Why The Laws of Startup Physics Have Changed | Ben Horowitz Interview

Key Takeaway

America's dominance stems from winning the industrial revolution through technological leadership. Today, AI represents an equivalent transformative moment. To maintain economic, military, and cultural leadership, America must lead in AI technology. The single most actionable insight: Focus on building technology solutions rather than policy solutions—they scale better and create real change. Technology solutions work faster and more effectively than regulatory approaches across nearly every domain.

Episode Overview

Ben Horowitz discusses the state of American entrepreneurship, AI's transformative potential, and the mission of Andreessen Horowitz. He emphasizes that America's current position resulted from winning the industrial revolution, and AI represents a similar inflection point. The conversation explores management principles learned from Andy Grove, the founding story of a16z, and why technology solutions outperform policy solutions. Horowitz argues that while AI may increase inequality among creators, it's fundamentally democratizing by giving everyone access to super-intelligence through smartphones.

Full Transcript

Transcript of Why The Laws of Startup Physics Have Changed | Ben Horowitz Interview from Invest Like The Best. Auto-generated from episode audio; may contain minor errors.

When Ben Horowitiz and his partner Mark Andre came into the venture capital industry, it was very different than it is today. You can argue that it is them more than almost anyone else that has reshaped this industry and matured it so much ever since. Andre Horowitz has become one of the most important institutions, not just investors, but institutions in the private investing landscape, having achieved a scale that no one thought was possible in venture, which was always supposed to be this small, tiny niche corner of the world.

This conversation is a bit unique relative to some of the other ones that Ben has had more recently. I tried to understand the shaping forces and influences in his life and the ways that he thinks America most needs to change. He's taken this as his life's mission to build a firm that affects outcomes in the country, not just in a small niche part of the market, but very broadly, even having discussions in this conversation about his work with, say, the Las Vegas Police Department, which he's tried to infuse with technology to lower crime rates across the system.

I hope you enjoyed this great and wide-ranging conversation with Ben Horowitz. I think a fun place to begin, Ben, would be your take on the state of the country. Like what does it feel like to you in 2026? I know part of your mission is to like directly impact the trajectory of the country. We'll talk about that a lot. Yeah. Uh but but begin with what does the landscape, the playing field like to you today? I think the tech sector is very very healthy. America's competitiveness is very very good.

The entrepreneurship culture is outstanding. Uh which you know and that's the main thing I look at from my lens. If you look at and I go kind of all over the world and everybody wants Silicon Valley like how can we have Silicon Valley in the UK? How can we have it in France? the thing that's I would say lacking so they have a lot of the ingredients right they have um great uh talent um they've got great universities they have like a definitely a worse regulatory environment um in EU increasingly bad regulatory environment for entrepreneurship but there there's a cultural challenge where you know succeeding doing something larger than yourself making the world a better place like those aren't things that that that uh young people feel like society values.

And so the likelihood if you're building a company of getting people to kind of work for you and dedicate their life to a mission like that is just not that great. Whereas in the US, it's amazing. I think the economy is in much better shape than people realize uh and start to see that. Well, we're getting, you know, we've done a lot of kind of things to stimulate it. You know, we've got lower energy prices. We've got much less regulation. We've got kind of a more user-friendly tax code.

Um, and that's all starting to kick in now. And then, you know, from our perspective, I think the bigger thing is AI is, um, you know, it's going to impact everything. There's almost no problem you can think of that you can't go, well, we have a real shot at solving that with AI. It's from, you know, what were the big problems in the US? Auto deaths. Well, we got an AI solution for that. Cancer, we have an AI solution for that. So, you know, the fact that we've got a technology where we can address everything uh is a real new phenomenon and and all that's I think going to kick in like in a fairly major way over the next 12 to 24 months.

Why do you think 12 24 months is is a time frame worth mentioning that some of this stuff will start to be felt more broadly? It's all kind of starting to take effect now and you know it's got to roll out get deployed. Now you know deployments of technology in particular in the past have taken a long time. Um but you know you had to build out the infrastructure to do it. So like for cars you needed things like roads and traffic lights and all that kind of thing.

And for the internet, you needed, you know, fiber in the ground and, you know, people to have smartphones and you needed to do a lot just to get going. Um, the internet is here. So, if you want to use AI, if you want to apply it to your business, you just do it. Like there is no infrastructure that needs to be built to adopt the thing. What could most interrupt this good trajectory that America is on where we are building solutions using technology? Like what are the biggest risks?

I think policy. One of the things my father said to me was a bad government, no matter how many smart people you have, no matter how great a culture you have, no matter how great the country is, can ruin the whole thing. Venezuela was the fourth richest country in the world. Crazy, you know, and then like, you know, communism and and that's that. And you know if you look at how little comes out of so many of these countries in Europe that have so many smart people and then you know and then the ones that went into communism and there's so many like genius Romanian entrepreneurs John vonman and the number of great genius scientists that came out of Hungary like this little country and then like it was just gone once the communists took over is like completely like nothing from from inventing everything to nothing overnight.

And I think that that can absolutely happen here. We could outlaw AI. Like I think there there were like pretty aggressive proposals. The last Biden administration executive order said that you could not sell a GPU without federal government approval. Like that was a real executive order and it got reversed. But like we were that close to being basically out of the uh global chip game. So it's it is fragile. By the way, like technology solutions solutions solutions work much better than policy solutions. That's the that's the other thing.

Like policy solutions is very hard to make anything work. Uh so if you think about um you know co we could tell everybody to stay in their house. Well that's got some like extremely bad side effects. you know, turned out not to work that well or like, you know, we could invent a drug that cures it or like a vaccine that works. It's just hard to have or a policy solution like, you know, all the policy stuff on climate change, you know, and Europe actually, you know, reduced emissions and all that, but it didn't do anything because like China didn't reduce emissions.

