Ben Horowitz Discusses Culture and Success

Mark and Reason, also a programmer slash engineer. UM. I get the sense looks at the world slightly different and the two of them have really put together a unique firm in Silicon Valley that has been wildly successful. If you are at all interested in technology startups, venture investing, management, culture, or hip hop, you're going to find this conversation to be absolutely intriguing. So, with no further ado, my conversation with Andresen Harowitz is Ben Harrowitz. This is Masters in

Business with Barry Ridholts on Bloomberg Radio. My special yest this week is Ben Harrowitz. He is the co founder and general named partner at Andres and Horowitz, a highly regarded venture capital farm located right on Sandhill Road in Silicon Valley. He earned his MS degree in computer science from u c l A, following a b a in the same space from Colombia. He is the author of several books, including The Hard Thing About Hard Things and his most recent book, What You Do Is Who You Are.

Ben Harrowitz, Welcome to Bloomberg. Thank you, Barry. So you began your career at the legendary Silicon Graphics in what was the technology scene like way back then? It was very different, um in that it was just there was just technology people in it. So it's really broadened since then an amazing way. And the reason was, you know, we were selling technology two technology people. It was all B two B. There wasn't really consumer businesses in the space.

And then Silicon Graphics was kind of the Google of its stay and that it was where all the best engineers went. Um, you know, it kind of had all the panash Uh. We had done the kind of animation for the Terminator movie, which was like a big deal and that kind of thing. So it was it was super exciting time and just amazing. You know when I got there, how smart everybody was, um, which you know in life. You just never get put in a situation

unless you're in a company like that. Quite quite interesting. How did you move from Silicon Graphics to um loud Cloud? How did that come about? Yeah? Well so the big kind of step in between it was be called Netscape UM which I joined. And what was your role in them? Yeah, so I started as a product manager UM on the kind of server product line, which ended up being very important because you know, Microsoft kind of took the money

out of the browser product line, which was our first one. Uh. And although that, although it didn't work out all that well for them, eventually led to the anti trust suit which they lost. I yeah, no, it definitely we definitely put the hurt on them, but they kind of forced us to sell the company. So, uh, you know, it was an interesting one where I think they won the

battle and we won the war. Also, we broke the Windows monopoly, which was you know, the win thirty two A p I was the kind of key lynchpin of it. And because of Netscape, people stopped writing to that and that kind of enabled the kind of way for everything else that's happened since. So from Netscape, you your partner Mark Andreeson famously created um the first browser. I think

he was still in college years old. Yep, then came out and launched uh Netscape, which very quickly when public, really kicked off the whole dot com fifteen months old. When I want public, who U was Netscape? That's unbelievable. Yeah, that fifteen months we we even today as crazy as things have been, although the argument is it's everything has gone much further in the opposite direction. Let me bring

this back to you. Um So from Netscape going public, how did you roll into loud cloud with Andresen Yeah so Netscape point uh public. But then eventually, you know, it was a very rough, kind of a legendary battle with Microsoft, and we saw the company to a o L one point six billion something like that. Not well Netscape, this is a Netscape slee So Netscape sold at the time it was four point two billion, but at the point the deal clused was ten billion dollars. Really that's

a in transaction. Yeah, amazing trans mid nineties for sure. Oh yeah, yeah, yeah it was it. Look, it was a great outcome for a company. I was four years old. I mean, you can't you can't be mad at it. Um, but at a O l uh we were. I was in charge of kind of a well e commerce. And the interesting thing at a L L e commerce was, you know, it was a way like you come, you pay a well ten million dollars and they put you in the a well mall. That's kind of how the

internet worked in those days. And yeah, the walled garden. And once you were in the mall, the problem was that your site would just basically collapse because a well had so much traffic it would basically turn it on you and you would just not even be able to handle fire. Absolutely, Oh my god. Yeah, and so that gave us the idea to create what was, you know, kind of the original or at least the original named so cloud computing company, loud Cloud. The idea is that

this is scalable dynamically on a fly. If a ton of traffic comes in and you don't just crash, you get to take full advantage of that traffic. And so, so let me back up a little bit when I'm really curious about you start at Netscape as a middle manager, how do you rise through the ranks and how do you eventually become tight within reason? Yeah, well, I think there were two things UM and they were they were separate.

So the relationship with between Mark and myself was due to kind of there's a phenomenon in companies where if you think about UM product strategy and the ability for any individual to create a new proper like to create a new product that works like that lands in the market is a very kind of rare skill. It's kind of rare skill you have in a company, and even in a really big company, they're only like five or six people who can do that, who can create a

new product and get a market. And he I and I were like whatever, two of the six at the company, and so we became friends, uh over that, and then I think the rise through the ranks was more. Look, almost nobody in Silicon Valley actually cares about or puts effort into like management and developing people. And so I kind of realized that early and I thought, well, you know, I ought to do that UM and then that will distinguish man. I think that's kind of what led me

to being a senior exact and then a CEO. That was a conscious decision, Hey, we're ignoring our staffing, we're ignoring the people who work for us, and if I find a way how to work with these people, manage them, motivate them, etcetera. That's a positive career move. I mean, was it that calculated, Well, um, you know, I don't know if it was that calculated, but that's kind of

how it unfolded in that. Uh. Look, you get rewarded in a tech company for kind of having the best ideas and kind of knowing the technology and the products and the market the best like that. That that always gets you points and people usually don't even notice how well you're kind of running your team. Um, at least in the short term. Over time it becomes obvious and uh so that was a big deal. I think that's that was a big deal for me anyway, quite quite interesting.

So you go from Netscape to loud Cloud. Eventually loud Cloud becomes OPS where it gets sold to HP for one point six billion dollars. Uh and you stick around HP for a couple of years. What was that like one year? Yeah, like I learned a lot um. You know, HP at that time was I would say, kind of past. It's heyday for sure, and you know it had gone through you know, uh, bunch of c e O s in succession um, which is never generally good. As you know,

the culture kind gets twisted around and so forth. Uh. And I think that the thing that I learned was, um, you know, a company's culture kind of goes bad when nobody feels like it's their company, when they all feel like they worked there. And I think we had gotten to that point with HP where nobody felt like, okay, HPS my company. It was like I was meaning no

equity participation. They don't feel like it's not a financial incentive, it's a it's more of a spiritual ownership like this is I'm proud of my company and where I work and so forth, and uh, you know, I'm gonna make sure that I represented the best way and the work that we do is high quality and all that kind of thing. Um, they had lost that. And you know, I've never seen a company that had lost it entirely.

They had it and then lost it. Oh yeah, I mean, of course you knew work in Silicon Valley that they had it better than anybody. You know. The HP way, Um, you know, Dave Dave Packard was just a legend as a CEO and a manager, and um, you know, and that was kind of they built a lot of the culture of the whole all of Silicon Valley. But by the time I had gotten there, you know, in the acquisition, uh you know, and there there's this kind of thing

which maybe you have seen it. People either get rewarded at work for caring or for not caring, a meaning that like, how do you get rewarded for not caring? Well, let's say that the company can't make a decision for whatever reason, it's to bureaucratic. So you work your butt off, you figure something out, you have a new idea, a new project or whatever. You try and bring it forth and get a decision on it, and like it goes

nowhere because nobody can decide. Then you're punished for caring because you spend all that time and you get just nothing but frustration. Meanwhile, the guy who was playing video games at his desk, Like, that guy gets rewarded because he did nothing and he's probably going to get the same pay increases, no negative consequences for not caring versus actual time waste and energy way for caring and trying to do. Let's talk a little bit about the early

days in terms of raising money and deploying it. What was that like when you guys were first launching A sixteen z as as it's known amongst a small group. Well, it was interesting because we had it had that quality. There's a quality that you always want and I understand it's better as a venture capitalists and I did as an entrepreneur, but you always really want it when you're starting something new, which is you want people to say

you're crazy. That's the dumbest thing that I've ever heard, because if you don't hear that, then you don't actually have a breakthrough because if it's obvious to people, then like it's not it's not that great idea. Um. And so we got that big time, which was awesome. So you know, we went and we when you were when you were launching and greesent Harlot's oh yeah, Now was that a function of we were right in the middle of a meltdown or just enrule, who needs another venture

capital farm? Well it was those two things. So it was you know, two thousand and nine was the worst time I think in the last thirty years to raise a new venture capital fund. Only only two new ones were raised us in coastal ventures, and of course of the coast is a super legend and venture capital business. UM, so like, yeah, it was a super bad time to raise.

