Podcast: Ben & Marc Show

Translation: Rhythm Worker, BlockBeats

Translator's Note:

The bullet that grazed Trump's right ear was like a dividing line, not only making Trump's chances of being elected continue to rise, but also dividing the attitudes of Silicon Valley bigwigs towards Trump. When the world's richest man Musk publicly supported Trump and J.D. Vance, supported by top investor Peter Thiel, became a vice presidential candidate, Silicon Valley leaders had different opinions, such as A16Z's transformation.


Marc Andreessen, co-founder of A16Z, one of Silicon Valley's most famous venture capital firms, has been a Democrat for most of his life. He has supported and voted for Clinton, Al Gore, John Kerry, Obama and Hillary. However, he said he is no longer loyal to the Democratic Party. In the 2024 presidential election, he will support and vote for former President Donald Trump. His choice of Trump over Biden mainly comes down to one important issue: He believes that Trump's policies are more favorable to technology, especially the startup ecosystem.


Marc Andreessen has emphasized the importance of technology to society in the past. Last October, he published a "Technology Optimism Manifesto" calling on technologists to ignore critics and pessimists and see technology as "the only eternal source of growth." According to Pitchbook data, A16Z is one of the largest venture investors in Silicon Valley, managing more than $42 billion in assets.


In a new episode of "The Ben & Marc Show (hosted by A16Z co-founders Marc Andreessen and Ben Horowitz), Marc and Ben discussed their latest article "Startup Tech Agenda", why the future of American innovation is at a critical moment, and why they turned to support Trump. The content of this podcast was also pinned by Musk on his Twitter homepage.


In their one-on-one conversation, Ben and Marc compare Donald Trump and Joe Biden’s policies on startup tech, explore the potential future of blockchain, cryptocurrency, and artificial intelligence, and examine how tax policy could shape the future capital of startups and venture capital. They also touch on the recent assassination attempt on President Trump.

Left: Marc Andreessen; Right: Ben Horowitz

TL;DR

· Marc Andreessen and Ben Horowitz believe that the unique value of startups is that they drive innovation, while monopolies hinder innovation. The success of technology and startups is critical to the United States' technological advantage, especially in the fields of blockchain, cryptocurrency, and artificial intelligence.

· They discussed the importance of blockchain and cryptocurrency, arguing that these technologies can reshape the way society works, especially in terms of controlling information and data. They believe that blockchain can help achieve a fairer capitalism where creators can receive higher returns.

· The Biden administration's regulatory strategy in the cryptocurrency field has been criticized as a crackdown on innovation. Andreessen and Horowitz believe that these policies are not conducive to the development of startups and call for clearer and friendlier regulations. They expressed concerns about the Biden administration's regulatory measures in the technology field, believing that these measures may limit innovation. Especially in the field of artificial intelligence, the Biden administration's policies may hinder the United States' position in the global technology competition.

· They had tried to meet with Biden but were rejected, and their recent meeting with Trump gave them a deeper understanding of his personality. Although he is a complex figure, his courage in the face of crisis is impressive. In the current policy environment, Trump is better suited than Biden to promote the development of technology and startups. They emphasized that this is not based on personal preference, but based on analysis of the actual impact of the policy.

· In addition, they discussed QSBS and billionaire tax. QSBS (Qualified Small Business Stock Exemption) is a key tax policy to encourage entrepreneurship and investment. The Biden administration proposes to abolish QSBS, which will have a serious impact on startups and venture capital, and may hinder innovation and economic growth in the United States. Biden's proposal to tax unrealized capital gains was called "the last straw" by Andreessen. This tax policy will force startups to pay taxes on the growth of valuations, which is not feasible for private companies without liquidity. This policy will be a devastating blow to the startup and venture capital ecosystem.

The following is BlockBeats' compilation of the content of this podcast:

The Importance of Startups

At the intersection of technology and politics, the challenges faced by startups are particularly complex and important. In this segment, Ben Horowitz and Marc Andreessen explore the unique value of startups and why they think Trump is the right choice to support startup technology companies.

Ben Horowitz:There are going to be a lot of friends who are going to be mad at me for saying nice things about President Trump. You know, the last thing I want is for our company, our employees, and the companies that we invest in to be involved in this because it's going to be very emotional. It's hard. But the reality is that the future of our business, the future of technology, the future of new technology, and the future of America is at stake. We're here. For the startup tech companies, we think Donald Trump is actually the right choice. Sorry, mom. I know you're going to be mad at me for this, but we have to do this.

