway, that's awesome. On with the more serious stuff.

All right. So I think today we're doing it differently.

Right?

So I think today I really want to ask Ben, Mark and Mike about how they started a 16Z, what they're doing, lessons, learning, life partnership and all those things, and the future. So I'd like to start actually with a question on CAA. So Mike started CAA in 1975. And I've heard that when you guys started a 16Z, it actually was an inspiration for you that there was a lot of similarities between how CAA was formed org chart, how they did things, how they ran it, how they managed it with a 16Z. I'd love to hear more about that, maybe Ben, if you want to go. Or Mike.

Well, I can go ahead, Ben. You take.

I could give. Why don't I give Mike the lead in and you know, why why we went to him. So, you know, Mark and I kind of had an idea of what we wanted to do as a venture capital firm. But one thing we knew, and I give kind of most credit to Mark because he did just a great job of studying the history of venture capital. But the problem that we had to solve was if you looked at kind of venture capital in 2009 when we started the firm, or really 2008 when we were looking at it, the top firms had been the top firms for a very, very long time. Decades. There was a good reason for that, because basically, people selected a venture capital firm based on success. So as an entrepreneur, you want a lot of things, but the number one thing you want, you're at a very high anxiety point, and you want success. Like, how can I guarantee my own success? And so they were looking for the successful firms, and there was no way a new firm without a track record could kind of compete with a firm like, say, Sequoia, who had funded Apple and Cisco and Google and all these great companies. So we needed kind of a wedge into that. And it was interesting because we knew, because we had known Michael for many years, because he was on our board at Loudcloud and Opsware. We knew that CAA had kind of done the same thing in the talent business, where there were these firms that had been around since the vaudeville days and had all the top actors and actresses. So if you were a top actor, top director, or what have you, you would go to the William Morris Agency and you would sign up. Of course you would, because that's where the actresses that you really admired were kind of agented by somehow. Michael figured out a way to start a new talent agency in 1975 and take it to the top of the industry over the next 15 years. And we thought, wow, that's probably a good model for us. So that's when we went to Michael and. And I'll pass it to Michael there.

Thanks, Ben. First of all, thanks for inviting me. I'm really honored to be part of this discussion, particularly with such good friends on the line and two guys that have had the most extraordinary influence on my life, personally and professionally. I think it goes back to when Mark and Ben, for some reason, unbeknownst to me, considered me to come on the board of Loud cloud. This was 99, 2000 in that area. It was the beginning of a journey for me and a very steep learning curve. We used to talk a lot about different kinds of businesses, and the one thing about Mark and Ben is they have insatiable appetite for information, ideas, and just exchanging thoughts about just about every subject imaginable. And clearly one thing about the business. I spent most of my professional career in the entertainment business. It's an easy subject to talk about because A, everybody has an opinion, B, everybody's a consumer of all aspects of it, and C, the kind of gossip side of it's really interesting. But Mark and Ben were particularly interested in the fundamentals of the business and the dynamics of it and things that only individuals who grew up in the valley would be interested in. Things that people in the entertainment business don't think about. When we started caa, we had to do something different. We had no choice. There were several hundred ensconced, as Ben said, talent agencies. They controlled, probably about 10 of them, controlled probably 80% of the talent. Talent went to places that they were comfortable. They could call their lawyer or their business manager or a publicist and get a recommendation of an existing company where people could basically would feed each other clients. It was a very incestuous, still is business. The thesis that we came up with was very simple. We had to differentiate. We had to come up with something that would break the paradigm of the older agencies that have been around forever. So we decided to come up with this concept of all of our executives being partners of the firm and all of our executives knowing all of our clients and basically to provide services that other agencies didn't provide. To simplify this, agents basically took what were called phone orders. If there was a part for an actor, an actress, a director, a writer, or a gig for a musician, it was an incoming call to the agent. They just sat and frankly, clipped coupons. We decided to reverse that and that we would package and put together product for our clientele, and we would aggressively look for opportunities by putting them together with each other and with other pieces of talent and not wait for the phone to ring. So all these stories were constantly discussed with Mark and Ben just because they were interested. And when I remember calling Mark, I doubt that you'll remember this, Mark, but I called when you and Ben were angel investing, before I even knew you were thinking about doing a firm. I was begging to get involved in your angel investing. And then, lo and behold, you guys decided to do what you've done. And there was a discussion that ensued about how to make it different. It was exactly the same playbook that was suggested for the simple reason that A they knew about it, B, the world of venture capital was a series of ensconced, if you will, Just like agents were. And they had to come out of the box with something very different and with something to offer that no one else could. And lo and behold, they did it. And I couldn't. I don't think it could have been executed any better. And I think that the firm itself very quickly established itself as something that was different, that was very dedicated to entrepreneurs. And not that other firms aren't, but that offered a multiplicity of services that other firms never thought about offering or did in a singular basis. I'm talking about the more ensconced traditional VC firms. So I don't know if that helps get the conversation going, Ali, but that's how I look at it.