Nobody needed another yet another venture capital firm. And then our idea behind it, which was we were going to use um Michael Ovit's as CIA as the blueprint for the firm. Everybody thought was the dumbest thing that they'd ever heard in their lives. I mean it was just like, what are you talking about? Like this is nothing like Hollywood. You can't do that, you guys, are you know that

will never work? Like it's been tried a thousand times, you know, like everything, like it's so dumb, nobody would ever try it to Like it's dumb and it's been tried already and didn't work. Like explain the CIA blueprint what you were doing in how different that was from

typical vcs. Yeah. So basically if you looked at um, the talent agency business before CIA, when Michael started in seventy five, I think, um, it was kind of you know, you had you looked at any firm, you had agents, and then you had kind of people in the mail room because there was no emails, so you have to deliver the mail. You remember this Barry it's an old

kind of school thing. Are you saying, I'm old? Well, you know, you're you're you're kind of at least close to me, okay, um, And then you have I think I actually have a few years on you. Yeah, okay, good, fifty eight you're fifty four some okay exactly so um. But anyway, so then you had secretaries and like that was the firm. And in the economics where you get ten percent of whatever an actress made or you know,

an actor or that kind of thing. Um, And so as an agent, the firm would generate tempers and override there. Some would go to pay for the secretaries in the mail room guys, and then the rest would go to the agents. And you know, that's kind of how they rolled. And so kind of as a result of that, every agent kind of was a little bit you know, playing for himself and that newk. Yeah, what you kill, your network is your network, you know, the guys you know,

and so you know, and that's how it worked. And then when you were if you were like a great actor and you were choosing a talent agency, you'd always go with the one that had the other big time actors, right, like it's just an obvious thing. And so the rich got richer, and the kind of same firms had been

the top for for you know, decades. Uh So, then Michael comes along and he flips the model and he goes so he and his kind of founding partners deferred all their commissions for the first several years and built what he called the franchise, which was the professional I network for talent agency business. And that basically manifest itself in the uh the pitch meeting where they would pitch the talent. So the way it worked at William Morris

was you'd go in, you meet with your agent. They'd say, oh, yeah, I know the president like Warrener Brothers Pictures, and I'll get you into that and the da da da, and that was that was kind of the pitch. You go into C A A. They had thirty people sitting around the table. The first person would say, I managed book publishing. Here are the relationships we have with all the publishers. Here are the new books coming out where I think that you would fit as we turned them into screenplays.

And the next person would say, I'm in charge of music, and here's how we can cross promote you there, and then next person say, I'm in charge of international. Here the Japanese television commercials we can slide you into. So

it was just an overwhelmingly powerful network. And if you fast forward, you know, fifteen years later, of course, Michael became the most powerful man in Hollywood and they owned you know whatever, ninety percent of all the top actress, a screenwriters, everything, and they transformed the industry and now everybody runs like CIA today. But oh yeah, absolutely, um so we thought, wow, venture capital looks just like this,

Like this is exactly how it works. You got a bunch of like partners and they are like jack of all trades. They do beat and they help you with recruiting, and they do this and that, and they don't do any of them well. And we knew that because, like, you know, we'd experienced it, and so we said, oh, we're going to do the CIA model here, and everybody said, you guys are stupid. So that's when we knew it

would work. So so the transition from being both a entrepreneur and somebody who was on the receiving end of venture capital that sounds like it very much colored the way you wanted the firm to run. Yeah, no, absolutely. So the other, uh kind of big idea that we had was venture capital was kind of oriented around you had this inventor and you would give them money and then when the company, if the invention worked and people liked it, then you would bring in a professional CEO

to build the company. That was the general motion, um, and that we had a couple of observations on that one. If you looked at the history of technology companies, the greatest technology companies were generally run by their inventor founder for a very long time, from you know, Thomas Watson and IBM, Dave Packard and Bill Hewlett at Heulett Packard, Bill Gates, um, you know, and then later on Mark Zuckerberg and all these kinds of things. And so we thought,

you know, that's interesting, um. And then as we looked at our own experience, you know, being kind of inventor and you know, in my my case CEO, Like, we knew that professional CEOs could not be taught to innovate, So like you could teach an innovator to be a CEO, but not necessarily a CEO to be an innovator. And so we thought, wow, what if there was a venture capital firm that actually helped a found or become a CEO.

And we thought it was two parts of the CIA power network, which gave you a network like a professional CEOs network, and then like the know how, like what is that job? How do you do it? Help them get scaled up? And so that was kind of the idea from from the launch. The idea wasn't let's find entrepreneurs with great ideas and eventually will find the way

to turn them into a company. You were looking to create a method to take entrepreneurs with good ideas and turn them into good CEOs of good companies exactly from day one, from day one, and and the rest of Silicon Valley did not embrace that. No, you know, like because they you know, they had been old school and they and look in their defense, it used to be way harder to get ready to be a CEO because if you think about like Tandem Computers, Um, since you're

fifty eight, you remember Tandem. Uh. In order to get Tandem to market, you had to build manufacturing, you had to build comprehensive customer support and professional services, and a direct sales channel. To get Twitter to market, you needed like three guys with laptops and aws and like you were gone and very different today, Yeah, very very different. Plus you know they used to go public a lot quicker.

There was um relevant to to that concept about three guys in a laptop in And I apologize if I'm confusing books because both of your books kind of all are jumbled in my head. Um, I learned the most important rule of raising money privately. Look for a market of one. Only need one investor to say yes. It's best to ignore the other thirty who say no. That sounds like that comes from real experience. Sadly, yes, yeah, no, so that that that's the hard thing about hard things, right,

But yeah, no, that's right. You only need I mean, that's the beauty of raising money. You just need to convince one. And I think entrepreneurs get discourage sometime, you know, particularly if they have a particularly novel or breakthrough idea that's difficult to understand because you know, if it if people can't pattern match it, then you know it's it is difficult to raise money, but you just need one

that's interesting. And since we're recording this right after the relaunch of Silicon Valley, the show HBO show your firm was a consultant to the first season at least of right your partner Mark. UM. I think a lot of the rest of America looks at Silicon Valley and they only know it through shows like that. What do you think the biggest misconceptions the rest of the country has about Silicon Valley? Um? Or is the show just dead on? Even the stereotypes and the exaggerations are all based on

people we know. I felt you don't like all shows. It's a very kind of cartoonist version of of how it actually goes. I think the biggest misconceptions are one like it's crush singly hard to build a company. I mean, it is like emotionally and kind of rushes. That's a great phrase. Oh yeah, I mean I think Sean Parker said it's like, you know, eating glass. It's just like and that's what it feels like at times, um, Because like you go out, you tell that you have this idea,