Okay, so today we're going to be talking about the startup tech agenda, and specifically the impact of the upcoming presidential election on startup tech companies, and how we think about it, and how you think about it, because things are about to get very real for startup tech companies and the presidency. Sometimes I feel like we focus too much on the negative in politics. It's good to know a little bit about that. Maybe we should just wrap up a little bit.

The US election is heating up

One of the reasons we do this podcast is that there are people who know more about foreign policy or rights issues for various groups than we do, or economic theory or various other things. But when it comes to startups and the policies around them, there are probably only one or two people in the world who are at our level because we do it every day. We work with startups. We see the impact of policy. And then we do a lot of work in Washington. And that's why we do this podcast. So, listeners, you know, we spend a lot of time talking to senators and representatives from both parties. Marc mentioned that we met with President Trump. We did meet with White House officials, many White House officials, including Chief of Staff Jeff Zeitz and National Security Advisor Jake Sullivan, Commerce Secretary Gina Raimondo, and others.

We haven't met with President Biden. We tried and failed. But we have a pretty good sense of working with the administration. We're really deeply embedded in politics.

We focus on one issue, the startup tech agenda. We're pretty bipartisan on that agenda because we donate a lot of money to both parties. We have great people on the Democratic side who are very pro-startup tech. We have great people on the Republican side who are very pro-startup tech. We just focus on that issue. Marc, maybe you want to talk about your background and your story in politics because it's different from the last time we talked about your experience inventing the browser. You got into presidential politics at a young age. I was going to say, obviously you have to be a Democrat because you have to be a good person. That's the root cause.

But in particular, successful business people can essentially be successful philanthropists. That's the path that Gates and many others have pioneered. And then you can be progressive on social issues, you can be on the right side of these social changes. People were paying attention to that at the time. It all seemed completely obvious and completely, completely easy. So I went down that path, and frankly, it continued all the way up to 2016. In retrospect, I would say that there was already a beginning of anti-tech, anti-business sentiment growing in the early 2010s. And one thing that bothers me, by the way, which we probably won't talk about today, is the growth of anti-philanthropy sentiment.

Marc Andreessen:I don't usually talk about this unless it's relevant to the presidential campaign that we're talking about in this podcast. It's relevant for people to understand where I'm coming from, where we're coming from, at least in terms of the origin story of thinking about these issues. I've had an unusual career and life in many ways. One of them is because of the things that I was involved in early on. The first time I met a U.S. president in a business context was when I was 23, 30 years ago, in the summer of 1994, when President Clinton was president. Bill Clinton and I did the first presidential webcast together. I know tech well. I was the third participant in the first presidential webcast, when it was Bill Clinton in the White House and I was in an auditorium on the Google campus. I knew Bill in 1996, I think. And then Al Gore, I obviously knew Al Gore, I talked about this last time, Al Gore was very important in creating the Internet and making all of my work possible.

I know him well. I know them, I interact with you, I work with you. And, they were right. And by the way, there were all kinds of political issues along the way. The crypto wars at the time were actually a big issue. There were a lot of interactions with the White House, and ultimately they made the right decision on that. I know them well. I actually supported Clinton politically in '96. I supported Al Gore in 2000, and I was very disappointed when he lost. And then, through all of that, I also knew Senator Kerry, John Kerry, and supported him in 2004. I met Obama, and I have Dan Rosenzweig to thank for bringing me to meet the early Obamas. I wrote a beautiful endorsement of him in 2008. You can still find it online now.

I publicly supported Hillary Clinton in 2016, and I've never been as deeply involved in this politics as I am today. But I've always been involved, in and out of it. In the 1990s, I was a Generation X, and I came of age in the 90s as an entrepreneur. You took it for granted, like almost everyone I knew, myself included, that of course you were a Democrat. Of course you supported a Democratic president. The answer was, because that basically solved all the basic formulas. The formula came down to a simple answer, which was that the Democrats in those days were pro-business at the presidential level. They were pro-tech, pro-startups. Pro-America winning in the tech market. They were pro-entrepreneurship. You could start a company. They were pro-business. You could be in business. You could be successful in business. You make a ton of money. And then you give it to charity, and you get huge recognition for it. And, that solves all your problems. I was going to say, obviously you have to be a Democrat, because you have to be a good person.

Marc Andreessen:That was the underlying idea. But specifically successful business people could essentially be successful philanthropists. That was the path that Gates and many others had pioneered. And then you could be progressive on social issues and be on the right side of these social changes that people were paying attention to at the time. The whole thing seemed completely obvious and completely simple. So I went down that path and it lasted until 2016. And in retrospect, probably in the early 2010s, anti-tech sentiment and anti-business sentiment had started to emerge. And then one thing that bothered me a lot, which we probably won't discuss today, was the growth of anti-philanthropy sentiment.