That's super fascinating. I think that's actually perfect segue. So it was modeled after caa, how it disrupted an existing industry that had existed for a long time. But how do you do that then? How do you. And you probably have to figure out some strengths that you have that the existing established VCs didn't have. This their weakness. So you can apply your strength to their weakness. What were those strategies? How did you guys disrupt them and how did you figure out how to do that? And how did it go?

Mark, do you want to take it? Do you want me to start?

No, yeah, go ahead.

Yeah. So, you know, it's interesting because there were a lot of different aspects to it, but the core thing we took from Michael, there were investing strategies and then there were value proposition strategies were the two categories of things. We had a few, many observations. Mark probably had 10 times the number of observations that I did about the industry, but we had lots of them and we were trying to figure out which ones to pursue. But on the investing strategy side, we had come from angel investing and at that time VCs had just completely ignored that part of the market. And we thought we knew that market and we could have that as a component of the firm. So that was one of the things. Another thing that we thought right out of the gates is we would be kind of from investing standpoint, multi stage. So we had investing ideas that were separate from the value proposition. But the value proposition kind of mapped exactly onto how Michael had thought about it in that the thing that we had experienced both at Netscape and, and Loud Cloud and opsware was that VCs were really best at kind of replacing the founder inventor as CEO with a professional. They were great at this. I mean, these guys had the most amazing kind of roster of professional CEOs that they could roll into a company and kind of take the thing over and run with it. And we knew from being entrepreneurs. And actually, one of my favorite stories about this is at the end of opsware, we had gone through all kinds of crazy stuff, and we ended up selling it for a billion six to Hewlett Packard. But I got a call from a private equity firm, and the private equity firm said to me, ben, we want to hire you into our firm. And on the first phone call, literally on a phone call, and I was like, you've never even met me. How could you say such a thing? And they said, well, we specialize in turnarounds, and we think the greatest tech turnaround of the last decade was loud cloud to opsware. I said, well, you are aware that I was the one who fucked it up in the first place, aren't you? It was one of those things. And right at that moment, I realized there's no way any professional could have come in and fix that company, because you would have had to know everything that was wrong with it, all the mistakes we had made to act fast enough to do it. You really have a huge advantage as the founder in being able to do this. Mark and I talked about this a lot. But if you go back through the history of technology companies, all the. Or not all, but almost all the greatest technology companies were run by their founders for a very long time. If you go back to Thomas Watson at IBM or Dave Packard and Bill Hewlett at Hewlett Packard, or Bill Gates at Microsoft, or Jeff Bezos at Amazon, or Steve Jobs at Apple, you name it. Henry takes Steve Jobs out of Apple, they disintegrate, and you bring them back and they become the most valuable company in the world. And we really thought there was a reason for this. We thought our differentiation would be we'd be the best place for an inventor to run his or her own company for a long time off of that position. We then said, okay, can we apply Michael's model? And we absolutely could. Because the thing that CAA did that none of the other agencies could match is they built a franchise, and that franchise was a network. If you think about a normal talent agency, you've got agents and each agent has a network. But those networks don't overlap, intersect. It's not the union of those networks. You get your guys network. And that was exactly what you got with the venture capital firm. You get the partners network. We thought, well, what if the entire firm we built into a network? And we did it by exactly the way Michael did is Marco didn't take any salary, we took all the fee money, and we built this what Michael referred to as the franchise. We call it the platform, but it's essentially a network where we could give an inventor a network that was as powerful as Bob Iger's network. Day one, like right out of the gates, you could call any customer, any executive, anybody in the capital networks, anybody in Washington, D.C. right off the bat, you pick up the phone, you get them through our platform. That was the concept. We took this burden where founders never feel like they have the network of the professional CEOs. Now founders could feel that. Then. The second kind of part of the differentiation that we built in was that the general partners, Mark and I, had built companies like actually built companies. So we knew what it meant to build a company, we knew what it meant to be a CEO. And so we said, look, we're going to offer that knowledge that know how and to prove it, like, we'll write about it. And, you know, Mark had this great blog, and then I started a blog. And then, you know, that eventually turned into the book. And so that that kind of became how we differentiated as a firm in the early days.

That's awesome. And you know, what I found as a founder, frankly speaking, was that you could help us so much with the recruiting, with marketing, with sales. You had all these experts. And I felt like one of the advantages you guys had was that you had actually run a company so you know how to run a marketing department, how to run a sales department. It seems the VCs of their time, they were really good at making investments and picking good companies to invest in. And then they went off on a good reputation to get other good investments, but they actually didn't know how you necessarily do recruiting or hiring or marketing or sales. How important did that end up being in the strategy?