But if you build a technology a really safe nuclear efficient or nuclear fusion facility then like that that would have a big effect and I think in general that's true that uh you know and police like defund the police did not make anybody safer technology does and so you know if you really want to change the world if you really want to make it a better place I think you can build a solution for darn near anything. If you want to change the world for the better, it's never been a better time to be an entrepreneur.

entrepreneur. entrepreneur. I was with a uh local restaurant tour yesterday here in New York, one of the best, for a couple hours having him describe to us how he is planning on using AI tooling to improve everything about his restaurant business. How do you think about the way all of this is changing the sort of potentially large attractive businesses that you want to invest in? Because there's been stick with the restaurant example. Toast is a great there's many great companies that have been built in and around restaurant software businesses.

It seems like this restaurant owner is going to be able to have his own spun up operating system specific to him not going to need any of that stuff. How how is this changing the way in which you view investment opportunities opportunities opportunities on the positive? Uh one everything is up for grabs, right? I I think people are kind of over uh reacting to that in the stock market and so forth and that if you look at um existing software companies like people think, oh, they're all dead.

Well, some of these guys are extremely hard targets. Like it's not that easy to take out Salesforce or SAP. You you you would be surprised um even with AI like how much uh heavy lifting that is. Having said that, it is true that you know a lot of these things, yeah, you can just make your own, you can do it yourself. Uh it's going to be a lot easier. That's a just like the number of possible interesting companies I think went up a lot. I think the other thing we're seeing is the products work so much better than any technology products we've seen in the past that revenue growth is so much faster for these AI companies and there's many such cases of companies coming out you know cursor which is ostensibly an IDE like what's the biggest ID before cursor like I don't know but it wasn't big uh and it took probably 12 or 15 years to get to that revenue level and you know they went over a billion dollars in revenue like in no time.

So that's super interesting. I would say though from an investing standpoint, investing standpoint, investing standpoint, the laws of physics of company building changed which is going to in affect investing in what's currently I would say an unknown way. So if you look at the one thing you knew if you'd ever built a software company is you cannot throw money at the problem. Yeah. Yeah. Yeah. Like you know what's a man year? you know, 700 IBMmers before lunch. Like that uh you know, that phenomenon kind of everything was built on because you knew if somebody built a great product and it took them three years and they did it with a small team, Google's not going to hire 2,000 engineers and catch them.

It's just not going to happen. That was a law of physics. Now, if you have uh the data and you have enough GPUs, you can solve damn near anything. and kind of we've seen that with uh Elon catching the big models in no time. I mean, he just took a lot of money and a really good data center design and some smart engineers. He's in the game, you know, like he got in the game very fast. That would have never happened in the past. The markets are also seem to be much much much bigger than anything we've ever seen.

So it would cause you to think about valuations and kind of long-term value and other sorts of things in a different way than we have in the past. On the one hand, it's like, well, when you calculate the long-term value, what if this market wasn't, you know, $50 billion? What if it was $5 trillion? And then on the other end, well, what if somebody could catch you? These are just concepts we've not dealt with. So how would the conversations feel different to me if I came in you've got all these great investors working at Andre and Horovitz the the the nature of the conversation amongst your teammates as they're debating this sort of stuff versus four years ago or something where where does it feel most materially different internally different internally different internally I would say one of the most different things is when you look at AI researchers it is really a different kind of thing if you haven't been at like Google or Facebook or open AI or anthropic and like somebody gave you hundreds of millions of dollars to try and build a giant model and you weren't like one of the main people, then you probably don't know how to do it because you can't learn it in school.

Um, and you can't learn it in school because it's it's a little bit alchemistic in nature. You know, you are it's it's a little bit of an art. And so if you've never done it before, the chance of on your very first try of building some kind of large model that it's going to work well isn't that great. Now that's, you know, people are coming up to speed more. There's more companies. Um, people are learning it. But that's kind of why you got to this, which from the outside world probably looked absolutely bananas that, well, why is somebody paying a hundred million dollars for an AI researcher or a billion dollars for an AI researcher?

Like, that's the craziest thing I've ever heard. Well, what if there were only 40 of them like in the world? And you have a$4 trillion dollar company. Yeah, then it kind of changes the math on it a little bit. And I think that's sort of where we were because it's kind of the first time we've had a need for a technologist that academia could produce. That um is kind of probably one of the bigger things that changed in the conversation is like who are all these people?

Like we track all of them and you know know what they're doing but uh it's very different. Your finance team isn't losing money on big mistakes. It's leaking through a thousand tiny decisions nobody's watching. Ramp puts guard rails on spending before it happens. Real-time limits, automatic rules, zero firefighting. Try it at ramp.com/invest. Every investment firm is unique and generic AI doesn't understand your process. Rogo does. It's an AI platform built specifically for Wall Street, connected to your data, understanding your process, and producing real outputs. Check them out at rogo.ai/invest.

rogo.ai/invest. rogo.ai/invest. The best AI and software companies from OpenAI to Cursor to Perplexity use work OS to become enterprise ready overnight, not in months. Visit works.com to skip the unglamorous infrastructure work and focus on your product. Everyone talks in venture about the power law. The thing underneath the power law is a sort of inequality. It seems like so many of the things that are happening are just massive multipliers on the trend of inequality in every way. the billion dollar researcher, the size of the biggest companies, the wealth of the people creating those companies.

I would argue that inequality is a feature, not a bug of the American system. But yeah, I'm curious for you to riff on like the nature of growing inequality and the the good and the bad associated with that. what's happening in AI is sort of, you know, I I would just say an extension of the Kobe Bryant effect, which is um, you know, a basketball player in uh, whenever James J. Nay Smith invented the game, you know, like there was a limited amount of money you could make because you basically played the game in front of the people who could show up for the game and that was it.