Ben Horowitz:But, oh, people who make a lot of money and give it away, get criticized for giving it to charity instead of paying more taxes. I just want to name a specific moment where it was like envy was pushed to the extreme.

Marc Andreessen:The specific moment that made me realize that this was shifting was when Mark and Priscilla Zuckerberg formed the Chan Zuckerberg Initiative. They committed to giving 99% of their assets to the Chan Zuckerberg Initiative. But there was a political faction that was very critical of them. The theory was that they should pay taxes and the government should distribute the money. They shouldn't have control over where the money goes. Another criticism was, "Oh, they're just doing this for a tax break."

Ben Horowitz:That's not true. That can't be true because you can't give away 99% of your assets to get a tax break.

Marc Andreessen:You give away 99% of your assets to get a tax break. It just doesn't make sense. It's like people are talking behind your back and being jealous. That's exactly what happened. The formula started to break down. Ben Horowitz: We've both come to realize that it's a lot more complicated than we thought it was. And I've had a similar, or maybe a weirder experience. My grandparents were communists. My dad, I always call him the Tiger Woods of communism, because he was raised to be like the greatest communist of all time. He was the editor of Ramparts magazine, which was a very left-wing magazine. He did a lot of work with the Black Panthers in the early '70s, and that had a big influence on me culturally. So a lot of my cultural references come from that era. And then I grew up in Berkeley, which was basically a communist town. And all of my friends growing up were of course very, very left-wing. And then my mom is still very left-wing. But my dad eventually veered to the other side, and if you're interested in this kind of extreme right, you can read all about him. I grew up hearing both viewpoints debated very fiercely, and I still do to this day. But it wasn’t until this process that I actually understood all the details.

And, there's a huge difference not just between Democrats and Republicans, but there's a huge difference between politicians, especially when it comes to tech. That's one of the big issues. We've met with a lot of forward-thinking people on both sides now, but there are also people on both sides who don't understand anything. And there are people who have, almost to say dark agendas, almost inevitably related to what I call control. Can they control power? When you get into politics, you get into power, and if people pursue power by hook or by crook, that can be very, very dark. Okay, so let's talk about, why is startup tech even important to the United States? We have so many pressing issues, like the competition with China, potential war; our war with Russia; our war in the Middle East; we have all these issues about equality and fairness. So why should anyone care about tech, let alone startup tech as an agenda, that should influence how they think about policy or politics or who they should vote for?

Marc Andreessen:Okay, I'll break it down into three parts. The first is why is tech important? The second is why is startup tech important? And then what startups are important? Well, is technology important? My point is that if you look at the long sweep of history, we Americans have been lucky in many ways. And one of the ways we've been lucky is that our country has been basically the premier or dominant country in the world since World War I. It was actually the United States' entry into World War I that really turned the tide for the Allies. It was again the United States' entry into World War II that turned the tide for the Allies in that war. And also during that period, the United States was also the leader in what's called the Second Industrial Revolution, which is basically the rollout of all the modern technology that we live with today. Basically everything from cars to railroads to telephones to logistics to our air conditioning, everything that makes our lives livable and comfortable, came through that era. The United States was far ahead in all of that. And we continued to lead after World War II. We were the dominant country on the planet for the next 50 years. And that proved to be very critical to the Cold War. Because there was a hostile ideology of full capitalist communism incarnated in the Soviet Union. People who didn't go through that time don't feel that way, but it was really a life-or-death thing. I grew up thinking that there was a high probability that we would all die in a nuclear war until it was over.

Ben Horowitz:We used to have to do those drills. Remember when we hid under the table?

Marc Andreessen:You hide under the table. When the bombs are falling, hide under the table, because it will help. This has been a very real thing for my generation and older generations since the late 80s. Basically, the United States has been the most important country in the world for the last 110-plus years. You can make a lot of criticisms about what the United States has done. But in terms of basic economic development, technological development, military power, and again, by the way, American foreign policy, you can have a long discussion about this. But look, the last 70 years have been an unprecedented period of global peace relative to any period in history. A lot of that has to do with American technological and military dominance. We're all used to that. And frankly, we take it for granted. We inherited it and take it for granted. But it's not necessarily the case, and it hasn't been the case before. The world used to be more divided and it used to be more violent.

Ben Horowitz:I mean, it didn't last very long. But here's the thing, it could easily change again.

Marc Andreessen:It certainly could change. We live in this world. We really, really seriously think that we wouldn't want to live in any other world. We want this to continue. There's a very popular narrative out there that America's best days are behind us. We've lost control and so on. And, so far, that's not true. But, that's still hanging in the balance.