Go ahead, Mark.

Yeah, just on that. So, yeah, so that was part of the historical study. That was part of what actually gave us confidence to start the firm. So you're exactly right. Conventional wisdom in 2009 was very strongly that, like, basically there's a big difference between operators and investors. And in fact, if you ask most of the top VCs in 2009, it's like, are the best VCs former operators? The general answer that they would give you to that is no. And the general explanation for that is because basically the theory is basically like, investing requires a level of sort of clinical analysis and sort of emotional distancing, and operators tend to kind of get too intertwined with their companies. And too emotionally entangled and often end up wanting to run them. And so there's just this, like, they're basically just these two different disciplines. And that was an interesting theory, but when we went back and looked at the history, there was a problem with the theory, which is almost all of the top venture firms of that period, as Ben said, were derivatives of success derivatives or just later generations of venture firms that had been founded in the 60s and 70s, right? And so, you know, Sequoia was founded in the early 70s. Kleiner Perkins was in the early 70s. You know, Greylock was in the 60s. You know, Excel was a sort of a late bloomer. They were founded in the 80s. And actually, if you go back and you look at the history of those firms, they were all started by operators, right? And so, you know, the founders of Sequoia were not professional investors. They were, you know, Don Valentine and Pierre Lamont, who were two of the legendary, you know, semiconductor executives at the time. You know, Kleiner Perkins was, you know, Tom Perkins, who'd been a legendary, you know, HP general manager, Gene Kleiner, who'd been a member of the Traitorous Eight, you know, the original kind of Fairchild intel team, you know, with Bob Noyce. And so, like, the Greylock guys were former operators. And so it's like, okay, these existing firms were actually started by operators who, like, made them successful for their first 20 years and then basically handed them off to sign kind of the more stereotypical professional investor. And so we said, okay, you know, this is actually, this is actually not a new theory. Like what Ben just described is not a new theory that's actually Back to the Future. Like, it's actually kind of how these, how these firms actually should be founded and how they should be constructed around that ethos. And it just turns out, you know, at least in our experience, it just turns out that, you know, to your point, like, the knowledge and experience of actually having done it is just so overwhelmingly helpful, you know, as compared to, you know, basically just observing it from the outside.

That's super fascinating. So kind of moving on. So that's how you guys started the firm. But then what I find fascinating is, okay, so I think your first round was a $300 million round, you know, the first time, but then you immediately turn around and raise another billion dollars. And then before anyone knows it, you turn around and now raised a growth fund. Before anyone had a growth fund, and then you had a biotech fund, you had a crypto fund. I remember this call in January 2020 from Ben and Ben and I are just shooting the shit. And I'm telling him, you know, this. Then in January 2020, Ben tells me, well, I don't know, maybe this Covid thing in China will be really bad for us. And I said, what are you talking about? He's like, well, you know, I can't get the Albert sneakers over here. That might be a real thing. And I was like, wow, what is Ben talking about? This is nothing. There's like some tiny virus somewhere. So you guys were kind of prescient with all this stuff. And from what I hear, actually there's a picture of JP Morgan in your office, Mark. So I'm kind of curious, what's your vision for the firm? Where are you guys going to take it? Is it, I mean, you guys are still working your butts off. What's your vision for what this will become? And does that have anything to do with kind of the sort of JP Morgan's and the big sort of banking institutions we had back in the day? Is that what you're kind of aiming at in the future?

So let me kind of start and I'll pass to Mark because I think he deserves a little more credit than I do for some of the prescience. Although, you know, we, we work as a team. But I think he identified some of these things first.

For sure, for sure.

Covid. But the, you know, early on, one of the things that we knew from building companies which, and I think not enough people realize this, not enough entrepreneurs realize this, is it's just as hard to build a small, mediocre venture capital firm or company as it is to build like a world dominating behemoth. It's the same work. You've worked your ass off regardless. And so you're better off going for the gold. I mean, like you're going to put in the time, you might as well go for the outcome. And Mark had this thing he said kind of really early on when we were raising fund one, which is, look, in fundraising and in venture capital, strength leads to strength. So we go out, we get the $300 million, we do a show of power, and then we go right back out and we get the next money. And we just keep getting stronger because strength is what wins in venture capital. The strongest firm is who everybody wants to work with. So we just have to keep building strength. We always had it that we were going to, you know, we wanted to be the most important venture capital firm. We never at any point in the firm were like, okay, if we just get to Be one of the top 10 or one of the top five or one of the top. Like that never was in the vocabulary. It was always, we have to build the best firm. And what does that mean? And that's kind of what kind of drove all the evolution from. Okay, not just what does the firm need to look like, but what are the technologies of the next 10 years? Because one of the things we always worried about is, look, in the first 10 years, we rode cloud, we rode mobile, we rode social. But those things weren't going to last forever. What was the next decade going to be? That led to crypto and bio and some of the newer stuff that we're doing. And it was really interesting because that actually did end up being an advantage against our peers and that we were the kind of ahead of them on both of those. So that attitude and that idea really worked. But Mark, maybe you might want to talk about kind of why we started with JP Morgan and then what does that mean going forward?