That's the whole market. Um whereas once you add television and the global audience and these kinds of things, you can get to you know a much bigger you can be LeBron James, you can become a billionaire and that that just was not at all possible before. And I think that uh you know we kind of first saw that with the internet where okay now I can build a product and I can get to global distribution very fast then all of a sudden I can become like extremely rich and then AI is another layer on top of that and that okay now take that same product and make it just more a valuable thing and so whoever invents that is whatever the internet company was plus+ and so that's going to make them even richer.

That's the kind of bad part of it. I think the good part of it is it starting out day one like completely democratized like the AI the AI the AI anybody gets access to like very powerful AI uh you know anybody who has a phone and now everybody most people in the world uh at this point have smartphones and now you've got like super intelligence uh in your phone. So that's a big it's an equalizer of the opportunity in a lot of ways that I don't think we've ever seen a bigger opportunity equalizer than AI.

Um in that every child can have like a super advanced amazing tutor teacher. Um so like education like education like education great education is accessible to all now. So I think it's an equalizing technology and uh you know there's some drive in inequality and this is another thing I I learned from my father. He said look son life isn't fair and that's extremely good advice because it's just not going to be fair. Like no matter what government or anything tries to do it's not going to be fair.

And the problem is if you create a system that tries to correct that it doesn't make things more fair. It just transfers all the power to the person running the system. And that's what happened with Stalin. That's what happened with Chescu. That's what happened with Pulp Pot. That's what happened with Mao. You know, not an accident that every single system like that went bad because it really ends up just being a power transfer. When you think about, well, what do you want? You'd like everybody to have a chance, you know, like don't give me no chance.

Give me some chance. Now, it may not be as big a chance as the other guy. It may not be, you know, like a perfect chance. Um, but if I have the desire, if I've got some capability, give me a chance to be something like to make my imprint on the world. And a system like that is going to end up with a lot of inequality. All, by the way, all systems end up with a lot of inequality. inequality. inequality. But you can try systematically to give everybody an opportunity.

And I think AI does a really good job of that. One of the memes that's very popular today is that you have a couple years to get some capital or you're going to be a part of the permanent underclass is like the is the phrase that is used on Twitter. And I certainly agree that um now everyone has the best lawyer, accountant, you know, adviser in their pocket and that's amazing. Um but what do you think about this notion that we're just going because of that we need less labor.

We need it's going to be harder if you don't have some capital to begin with to accumulate capital and break in. I don't I don't necessarily believe that. I'm just curious what you think about challenges we'll face because of AI society. society. society. Yeah, I don't really think that's right. I think that I don't think like the the door is going to close behind you. I think like the opportunities tend to multiply multiply multiply um when you kind of open up a new door and open up like a new way of doing things.

We saw that with crypto. So many people who made money on crypto were like people who, you know, literally didn't have much to start with. they just got into the technology early um and then they kind of parlayed it up. And so if you have something that grows really fast, that's actually the opportunity for somebody with a little bit of capital to make a lot of money because it doesn't take much. You know, if you bought Bitcoin for a nickel, you did really well. Uh and all you needed was a nickel.

And that's uh you know, I think that's the nature of these things that go hyperbolic. And you know particularly if you create something I also think uh the the labor market stuff I think people are acting as though it's very predictable and when it's not at all predictable. So if you look at kind of the history of the of the world um and automation and this is what it is. It's a kind of like an automation technology. We've been automating things since the agricultural days. And in in those days, I think 95 or 96% of all jobs in the US were agriculture.

Almost all those jobs have been eliminated. Um and the jobs we have now the people doing agriculture wouldn't even consider jobs. And so like the idea that we could imagine all the jobs that are going to come, you know, sitting here, you know, that AI is going to enable, I think is low. I think the need for like more creativity jobs um is going to go way up and the kind of need for kind of jobs to process work for the creatives will probably uh go down in some ways but um I'm not even sure about that.

You know, we've had AI going right imageet was what 2012 and then natural language stuff and Burton and all that was like 2015 and then you know chatbt was 2022 and like where's where's all the job destruction? You know why hasn't it happened yet? And why are you so [ __ ] sure it's going to happen next? And why are you so sure no jobs are going to be created? I don't think it's nearly as predictable as people are are saying. How would you describe the nature and scope of your ambition over the next 10 20 years?

One of the things that I learned um so I had a mentor who's a a great great CEO by the name of Andy Grove. Um and he was uh the CEO of Intel and he kind of famously did the the major pivot of them out of the memory business into the microprocessor business. Maybe the greatest tech CEO we've had. Uh and one of the things that he he said that you know in a way is very obvious but I think is um also profound is if you're the leader in the industry then the growth of the industry is dependent on you.

Um like you it's up to you to expand the market like nobody else is going to do it. Uh and so when I think about the firm I think of it a lot in those terms. The reason America is America and and there's many narratives on this, but like I think the factual one is like we won the industrial revolution. We really did. We had Henry Ford and we had Thomas Edison. We had like great entrepreneurs. They built great technology. The technology lead to a military lead, led to an economic lead, led to cultural dominance.

None of that was by accident. And had we not had all those inventions, had all those companies, um, which led to, you know, everything from like winning World War II, we just won't be, we'd be some other thing. We won't be America. So, we're there again. Like, this is the equivalent change of the industrial revolution in terms of how everything works, governments, societies, businesses. And you know, we're either going to be uh the leader of that technology, the provider of that technology, or we're not. And if we're not, we're not going to be um the economic superpower, the military superpower, the cultural influence, the kind of standard of the world that we are now.

