
Things I’ve Learned From Marc Andreessen - shazad
http://25iq.com/2014/06/14/a-dozen-things-ive-learned-from-marc-andreessen/
======
pud
Marc said in an interview once, "being CEO is basically a constant stream of
bad news."

I love that.

~~~
lazyjones
> _being CEO is basically a constant stream of bad news. "_

Aw, poor CEOs (I'm one)... Perhaps ask an ER nurse how her job compares.

~~~
spindritf
Most ER patients recover (I would hope). It also wasn't a plea for pity.

------
mathattack
I'm a fan of MA, but I think people equate him with sainthood. He's not a
saint. He's a pioneer that pushed the internet forward, made some mistakes,
and now has some wisdom (and money) to dispense. I give his writing some
credence, but nobody is perfect. I like that he has made post-browser
mistakes. That gives credibility to his writing.

------
md2be
Thanks for the work that went into this post.

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graycat
It is both possible and, really, with just a little inspection, really easy,
just a wave of a hand, to see how to do much better at investing in
information technology than described in the OP. Below I outline how. The
crucial supporting background is just rock solid, so far essentially missed by
VC but among the most solid in all of civilization -- no joke. That VC is
missing out is just absurd.

The OP is yet another effort at 'understanding' venture capital investing.
There's something strange here: At

[http://avc.com/2013/02/venture-capital-
returns/#disqus_threa...](http://avc.com/2013/02/venture-capital-
returns/#disqus_thread)

that is, VC Fred Wilson's blog, is some data that shows that on average in the
US, information technology venture capital returns in one word suck, that is,
are really poor, bad, low, etc.

So, in trying to understand how venture capital investing works, at least on
average we are trying to understand something that works poorly.

Below I explain how to do much better, but broadly that VCs struggle so much,
as is clear in the OP, is from incongruous to absurd.

The OP is awash in some really bad news that shows that the VCs admit that,
really, they don't much know what the heck they are doing and, instead, are
reading tea leaves and then shooting in the dark; such nonsense is
unnecessary.

Let's consider some quotes from the OP:

"even the top VCs write off half their deals."

Dumb. Each year a VC gets 3000 deals, looks carefully at maybe 200, invests in
maybe 20, and 10 flop. Clearly something's seriously wrong here.

"And of course, you make all your money on successful and non-consensus."

That the good deals should be so difficult to evaluate that there should be no
"consensus" is absurd. Sure, detecting the next SnapChat is difficult, but
largely we should set aside such deals -- based on, what, starting a fad of
teenage girls having fun being 'improper'. Instead it is possible to have
plenty of deals that are fairly easy to evaluate.

"And let me translate ‘non-consensus’: in sort of practical terms, it
translates to crazy. You are investing in things that look like they are just
nuts.”

E.g., another SnapChat is that way, and that's why a VC should not take
seriously such deals. E.g., someone comes out with a better version of the
same basic idea, but maybe SnapChat is hurt by their installed base that
becomes dragging a big anchor to responding.

But there are much better deals than SnapChat where nothing looks "crazy" or
"nuts". Putting up with deals that are crazy or nuts is, well, crazy and nuts.

“The entire art of venture capital in our view is the big breakthrough for
ideas. The nature of the big idea is that they are not that predictable.”

Yes, “The entire art ... is the big breakthrough for ideas"; the problem is
that, flatly, VC (1) is working with "ideas", e.g., SnapChat, that are based
on fads, etc. and, thus, are essentially impossible to evaluate and (2) VC
doesn't understand what really good, "big breakthrough ... ideas" are, where
to find them, and how to evaluate them. For the good, big breakthrough ideas,
accurate evaluation is quite doable, and there is little that is' not
"predictable”. VC doesn't understand (1) and (2), and I explain below.

“Most of the big breakthrough technologies/companies seem crazy at first: PCs,
the internet, Bitcoin, Airbnb, Uber, 140 characters.. It has to be a radical
product. It has to be something where, when people look at it, at first they
say, ‘I don’t get it, I don’t understand it. I think it’s too weird, I think
it’s too unusual.’”

“Most of the big breakthrough technologies/companies seem crazy at first" is
only true because VC has been, to borrow from a movie, "digging in the wrong
place".

“You want to have as much ‘prepared mind’ as you possibly can. And learn as
much as you can about as many things, as much as you can. You want to enter as
close as you can to a zen-like blank slate of perfect humility at the
beginning of the meeting saying ‘teach me’…. We try really hard to be educated
by the best entrepreneurs.”

Sorry, I have a serious background in how to "learn", and my experience is
that VCs are quite poor at it and need to 'put on their game faces' and 'up
their game' several notches from some very good sources, and some popular
Silicon Valley coffee or sandwich shop is NOT such a source.

“You want to tilt into the really radical ideas… but by their nature you can’t
predict what they will be.” “There will be certain points of time when
everything collides together and reaches critical mass around a new concept or
a new thing that ends up being hugely relevant to a high percentage of people
or businesses. But it’s really really hard to predict those. I don’t believe
anyone can.”