Ben Horowitz:And America still has real strengths. People underestimate that. It's kind of like with politicians. It's easy to see all the things that are wrong with America. But we take for granted what's right about America.

Marc Andreessen:I call it the triangle. There are basically three areas where we're the best in the world. And those three areas happen to be really important areas. Those areas are technology, economics, and military. If you think of them as a triangle, it's interesting because each one is dependent on the other two. This predates even Silicon Valley. This actually goes back 100, 110, 120 years to the creation of any modern warfare system. Including places like ancient Japan.

We've had technological dominance, technological superiority throughout this period. The fact that we have technological dominance has essentially given us economic dominance. The cornerstone of American economic success over the past century has been gained from wave after wave, going back to the second industrial revolution, continuing through the computer age, the internet age, and now the age of artificial intelligence and all the other biotechnologies that go along with it. So technology and economics are deeply intertwined. You can only have a world-leading military if you are the world's leading technological power and the world's leading economy.

Because you need the technology to actually develop the military systems that make you the world's leading military, and you need the economic strength to pay for those. Basically, the greatest success story in our lifetime from a world situation perspective was the defeat of Soviet communism in 1989. Basically, if you read what happened during that period, they basically surrendered. They basically just gave up. And this happened in a way that, by the way, shocked almost all the experts, where the Soviet Union just showed up one day and they said, we're done. We're not going to fight you anymore. We're done. Basically, what happened was they fell behind technologically. They fell behind economically. And then they concluded that as a result, they were sunk militarily and it was going to be impossible to win the war and there was no point in trying to fight anymore. It was one of the most extraordinary events in world history. This global empire with massive ambitions and massive power and a record of massive brutality just gave up.

Ben Horowitz:Hundreds of millions of lives have been saved and improved, coming out of that situation.

Ben Horowitz:I know. It's interesting because there's always been this communist movement in the United States, especially among young people. The response to that is always, just meet anybody who lives in a communist country and you're cured.

Marc Andreessen:I totally agree. Basically, any criticism of a capitalist society or economy is amplified tenfold under communism. Whether it's environmental damage or quality of life, any problem is worse under communism. It's a huge moral victory, but it's due to that triangle, which is technological strength, economic strength, and military strength. That's why technology is important. If you don't have the technological part of that triangle, you don't have the economic part. You don't have the military part.

Ben Horowitz:And that power was built through small tech entrepreneurs, like Thomas Edison, Henry Ford, who built these technologies and companies and these manufacturing capabilities that ultimately helped us win World War II and build our economy. And those same entrepreneurs are still around today, or their descendants. Those are the interests that we care about and try to protect.

Marc Andreessen:Right. And then that brings us to the role of startups and startup tech. I would say to that question, this is probably the point where I disagree most with my very close friend Peter Thiel, who famously wrote in his book that innovation requires monopolies. This is probably the point I disagree most with him about, that monopolies prevent innovation. Monopolies are death to innovation. Because the motto of any monopoly, as you like to say, is "We don't care because we don't need to." You just look at the behavior of any monopoly company, they just don't innovate. The answer is because they don't need to. It's hard, it's risky, it's dangerous, you might get fired, people might laugh at you, they just won't do it. So basically, innovation comes from startups, innovation comes from startups in two ways. It comes directly from startups. As you mentioned the long list, by the way, like Lockheed, Lockheed was once a startup. Hughes, all the core technology defense contractors that won World War II, the Cold War, were startups when they started. When they were successful, they were startups. You have the contribution of startups, but you also have this other important part, which is that the existence of startups keeps the big companies on their toes and incentivizes them to take action. Of course, the classic example that's going on right now is Google inventing the Transformer in 2017 and then shelving it. And then startups came in and picked up the idea and ran with it. OpenAI, Anthropic, and many others. Now, as a result, Google is now forced to react, and now they're doing amazing technology development, with Gemini, doing brand new breakthroughs, but that's clearly the result of responding to the pressure of startups. So even if you think that all the innovation is going to come from the big companies, they still have to be incentivized to do it, and they're incentivized to do it through competition from startups. So basically, what this means is that America's technological advantage lives and dies by whether startups succeed and whether there is fertile soil. And finally, I want to point out, which startups, because one of the responses I heard was, Marc, obviously that's true for something like drone autonomy software because it has military applications, but how can you possibly say that about other XYZ things?