Yeah, long term, Mark, what can this. How big is this going to be? What's kind of are you guys, you know, setting your sights at?

Yeah, so actually let me ask a question to Michael on that, on that previous topic. And then because this goes to a very important strategy thing that really, you know, worked out well for us. So let me actually ask Michael a question and then Ali, I'll come back. Come back to your long term question. So, Michael, you may recall. I'll try not to leave the witness too much, but you might recall a question I asked you many years ago that actually kind of fed our strategy that Ben just described, which was, you know, before, I think, let's see, CAA ended up with a higher percentage market share in the sort of most important categories, the agency business. So the top actors and actresses, the top screenwriters, the top directors just ended up structurally with a higher market share than the firms that came before it when the market was more fragmented. If I recall correctly, I asked you one time, I was like, look, here's what I don't understand, which is if there's an agency that already has a whole bunch of leading men, actors for whatever romantic comedies, or already has a whole bunch of action stars, or already has a whole bunch of the A list directors, you know, if. If I'm an actor or a director and I'm competing with all those other guys, you know, for those same jobs, like, don't I need to be at a different agency? Because, you know, how. How can you basically represent too many people in the same Category and maybe you could expand on kind of how that, how you saw that actually play out in practice because that, that directly translated into, into how we think about things.

Right. Well, thank you for the question. I, I It's very complex to answer. And on the other hand, it's quite simple. The thesis that we had was that everyone in the company would pull together as opposed to how other agents worked, where they worked singularly for their client. So they had one client, had one agent. Our agent idea was that the clients had all the agents working for them and cut the competitive environment also by sharing revenue divided up amongst everyone. If we had a great year, everyone benefited. If we didn't, everyone had to contribute. What we did is made an environment that actors that normally competed would be better off under one roof. For example, there were three actors that were wildly competitive with each other. Bob De Niro, Dustin Hoffman and Al Pacino. They all could play the same roles, they all had different agents. We basically decided that we would go after people that were competitive with each other on the theory that we would make sure they each knew what the other was doing. And we'd lay all the cards on the table because our internal partners didn't fight with each other and didn't look to one up each other. So we signed each one one at a time and proved to them by putting them together. So we put them together in different films. De Niro and Hoffman in a film, we put De Niro and Pacino together. We put these individuals who normally would have had one agent into packaged product that we put together where everyone was pulling for the same end result. Frankly, under my watch, I was very fortunate. But we lost very few clients and frankly, we never lost a client ever because of a competitive problem. Everything was laid out in front of them. They knew what each other were doing. They realized it was better that everything be under one roof. Then to underline this point, we were all about representing everyone, which is something that you and I talked about early on. Is it possible? Is it something that's good for the talent? Is it good to have that kind of leverage? Frankly, what we managed to do was represent almost everyone. At one point we had 46 of the top 50 grossing filmmakers in the world and most of the working talent in front of the screen. The reason that we were able to do this is it gave us the ability to put them together to make product that they could do together and then to have leverage against the distributors who finance these films. And the goal was basically Monopoly. And no one had ever Thought about that before, everyone had this point of view that no one could represent everyone. Our point of view was we can represent everybody, and it's better for the clients if they're in our walled garden than outside it looking in.

Yeah, that's amazing. And so, right, the point.

The point.

The point, right, is it's better for each client. Right. To be working with the agency that has the most power. Is that the right way to think about it?

Yeah. Because if, you know, our job was not to run the studios. Our job was to get product made. So many, many films, as the three of us have discussed, that we did, and we did over 300 of them. But films like Ghostbusters or Jurassic Park, Gandhi, Stripes, Meatballs, I could just go right down the list. Casino, you know, Goodfellows. These movies were pieced together. Heat with our clients, 100% our clients. Rain Man 100% our clients, Tootsie, 100% our clients. But none of them were developed by studios. They were developed internally by what we called an engine. So if Dustin Hoffman wanted to play a woman and try to do a love story based on the idea that became Tootsie. He was the motor, the engine that drove the product. But we didn't have a studio, we didn't have financing. Everybody contributed, including the clients. So basically, Mark, all of the clients benefit. And we got. The main reason, aside from getting the creative product, was that we were then able to have all the leverage to make deals. So all of these packages that we did, our clients were getting the most percentage of the gross receipts in the history of the business. In the history of the business. And if you were a CA client at that time, you were brought up to the levels of other CA clients, and the clients didn't care what anyone else got as long as they got what they thought was the best. So we just levered it up in every direction.