"Really radical" is fine, maybe often necessary, but, of course, not nearly
sufficient; but it is just crucial to have ideas that can be evaluated
accurately and to do the evaluations. For "really really hard to predict
those", VCs are "digging in the wrong place". Instead, with good "breakthrough
ideas", "really radical", provocative, shocking, "crazy", "nuts" that can be
evaluated and that have a good evaluation, being able to "predict" is really,
really easy.

“We are looking for a magic combination of courage and genius"

Looking for "magic"? Looking for magic went out of style back in the "Age of
the Reason". Looking for magic is wandering and shooting in the dark. As I
explain below, there is a way to find the light switch, turn it on, and see
what's happening (thank you A. Wiles).

“The thing all the venture firms have in common is they did not invest in most
of the great successful technology companies.”

There is a reason: VC has concentrated on deals, "digging in the wrong place",
that are essentially impossible to evaluate. Instead, concentrate on deals
that can be evaluated and, then, evaluate them. What deals are those? I
explain below.

"The challenge in the field is all of the great VCs over the last 50 years,
the thing that they all have in common, is they all failed to invest in most
of the big winners."

Again, the VCs were "digging in the wrong place". Yes, even in that place
sometimes there is some gold there, but that doesn't much help because the
gold is in a form essentially impossible to recognize, that is, evaluate. So,
dig in the right place where can recognize, evaluate, the gold that is there.
The right place? I explain below.

The theme of the Andreessen remarks is wandering and shooting in the dark. But
that is unnecessary.

~~~
graycat
Here's what to do:

(1) Problem. Pick a "big ass" problem where the first good or a much better
solution will clearly be a 'must have', not merely a 'nice to have' and will
be very valuable, in the sense of making money, the green kind. Note the
"clearly". If pick a problem that does not satisfy "clearly", then try again.
I didn't say that the success would be easy to do.

Part of the reason VC has been "digging in the wrong place" is that it tries
to make money with small problems, where the solution is just 'nice to have'
instead of 'must have'.

The ideal example of a 'big ass' problem, although not in information
technology, would be a safe, effective, cheap one pill cure for any cancer.
"Breakthrough"? Yup. "Crazy"? Sure; NIH has been throwing billions a year at
that. But it would be a 'must have'; no question about 'product-market fit'. A
'must have' doesn't have any questions about 'product-market fit'. If looking
at projects where the results have some doubt about 'must have' and likely
need to work on 'product-market fit', then are looking at the wrong projects,
are "digging in the wrong place".

Another fad for teenage girls does not qualify as a 'must have'. Yes, such a
fad might make a $1 billion, but it is too difficult to evaluate. Instead, I
mentioned "clearly" be a 'must have'. That is, it is crucial to be able to get
a good evaluation early on, and nearly never can do that with fad products,
as, indeed, the Andreessen remarks so clearly indicate.

(2) Solution. Find the needed solution. Often the solution will not be easy to
find, but this need not concern VCs since they need look only at deals where a
solution has already been found. If can't find the needed solution, then
return to (1) and try again. A solution that is difficult to find can give a
technological barrier to entry.

Q. Whatever you are working on, someone else has already done that.

A. Let's consider that: Take all the people who have done that. Then, except
for rare ties, there must have been a first such person, and for them no one
else had already done that. So, the claim is false. Sorry 'bout that. Instead,
there really are things that are significantly and genuinely new.

Q. Then someone else can just reproduce the solution.

A. Some solutions are quite difficult to find, may be based on original work
and/or advanced prerequisites understood by only a few people, implemented in
software, secure inside a server farm, and, thus, provide a technological
barrier to entry.

(3) Prove that really have a solution as described. When have such a proof
early on, usually it is just on paper, especially for solutions in information
technology. Is this possible? Yes, for nearly all of science and engineering
on practical problems, it's routine and standard. It's how we build a new
airplane engine, a new airplane, a new rocket, a new satellite, a new
application of carbon fiber, etc.

(4) Evaluate the paper solution. Can this be done? In nearly all of applied
science and engineering, such evaluations are standard and routine; it is
insisted that such evaluations be done. No one puts up a new satellite with
'agile' techniques iteratively 'searching for product-market fit'. There's no
counting on "magic". Fads of teenage girls are just irrelevant.

(5) Develop the solution.

(6) Deliver, sell the solution, the first good or much better "must have"
solution.

Can these six steps be done? Sure; history shows that there's no doubt.
Thankfully for US national security, the best examples are funded and
exploited by the US DoD.

A great example was the SR-71: Problem: Get pictures of the USSR. Solution: An
airplane that can fly at Mach 3+ at 80,000+ feet for 2000+ miles without
refueling. Proposed essentially just on paper by Kelly Johnson and the
Lockheed Skunk Works. The project passed evaluation and went ahead as planned.

Other examples: GPS and the earlier version by the US Navy -- proposed on the
back of an envelop by some physicists at the JHU/APL, A seafloor, passive
sonar array. The F-117 stealth plane; flew across Saddam's anti-aircraft
artillery without a scratch; another Lockheed success. The Keyhole satellite,
that is, a Hubble but aimed at earth.

Outside of the US DoD, the LHC; found the Higgs as planned. The WMAP satellite
-- found the details in the 3 degree K background radiation as planned and got
enough resolution to permit an estimate of the big bang 13.7 billion or so
years ago.

These projects were evaluated essentially just on paper and worked as planned.

Generally such science and engineering has a much better batting average than
VC. E.g., in each case, the SR-71, GPS, the LHC, WMAP, there was a problem
that needed a 'must have' solution, such a solution, evaluation just on paper,
and success. No "magic". No getting 3000 projects, looking carefully at 200,
picking 20, and having 10 fail.

What should VC do? Sure: Stop "digging in the wrong place" and, instead,
follow steps (1) - (6).

Will VCs get many such project proposals? Well, likely now they get more than
they are willing or able to evaluate, but with interest in and success with
such projects, they stand to get more such proposals. Considering how few VC
projects pay off now, VCs don't need to get more than a few dozen good
proposals each year. Digging in the right place doesn't require moving much
dirt to get to a lot of gold.

------
tonetheman
Things I have learned from Marc Andreessen: he thinks Snowden is a traitor.
And blames Snowden for causing problems for US companies to sell overseas.