you're so excited about it. You raise money like from like you know you generally you start with like your best friends or like your parents are like that kind of thing, or like somebody anybody you know with money. Um, and then you know, you hire the best people you can find, you know, and and then you spend all

your time on it. So really the only people you end up knowing in your life for the people who work for you, people who gave you money, because like all your times on the company and then starts going wrong and you go, okay, like, well what happens if this fails? And it's like, well, my like that's like not only do I let down everybody that I care about, but like that's my whole life, Like it's just gonna fail with me. Um. So that kind of pressure is

not like something that you experience. And I'm sure you know if you're a soldier or whatever, you feel you have even worse pressure. But like it's a very extreme pressure. And and then you're always hiding it as CEO because you never want anybody on the outside to know there's something wrong with your company. And so that you know

that part of it is is really really difficult. In the hours are just crazy hard, um and you know, like and then you know things don't work, they go wrong, You're running out of money, like customers don't like the product, like things blow up, people scream at you. It's it's a very, very tough thing for any entrepreneur. I would say,

like even the smallest entrepreneurs go through this. So, since we're gonna talk in a moment about your new book, which is all about culture, I know people outside of the United States who have said to me the genius of America culturally is that you don't punish failure. You're you're describing the pain and agony of failure, of not succeeding. But we seem to be one of the few places that it's not quite I don't want to call it a badge of honor, but it's not punished in the

United States. How you tried something, didn't work, try something else seems to be more of a philosophy here than in most of the rest of the world. And some people have credited that as the genius of Silicon Valley. What what are your thoughts? Well, so it is to say it's not punished, I think is um a little bit of it isn't relative to japan Um. I think that's true. You know, there's not the shame you're not

expected to commit. Harry Carey at the end of it, even in Europe, if you try something and fail, it's pretty difficult to launch a second company. Yeah, and that, um, I agree, you know, like the kind of rewarding of optimism, although like we're getting I feel like it's um, I mean, well it seems like we work getting punished pretty hard

right now prevailing. And I would say that, you know, to contrast that in terms of like how they're looked upon and and like he got a lot of money for himself and all that kind of one point seven billion dollars not counting the money he got actually coming up with the wee company name and right as well as as well as going out and finding buildings owning them himself. And then at least that was that was the story more of what leverage meant than uh, what

like it means to fail. I think what it means to you know, if you look at even you know, little companies when they fail, now I get like pretty viciously attacked in the press. And but do those entrepreneurs go on and are they capable of now? If it's difficult? Is like I I don't think it's that easy to fail as an entrepreneur and go on. It is certainly easier than in other countries and I think that, Um, from a societal perspective, Uh, there's death only more support here.

But I think the and look among venture capitalists. For sure, venture capitalists are very forgiving and will fund you even if your last company failed. So it's not But in terms of like how you're perceived by people in your circle, kind of people in the broader world, it's pretty rough. Uh. And then the people who work for you, I think

most importantly, it's very difficult. There are a few entrepreneurs who do such a great job that they can take somebody for four years or eight years out of their career, get them no financial benefit, and then like start that one again. Let's talk about the book. You pretty much begin by saying culture is everything in business and sports and life. You you write a lot about it. How can a young company that is just getting off the ground develop a culture and maintain that over time? Yeah,

and I think that, Um. So there's couple of things in that question that I think are important to understand. One is, um, you don't necessarily have to maintain the exact same culture over time. Cultures do evolve. It's not

like whatever a mission statement or something like that. And I don't get the sense that you are the biggest advocate for those sorts of firm mission statements that I don't think they did, you know, like they're they're these kind of there's a lot of this survivorship bias in business, where like you look at something after the fact and go, oh, yeah, they had a great mission statement or a cult like

culture or a big Harry audiation. It's like if you that's probably why they didn't succeed, you know, like a doubt that that was the thing, like probably like the phenomenal product they built and then like the rest of it shaped up around them. Another words, go looked at the ten thousand companies that failed and see how many of them had a great mission state? Yeah, exactly exactly, I've seen many. So I don't think that's what it is.

And look, when we're talking about culture, we're talking about and Bushido has a great definition of it, which it's not a setuple leafs, it's a set of actions, um. And so that begs the question, Look, how do you get people to behave how you want them to behave when you're not there? So like why do why does that person return that phone call that day and not like a week later or not never? Um, why do people stay at work? Tell eight pm and not five pm?

Why do people stay at the four seasons versus a red roof? In when you do a deal, are you optimizing for the price or the partnership? Like? All these things are your culture and they're not in the mission statement. They're not in the KPI s and okay rs and all these kinds of things, And so how do you program program them in? Turns out to be a very very kind of complex effort and not easily done. And I think that, um, you know, which is kind of

the rationale behind the book. Uh. And you know, it is hard to start it right at the beginning of the company because you don't know what you want to be, and who you want to be has a lot to do with your actual business strategy. So an example of this if you take Amazon, right, they have a very

frugal culture. You know, then they like enforce it in all the famously the desk on top of the two so the door on top of the sources as a desk you reference in the book, Yeah, and the whole thing, right, But you know they have a strategy where that makes sense because they want to be the low price leader. And that's like in like Bezos is like original loop about you know, his his wonderful drawing about like how Amazon works and all that, like that was fundamental to

their strategy. Apple didn't have that cultural value, um, nor do they need it, and that they it would be antithetical to what they're doing because they want to have they want the most beautiful products out there, and like they're going to spare no expense. And Steve Jobs actually got fired the first time for sparing no expense, uh, you know, which was on culture for him, but not for Scully. Uh. So you get you know, the culture

has to be built for the strategy. Um. And so as you are developing your strategy, you might not be able to really know what you want your culture to be in the beginning. And then look as you scale, you run into different kinds of issues and so forth. Um. But yeah, there there's definitely I would say they're techniques, but you've got to, you know, to get it right, you really have to understand culture in the kind of

the gestalto of it, like the entire thing. And uh, that's um how I approached the book and and and why like it took a whole book to explain it. So let's talk a moment about Shaka singor Well, all the proceeds of the book, I have to add, are going to helping people who get out of jail stay out of jail. Tell us why you want to focus on the culture that Shaka am I pronouncing the name right, Uh.

Tell us a little bit about Chaka. Yeah. So Shaka uh went to prison when he was nineteen years old for murder that he did commit um and UH became, you know, a rose to kind of a leadership position in a in a very kind of violent prison gang called the Melanax and um and spent nineteen years in prison, seven of those in solitary confinement. Uh and Uh. The reason that I wanted to tell his story of how

he did that UM was several folds. First of all, you know, the big mistake people make on culture is they take too much for granted, make too many assumptions. And it's easy to do in Silicon Valley where I'm from, because when employee comes to you, they have a lot

of cultural basis. They're already doing a lot of things right, I mean, you know, and it's everything from simple things where they know how to show up to an interview on time, and they know how to go through that process that they've had like some kind of schooling and education and like you know, which includes kind of a cultural background on and how educated people behave and then they've probably worked at a Silicon Valley company that had some elements. When you get a guy in prison, they

don't have any of that. They don't they have almost nothing culturally that you can use because the way you get to prison is you come from a very broken culture and that you know, that gets you into behavior that gets you locked up. And so he had to start from first principles on everything, which is amazingly instructive way to understand how culture works. But the other like remarkable thing about Chaka was he got to the top

of the gang. He ran it very effectively, but then he realized he didn't like the culture and changed it and uh and had to change himself to do that. So that transformation process, I thought was super interesting as well. And what what organization you're working with that the proceeds of the book are going to to help X cons

stay out of prison. Yeah, so there's several one is I one in them all, but the Anti Recidivism Coalition out of l A uh Scott Bude's organization, and then UH cut fifty UM which is was founded by my friend Van Jones, are two of them. Let's let's talk a little bit about VC today. There seems to be a whole lot more venture capital firms now than there were. How how has that competition impacted the way venture capital is practiced in general and doesn't have any impact on