At least I think that would be bad. I think you know uh America's been kind of good for the world and good for giving people a chance like we talked about before and so our role in that you know you know taking it try try and be humble with the role but our role is like from a policy standpoint from a funding standpoint from a helping people build standpoint to make sure that that next set of great companies comes out of uh America or allied nations a core ambition is to do our part in kind of helping that helping that helping that I want to ask about some of the ingredients to do that.

Well, but just as a quick sidebar on Andy Grove, uh his book is incredible. Like everyone should read High Output Management. Um what was it about what what very specifically did you learn from him? Like what did you see him do that impacted the way that you think or behave? Well, like I'm so overly influenced by him, it's hard to even pin it down. But so high output management, you know, I I actually wrote the new forward um for it. Uh which I actually think that's the best thing I ever wrote was a forward high output management.

Um, but the hard thing about the reason I wrote that forward was um I, you know, it was my favorite book and I wrote uh the hard thing about hard things was basically intended to be um the updated version of it. But the the thing in high output management that um he did so well that I I tried to you know kind of do my own version of is you know the the the concepts of management are easy like they you need an eighth grade education maybe to kind of understand management.

It's not like physics. It's it's pretty simple. Uh but the psychological part of it is extremely difficult particularly for a young person to be able to do. Uh you know it's it's super confrontational. You're having to kind of look through the conversation you're having to the entire organization. You really have to be confusion at times. The the good of the of the whole supersedes the good of the individual. uh and all these things are are really complicated to do. His big influence on me was me trying to not only absorb that but then kind of tell it in a more up-to-date kind of modern way.

I went to visit him. He had this award on the wall which was it was literally like um manager of the year from for the Santa Clara facility of Intel and it was from I don't know 1992. I'm like Andy we're like the biggest CEO in the world like why did they give you the manager of the year award for the Santa Clara facility? And he goes, "Oh man." He's like, "You know, Santa Clara was like the always scored like it was the lowest quality scores, the lowest [ __ ] score on everything at Intel." And so I was just like, "I'm going over there and talk to them." So I go over there and he said, "I brought a roll of toilet paper and I put it under my desk, under my chair." And you know, I said like, "When are you going to get this facility up to code?" And they just started in with all this [ __ ] [ __ ] [ __ ] [ __ ] And I [ __ ] reached under my chair and put all the toilet paper up.

I said, "Clean up your [ __ ] and tell me when the [ __ ] you're going to be up to code." And in two months, they were up to code. and they were always the highest rated facility thereafter you know just on that. Uh so they gave them manager of the year for that. that. that. When did you first experience the lessons that drove his success this confrontational psychologically confrontational psychologically confrontational psychologically difficult aspect of management yourself? How would you encourage other people to like get a get a taste of it?

You can't just read about it. Obviously what happens uh to founders is you invent something right now. I've got to build a company. you don't know what you're doing and you make mistakes and then those mistakes really cost the company and you lose confidence and that leads you to hesitate and that hesitation is what kind of causes the failure mode. So then either like the company's indecisive or they get very open. All these guys got so open to input from their team and their executives and like but you know the team doesn't have the full context.

Only the leaders got the context. So even if they're smarter than you, you still likely can have better judgment because you have all the knowledge. Um, but you know, they defer and then if you defer to people who work for you, then that kind of creates a weird political situation because people jump into the vacuum of like, you're not making the decision, I'll make the decision. And then that feels political to everybody else. And so that's the pattern people run into. And so, you know, you really kind of have to build up enough confidence in them to have that confrontation.

The hardest version of this, by the way, is the reorg. Uh because reorg is basically you're redistributing power to make the company work better, to like have communication be better, to not have as much conflict. But what's going to happen is somebody who's really good, who you've had for a long time, is going to lose power and they're going to be [ __ ] pissed. Um and so then if you compromise the organization so they can maintain their power then you've just kind of redistributed power from the people doing all the work to the executives and that's a catastrophe.

So it's always that kind of thing where people don't want to have that conver confrontation. They don't want to tell that person look the organization's here. you you helped us tell here, but like you either have to be happy in this new role or it's going to be a rap. When you're young and inexperienced, you know, it's going to hurt to like tell him that, but I don't know it's going to help me to do this reorg because I don't I'm not experienced enough to know that.

I've never done that before. And so I'm going to go with the known avoid hurt to the to the theoretical avoid hurt. Um, and that's when you wreck your company. And and and so that's the pattern. And I, you know, I always do my best to like lend them my experience on that. You you were lucky that when you started Andre and Horwitz, you and Mark had both had tons of operating experience both together. together. together. Yeah. I still didn't know what I was doing as CEO.

Fair enough. Fair enough. Fair enough. And he didn't know what he was doing either. Like his ideas now, like if you ask Mark about management now, like he's so different than how he actually did it. Um, and it actually makes him mad if you talk about it too much because he's like, "I got such bad [ __ ] advice. They told me to hire all these guys." How do you think he's most different? Like what would he say is or what do you observe to him to be the most different?

I just think he's like way more um in control of his own. Like Mark is super emotional person. Um and he's just way more in control of it than he was then. Uh just in terms of just like the personality. He used to be like zero or 100, right? Like so he would be like full of emotion like what the [ __ ] are we doing? or like I'm just not gonna say anything like but nothing in between. Something I know the least about about your firm is like the first I don't know what period of time three days, three months, three years.

And I'd love to hear about how you thought about the business right as it was getting started. Of course, we're I'm going to come back to what it is now and and those ingredients you mentioned for having the impact you want to have. But uh lots of this is an incredible part of the world. Silicon Valley, Wall Street, you know, these are institutions that make America great. Lots of people listening have ambitions to do this sort of thing. And I'd love to hear like the very very ear early primordial case study.

