It was, at first glance, hard to understand how anyone could be upset at the idea that It’s Time to Build. That’s the title of a recent essay by Marc Andreessen, and of course I agree; I expressed the same sort of frustration Andreessen opens with last month in Compaq and Coronavirus:

There has been divergence between countries that acted and countries that talked. Taiwan, where I live, is perhaps the best example of the former…The contrast with Western countries is stark: to the extent government officials across the Western world were discussing the coronavirus a month ago, it was to express support for China or insist that life carry on as before; I already praised the role Twitter played in sounding the alarm — often in the face of downplaying from the media — but even that was, by definition, talk. What does not appear to have happened anywhere across the West is any sort of meaningful action until it was far too late… The first problem of being a society of talk, not action, is the inability to even consider hard work as a solution; the second is a blindness to the real trade-offs at play. The third, though, is the most sinister of all: if talk is all that matters, then policing talk becomes an end to itself.

“Action” is a different word than “build”, but, at least from my perspective, they express the same sentiment: bend the world to our will, instead of simply accepting our fate. In that light Andreessen’s article was meaningful not for the examples of what might be built, but rather for arguing for the action of building as an end goal in and of itself.

Andreessen and Me

Andreessen, who today is perhaps more well-known for his eponymous venture capital firm Andreessen Horowitz, is first-and-foremost a living legend for having created Mosaic, the first web browser that supported graphics; Mosaic became the basis for Netscape’s Navigator, whose 1995 IPO kicked off the dot-com era.

An irony of Andreessen’s claim to fame, though, is that while it provided access to information from anywhere by anyone, perhaps the most important impact on Andreessen was getting him out of the Midwest and to Silicon Valley. That, at least, was a theory put forward in a fascinating 2015 profile in the New Yorker:

One afternoon, as we sat at his baronial dining table, he made an agonized but sincere effort to discuss his blue-collar childhood without mentioning his nuclear family. “I really identified with Charles Schulz in the David Michaelis biography of him, ‘Schulz and Peanuts,’ ” he said. I was struck by the parallels between Andreessen and both “Peanuts” — in which Charlie Brown has a massive bald head and the parents are kept offstage — and its creator. Charles Schulz, who grew up in Minnesota, was socially awkward, hated being embraced, and loathed his mother’s Norwegian relatives, a farming family. Andreessen went on, “Ninety-six per cent of the people who grow up like he and I did, in the Midwest, just stay there, but the ones who leave” — the cartoonist, too, moved to California — “become intensely interested in the future. In Schulz’s last ten years, he really focussed on Rerun, Linus’s younger brother—the youngest and most optimistic character.”

I can, given my own childhood in small-town Wisconsin and current residence in a country so far West it is called East, relate to Andreessen in this regard. For me, the Internet was a way out, first to learn, and then to live abroad, and now, a way to make a living. I know it gives me a positive bias towards technology; I’m not convinced it is wholly unearned, but an easier way out should always be viewed with some amount of suspicion.

Software Eats the World

This perspective led to Andreessen’s most famous essay, 2011’s Why Software Is Eating The World:

My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy. More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not. Why is this happening now? Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale. Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day. On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries—without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month. With lower start-up costs and a vastly expanded market for online services, the result is a global economy that for the first time will be fully digitally wired — the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later.

Andreessen was right, which was good for him for lots of reasons. First, it’s good to be right generally, and even better to write the defining piece of an era.

Second, software is, as I have discussed previously, perfectly suited to venture capital: it has significant capital costs, and mostly zero marginal costs, which means there is a big need for up-front investment combined with unlimited upside. In other words, if software is eating the world, then it is the venture capitalists who are among the best positioned to get fat, at least in theory (that noted, one would have likely been better off investing in the Big 5 tech companies in 2011 — for reasons I discussed last week — than in Andreessen Horowitz’s funds).

Third, in Andreessen’s vision, Silicon Valley was doing the disrupting from, well, Silicon Valley, which had always been the plan. Andreessen told Wired in 2012 that when it came to Andreessen Horowitz (Chris Anderson, the interviewer, is in bold):

Our vision was to be a throwback: a Silicon Valley venture capital firm. We were going to be a single-office firm, focusing primarily on companies in the US and then, within that, primarily companies in Silicon Valley. And — this is the crucial thing — we’re only going to invest in companies based on computer science, no matter what sector their business is in. We are looking to invest in what we call primary technology companies. Give me an example. Airbnb—the startup that lets you rent out your home or a room in your home. Ten years ago you would never have said you could build Airbnb, which is looking to transform real estate with a new primary technology. But now the market’s big enough…everything inside of how Airbnb runs has much more in common with Facebook or Google or Microsoft or Oracle than with any real estate company. What makes Airbnb function is its software engine, which matches customers to properties, sets prices, flags potential problems. It’s a tech company — a company where, if the developers all quit tomorrow, you’d have to shut the company down. To us, that’s a good thing. I’m probably a little bit elitist in this, but I think a “primary technology” would need to involve, you know, some fundamental new insight in code, some proprietary set of algorithms. Oh, I agree. I think Airbnb is building a software technology that is equivalent in complexity, power, and importance to an operating system. It’s just applied to a sector of the economy instead. This is the basic insight: Software is eating the world. The Internet has now spread to the size and scope where it has become economically viable to build huge companies in single domains, where their basic, world-changing innovation is entirely in the code.

Software eating the world, with zero marginal costs, all from Silicon Valley.