Andrews and Harrowitz. Well, so I'd say, first of all, like the reason there's so much more money is, um, my partner Mark was right, and software's eating the world. And so what's happened is, you know, as we discussed earlier, it used to be we just sold technology to technology companies and that kind of made the market for new technology companies just not that big. Now every business is because coming a software business, and so the market is

greatly expanded. So there needs to be more money to fund all these you know, new ideas. Um, the money coming in has kind of changed the landscape a bit in that you know, the tiers, the kinds of venture capital that you can get are different. You know, there's seed funds and precede funds and a round firms and

be around firms and you know, growth firms. And then there's even now kind of substitutes for the public markets, you know, like soft bank UM for US UH, the kind of increased number of firms, I mean, it does change things tactically. There is this other aspect though of venture capital which we benefit from, which is unlike other asset classes. So if you look at UM whatever you know, stocks or bonds or real estate or so forth, like the top managers for like the eighties are never the

top managers for nineties are never the top managers. No persistency, no persistence among the top managers because you know it's an open playing field, so to speak. But venture capital, the top managers are super persistent. Like MKOY has been a top firm for you know, fifty years uh. And the reason for that is UM, the best entrepreneurs will only work with the best firms, and so if you're in the top tier, UM, you you don't compete with

anybody who's not in the top tier. And they're only about four or five firms in that class, and so US being one of them, we always compete with the same kind of four or five. So it doesn't matter if there's more money coming from left or right or whatever, because like to build a company, it's great to have the money, but there's other things that you need, for example, like how do you attract with so many startups out there, how do you attract employees to come to your company?

And you know a lot of that is who did you get money from? Did you get money from the small arst guys, the best guys, or did you get money from somebody nobody heard of who just has some money. And then like that becomes a spiral for you because you don't get the best employees, you don't build the best product, and then you know, you don't get the customers, you don't get the money, and you've go out a business.

So so cumulative advantage is a real thing absolutely a venture capital Yeah, it is probably the most the driving factor of returns, much more than um you know whatever, how smart I am. Really you're gonna say, wow, that that's a fascinating statement. So, if you are fortunate enough to be funded by one of the very top tier firms, the statistical odds, the probabilities of you as a startup succeeding are a little higher, a lot higher, a lot higher then a second or third tier firm. Oh yeah,

no question. Now, like you may have any repressible product um that just goes viral and berserk and then you know that, yeah, that that can conquer a lot. Although even with that um, the counterfactualism would have done with a top tier fill And then if you do happen to have a competitor funded by a top tier firm, is going to get better employees than that could be a real problem for you. Yeah, that's actually you know a lot of the Facebook MySpace thing, and Facebook just

had better people doing better work. Huh. That's quite interesting. You mentioned soft bank as a UM alternative to public markets. Is that still the case? Post we Work, post uber have has a little bit of the blush come off that rose. I know they're already the Saudis are renegotiating the profit split and trying to lower fees and everything, and they're working on raising a second funds, which was originally gonna be another hundred billion dollars. I don't think that.

I don't imagine there anywhere close to that and commitments these days, what does SoftBank mean to the public markets. Well, so I think, you know, it's a very bold idea and you know that that that was certainly the proposition to kind of new companies is like you don't need to go public. Well I'll give you or will invest five million or a billion or you know, and we

work dollars into you. And uh, you know, I think that definitely over the long term for it to be significant and to change, uh, kind of the landscape ad venture capital and public markets, it's got to work. Uh. And so you know, like the jury is still out on it. It's not done yet. Um, but you know, like terrible pr doesn't help. But you know, even I couldn't tell you the impact of the we work pr on entrepreneurs yet because we're just too early into it.

But um, yeah, that's something that they definitely have to manage. So I'm trying to remember the name of the study, um, and I'm drawing a blank on it. There has been a study that specifically looked at the rate at which venture capital firms were forming and raising capital. And in

the nineties it was at a certain level. It ticked up in the two thousands, and it really ticked up post crisis like two thousand two twelve and then seventeen in walks the eight hundred pound guerilla with a hundred billion dollars funds forget the future and will let the jury decide on that. What was the impact on things like valuation and raising money of the soft Bank Vision funds since they launched in seventeen, Did they really shake things up and affect things? Well? I think they, Um,

they definitely affected the companies they invested in it. You know, I would say more so than the landscape itself, because it's such a like a unique, slash unusual deal. There were some like regular deals that they did, Like they put money into Slack and you know that was kind of in a very regular way, just like they just look like a growth investor. But in many companies they wrote you know, quite enormous checks and uh, you know, with the expectation that the company would live up to

deploying that money. And I think you know some of you know, when people write the retrospective on we Work, um, you know, like some of what was distorting for we Work was they already had a very ambitious plan and then soft Bank encourage them to be more ambitious, and the difficulty with a new company and that kind of idea is if you if you're an entrepreneur, and this gets back to what we talked about earlier about how

market I met. But you know you have always like not one good idea, but you usually have like six or seven like really good ideas. And you know that we works were all named we something, but we we school whatever we school. Yeah, so you had all those good ideas. Um, the problem is that from a talent perspective, there are only a few people who can get you to product market fit on any of those ideas in your company. So like you just very quickly dilute yourself.

So if you if you do like your top idea, even if it's you're not your best idea, there's a real chance you can make it work. But if you do your top ten ideas, none of them are going to work. And that's almost guaranteed. And because you've deluded your talent too much. It's not it's not a money issue. It's a talent issue. And so you know when you and the problem is entrepreneurs don't know whether their first idea is better than their tent idea, So that was

a question you immediately that I put myself in that category. Like, it's very hard to distinguish which is your best idea, don't you don't. Really good ideas require the marketplace to validate them, or a little bit of baptism of fire for the entrepreneurs to sharpen their skills and be able

to get their best ideas to the market now exactly so. Uh, A very good friend of mine wrote a paper called the Idea Maze, which describes the apology screen of us and I remember seeing that, and in fact, Uh, your partner Mark talks about the idea Maze and is surprised

that entrepreneurs come to Andrews and Horowitz not having read it. Yeah, No, it's it's It's one of the I would say, most important things to read if you're an entrepreneur, um, because it describes that process you have an idea, um, but any idea, there's tons of stuff wrong with it because it hasn't right. It hasn't bumped into the market and the partners and the competitors and the technology landscape and

all the things that's going to bump into. And so as you hit all those things, you have to navigate your way through to the maze to the actual product, and doing that with one product is like it's hard enough. Yeah, I mean it's like it is like the kind of

business equivalent of giving birth. It's very difficult. So like having tried ten babies simultaneously, like all the babies are going to die, and that's that's I think what can happen if you get a giant infusion of cash And so that's the thing that now on the other hand, and Peter Tiel describes as well, there's zero to one, which is getting to this product market fit, and then

there's one to end. And I think that, you know, in theory, SoftBank could certainly put money in something that was going one to end and help it get to one to end faster. Um. But you know, like, well we'll see if that's how it works or if it works in a different way. Is too much capital potentially your burden for either the venture fund like the Vision fund or for a scrappy startup um like we work. Is that just too much money for a young, untested

sort of green CEO to deal with? Well, I think that it is for a company if it causes the ideas that you try to implement to multiply. If you do that, then then that's going to be very dangerous. Um as opposed to take that one idea and see it through to its natural conclusion. Take it global. Um That like, if you need more money to take the market faster, that's a more scalable activity. It's straightforward, there's