~~~
CamperBob2
Yes, I never expected Marc Andreessen to flip his own bozo bit, but that quote
did the trick. Andreessen took the concept of "shooting the messenger" to new
depths of stupidity when he said that.

Still, this link is well worth the few minutes it takes to read. His blog has
a lot of "Things I've learned from" entries from various people.

~~~
mpyne
> Andreessen took the concept of "shooting the messenger" to new depths of
> stupidity when he said that.

And yet, not really. With the exception of RSA, American tech. companies are
being hammered for the actions of NSA, not for their own "crimes". Even German
companies obey German legal directives after all, and Vodafone made clear the
other day the extent of government monitoring of networks around the world.

To the extent that Snowden has made clear the reality that government (and not
just criminals) can take advantage of the jurisdictional problems of an open
Internet, that's not the fault of the U.S. tech sector either. After all, some
of the most successful NSA programs are really liaisons with European security
agencies that run the actual intake work, not conspiracies with Silicon
Valley.

The correct solution for Europe if they want to be free of the possibility of
other nations (incl. the USA) doing targeted operations in their networks is
to completely balkanize the Internet, which companies like Google and Facebook
oppose for obvious reasons.

You can credit Snowden with revealing to the world the types of dangers
inherent to an open Internet, but that very same set of revelations is a large
part of what's harming the U.S. tech sector. You're right that people may have
figured it out eventually, but nations and companies around the world tended
to agree not to make too big an issue of it since the benefits of an open
Internet were thought to outweigh the risks. But Snowden forced the issue.

The only true solution to the issues he raised, if you're a European citizen,
cannot be left to voluntary compliance by the other nations of the world,
especially since you can never certify compliance with that. You'd have to
instead build out your own Facebook, your own Google, your own tech sector,
just like Russia and China have done.

So credit Snowden with opening the eyes of Europe to that reality, but you
can't eat your cake and have it too. We've seen region locking spread too far
with just with RIAA/MPAA to want to see it infect the rest of the Internet,
but _that_ is the message Snowden is responsible for (even if it wasn't the
message he meant to send).

~~~
drumdance
It's one thing to be dismayed at what the revelation of facts has done to the
tech sector. Nonetheless, they are still facts. Calling Snowden a traitor is a
red herring.

One could just as well say that Andreessen's greatest allegiance is to money.
So perhaps in that context Snowden is a traitor to Andreessen's cause.

~~~
calibraxis
Yes, it's not that Andreessen's lost his mind; just that his role in life
means he's in antagonism with people like us.

And Snowden is a traitor to the US government, whose interests are pretty much
the same as wealthy elites like Andreessen (to a first approximation). But not
a traitor to the world or even just the US population.

------
bergerjac
black text on dark red at 13px - not too reader-friendly

~~~
apu
It's black-on-white for me.

------
inaworld
"be the market" is the advice that comes out of portfolio theory. To say that
it applies to one type of investor but not to venture investors is to
basically announce that you have absolutely no understanding of portfolio
theory.

~~~
hglaser
This is an odd comment. Do you think that Marc Andreessen, who manages one of
the most successful portfolios of startups in the history of startups, has
"absolutely no understanding of portfolio theory"?

Or do you think an alternate explanation might be more likely? Is it possible
that you misunderstood something? Or is it possible that, if Marc is
challenging this thesis of portfolio theory, he might be doing so from a place
of great experience and be worth listening to?

~~~
lazyjones
> _Marc Andreessen, who manages one of the most successful portfolios of
> startups in the history of startups, has "absolutely no understanding of
> portfolio theory"?_

He doesn't need to be above average there. Just like PG, he (mostly) invests
in technology he actually comprehends, unlike some other delusionary VC from
the investment banking world.