Yeah. And so Ali to your question. Yeah. So basically, it's like, look, there are big differences, right? I mean, there are big differences. Like, in this case, we're the financier. So, you know, so, like, you know, there are structural differences. You know, tech works differently. There are other conflict issues. But, you know, you can kind of get where the principle came from, basically, which is like, the way I would describe it is like the attitude for both CA and for a 16Z is it's like it's us versus the world. Right? Like, you know, the challenge, this is what we talk to founders about all the time, is the problem is probably not some other startup that you know about today, right. Or some other thing or somebody pivoting or whatever, whatever. The problem is the world like the problem is like going out into the world and like having maximum impact as a new company and like punching through, right. And recruiting, you know, being able to recruit talent at scale and being able to go get customers and being able to have like, you know, these top end relationships with all these other CEOs and everything. And so it's regulators, like the press, all these other things. And so it's us against the world. And so basically the bet kind of the whole time has been that if we kind of maximize our power to punch on behalf of the portfolio companies, then that's actually best for all the companies. And that's something that we very much kind of inherited from Michael.

I'd like to add one quick thing. Ali, I'm sorry to interrupt, but Mark brought up a really good point. I think it's important to preface this discussion and I stand corrected. Should have done it originally. You can't compare the nuts and bolts of CA to the nuts and bolts of Andreessen Horowitz because there's a lot of differences in the details. Yet you can compare the basic ethos and thesis of both companies. And I was particularly inspired in that this idea could be transferred to a completely different silo. And I think it started when Mark and Ben went out to raise money, for example, I remember calling them with several suggestions of investors and they handled how they took money like we would cast a move it. They wanted the right people on the cap table, people that would be supportive, people that were high on the reputation scale. It was all done very similar to the way we looked at things now. Are the businesses the same? No. But do they have the same underlying value systems? I think so. I think it's very much about a thought process and knowing where you want to go and not being afraid to embrace change and not being afraid to want to have the whole pie. And in my opinion, I think that there's nothing wrong. I think in business the idea of being competitive is a good thing. I don't think there's anything wrong with it. And I think the idea is to win, it's not to lose. And assuming you do your social responsibility, which the firm has done, I think that the idea of wanting to win and have the right people all under 1/10 is a very, very positive thing to do.

Yeah, I love that the idea is to win, but in venture it seems people actually only remember, I mean when they talk about Mistakes. They remember the deals you didn't invest in, the deals that came your way and you didn't invest. You guys haven't told me which ones you've actually passed on, but I spent time on Crunchbase and looking like, what are the kind of big companies that came and went during this period where you guys were around? I didn't see you guys investing in Square, Twilio, Doordash. I don't know if you had an opportunity. I'm curious, are there sort of deals like that that you passed on, that you learned anything from, you did postmortem on, and you kind of change your reasoning process after those? Or is it just. It's just a probabilistic game. You win some, you lose some. That's just, you know, everything is right on.

I just want to start by saying I don't recognize any of those names. I don't know what you're talking about. Coinbase, Those names I recognize.

Yeah.

So, Ben, go ahead, please.

Yeah, no, look, we learned a lot over the years. I mean, neither Mark nor I actually had any kind of professional, like, venture capital investing experience when we started the firm. So there was a lot to learn. I would say the one, the most vivid memory for me was Square. And, you know, I think we changed a lot, not just for Mark and myself, but for the whole firm, because I do think we could have won that deal. It would have been a fun one deal. It was. We saw the A round. We knew Jack from Twitter, where, you know, Mark had been an angel investor in Twitter, and I knew Jack and we liked everything about the company except for the CEO at the time. So the CEO at the time was a fellow by the name of Jim McElvee. And I just could not and remember I was coming from being a CEO and I just couldn't imagine this guy building a company like I couldn't imagine at all. And so Mark and I went back and forth, and I would say, this one is definitely my fault that we passed. And we passed because Jim McElveen was the CEO. And Jack fired Jim three months later and took over as CEO. And the thing that we learned from that, which we talk about almost daily in the firm, is, look, we go with strengths, magnitude of strength, not lack of weakness. So the strength on Square, Jack Dorsey's new company with an amazing demo, that was enough. We should have just put our money in right then and there. And look, yes, it had weakness, but, like, big strengths deal with weaknesses. And no, weaknesses don't create outsized Strengths. And that's probably one of the most important investing lessons that I think, not only that I've had, but that we've had as an organization.