kind of known methods and so forth. You can throw money at it, and if you waste it, it's not destructive. But if you throw money at product, that's destructive. And so it's a it's a tricky balance um And yeah, no, it's it's something that they sure surely have to struggle with. So in in the book, you quote your partner Mark Andreessen, you only ever experience two emotions euphoria and terror. I find that lack of sleep enhances both. Yeah, that's a

description of entrepreneurship. So so is all that extra capital not helpful if it or does that takes away some of the euphoriaan terror? And I think that that is actually dangerous because it's that level of focus caused by that, Like you have to be able to handle the emotion. But like nobody ever, it's very hard to build a great company without that kind of feeling of oh my god, I've got one bullet and I have to hit the

target and if I don't like, that's it. Like the level of focus you have to have to do that is kind of what makes the company. The culture, like everything gets built off of that. And if you take that, like, if you take that away, you just have like, you know, you just end up with a big, fat, slow, bureaucratic startup. You know which big companies don't execute that well generally, but they do. They are so large they can just pound you with money, but they've got a sustainable underlying

engine like Google Search or something. If you don't have that underlying engine, you just have the money somebody gave you and you start acting like that. That that that can be super, super destructive. So I'm fascinated by your concept of the hard thing about hard things, which is effectively spoiler alert, Hey, there's no formula for doing this, there's no framework. That's what makes them hard. It's a case of first impression. Um, that was a really insightful observation.

Does that come from your work as an entrepreneur or is that something you really see as a venture capitalist or both. Well. I think it was mainly my work as an entrepreneur. I think that UM crystallized being a venture capitalist working with other entrepreneurs, realizing that my experience

was far from unique. UM. But yeah, And I think this is what's wrong with most of the business literature as they try to put it into some framework like here are the three steps you need to go good to great or be a built at last or whatever gym concepts. Because it's not like it is very situational.

It's very specific to your company and your product and your market and your people and and all these kinds of things, and so um, yeah, the things that you're doing, you know, you have to understand at a different level. There's not the A. B C's of building a company. You can follow the thirty steps of building a company that anybody puts out and get nowhere all the time.

And you know the same with the culture. Uh, you know, with the uh the new book, like people have these step by step Oh, have an off site and like you know, create your values and then like put it in people's performance reviews. That doesn't do anything other than get you a hypocritical culture where people go, yeah, we have those values on the wall that we don't live. Uh, so you know you have to get to the real thing. Um. In other words, create your own values, don't follow someone else.

Understand how systems work, you know how well, it's not even so much create your own values. It's like you got to focus on, like how do you get people to behave the way you want them to? Give you? An example is so like Tom Coughlin could have put values on the wall that said, like we're going to be very detail oriented, we're gonna care about like everything more than anybody else does, and like nobody would have done anything. But what he did is he said, here's

the role. If you're on time, you're late, and if you came to meeting on time, he'd find you like thousands of dollars because you needed to be there five minutes early. Now, like why is that better? One? Like, as soon as he says that if you're on time, you're late, you go like where the hell am I? Like what is this? Why is he saying that? And

when you ask yourself why is he saying that? Then what you're gonna find out is because like we're out working everybody, we're paying more attention to everything than anybody, Like the way we practice every detail that we go over, like we're going we're gonna be here before everybody. Then um. And if you run into it every time you go to a meeting, like you can't like get away from that cultural value. Whereas like you put on the damn wall and you see it once a year in your

performance review, come on, like that's not doing anything. And for people who may not be familiar with it. Kauflin was the coach and New York Giants one two Super Bowls. Wrote a book, Earned the Right to Win, which I do not love sports books as business metaphors. This is a great book. Really really comes across his meeting we'll we'll talk about this later, his whole concept of meetings.

If you're not there and and prepared and thinking about what's going to happen at the meeting, like you can't show up at the line of scrimmage a moment before the bullet snapped out. It's all the prep work that goes into it. He he was really a very deep philosopher. Yeah, and a cultural philosopher. Yes, yes, absolutely. We have been speaking with Ben Horowitz. He is the author of what you do, is who you are, how to create your

business culture. If you enjoy this conversation, be sure and come back for the podcast extras, where we keep the tape rolling and continue discussing all things venture capital related. You can find that at Apple iTunes, Stitcher, Spotify, Google Podcasts, wherever your final podcasts are sold. We love your comments, feedback and suggestions. I to us at M I B podcast at Bloomberg dot net. Be sure to give us a review on Apple iTunes. Check out my weekly column

on Bloomberg dot com. Follow me on Twitter at Riolts. I'm Barry Retolts. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast, Ben, Thank you for doing this. I have been chasing you down for a

good couple of years to join. I eventually had to work my way through the rest of all the employees at Andres and Harowitz, and now I have you in my in my lair, I have to ask about the origin of a sixteen Z. I know that there are sixteen letters between the A and Andrews and the Z and Harrowitz. How did that come about? And full disclosure? When I was in your office, you guys gave us some swag. I have that hat which I where all the time. I really enjoy it. Where where did a

sixteen Z come from? Well, so we named the The reason we named the firm first of all Andrews and Horowitz was the big question we got when we were raising money from the LPs was they were like, hey, you guys are like already kind of successful entrepreneurs. Why are you really going to stay doing this venture capital thing. We think you're just gonna like raise some money and then quit and really yeah, yeah, yeah, that was a big objection. And uh so I actually got the idea.

It was like Mark, like, if we name it after us, then they'll still be stuck to it, and then they'll know we're stuck. And yeah, so that was Andrews and Horowitz and then but then we had an immediate problem, which is, uh, nobody could spell that if they were going to send us email or something to ease to S is an inres and not an easy name to spell, not at all. And so I came up with the ideas. So when I was an engineer, like way back in

the Stone Age, it's such a geek thing to do. Yeah, we used to have to internationalize code um to make it work, you know, make it go from like whatever single to double by uh strings and all this kind of thing. And so we called that internationalization and we abbreviated it I eighteen and I eighteen letters in the end. And I was like, oh, this will be great. Book called a six Z and and the domain was easily available.

Not that entrees in Horowitz probably wasn't available. You know, that was available to it was just a nightmare to right now. So when I had UM your CFO or CEO, Scott Scott Cooper, So he was in his book, he's telling the story that essentially post opswear loud Cloud, you and Mark were effectively I think he called you check book vcs. You were funding companies literally out of you know, writing a check to people. And and he didn't say this, I put these words in his mouth. But he's like

a very he's a lawyer. He's very rigorous, he's very struck. Shared I pictured him like, what are you guys doing? Wait, you're just writing checks out of your purse. Like I pictured him losing his mind and saying no, no, no, we have to set up a legal structure we have to get organized. There's a lot of um, you know, a little urban legend about the origin stories of how how accurate is you guys were just kind of like, yeah, let's give these guys money and give those guys money.

Well we I mean we were, but like we started out as an angel fund before we even like formed the kind of structure of the firm and so forth, which now we have many entities, so Scott is very happy with that. I can't even count all the entities we have. Uh, but you know, like we would meet entrepreneurs and we were writing you know checks for hundred grand,

two hundred thousand dollars. I mean that does sound like a lot of money, but right it's seed or angel rounds and yeah, so if we loved an entrepreneur, we would you know, yeah, absolutely, Um, and you know a lot of those turned out uh really you know quite well. So, Um, what were some of those first checkbook firms? Uh funding? What companies did you fund? Yeah? Yeah, so well there was a few that where I mean, like probably the best checks were like things like, uh, LinkedIn and Twitter.