Here's what I'm saying, look, historically it's really impossible to predict which innovations are going to be really important. My personal example, which we talked about in the last podcast, is that in 1993, no one in the expert class would have said or said that the Internet would be of strategic importance. If you go back even further, one of my favorite books that I recommend to people is a book written 50 years ago by a professor at MIT called "Man, Machine, and the Modern Age." In it, he goes through the history of new technology and how it's adopted and pervasive. One of the examples in the book is that 100 years ago, there was a guy named Sims who invented the first naval gun. This was about 120 years ago. The first naval gun that could automatically counteract the rolling of the ship in the waves. This gun would automatically stay aimed even when the ship was rolling. And he was basically laughed at, scorned, mocked, and stonewalled at every step of trying to promote this idea.

It's a spectacular story. But there's always a story with any of these new things, there's always a story that this thing can't possibly be important, can't possibly be meaningful. And then it turns out that some things may not end up being important, but a lot of things end up being very important. Now there are people who think they can judge in advance which new waves of technology, which new waves of startups will be strategically important. That's a deeply misguided view. They don't have any ability to predict that. And if they apply that judgment, they're likely to be wrong. People like them have been wrong on these topics in the past. And this tendency now to apply this kind of, how do you put it, perverted industrial policy, where you say, this sector is going to be allowed to succeed, but we're going to kill it in the cradle, is extremely destructive.

Marc Andreessen

Blockchain, Cryptocurrency, and Stakeholder Capitalism

Ben Horowitz:The strength of America is that all of our smart people are at work. You're right. Anybody with talent and ambition can try to build something. The opposite of that is, in Stalin's Russia, if Stalin didn't let you build it, you couldn't build it. And that's the problem, when you start applying that, you get all of the weaknesses of the United States, our crazy disjointed culture, all of the depravity, the drug addiction, but without the thing that makes it all work, which is the capacity of all of our talent. We're so talented as a country, talent from all over the place is making a difference. And that's not the case in top-down governments, communist societies, dictatorships, and fascist societies. In those worlds, talent is destroyed. And interestingly, we spent some time with Malay Yu specifically, but I just met him at a conference in Argentina. The story of Argentina, which is one of the most talented countries in the world. But all of this talent has been completely destroyed by bad government. That's something we worry about at the startup tech agenda.

So should we get into the subject and compare and contrast the two campaigns? We certainly know more about Biden because he's been developing policy for the last four years. But we do know what Trump's platform is and what he did before. Some technologies don't stand out, but some are important. Okay, the first topic is blockchain and cryptocurrency, which is one of the areas where we interact with the government the most. Let me start by explaining why we think this is a very important technology. Going back to the internet, one of the reasons the internet is so special and so important is what's called permissionless innovation, or the web that nobody owns. Microsoft doesn't own it. AT&T doesn't own it. Nobody owns it. It's the community that really runs the web, runs the internet. Anyone can participate, build a node, and go ahead. The result is that anyone can build a business on it, anyone can create on it, without having to pay a lot of taxes to some corporation. I remember all the companies that were built. But I also remember Prince putting his work on the internet. It was an amazing thing because he was able to, he changed his name to get out of his record deal and did all these things. It was an exciting place where everybody could participate without having to go through big industry. You could just go do your thing. If you have a talent or an idea, you can publish your idea. You can write and put it on the internet. You don't have to get a job at the New York Times, et cetera.

But then what happens is that the history of technology is a little bit like the history of the web and servers. Eventually, servers are owned by big companies. There are a lot of technical architectural reasons for that. So the companies that win end up owning all the data in the discovery layer, like Google, or the social networking layer, or the commerce layer. And so those companies become extremely powerful, more powerful than most governments. Google, I think we would all agree, is more powerful than 95% of the countries in the world in terms of controlling information, owning money, et cetera. And that's detrimental to people in a number of ways. One is building a business, you're now dependent on them, and they can wipe out your business by making you unfindable. If you're an artist, the percentage of your work on Instagram or TikTok is very high. You upload your content, they take 99% of the proceeds. There's nothing else in the world that does that. Even a company like Apple, you build an app, they take 30% of the proceeds. That's just a very high concentration of economic power, control of information, et cetera.

We haven't had the technology to handle this. But now we have blockchain. It's an amazing breakthrough, you can build these same services. But instead of companies owning the computers, the community owns the computers. Just like the community owns the network. It's a very significant breakthrough, and it's very important for society, for the functioning of a healthy society. We hear words like "stakeholder capitalism." It's really stakeholder capitalism, where the customers participate, the people in the community who run the servers participate. Everybody participates. If you look at the early services, the creators get 90% or 95% of the revenue, not 1%. It's really an amazing potential.