That's fascinating. You always say it, right? You say, invest in strengths, hire for strength, look for strength. You get a bunch of smart people in the room. You can always nitpick to death and find flaws in anything, and you end up with mediocre stuff that kind of.

Like, great, great people have great weaknesses, you know, and great companies have great weaknesses. But, you know, and mediocre companies sometimes have very, you know, little weaknesses. They're mediocre at all things.

But, you know, it's a further issue to consider, which I think the both firms did exceedingly well, which is that the leadership is not fearful of hiring great people and agreed that some have weaknesses, but all people have strengths and weaknesses. But when you hire great and you're not afraid to be replaced and you're not afraid of competition from people younger or smarter, it just goes miles in the right direction. I hired people that I thought in some cases were better than me. I hired people on the idea that they could replace me. I hired people that I thought could get along with each other, and I hired people that were in the trench. So this at Andreessen Horowitz that originally started out, if I recall, of hiring only people with operations experience, I thought that was very smart because it's easier for someone who's been an entrepreneur or operated a business to be able to talk to people that are starting businesses or dealing with all of the trials and tribulations of something that's new. There are so many things to do. Mark once said to me, I called years ago to complain the entrepreneur wasn't getting back to me. And he said, dude, you got to understand something. These guys have serious day jobs, and they got.

They don't.

It's not enough time in the day. I could relate to that, having started a business. I started our business when I was just turned 27, and there weren't enough hours in the day. Six days a week, seven days a week, 24 hours. It was nonstop. So if you have operating people or people that have been in that saddle, as Ben said, you're sitting there with the ability to be able to empathize and also organize and also assist in their build. Without that, I think the advice comes with a little less credibility.

That's totally true. I mean, this is why I, you know, I frankly took money from a 16Z. You know, we felt like they're Kind of like us. So that's totally true. All right, so I want to, I want to turn to the relationship between you two guys and I'm going to turn to my favorite quote from hard. Think of a hard thing. So this is back at Netscape when Microsoft was there was Internet Explorer and you guys were in a difficult position and you had a counter plan that you were going to launch. And I think Mark leaked it to the press. And Ben, you sent this email to Mark saying, I wouldn't say it was the leaked.

He did a full interview.

It's a full on interview.

Let me question. I announced the entire thing right there in public. All right, I'll read it.

Yeah, yeah. It wasn't sneaky. It wasn't like he was off the record snitching. He just like literally announced the fucking thing.

He broadcast.

It was a stab. It was a stab straight to the chest.

So Benny sent this email saying, I guess we're not going to wait until the 5th to launch the strategy.

Ben.

15 minutes later, Mark said, apparently you do not understand how serious the situation is. We are getting killed, killed, killed out there. Our current product is radically worse than the competition and you're running product, Ben.

Right.

And we had nothing to say for months. As a result, we've lost $3 billion in market capitalization. We are now in danger of losing our entire company and it's all service product management's fault. Again, you run pm, right? Next time, next time do the fucking interview yourself. Fuck you, Mark. So, you know, so my first question on this is, why do you think your partnership has been so successful, the two of you, over so many, so many years, and different businesses, startups, venture, and what can people learn from that? How can you build that kind of trust between two people?

Well, let me just start by saying I still send that exact kind of email to Ben. I just use the word darn. So that's my big advance. And then Ben can weigh in on the rest.

Yeah, so we didn't know each other as well when he sent that email. So it did make me a lot more nervous because Mark was the founder and CTO and I actually needed that.

Job.

And all that kind of thing. Yeah, I just needed to be employed, you know, like, I think a lot of it is, you know, can you be honest with each other and learn from each other and you know, like sometimes, sometimes, you know, Mark is wrong and I have to deal with it and then sometimes I'm wrong and Mark has to deal with it. And. But I think the thing that's made the relationship work is in those cases, and when we argue about things, we definitely hurt each other's feelings from time to time. But, like, we always learn. Like, I always learn from him, and I think he learns from me. And if you can have a business relationship where 26 years in, you're still learning from each other, like, that's very, very powerful. Because it's just, you know, I can't even imagine, you know, at this point in my career, you know, working without Mark, because I would miss out on all those things that I learned, like, you know, day in, day out, every week from these fights we have. Because, like, we both think we're pretty smart and have strong points of views about things. And, you know, look, over the years, you know, we've learned that we can be wrong. And look, sometimes, you know, like, I've been right, and we make a decision that Mark wants. And then a lot of times, like, with Square, I think we made that decision that I wanted. I think Mark probably would have gone the other way. And we learn from it, and that's the biggest thing.