I think we're probably the you know, two of the best, but you know one that I really um meant a lot to me. Was a company called app Nexus. I don't know if you know them, they're here in New York, but they sold to A T and T for well over billion dollars and um, you know they those guys. You know, it was just a bet on Brian the CEO,

and uh man like he was tough. He just went through everything and you know, changes of the business, like you know, people giving up on him and all these kinds of things, and he just kept going and built quite the company. So so so a couple of my favorite quotes from the book and I'm not again I jezz I don't know which book this is from. I think this is from the Hard Thing book. No matter who you are, you need two kinds of friends in

your life. Explain that. Yeah, so that was you know, it was just kind of trying to come up with a the way to describe my friend Bill Campbell you know, late Bill Campbell Um was the chairman of Into It, chairman of the CEO and then chairman of into it um, you know, and kind of legend around Silicon Valley. He mentored Steve Jobs and Larry Page and a bunch of other guys but someone called him that. That's in the book the trillion Dollar Coach, Trillion Dollar Coach, right exactly.

But you know the way I always saw him was, um, you know there there there's two kinds of friends you need. One is, you know, if something good happens in your life, who do you want to call? Because they're going to be as excited about it as you would be yourself like and then you have very few friends like that, you know, like your faith. And that's always a great

line between like fake friends and real friends. Is your fake friends, you know, like they hear it and they pretend they're happy, but they're not really happy and ahead of me again. Uh and then uh, you know the second kind is like if you're really in trouble, like you know, like you're in jail and you have one phone call to make, who you're gonna call? And you know, both those guys for me were Bill Campbell. That that's quite um, quite fascinating. Um. Another quote from that book,

what's the worst thing that could happen? What would I do if we went bankrupt? And you described that as a very freeing question. Yeah, yeah, I know, so that was so you know, I didn't know what called sweats work until he became a CEO, and then you know, I'd be you know, it would be three o'clock in the morning, I'd be wet um and you know, awake, and my guts would be boiling, and I'd be like, oh, this is what they meant. And so, you know, we were in a lot of trouble. Um. The company was

definitely hitted for big bankruptcy. And I asked myself the question. I was like, okay, like, yes, what what's the worst thing that could happen? So, like, what is the worst thing that could happen to the company? And I was like, Okay, the worst thing that could happen is world go bankrupt. I'll lay everybody off. All of our customers who trusted us would fail, like all the investors who trusted me would lose their money, and like I'd have no friends.

And I was thinking, Wow, that's like pretty bad. And so then I then my next thought was like, well, is there a way to kind of oh And then the last part of it was really essential, which is well, maybe after all that I could buy the intellectual property out of the bankrupt thing and make it into a new company. Um, and then I thought, whoa, why wait for bankrupt? Yeah, maybe I could do that before we went bankrupt, and that that's how loudcloud became ops where exactly?

And that worked out pretty well? Yeah, no, thankfully, um it did, it did. I would probably not be here today had that worked out, you know, speaking of failure like that failure would have my life would have been very different. I think if we had failed at that, Why did loudcloud not work? Was it just too early in the evolution of bandwidth, server technology, etcetera? For like that was Amazon Web Services a good couple of years before. Well,

and I would say all those are true. And then maybe the most fatal thing was it was built pre UH virtualization, which there's a technology called UM virtualization which kind of transformed UM your ability to do cloud computing costs effectively, which is you could take a single computer and make it look like many computers. And breakthrough technology from a company called vm ware many years ago, uh, and that really kind of changed the nature of it.

Vm Ware I E. MC bought them about them right right right, And that was another giant uh pre Amazon cloud UH data storage company back from late nineties. Yeah, yeah, yeah, no, absolutely one of the biggest. Uh. There was one other question. I wanted to pull out one of your quotes that I thought was so interesting. Oh, um, this one. I love this quote. A healthy company encourages people to share bad news. A company that discusses its problems freely and

openly can quickly solve them. A company that covers up its problem frustrates everyone involved. Describe that, well, look, um, you know there's this whole saying that like NBA has come with a lot of the time, which is, you know, don't bring me a problem unless you have the solution. And that's kind of good, except for what happens when they don't have the solution. Um, And then what you're

really saying is don't bring me problems. Uh. And that can become like pervasive in the culture where you know, and I always uh liken it to the Wicked Witch and the Whiz where you know she sung that song, ain't nobody bring me no bad news? You know, like you don't want the whiz wicked Witch running the company because you need you need to know what's wrong, because the faster you know it, the better it is. Uh. And the slower you know it becomes a Kimchi problem.

The deeper you bury at the hutter it gets. And so but it's a very much a cultural thing because people don't want to be associated with problems, so you know, getting them to bring them to you, you know, there there has to be some kind of like reward in the culture for doing that. And one of the things we didn't get to doing the earlier segments I wanted to ask about. I I work in the financial services industry.

Diversity is a big problem there. Um, it tends to be male dominated, it tends to be not a lot of people of color. I know a lot of firms are working on that, but it's progress has been slow. You guys have have created specifically a cultural Leadership Fund to try and change that. Tell us about the lack of diversity and venture capital and and what andrews in Harwitz is doing about that. Yeah, so, like, let me

this is big. So there's a chapter in the new book called Genghis Khan Master of Inclusion, which kind of goes through this theory. And uh, it's a very I think it's very important topic. And it's something that you know, generally silicon values getting exactly wrong. And I think Wall Street probably the same. And it's not intention so like the first misinterpretation as people think, oh, everybody is racist and sexist and finance and in venture capital, and that's

not actually the thing. Um. And in fact, starting from that point actually makes you effectively systemically racist and sexist. And I'll tell you how, because then you go, oh, I need you know women minorities in my company, and then you hire them, and then everybody in your firm knows they came in the side door, the women and minority door, as opposed to the front door. Um. And the real problem is you can't see the talent. So

i'll give you a metaphor on this. So my friend Steve Stout, who ran Sony Urban Music, calls me one day and he talks in these kind of ways. He goes, Ben, I ran Sony Urban Music. And I was like, yes, I know that, Steve, but I also knew he was going to tell me a longer story. And he goes, but it wasn't Sony Urban music. It was Sony black music. Um. But we couldn't call it urban music because or black music because that would have been racist, So we had

to call it urban music. I was like well, that's kind of silly, and he goes, no, that wasn't What was silly, he says, because we called it urban music, I couldn't market in rural areas, like no black people live in rural areas. And I goes, wow, that's really dumb. He's like, Ben, you're not even listening to me. I had Sony urban music. I had Michael Jackson. What white people don't like Michael Jackson. It's not black music, it's music. And I was like, oh my god, that's what we're

doing in Silicon Valley. We call it diversity, but it's really urban talent. It's this like we've categorized it into something that it doesn't need to be categorized in because we haven't trained ourselves to see that kind of talent. So just give you an example of what I mean by that. So at my firm, when we started, UM, we were like, you know, we were like every other firm. I had Frank Chen and he was running research, and

everybody in research was Asian. And I had you know, Margaret, she was running marketing, and everybody in marketing was a woman. And I had you know, Cooper. Everybody he hired was an investment banker, and like it just went on like that. People hire people who look like them, sound like them, have their backs. I know what I'm good at, I value it highly, and I can test for it in an interview. So by default, that's what I'm hiring. And

so I go to market and I go market. What is in your criteria where no man can get the job in marketing? Like? What is it? And you know what she said to me? Helpfulness? Really? And I was like, oh, snap, I don't know any helpful man. And but then, but like here's a real dumb thing about what I was doing. Is we're a venture capital firm. We're in the services business. You don't think helpfulness is important in the services business, like to be able to anticipate somebody's needs to get