Yeah. study. Yeah. study. Yeah. Of what it was like and what kinds of conversations you were having and what your initial ideas were. So venture capital, first of all, you kind of have to understand the the context of it was um there hadn't really been new top tier venture capital firms. So like the the last one before we started that you would say is top tier was probably Benchmark which ostensibly started in 1995 but it didn't really because all those guys came from another firm called Merryill Pickard and that firm was like from the 80s and there there hadn't really been a new one from the 80s and if you looked at why every VC was kind of reputationbased and so to be top tier you had to have invested in Apple and Cisco and Google and you know Yahoo and all the great companies and you can't from a standing start get to that and then if you're not top tier in VC you're not going to last because yeah in a super hot period everybody makes money but the best entrepreneurs will only work with the top tier firms because that's how you're going to recruit great engineers that's how you're going to get follow-on money like everything comes out of that so you'd never take money from a tier two if you could get it from tier one and so That's why the tier ones always have better returns.

Um, so we knew we had to be tier one, but we had that problem. And the idea that we had was, well, venture capital is a great product for LPs, um, but it's not a great product for entrepreneurs. And so, if we could build a better product for entrepreneurs, then we could win. And that was like the the original kind of framework. And the idea that we had for the product for entrepreneurs was you know because we had been entrepreneurs was around what you and I had been talking about which is well if you're like a founder who wants to run their own company you're not getting much like you need so much you don't have the confidence you don't have the knowledge you don't have the knowhow you don't have the network.

Um what if we built a firm that like was designed to give you enough confidence, power, network reach, advice that you could actually be a CEO. And so that was the whole idea behind the firm originally. And then the second idea we had, which was the other thing, like VCs didn't ever market themselves at all because if you're all based on your investing track record, it's best that it's just magic. Like why say anything? Like keep that a secret. And so they weren't talking. And so when we went out and talked, like everybody covered it.

So we instantly everybody knew we had this product. Where did that where did the germ of that specific idea come from? like let's be fairly loud relative to what others do from the very beginning. Well, it's funny because you know Mark and I were talking about it. He said to me, he's like why don't VCs market and actually it the original thing went all the way back to kind of the first uh class of VCs which were the investor revolution VCs were JP Morgan, Rothschild, Goldman Sachs etc.

right like they were the ones financing these things. Um, and it turned out that these guys were financing both sides of World War II. Um, and so they really didn't want any publicity because that would have been like an extremely [ __ ] bad uh thing. To a large extent that just carried over all the way through Arthur Rock and and all these things and then, you know, the reputation thing clicked in and it was working, so there was no need to do it. Um, and we got a lot of criticism when we did it.

our LPs would say, you know, like the other VCs say, you guys are egoomaniacs. You name the firm after yourself. You're marketing it like this. And it was so funny because the reason we named the firm after ourselves is when we try we raised money in 2009, which is right on the, you know, edge of the financial crisis. And the big objection from LPS was, well, like you guys are like really good entrepreneurs. You're just going to leave this thing and go build another company and then we're going to be stuck with the fund.

And we couldn't get them off of that. And so then I had the idea. I was like, "Well, why don't we just name it with our names and then they know we're safe." safe." safe." Yeah. Yeah. Yeah. And and that worked. As your business grows, Vanta scales with you, automating compliance and giving you a single source of truth for security and risk. Learn more at vanta.com/invest. vanta.com/invest. vanta.com/invest. Ridgeline is redefining asset management technology as a true partner, not just a software vendor. They've helped firms 5x and scale, enabling faster growth, smarter operations, and a competitive edge.

visit ridgelineapps.com to see what they can unlock for your firm. firm. firm. Um, if you think about the the period of takeoff of the firm in 2009 up until you reach, let's call it like cruising altitude, like when was cruising altitude and and and what was the most difficult part about getting it from takeoff to that point? Well, I mean, the first thing is we really didn't know that much about investing. Mark and I had done some angel investing, but we not neither of us had any venture capital experience.

And like you know, credit to Sequoia, credit to, you know, Greylock and and and Kleiner and all the guys who were around at that time, you know, they just had years and years of of doing it. We made more than our fair share of investing, investing, investing, mistakes, you know, missing things we should have done and and then, you know, doing things that we shouldn't have done. Um, but missing things that we should have done was probably the bigger one. And one. And one. And you know and then the other thing is is that kind of how we thought about the profile of the investor was wrong.

So we so overindexed on our idea that we had to help the founder uh become a CEO that we made it a requirement that you couldn't be an investor at Andre and Horowitz if you hadn't like founded and or run a company. And that, you know, was a very good attitude and and set the culture of the firm in a lot of ways and had good uh things that came from it. But I would just say that like most CEOs aren't as interested in investing as they think they are.

Uh and then also most CEOs aren't as good at helping somebody else learn the job. Uh and so those two things ended up being, you know, not quite correct. Uh, so we made some adjustments, you know, fund one just went really well because we, you know, we hit the scene hard. It was a small fund. We did Skype, we did Slack, we did Octa. I mean, like, there was Stripe was in there. Like, so like there were just too many good things in a $300 million fund for that thing not to blow the doors off.

Fund two wasn't as good as one. Um, and then by the time we got to three, that's when we had uh the contention among like, oh, we really don't have the right profile for GP here. Uh, and there was a while where we thought that was going to be a terrible fund. It ended up being a great fund because we had, you know, Coinbase and Data Bricks and Lyft and GitHub, but that that one was scary for a while, but coming out of that, we kind of knew what the firm needed to be.