Let me ask you this, and that's awesome. What do you guys disagree on the most?

I'll leave that one to Mark.

So let's see if you agree with this. So I. I think it's when I think I have the concept right, and maybe I do, and then you think it's the wrong people or vice versa. You think you've got the right people, and I think the concept is wrong. So it's like. It's like. It's like the intersection of theory and practice, or it's like the intersection of kind of concept and actual, like, team and people. And by the way, this is true, like, this has been true, actually, for probably mistakes that we made inside the firm as well as investing. Mistakes we made. Does that sound about right?

Yeah, I think that's right. And I think that the thing that we've actually gotten better at over the years. I think that's exactly right, is.

We.

Kind of go, okay, you're dug in. How do we get to the right people? Or how do we, you know, how do we make the adjustments so we can actually pursue the idea? And I think that's right. It's both on investments where, like, the investments that I don't like that you want to make are always. Those aren't the guys. Yeah, I totally believe in the idea, but, like, those aren't the guys. And then same internally, where it's like, we should definitely do it. We just can't do it like that. And then we have to talk, but it's complicated because we have to talk enough so that at least there's enough urgency to go do that or go find that team or do the next thing that I think that's.

That makes a lot of sense. Or also, you know, the decision to do nothing. Right. Like the decision to wait, which is, you know, which is, you know, for people who are action oriented, like a very difficult decision to make and requires, you know, a form of willpower all of its own.

What you just. What everyone listening just witnessed is the definition of a great, great partnership. Partners that agree on everything are a disaster. Partners that take positions with each other, that fight to the death on something they believe in just makes them sharper, makes the decisions better. There's nothing I can't stand more than yes people as partners. For myself, it's like when I call Mark or Ben about an opinion on something, whether it's professional or personal, I get it right between the eyes, and that's what I want. And that's what a great marriage in business means. It means you get the truth and you don't get bs and you don't get manipulated. And if you are manipulated, it's okay if it's in the service of an argument for the company. But what you just witnessed, what everyone just heard, is why they work well together.

Yeah. I mean, we could see it. And on that note, I have a question. Name one thing that the other guy is just way better than you at.

The other guy. Meaning Mark.

Yeah.

Like, I really think that Mark is, you know. You know, really not just better than me, but, like, better than anybody in that I've ever met and, you know, possibly in the world at synthesizing a tremendous amount of information that he can absorb. And part of it is like he can just consume more information than anybody else, but about, like, what is likely to happen next. And that's, you know, that's. You mentioned Covid earlier. You know, I remember when Mark first looked at it, he was like, this will probably be nothing, because he had seen all the other ones come before and had followed them closely. But then maybe a week later, he was like, oh, fuck, we're in trouble. And that was right in January, which was long before everybody else. But the fact that on something like that, a pandemic, which is, you know, it's just very hard to calculate because it's a, you know, it's a. It's a tremendous amount of kind of Bad information that was coming at us at the time, if you remember. I mean, most of the articles were saying, you know, this is nothing. You know, the flu is far worse. Why are people even talking about it? And that was, you know, months after Mark had already said, no, this is going to be a problem. So. And he didn't just jump to that. You know, he actually started on the other side. And then as more information came in, he was like, nope, I'm wrong. This thing's going to be bad. That's a good skill to have seen him do that with many, many, many things. Oh, yeah. I mean, this is why, you know, like.

Yeah.

And it's kind of how we work together. So Chris Dixon actually was the guy in the firm who kind of first got very interested in crypto. But Mark was the one who got the confidence that, okay, this is going to be really a thing. And then I was one who said, let's just make the whole fucking firm in RIA right now and not even look back. Today, we're the only. Of all those top tier venture capital firms, we're the only ria. And that combination of things where, you know, we've got great people in the firm. We have Mark who's so good at synthesizing all this information and getting confidence in a direction. And then, you know, between our, with our relationship, I can go like, I don't care how much of a fucking pain in the ass to be a regulated industry. Like, if this is where it's going, this is where we're going. And that's, I would say, a good kind of example. But let me give it to Mark.

Yeah.

Mark.

The hook.

Yeah.

Name one thing that Ben is just clearly better than you.