to it before they know you do. You don't think that's a differentiation. And so like, we didn't have that in our criteria for anybody's profile other than hers. When we added it, that's all we did. We don't have anywhere like a head of diversity, a diversity program, nothing, people were women. All we have to do is actually be able to see the talent. We're a talent blind

and so the right thing to measure is blind. Yeah, the right thing to measure on diversity inclusion is what is it like like from attrition standpoint, employee satisfaction standpoint for your diverse groups, Because the only way you get that to be where it should be is if you can see the talent. And if you can see the talent, guess what, You're not gonna have a pipeline problem. You're not gonna have any of those other problems that people run into because you can see it and the talent

is out there. And so when you get to the Cultural Leadership Fund, people think that's actually a diversity idea. It's not. It's actually a bet on black exceptionalism. And what I mean by that is this is us recognizing that in the last hundred years, every new musical art form, from jazz to blues, to rock and roll to hip hop, was invented by the same group African Americans, African Americans. Almost all new fashion ideas were created by African Americans. Lately,

almost all the important new visual artist African American. What does that mean. It's means like you have a group that's genius at moving consumer behavior, like we can see that. So we partnered with the best leaders, people like Quincy Jones, Sean Combs, so forth, where they would invest in our cultural Leadership Fund. We could then connect them to our entrepreneurs, get an advantage on moving consumer behavior, and then we just take the money and put it back into getting

more African Americans into tech. So for us, it's a bet on talent that we can see that the other venture firms can't necessarily see and we're benefiting greatly from that, and you know, we win deals all the time on that. Uh So, you know, it's just the right way to think about diversity and inclusion, which is like, how do you gain advantage And you can't gain advantage if you're running around blind and then changing your criteria to race and gender. That's not going to get you anything that

you just set up Urban HR. So you mentioned hip hop um amongst the list of musical inventions from African America. So we're only about five years apart in age. But my hip hop fandom kind of stuff opt with Poles Boutique and right, I mean, Paul's Boutique is a spectacular album. I think most people will admit the scratching and mixing and sampling in just just an unbelievable In fact, that was before the copyright wall came down, so they were

doing stuff that you really came later charge. But I don't know, if what what the basis for my lack of because I still listen to new music, but most of it tends to be jazz and pop new stuff that comes out. How have you managed to stay current current in uh hip hop? And what are you listening to these days? Oh? Well, you know, like I get that's an interesting thing to describe. I think the art

form really evolved in um, you know since Paul's boutique. Uh, you know rock Kim was just an amazing breakthrough lyrically, uh, and then Dr Dre musically, and then you had the great I'll Go. You know, I progress somewhat. Yeah, that era I mean Wu Tang nas jay z uh Notorious b I G was an amazing kind of era. UM. So that there's still like very good things happening. I mean, so Young Thugs new album is quite good, Like I would recommend it highly uh so much fun as the

name of the album. UM, I think that you know the baby is uh, like everybody loves the baby, and he's got a new album out that's pretty good. Um that I like. So there's there's definitely good new stuff happening to Like Drake is amazing. I think he doesn't, you know, because he's almost so big that like real hip hop hits don't give him the credit he deserves. But this guy is an absolute genius, and uh, it's

putting out continues to put out phenomenal music. I Um, I just got a new car not too long ago, and all the new cars have them the music hard drive that if you so, between the phone and the iPod, I got a bazillion things. But every now and then I just bring out a stack of discs and transfer it to the to the drive and right, I mean that's where we are. The previous car, you could use

the SD drives. This car you can't taken. You can take your phone on Bluetooth, yeah of course, but you know the phone only has you know, five twelve gigs of music and I want to put some of my

favorites in. But the reason I'm bringing that up is I brought I brought out seven James Brown discs and I transferred um, the James Brown Party people three dis set and then the Showtime three four disc set, And as I'm listening to all this stuff with a hundredth time, it's amazing how much hip hop pulled vocal samples, beats, baselines, rhythms. Just I don't I have a lot of young guys in my office. Brown was originally like the most sampled guy.

I don't think people realize how influential he still is to this day. Amazing driving music. It's it's just fascinating. So I've got a tip off your James Brown fan. So there's a there's a show called Tales from the Tour Bus might judge, there's to James Brown episodes. You have to they're the most from It's on I think Cinemax. But it's uh, it's an amazing show generally, but season

two James Brown amazing. Like so first of all, like just how genius he was the band he put together, and how incredible they were, and how absolutely nuts out of his mind was He never really like he barely drunk and he never did any drugs until he was fifty five, and then he started on Angel Dust like that was his first rock. He didn't anything part way, he was Yeah, pedal to the metal, and so you know, when people see him at the end, they wonder, like,

what the hell happened? Is Angel Dusk? And so like that. The whole thing is just like a crazy tale of of of him. So it's much better than any of the James Brown movies. So last question before I get to my favorite questions, what what else are you watching? I mentioned Silicon Valley? What what are you streaming? What

are you watching these days? Well, the new season and Mr Robot, which one of the great the last season, final season, Yeah, what an amazing The first season was very stressful, Yeah yeah, yeah, like and that was like challenging to work your way through. Yeah yeah, yeah, that was It was very intense. Um that it continues to be intense. Yeah, uh, you know, I watched uh succession. Um people like that. It's you know, it's a very

well done show. I a little little bit of touches the Murdochs, I know, and I'm friends with them, and I feel like it's not fair if you look at it through that lens, But it's still like a super well done show. So if you saw that, did you see loudest voice in the room. I haven't seen that yet things about it's the showtime I want to say it's a six or yeah, who's amazing in it? And

it's based on the Gabriel Sherman book. Really it's shocking to look at Russell Crowe and say, how did's one guy play Roger Ales and some of the Gladiator and um, what was the beautiful mind? Like, it's incredible? How different range? Well, and then the really unusual thing about him to me is he not only has the range, but he also has the intangible. He's a movie star. He's a Humphrey Bogart,

He's like a Denzel Washington like that. But those guys, you know, the most movie stars, they're amazing because they're movie stars, but they don't have rain like Robert de Niro, but they don't have that kind of acting range as well. So he's he's really unique. Um, what we'll give me one more thing that you're watch him. Um, let's see what else I watched. I want to give you a good one. By the way, I'm gonna have to add this as a regular question because this is a really

interesting question. Yeah, I'm trying to think what, oh you know, what I liked is uh, the Righteous Gemstones. Really yeah, yeah, that did started out a little slow, but you know it's the guys who did Vice Principles and He's bounded down, which are both like outstanding. So now I have your I think Righteous Gemstones may be the best of the set. So I only have you for a few minutes. Let's uh get to my favorite questions and I'm gonna do uh,

I'm gonna do an abbreviated version of this. What's the most important thing we don't know about Ben Harwitz? I feel like people know so much now really, because I think you're kind of an enigma. Your partner is more public than you are, generally speaking. Yeah, no, he definitely is. Well I am, I mean, and maybe people don't know this about me, but I am the best barbecuer in all of Silicon Valley. Yeah that's a really low bar. Yeah, you know it's a low bar, but like still I

wear the crown parality. There you go. Um, who are some of your early mentors you mentioned Bill Campbell has to be on Andy Grove. I would say Andy Grove is super high on that list. What an amazing, amazing guy. Actually, the highlight of my professional career was when he asked me to write the new forward High Output Management, And I still think that's the best thing I ever wrote in my life? Is that for it? Because it just meant so much to me? What amazing, amazing human thing.

That's an amazing pair of mentors. Um, what venture capitalists influenced the way you think about venture investing? Or maybe I should, knowing knowing your firm, I should ask who really influenced your approach the venture capitalists? You mentioned Mike ovit's before who else influenced? I think like structurally in the approach. You know, Michael Ovits in terms of how we run the firm was by far the most influential.