Uh, and so I think it was settled down after that, you know, it wasn't such a like startup. It was like, okay, we got across that chasm. But then the bigger thing was we always had this idea about software is eating the world. um and you know which is Mark articulated really well in his uh 2011 piece. And so we always felt like venture capital firms needed to be able to scale uh and that the other firms would have trouble scaling because of uh the way they worked, the way they shared control.

Um so that could be an opportunity for us. Um but we hadn't figured out how to do it yet. And then I'd say um starting with like the bio and the crypto fund I started to get to the kind of organizational picture of how we would become um be able to address every market of technology. Uh and but with investing teams that weren't 20 people like that doesn't work. So you need an investing team of like four or five people but you you have to you can't address the whole technology market with five people.

So you have to have multiple teams. Having multiple teams in a venture capital firm, it was a little bit of a novel idea particularly when each team has like a platform that helps the founder build the company. And so we began it really in earnest with the crypto fund I think like around 2018 and then uh and you know now the whole firm is kind of organized that way. If you think if we zoom now to today and back to what you said which is that the scope of your ambition is big as the leader be the one to help be the ones that are expanding the market.

What are the components of doing that? Like what is the system need that it doesn't currently have that you might be able to provide? One is um the the capital markets are have changed you know dramatically with dramatically with dramatically with not much um help. So I went public at 18 months old with $2 million in trailing revenue. That wasn't a good idea. But companies used to go public routinely with $50 million in revenue. It was fine. Um you know now nobody's going public a billion, right?

like you you get to go public or something like that and if and you're kind of small if you don't have that and so you kind of need a lot more out of the private markets than VCs are built to do and so you know that's one of the kind of things we have to think about. Another one is the companies in the portfolio the portfolio the portfolio you know they'd leave you at 100 million in revenue. They're going public. They're out to the races. Well that's not true anymore.

And so what do you need when you get to be 200 million 300 million in revenue? Well, you need to be multi-product, you need to be multi- channelannel, you need to be multi- geography. Um, so as a venture firm, you know, we need to help them and as a venture industry, we need to help them do that. Like how do I get to Japan? How do I uh get to South America? Like most venture firms don't provide much along those lines. So we kind of have to step up to those ideas if we're going to have companies in the portfolio at that stage.

stage. stage. Do you hope that over time your firm and maybe some others like it that have become these big institutions and venture go on to be sort of like the Blackstone you know Apollo type companies that are big publicly traded you know enduring businesses. A big huge wave in among venture capitalists is uh private equity AI rollups. It's a good business idea like a really good business idea which is okay okay okay you know just like the spreadsheet kind of created the original private equity business AI is kind of creating a new private equity business where you can buy any existing company optimize it with AI and it'll be more valuable.

That's a good idea. It's a good thing to invest in. It's not something we're going to do for two reasons. Um, one, it's like the cultural opposite of who we are. So, we're about building new things, um, growth, believing in the entrepreneur, price doesn't even matter. As long as the thing succeeds, you're going to do well. Private equity is like entry price is key. like the I mean know I I had a great dinner with Mark Rowan who's a super genius uh runs Apollo and he was like entry price entry price entry price you know we never even think about that we think about it but it's not like first and foremost at all like thinking about containing cost and this and that and the other that's just not like what a good venture capital frame of mind is so like culturally I didn't want to mix those two things but more than that like I just didn't want to be in a business where the way you make money is you figure out how to optimize an existing thing and you know lay off people and that kind of thing.

We're about like new technology companies building the future um taking things forward and I'll leave that to the other smart guys in the industry. industry. industry. What if any trade-offs ex feel like they might exist at this scale as you continue to scale as you consider all these different people you're trying to serve? Well, the investors internally, the LPs, the founders, so many people need to nothing's perfect. like what what are the trade-offs to the path that you've chosen? you've chosen? you've chosen? I think you know with any scale of organization you really have to over pay attention to culture um or the culture will drift.

We probably spend um more work on that than than any venture capital firm. I'm like you're not allowed to join unless you sign the culture document. I I spend an hour with every single employee teaching them the culture. Like it's like that level of investment. Um, and then you know we really try to enforce it uh hard when we can and you know we have pretty good consistency but like that's that is hard to maintain as you grow. Can you teach me more about culture? The the you've written a book about it.

You've you've built them. You've studied some very interesting cultures that you wrote about in the book. if you had to teach a seminar or something on like what a culture is in the first place and then how to design one given what you do and who you are and then how to you know make sure it it people live by it. Let me give you kind of like the a small but like the probably the most important insight which is from Bashidto the way of the warrior from the samurai.

Uh a culture is not a set of ideas. It's a set of actions. Um, and so if you define your culture as a kind of set of ideas, integrity, do the right thing, we have each other's backs or any kind of like these ideas, they call them corporate values, it's actually just a bunch of [ __ ] platitudes, it doesn't mean anything. The culture has to be defined in terms of the exact behavior that you want that support that idea. What do you have to do to actually be that thing that you want to be?

And so, and it's the little things, you know, how responsive are you to your colleagues? What's the SLA on returning a Slack message or an email? Do you show up to meetings on time? Um, and and this is like not everybody has those ideas, but if you want that idea, it's got you've got to manifest it through something else. So, like we have an idea about like you have to respect the entrepreneur. Well, what is that behavior? Like one, you can't ever be [ __ ] late to a meeting with an entrepreneur.

I used to find people $10 a minute in the beginning of the firm to reinforce it. And then uh you know, you have to get back to an entrepreneur. If you say no, like you have to say no. You have to explain why you're not investing. Um and you know, it has to be clear. And we're going to survey that entrepreneur after you um say no to make sure that you said no and that they had a good experience. So like that that's a behavior. If you uh try to make yourself look good by making an entrepreneur look bad, you're fired.