It’s Time to Build

This, as far as I can tell, is where the disconnect for some comes with It’s Time to Build. The sort of building Andreessen calls for is very much in the real world, costs real money both up-front and on a marginal basis, and would surely make the most sense anywhere but Silicon Valley. From the essay:

Why do we not have these things? Medical equipment and financial conduits involve no rocket science whatsoever. At least therapies and vaccines are hard! Making masks and transferring money are not hard. We could have these things but we chose not to — specifically we chose not to have the mechanisms, the factories, the systems to make these things. We chose not to *build*. You don’t just see this smug complacency, this satisfaction with the status quo and the unwillingness to build, in the pandemic, or in healthcare generally. You see it throughout Western life, and specifically throughout American life. You see it in housing and the physical footprint of our cities. We can’t build nearly enough housing in our cities with surging economic potential — which results in crazily skyrocketing housing prices in places like San Francisco, making it nearly impossible for regular people to move in and take the jobs of the future. We also can’t build the cities themselves anymore. When the producers of HBO’s “Westworld” wanted to portray the American city of the future, they didn’t film in Seattle or Los Angeles or Austin — they went to Singapore. We should have gleaming skyscrapers and spectacular living environments in all our best cities at levels way beyond what we have now; where are they? You see it in education…manufacturing…transportation…

The point about Singapore — Asia broadly — could be made about every point that followed. And that includes the response to the coronavirus.

Andreessen then states what he sees as the problems:

The problem is desire. We need to want these things. The problem is inertia. We need to want these things more than we want to prevent these things. The problem is regulatory capture. We need to want new companies to build these things, even if incumbents don’t like it, even if only to force the incumbents to build these things. And the problem is will. We need to build these things.

This leads to the core question about Silicon Valley and its relationship to Andreessen’s essay: has tech — specifically the software-centric tech that Andreessen has done more than anyone to proselytize — been the primary source of American innovation because it represented the future? Or has it been the future because it was the only space where innovation was possible, because of things like inertia and regulatory capture in the real world?

I can’t speak for Andreessen, but having observed him for many years I would guess the answer was mostly the former: Andreessen’s entire career, from Mosaic to Loudcloud to Ning, has been about creating space online, obviating the constraints of the real world, which wasn’t worth much anyways. From that Wired interview:

Think about Borders, the bookstore chain. Amazon drove Borders out of business, and the vast majority of Borders employees are not qualified to work at Amazon. That’s an actual, full-on problem. But should Amazon have been prevented from doing that? In my view, no. Because it’s so much better to live in a world where that happened, it’s so much better to live in a world where Amazon is ascendant. I told you that my childhood bookstore was something you had to drive an hour to get to. But it was a Waldenbooks, and it was, like, 800 square feet, and it sold almost nothing that you would actually want to read. It’s such a better world where we have Amazon, where everything is universally available. They’re a force for human progress and culture and economics in a way that Borders never was.

Human progress in this view is solely online.

What Tech Must Do

I agree with Andreessen that much of the software revolution is inevitable; I also agree that tech’s seeming exclusivity on innovation has also been about the online space being the one place without the inertia and regulatory capture Andreessen decries. If you are talented and ambitious, what better place to be?

What I also sense in Andreessen’s essay, though, is the acknowledgment that tech too has chosen the easier path. Instead of fighting inertia or regulatory capture, it has been easier to retreat to Silicon Valley, justify the massive costs of doing so by pursuing infinite-upside outcomes predicated on zero marginal costs, which means relying almost exclusively on software as the means of innovation. To put it another way, where did Andreessen’s personal preferences end and his vision begin? Note this paragraph:

Building isn’t easy, or we’d already be doing all this. We need to demand more of our political leaders, of our CEOs, our entrepreneurs, our investors. We need to demand more of our culture, of our society. And we need to demand more from one another. We’re all necessary, and we can all contribute, to building.

What it means to ask more of one another, at least in tech, is right there in the overlap between preferences and vision.

First, tech should embrace and accelerate distributed work. It makes tech more accessible to more people. It seeds more parts of the country with potential entrepreneurs. It dramatically decreases the cost of living for employees. It creates the conditions for more stable companies that can take on less risky yet still necessary opportunities that may throw off a nice dividend instead of an IPO. And, critically, it gives tech companies a weapon to wield against overbearing regulation, because companies can always pick up and leave.

Second, invest in real-world companies that differentiate investment in hardware with software. This hardware could be machines for factories, or factories themselves; it could be new types of transportation, or defense systems. The possibilties, at least once you let go of the requirement for 90% gross margins, are endless.

Third — and related to both of the above — figure out an investing model that is suited to outcomes that have a higher likelihood of success along with a lower upside. This is truly the most important piece — and where Andreessen, given his position, can make the most impact. Andreessen Horowitz has thought more about how to change venture capital than anyone else, but the fundamental constraint has remained the assumption of high costs, high risk, and grand slam outcomes. We should keep that model, but surely there is room for another?

I do believe that It’s Time to Build stands alone: the point is not the details, or the author, but the sentiment. The changes that are necessary in America must go beyond one venture capitalist, or even the entire tech industry. The idea that too much regulation has made tech the only place where innovation is possible is one that must be grappled with, and fixed.

And yet, Andreessen himself said that we need to demand more from one another. We need to figure out how to fix Wisconsin, not flee from it. We need to figure out how to build real businesses that build real things, not virtualize everything. And we need to start fighting for not just infinite upside, but the sort of minute changes in cities, states, and nations that will make it possible to build the future.

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