I think that, you know, in being vcs UM, you know we we knew a lot of the great So you know Jim Bryer, you Kosla, you know John dor Um. We're all very influential. You know Neil Boozery, although he's more of an entrepreneur than a venture capitalist, but like he certainly was very kind of helpful and influential on at least me early on. Um, those are some of them. Yeah, let's talk about books. What are some of your favorite

things to read? Technology related or not well. So I have been reading Victor Sebastian's um Lenin biography, which that's Vladimir Lenin Vladimir Iliot. Uh. That's a pretty big book if I remember the big book. Um, it's just astoundingly amazing, and you know, particuling in today's time because you know, people people have sort of forgot the hundred year history of communism, which just a brief summary everybody dies U but going down, going back through the Bolshevik Revolution, you

can really see why. And it's you know, it's a really interesting systems thing because it's marketed as power to the people and it's the exact opposite thing, which is it's a massive concentration of power where you transfer all the wealth to a very few number of people running the government. Yeah, it's well, but it's too high a level of power. So like if you get anybody gets too power, Like if there was a company like Evil Corp is in Mr Robot, that company would be massively

destructive because it's just too kind of concentration. So it's not specific to government or business or anything else. It's just specific to power. And I think the problem with communism is it's just such a big concentration of power. And you really see this. I mean, so just some of the things in the Bolshevik revolution, you know, the so the first thing is, okay, anybody in government, anybody

can do a government job. You know, any peasant could do it, because like, these are just the rich people who have these jobs, and they're all evil, And so he gives all the jobs to peasants. And within three months of them taking control, there's a famine so bad that they have to put out propaganda to keep parents

from eating their children. And then like so coming off that, like what do we do about the famine, Well, we've killed all the rich people, so now we've got to start killing the kulaks who were farmers with like two horses, and so like this is how it rolls when you kind of give somebody massive power and you're driven on hate of anything, and like, you know, I mean, I understand people don't like rich people, but like hating anybody, um is just a very bad source of uh political ideology.

So forty million deaths later, what what ends up happening in uh Communist Russia? Yeah, I mean, you know, like and then we discover it and then you know, it's very hard to convert from a system like that into another system, is you know, you know, we're we're finding also it's complicated in China, it's complicated buttitarian than it

is communists. But they go to totalitarian and communism go together because you're going for that concentration of control like you can't have kind of So here's here's the thing on communism that you know, my friends who have grown up in you know, Russian Romania and so forth say, it's like people think, oh, Stalin was crazy. Stalin wasn't like if you read his work and so forth, like he wasn't very smart. The problem is you've taken away

the carrot, so all you have is a stick. And so if you all you have is a stick, then you need totalitarianism to control the people. You need to be you need you need to go to work because you're not paying him. Um that's one book. Give us another. Um, well, you know, i'll reference. Let me reference kind of the book that I've read over and over again in preparation for this book. It says The Black Jacoban's by C. L. R. James, which is, uh, so you appreciate this story. It's recommended

to me by the late Christopher Hitchens. And all I asked him was like, what books should I read? He's like, oh, the best book, like is The Black Jacobin's written in nine seven, you know. And really he said that this to me maybe like seven eight years ago. Uh, and that was the story of the Haitian Revolution And just an amazing book. Is that how that you found its way into this book? Absolutely? You know that was the kind of uh that's the very first thing I read

kind of on the Haitian Revolution. Uh and really really really amazing tell us about a time you failed and what you learned from the experience. Uh, well, you know, I wrote a whole book on how I failed to build the first cloud computing company. Uh. You know, I felt a lot of things. I actually just um, so one of the let me tell you, like a really one of the many failures a loud clouds. So the company you and we came out of the gates faster

than any company that I've I've seen since. So in quarter number three after founding, we booked twenty seven million dollars in revenue, like so like just astound. And that's when seven million dollars was a lot of money in uh and we were growing so fast that the fire marshal was threatening to shut down the company. UM, so I had to get yeah, and so it's had to get more real estate. Um. And so I kind of delegated it to uh my finance team and um and

I just didn't pay any attention. I was just like, get as more real estate. We got to get it before they shut us down. So we leased the building. UM. I signed off on it thirty million dollars in restricted cash to hauled it down. And it was kind of at the time, I think it was like ten dollars a square foot a month. Within two months of that, it was very pricy. Within two months of that that Tom crash real estate in the next twelve months drop to nine cents of square foot. Like we had a layoff.

We never really and Ernest moved into the building. UM and I had this thirty million dollar bill. Uh. You know, in a startup company, it was which was just absolutely killing us. And you know, the thing I learned was like I knew when I delegated it it was probably a problem. Um, but I didn't want to deal with it for even five minutes. And uh, you know. What I learned is like, if you see pain, darkness, failure, you have to run towards it. You can't run away

from it. When you're CEO, embrace the pain, run straight at it. So let me move this in a different direction. What do you do for fun? What do you do when you're not in the office? Yeah, yeah, so you know, I listened to hip hop. I've got like an amazing sound system. I am a big sports fan, so I give who's your sound system, what's your MP and what's your speakers? By the way, this question is for seventeen people.

It's a little company called Aristecca, and they have this amazing technology which is there's a software layer kind of that runs over the top that like a problem with speaker systems is certain sounds hit you first. So like the vocals, the guitars, the base don't all hit you at the same time. They hit you at different speeds. This makes it so they all hit you at the exact same time and the clarity on the system is justable. I promise we are going to get emails from audio

engineers challenging that. We'll see, we'll see what the pushback. My final two questions because I know we have to get you elsewhere, right, Um, what sort of advice would you give to a recent college grad who was interested in the venture capital world. Well, I'd say do something else before you going to venture capital, because the most

important thing in venture capital is understanding there. One of the most important things is understanding the process of how companies get built, and that's a little bit difficult to do from the outside. So if you can do that from the inside and then you know, maybe going to venture capital later, I think that works better. Uh. And then the the other thing is right if venture capital is like one of these dumb fields and that doesn't

prepare you very much for anything else. So like if you have a tenure career and it doesn't work, then that you know you're really starting from scratch, Whereas if you're an entrepreneur or you work at a startup, then there's many things you can do off. It's something the full back on. And finally, what do you know about the world of venture investing today? You wish you knew when you guys were getting launched in the late nineties, I'm sorry, the late two thousand's. Um, Well, that's a

great question. Isn't it though, Yeah, I think, um, probably I wish we knew more about the investing process, like what did good investing process look like? I think it's something that we've learned over the years, and you know, we've had to develop, uh, and we're you know, like I would say, we're way way, way better at it

now than when we started. And I think, you know, like at this point I can tell that we're as good as the best firms because you know, we end up landing like any deal, you know, just by the deals we pick, Like you can tell by you know, what they really smart competitors pick. So we've gotten much better at it. But it was something we learned kind of the hard way. I would say, quite quite interesting. Ben,

thank you for being so generous with your time. We have been speaking with Ben Harrowitz, co founder and general partner at Andrews and Horowitz and author of the new book What You Do Is Who You Are How to create your business culture. If you enjoyed this converse station, well, look up an Inch or down an Inch on Apple iTunes and you can see any of the previous two eighty seven conversations we've had over the past five years. We love your comments, feedback in suggestions right to us

at m IB podcast at Bloomberg dot net. Be sure and check out my weekly column on Bloomberg dot com. Sign up from my daily reading list at Ridhalts dot com. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Karen O'Brien is my audio engineer. Michael Boyle is my producer. Michael Batnick is my head of research. I'm Barry Ridholts. You've been listening to Masters in Business on Bloomberg Radio.