So like you get on X and say, "Oh, he's selling dollars for 85 cents." No, no, no, no, no, no, no. We're dream builders. We're not dream killers. [ __ ] that. We're Somebody wants to do something larger than themselves. Build a company, you know, make the world a better place. We're for that. we don't give a [ __ ] what the idea is, you know, and or if Sequoia funded them or whatever. We'd love that. That that's who we are. And so the behavior is the culture is the actual thing and that gets you the idea as opposed to the idea and then figure out how you're going to behave.

And so that's probably the main thing on culture. Can you say more about the influence your dad had on you? You mentioned that lesson of nothing's fair or life isn't fair. fair. fair. Yeah. Yeah. Yeah. Tell me about your dad. He was what's known as a red diaper baby. Uh he uh my grandparents were communists. Like they went to secret meetings. They had cards. My grandfather was fired during the uh McCarthy era from being a a junior high school teacher um you know for being a communist.

And he grew up a communist. And he started out um on the left. He was uh editor of a there's very famous new left magazine called Ramparts magazine which he was editor of and he uh uh uh you know was involved in the the Black Panthers with Huey Newton and um you know the Oakland chapter Eldrich Clever and he sort of dropped out of politics and he reemerged um I guess probably eight years later on the right. He really understood kind of the ills of communism and socialism which which helped me a lot.

Like one of the things that he said to me that uh always stuck with me. He's like, "Son, go to the library, pick any book on socialism. There's hundreds of books. And in that book, I guarantee you, you will find page upon page, chapter upon chapter of how to divide the wealth. You will not find a single sentence on how to create how to make it." And I was like, "Oh, wow. That's not like a very good system, is it?" I learned a lot about systems thinking from that uh which I you know ended up being I'd say very helpful to me as uh CEO.

He wasn't like uh you know this this this new age father he wasn't like that you know in the old days your father like they wouldn't even talk to you till he got to be like 12 and uh you know and then you get these little snippets of wisdom and like one of the ones I actually put in the hard thing about hard things but I had uh you know I had three kids I was young um and I remember there's like 102 degrees the air condition was broken the kids were going crazy like one of them poured a whole bottle of apple juice like a gallon of apple juice into the rug Apple juice is steaming out of the car.

But I'm just sitting there looking like I was going to die. And my father looks at me and he goes, "Son, "Son, "Son, you know what's cheap?" I said, "What?" He goes, "Flowers. Flowers are cheap." I said, "Okay." He said, "You know what's expensive?" I said, "No, what?" He said, "Divorce." And, you know, he had been uh married four times, so he knew what he was talking about. talking about. talking about. Yeah. As you look out today in the world, I'm curious what things are captivating you most and maybe even like most inspiring you.

You get you have such an interesting perch. You get to see see see so much at the frontier. What's going on in coding now is like quite phenomenal. You know, like we kind of went through this period where like, okay, AI can write code, cool. Okay, you can vibe code stuff with a lot of security holes, fine. Um, but I think over the break, over the kind of winter break, break, break, it turned a corner where like really really good programmers were going, "Whoa, "Whoa, "Whoa, oh god, oh god, oh god, this is this helps me." Like I just became a hundred times more productive and I can't remember any kind of of of technology where like just all of a sudden you wake up and everything the whole world just changed like that.

And that's happening on a pretty regular basis I would say. And then you know you know we spent a bunch of time with uh people in Hollywood who are using AI. I think AI will help you make movies both better and at much lower cost because you can do you know you can shoot a scene and then have the AI do a variation of that scene. That's very very good. Um, and so you don't have to do, you know, the really like if you're an actress, you have to shoot a scene like 15 or 20 times or something.

Uh, wouldn't it be nice to shoot it three times and then you just like take the pieces you like and make it what you want? Uh, so it's I I think it's a little underestimated as a tool for creatives. I think um, and I think that's true in music, too. You know, I was uh kind of a young person when hip-hop started and the the huge criticism like this is not music. They're just taking music and they're like remixing it um and they're rapping over it and it's a bunch of [ __ ] like it's a novelty.

But it was postmodern art and I think we're going to get into uh kind of postmodern art with like what people will be able to do with AI and music. And that was like one of the most exciting times in music. Like the invention of the new art form is when it gets really exciting. exciting. exciting. What people in hiphop specific people have had the largest impact on you personally and and how? Nas is a very good friend of mine and um he uh he's definitely had a big impact.

Just the the lens at which he sees the world is so different um and interesting for me. So we're both like very big fans of Rock Kim who is kind of like the John Cold Train of rap. So, Rak Kim had one of his first big song was a song called My Melody. And uh Nas and I are listening to My Melody and the the first line is turn up the bass, pull up a chair, hand out a cigar, I'm letting knowledge be born. I'm my name.

And so he puts it on, hands out a cigar. Uh and he pauses it and he goes, "Ben, why is he handing out a cigar?" And I go, "I don't know why." Then he plays an line. I'm letting knowledge be born. and he's like, "It's a birth bin. He's passing out cigars at the birth of knowledge." And I was like, "Oh [ __ ] I listen that song a thousand times. I never heard that." Um, and I can't tell you how many times like he sees or hears something uh that's there that I don't see.

So having, you know, somebody that I can talk to who has just like a completely different perspective of all things in life. Um, and it was interesting, you know, uh, we did the Coinbase deal together, uh, and he had called me like two weeks prior to us really kind of, um, seeing that, uh, because he wanted to learn about Bitcoin. So, you know, I explained to him how it worked and, you know, he was very interested. And then, uh, you know, when I was talking to Chris Dixon, who was working on the deal, I was like, "Tell me about the guys." And he's like, "Well, you know, one of them, Fred, is like really into hip-hop." I was like, "Okay." And so, you know, I brought Nas over over to my it's like have him come over to my house.