Also, it solves some real societal problems that we face, like who controls the truth. This comes up with deepfakes, right? You have AI, and now AI can make a video that looks like Joe Biden. How do we know if this is real or fake? Who tracks this? Who has the source of truth database for this? Is it the Republicans? Is it the Democrats? Is it Google? Who do you trust, or should it be a community-run utility? That's the problem that blockchain solves. We think that for our country, for our society, this is probably the most important technology that we deal with. It needs, we work with the government right away because it does need regulation because of the way that communities pay for the electricity that's used to run computers. There are about 10,000 people running the Ethereum service, which is one of these blockchains, and they get these tokens. These tokens are their compensation. And the thing about a token is, it could be a stock certificate, it could be a Pokémon card. It could be a lot of things. It's a computer structure. There needs to be a regulation that says, in this case, it's a stock certificate, in that case, it's a Pokémon card. So that the industry can work and it eliminates the problem of scammers or people who are trying to sneak away with your money.

Then we went to Congress and said, maybe we can pass a law to clarify when something is a security and when it is a commodity. The government, in the form of the SEC, specifically, the people appointed by the White House, have been working against us every step of the way, using very vicious tactics. Just to name a few. First of all, they refused to issue any guidance. And then they went after companies without a law, without guidance. So they sued over 30 of our companies. They sent out Wells notices, and in our entire career, we have never seen a Wells notice, which is a form of the SEC announcing that they are investigating and going after any private company. These are private companies. Specifically targeting this industry. They lost almost all of these lawsuits, but the problem is, when you are a startup, you don't have the money to fight the US government. They are destroying the industry that way. They also made it impossible to have a bank account, even though it is completely legal to build this technology as a company. The FDIC said to the banks, look, if you bank these companies, we will not let you borrow at the federal window. We're going to attack you, and it's a similar technique that you can read about that they used for the cannabis industry, why you have to pay with cash at a cannabis store, and it's the same thing that they're doing in the crypto industry. You can read about this if you're interested. They call it Choke Point 1.0 for cannabis, Choke Point 2.0 for crypto. Going beyond the law to use the administrative state to basically try to destroy an industry.

Then we tried to pass laws. There's something called SAB 121, which is a crazy rule that the SEC created that says if you have custody of someone else's crypto assets. If I have some Bitcoin and I give it to you for safekeeping, then as a bank, if the price of Bitcoin goes down, you're liable for that, even though it's my Bitcoin. You can imagine, oh, banks store gold, and if the price of gold goes down, their customers own it, not them, they have to be liable. Well, that means banks can't have custody of crypto. So the Senate, Democratic senators like Chuck Schumer said, come on, this is ridiculous. They voted to get rid of the rule. And then Joe Biden overruled the Senate's bipartisan conclusion to keep the rule. That's how aggressive they are. It's really frustrating and difficult for us and the industry, and this is such an important technology.

This has been one of our biggest battles. To give you an example of how devastating this has been. We have a company, Worldcoin, that's solving a big AI problem, which is that you can prove you're human without revealing your identity, without revealing your social security number, without revealing your driver's license, like hard password strength, proving you're human and not a robot. They've launched their product all over the world, except the United States, because of this behavior and these laws. To give you an idea of how important this product is, I mean, this is something that the Malaysian government endorses. This is something that half the citizens of Buenos Aires use regularly. This is a really great, useful, important product that makes everyone's life better, and we just banned it in the United States. This is a huge blow to startup tech.

Challenges Facing the Crypto Industry

Ben Horowitz:We should go ahead and explain this. We tried to get a meeting with Gary Gensler, who's the chairman of the SEC. He's running this campaign against cryptocurrencies. We're the largest cryptocurrency investor or the largest blockchain investor in the world. We requested at least six meetings with him. I even reached out to his office colleague at MIT, who said, "Gary is definitely going to meet with you. It's so important, he has to meet with you. You know all these things." But he couldn't schedule a meeting.

It was said that his appointment was not made by Joe Biden, but by Elizabeth Warren, who also refused to meet with us. She was the only senator who refused to meet with us. And of course, we couldn't meet with the president himself. It was really very frustrating and difficult. By contrast, when we were pushing this legislation, the Market Structure Act, which determines what is a commodity and what is a security. We've been working with Congress, and by the way, some wonderful Democrats in Congress have been helping to support us. Richie Torres has been an absolute hero. Chuck Schumer has been great. We've been working with them. While we were doing all this, Donald Trump came up with his cryptocurrency stance, which you can read about, but the contrast now is just crazy. Marc Andreessen: This was out before we met with him, and it's such a stark contrast. But he's spoken publicly about it, and he's actually going to speak at the Bitcoin conference after the convention. He'll have more on the record on this. But one of the things that Trump did was he rewrote the Republican National Committee platform for this convention, and he rewrote it himself. It's a very clear, simplified version of the statement of intent. You can download it and read it, it's worth a read. I'm going to read a paragraph straight out of it. It's chapter three, building the greatest economy in history. Point five. We all support this. We all support this. Point five, supporting innovation. Those words are only coming out of his side now. And then, paving the way for future economic greatness, leading the world in emerging industries. The first industry is cryptocurrency. We will end illegal and un-American cryptocurrency suppression. We will oppose the creation of central bank digital currencies, which is another section. We will defend the right to mine Bitcoin. We will ensure that every American has the right to self-custody digital assets and to trade them without government surveillance and control. It's like full support for the entire space. Like a complete unanimous embrace of the whole thing. He's spoken about it on other occasions and confirmed it. It's a complete 180-degree turn from what we've been through.