Yeah. So it's actually that exact last point that he made. So for people who don't know, like ria. So ria. So venture capital firms basically run without a lot of kind of regulatory oversight because it's sort of very specific kinds of sort of these accredited investors and then only investing in private stocks. And so historically, venture capital, that's not because they like us. It's just because historically venture capital has been a backwater. It just hasn't been a systemically important sector in the financial system. It doesn't create systemic risk, and it's just not that big. But as a consequence, there are very real constraints on what a venture capital firm can do, and there's very strict limits on what you can invest in. And one of the things is every fund has to be overwhelmingly majority invested in Private equity and C corporations. So this crypto thing comes along and to really commit to crypto and raise a crypto fund and to run integrated investment operation where you're investing interchangeably in company equity, but also in crypto tokens. Basically it's like what all the lawyers will tell you is when you have to re register your firm as an RIA and what that means is you have to basically run the same way that basically hedge funds run. So under the same regulatory regime, if you've seen billions, you need an Ari Spiros. Like and that's like the very beginning. Like you need a compliance function. You operate in a completely different set of like disclosure rules. You have like all these limitations on your personal activity. You know, all of us as individuals are signed up to all these restrictions. We have to like pre clear all basically financial transactions we do in our personal lives. And then we have like a, you know, this whole set of limits on what we can do on the marketing side, which is a big deal for us because you know, we're very, we do a lot of marketing. And so like it's a big structural organizational change with like serious implications for the organization. So it's not something anybody does lately. And so this goes exactly to I think where Ben skills like really jump out, which is, it's this like, okay, you know, it's basically okay, smart guy, you've got this idea, right? But like how practically speaking are we actually going to be able to implement this idea in the context of an organization that's then going to be that then it's going to function, right? And how is that going to intersect? So how is it going to intersect with how something is structured? How is it going to intersect with how something is organized, right? And then really critically, like how is it going to affect the people? Right? And you know, and so like, so there's several parts of that. One is just like, okay, like can this be done? Like, you know, doing this kind of thing? Like can we actually practically speaking, can this organization do that? Or is this the kind of thing that might just like blow the whole thing up, right? And then it's like, okay, if we decide we can do it, then okay, like what, how are we actually going to implement that? Like what are the sequence of steps? What are the issues? Right? What are the constraints? Who do we need to, you know, how do we, you know, building buy in, right? You know, consulting with people inside the firm. How do we make the decision? And then of course, as you know, Ali like, well, like Decision making, any large organization, like, it's never unanimous, right? And so it's like how do you thread the needle between basically like, you know, some people are in favor, other people aren't, and you still want to do it. Right? And then there's like all the kind of, you know, personal level kind of issues that kind of flow from all this stuff. And so it's this translation from concept to reality. And I would also say, like, I think this is also, this is the skill and capability that like really great CEOs have. Including you, including Michael, including Ben. This just like least well understood for people on the outside because it's like on the outside it all looks like it almost just be strategy, right? It's all just like, okay, we need to think about everything and then we make a decision and that's kind of what happens. And like, you know, on the inside, you know, like, no, no, that's just the beginning. And so I think that's, that's what he's just like incredibly, you know, incredibly good at at our firm.

Operationalizing it. Right. And executing on it and actually operating it. It's one thing to have an idea. So, you know, so to go from theory to practice, it's kind of Mark starts with the theory and then it's put the practice and executed on and operated through Ben. Is that the good abstraction sort of understanding.

But I guess I would also add like, Ben is much better at theory than I am at practice. So I would say it's, it's, it's. I would say it's more lopsided than that, but in my favor.

And Mark, Mark has good practice ideas. So yeah, it's more overlapping is the way I would describe it. Like, it's not like I do this thing and he does that because it would never work because I would never understand what the fuck he's talking about if I didn't get all the concepts. Like I, I mean I read the Satoshi white paper like six times to make sure that I understood everything about crypto and how it was working and all these kinds of things. And Mark really, really does understand and take the time to like go through all the implications that it's going to mean to take a venture capital, like people who want to work in the venture capital industry and turn it into a fucking hedge fund overnight. Like that's a. The overlap is what makes it work. I would just say that's awesome.

So we're at 6pm this has been awesome. Thanks everybody. I mean, Mike, it's awesome to hear how you built up CAA, how it influenced A16Z, hearing your vision of the future, guys, and how you work together. Super fascinating.

Thank you, Ali. And a public thanks to Mark and Ben for being two of the best friends, personally and professionally that anybody could ever hope to have.

And thank you, Michael, for being the godfather of the firm and giving us the idea that amazingly worked across industries. To have an idea that good that you can do and then do again 35 years later, it's just one of the most amazing things in a whole different industry. Okay, well, thank you, Ali. Thanks, everybody for coming. Thank you for Lisa for warming up the room and all our early guests. It's been great fun. Talk about this.

And I think next week we're going to interview Okta CEO and Authority Zero CEO on the acquisition. And here the perspective of two CEO.

Right?

No, that's on the 20th, 20th. Okay.

Yeah. All right.

Okay. You're right, actually, I got it wrong. Okay, so then stay tuned. We will have a boss talk next Tuesday at 5pm yes.

Yes. We'll see you then. Thank you, everybody.

Bye.

Bye. Okay, thanks, guys.