There's a boxing match on Saturday. You know, I had Nas come over and like that's how we got that deal. Um, wow. wow. wow. But, uh, yeah, he he's just like a I would say a big influence on me personally. And then he's such a you know I um you know I as a whatever as a leader and so forth like storytelling is and a writer um is important to me and he I I think he's one of the great storytellers of all times you know like just a super genius on that.

Is there a CEO comparable to Nas where you know there's this class of guys in the 90s where Jay-Z you know I'm not just a businessman I'm a businessman. Um, and there were these just massive franchises that got born. These guys all became incredibly successful in the business world. And it it felt more um like industrialized almost like the whole process whereas not like even just his album that just came out is it it feels just like Ilmatic feels like it could have come out then or now.

It's like this weird timeless quality. He still has that somehow. And like Premiere, same thing. Yeah. Yeah. Yeah. Do you know anyone else like that in another domain? He seems like such a unique unique unique person relative to his peers. Maybe Jensen Jensen has like this like very defined, you know, agree with it or not, but it's like this view of who he is, what the company is, and so forth that's kind of gone across across across eras. Um, eras. Um, eras. Um, but it's still the same thing, right?

Like it's not that like it played in gaming, it played in Bitcoin, it plays in AI, but it it's still Nvidia. Like it's not he never thought he had to change the name of the company. He's gotten better over the years, but in a weird sense, it it never felt like he's trying to be current, which like Nas never kind of feels like he's trying to write a hit. Can you tell the story of the work you're doing with the Vegas Police Department? And I'm asking about this one because it's super interesting, but also because it feels like uh an interesting different kind of example of what the application of this constellation of new technologies might allow for in terms of improvement efficiencies.

You know, it's just such an interesting case study. A couple things about the Las Vegas Police Force were intriguing to me. The biggest one was uh they they're kind of they were different than other police forces in the country because they're a big metropolitan area that's not run by the chief of police, but run by the sheriff. And the reason that's important is the sheriff uh is an elected official and does not report to the mayor. So they never got caught in the big political movement and defund the police and they were the one of the only cities that didn't reduce the police budget or anything like that.

So they kind of stayed intact and they're also interestingly the one or the one that I knew that never militarized and they do community policing and you can see it in the numbers. So the murder clearance rate in Las Vegas is the highest murder clearance rate meaning they they uh solve the murder 94%. And you know I think San Francisco is like 75% and then Chicago's like in the 30s and the national average is below 60. And I asked him, I said, you know, why why is your murder clearance rate so high?

And the sheriff, Kevin McMahill, said, "Ben, said, "Ben, said, "Ben, you know, when somebody is murdered, there's always somebody who knows who did it. They just don't talk to the police." So, but they talk to us because we're part of the community. Like, they know us. And so, I was like, "Wow, that's a great kind of environment to see if this new technology worked." And I knew about all the public safety technology because we invested in through American dynamism. So I I was like, look, we're going to become the highest tech police force in America, hopefully the world, and I'm just going to fund it.

And so I bought, you know, we've got a drone program and we've got u, you know, prepared 911 and we've got flag safety, you know, AI cameras. If a an emergency call, if a 911 call comes in or if a gunshot goes off, there will be a drone deployed in there within 90 seconds. And then that drone uh video feed will be in every police officer's phone in the vicinity like instantly. Since we started the program, I think crime is down over 50%. Um and then uh you know shooting of suspects by police is down like close to 75%.

But everybody's safer. And I think this is the thing that that was the most surprising to me on the technology deployment um is that so when you talk to the police they go look the problem is the descriptions cause like half the violent confrontations. I'm like well what do you mean? So somebody jacks a car. There's a baby in the back seat. We get a description of the car. It's a 2004 Hyundai that's blue. Well, it's really a 2008 Hyundai that's green. But we pull a guy over in a 2004 Hyundai that's blue and you know that person has had bad experiences with the police and you know now he's got a gun in the car and all of a sudden we've got an incident and like an innocent citizen gets harmed or police gets shot with AI camera.

We know that's the car. That's it. Uh, and we know there's a baby in the car. And so we're not sending one guy with a gun to see if that's the guy. We're sending a whole squad. Um, and we're apprehending them safely. And so everything um about like policing is inherently dangerous, but intelligence makes it dramatically safer. And so I'm a huge believer in this technology for making everybody safer. You know, suspects, criminals, citizens, police, everybody. The other kind of uh knock on effect is it's kind of put the pride back into policing.

We used to have a big problem in Vegas where uh you know because nobody wanted to be a police officer, we were lowering the standard, but now the standard is really high. So between the drone center, which is like super state-of-the-art, and then you have these um cyber trucks that look so like amazingly futuristic and cool driving around like everybody wants to be a police now. And Las Vegas happens to have the highest concentration of veterans uh in the country. So plenty of like super qualified people to choose from.

They all want to be police. Uh it's so that's all gone really well. The last question I ask everyone is the same. What is the kindest thing that anyone's ever done for you? A mentor of mine, a fellow by the name of Ken Coleman, who uh was a big executive at Silicon Graphics. And when I was um uh I guess a sophomore in college, uh I got an introduction into him and uh he gave me a job as a summer intern. And without that job, I don't know that I ever get to Silicon Valley or or that whole thing.

So I would say that's probably that that was the highest impact. Just he didn't have to do that thing that anybody did for me. me. me. It may interest you that that is the most common form of answer. uh across 500 of these someone that like took a bet when they didn't need to. Ben, pleasure to finally do this with you after a couple years of uh of watching you and and learning from you. So, thank you so much for your time. Thank you, Patrick. It was fun.

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