Ben Horowitz:I would also say, look, the experience that we're having with this is just personally shocking to me. This idea. And, again, I come from an era where, you know, the Clinton administration would never have done this. I don't think the Obama administration would have done this. Absolutely not. This is new behavior.

Marc Andreessen:Well, whether you liked Obama or disliked him, he was always interested in the opinions of business and technology experts, whether he agreed with them or not. He wanted to learn. He wasn't the kind of person who wouldn't listen, and that's exactly what we're facing right now.

Marc Andreessen:It's tough. It's just terrible. It's a brutal blow to the industry, and I've never experienced anything like this. I'm completely shocked that this could have happened. It's really frustrating that we can't make progress on this with the White House.

Ben Horowitz:It's just an intolerable situation. And it's really interesting because our old friend Reid Hoffman wrote a piece defending the Biden administration. He said that business people should support Joe Biden because the most important thing for business is the rule of law. And I thought, wow, that's really ironic because they're basically subverting the rule of law to attack the cryptocurrency industry. I mean, we're dealing with this right now. It's probably the most emotional topic. Let's move on to artificial intelligence. Why is artificial intelligence important to the United States?

Marc Andreessen:Look, this is actually an issue that no one is arguing about. The cryptocurrency people will argue about whether it's important. And obviously, we are very adamant that it is important. With regard to artificial intelligence, there is no doubt that it will be a cornerstone technology for economic growth. If it is allowed to develop the way it should, what's going to happen next is at least equivalent to the dot-com boom of the '90s, if not the computer boom in the computer industry since the '50s, which is equally as huge for the United States. And then look, artificial intelligence is powerful enough that it may be bigger than both of those. It may be the biggest technology boom ever. So it's extremely important in terms of the economy. And then look, the entire military doctrine, military warfare, everything is going to change. All of this is going to change around artificial intelligence. This is already happening, by the way. The Pentagon has classified AI and autonomy as what they call the third offset, which means basically the next generation of cornerstone technologies. There have only been three offsets in the history of the post-World War II era.

The first was nuclear weapons. The second was mobile warfare and related things. The third was artificial intelligence and autonomy. So there's going to be a complete revolution in military affairs, a complete reconfiguration of how the U.S. military and the global military operates. The Department of Defense, right, they've confirmed that. We're working with them a lot on this. They're pushing very hard on this. We've funded a lot of companies. So it's going to be very important. And then China has announced the exact same thing. So they're completely reconfiguring their military in the same way. It's a huge national security priority for them. They have complete control over their domestic tech industry. So they're using the capabilities of their smart people very specifically to do this. This is the technology race of our time. This is going to determine the world for hundreds of years to come. This is going to determine how governments operate. This is going to determine how surveillance operates. This is going to determine who wins wars.

Marc Andreessen:You can see it. Exactly. I don't know why you're so excited about this. Well, look, you can already see it. You can see it on the battlefield in Ukraine. Right, I won't go into detail here, but it's a huge shift. It's all playing out right now on the battlefield in Ukraine. And then obviously, this has major implications for what's happening in the Middle East and elsewhere as well. This is a core and foundational technology, as you would expect. The United States absolutely has to win this race.

The Biden Administration's Regulatory Storm

Tax policy is a key factor when it comes to the evolution of the tech industry. Marc and Ben discuss some of the Biden administration's tax proposals and their potential impact on startups.

Ben Horowitz:So what have we seen so far from the Biden administration, and specifically the White House? I would start by saying that Congress is trying to find answers in a bipartisan manner. The Biden administration is doing it a little differently. Maybe you could just give a quick rundown of their actions so far.

Marc Andreessen:There are different branches. The Secretary of Commerce that you mentioned is one example, who we've been talking to.

Ben Horowitz:By the way, Gina Raimondo has done an excellent job thinking about AI policy, particularly how it relates to issues like China and CFIUS, as has National Security Advisor Jake Sullivan. When we talk about the White House, we're really talking about executive orders from different parts of the administration.

Marc Andreessen:And there are a lot of really smart people working in the Department of Defense and the intelligence community who, I want to emphasize, are doing a lot of good work. There's a lot of positivity, a lot of people really working on this problem.

Ben Horowitz:Okay. We were trying to figure out this idea in the executive order, which was basically limiting how much math you're allowed to do in your life to 10 to the 26th power of floating point operations (flops). You and I did a lot of research. We talked to advisers in the White House. We talked to policymakers in the White House. And it came down to a belief that we thought was very wrong, which was basically, if I can summarize it, that there were probably only three or four base models in the world that were relevant because only a handful of companies could afford the number of GPUs needed to make the relevant models. There were a couple of problems with that idea, first of all, there were a lot of techniques that showed that you could make a really good model on top of someone else's model. There's a technique called distillation, which we talked about before. And secondly, it now appears that labeled post-training data is more effective than adding GPUs. Scale may be the only thing that matters, or it may not be. But there are a lot of very important foundational models that are not big right now but are getting a lot of use that are not in those three typical models. The idea is that if there were only three models and they were all from the largest companies in the world, then you could put some hurdles in front of them and they would jump over them. But for startup tech, by the way, almost all of the foundational models we invest in are growing very fast and doing very well. Those will be killed by this type of regulation. Maybe you can talk about why the floating point limit is so strange.

Marc Andreessen:For those who don't know, a floating point operation (flop) is a technical term in computer science that stands for floating point operations per second. I know that doesn't explain much. What it means is that it's basically a way of measuring the speed of a computer, how many operations a computer can do per second, how many math problems a computer can solve per second. Computers are doing math very fast now, they can solve millions of these operations per second. The idea of this 10 to the 26th power floating point operation in the executive order is that, as you said, only the largest models can reach that level. The problem is that there is a 50-year-old universal phenomenon in our industry that is probably the clearest thing we know about predicting the future of our industry, and that's called Moore's Law. It's a well-known phenomenon that computing power gets faster and cheaper every year.

I'll also say one thing about Moore's Law, companies like Nvidia, now one of the most valuable companies in the world, about three trillion dollars. It's an incredible success story. The reason the company exists is that their chips are now the standard chip. This is now the biggest profit incentive in the history of the global chip industry, and you have to find a way to apply more chips to compete with Nvidia, lower prices, and increase production. Even Nvidia's CEO, Jensen Huang, who is a good friend of ours, is pushing this hard. He predicts that the speed of these chips will increase dramatically, and the cost will decrease dramatically from now on. So, in the next decade, the cost on the chip side will drop dramatically. So, things that seem very expensive and difficult today will become very easy and very cheap. There are a lot of historical precedents. I'll give you one of my personal favorite examples, which is the original Sony PlayStation, which is a game console.

Ben Horowitz:I have one, playing Call of Duty.

Marc Andreessen:People knew about these. When those first shipped, they were export controlled. So Sony wasn't allowed to ship these to countries that might have had their own nuclear programs, like Iraq, because at the time, these chips were considered too powerful and could be used to build nuclear weapons. This illustrates a basic question of why this was the case, because previously, someone had set floating point limits for supercomputers. And then Moore's Law took effect, and the Sony PlayStation came out as a $300 consumer device with that floating point power. All of a sudden, you're subject to export controls. The beauty of GPUs. The PlayStation was one of the first GPUs, it had a GPU in it. These restrictions that seemed reasonable, quickly became unreasonable. I'll give you another example of how this deflation happened. When OpenAI first released GPT-2, which was probably the first LLM that worked, they refused to release it at first because they had all these warnings about how dangerous it was and how safe it was. Today, GPT-2 is now open source.

Ben Horowitz: Andrej Karpathy was the co-founder of OpenAI, he's left, and now he has an open source version of GPT-2, and you can train your own GPT-2 from scratch for less than $100 in compute cost.

Marc Andreessen: It's like, I don't know, they went from like $10 million to $100. Right, that kind of order of magnitude drop. Things that look very expensive and very exotic today are going to become mainstream, and then become cheap, and then everybody is going to have them. And by the way, every computer science student is going to have a model of this capability on their laptop. You're going to have a model of this capability on your phone. In five years, you're going to have a model of this scale on your phone.

Ben Horowitz:The deflationary effect of this is going to be very significant. These things are going to come out, and these are going to be like microprocessors.

Marc Andreessen:These are going to be universal products that are basically going to be built into every device, and everybody is going to have it in every device. And basically the regime that the government is threatening to put in place now, by using this restriction, is going to basically establish the two or three companies that they think are the only ones that matter. Sort of like a perpetual monopoly. They're going to basically destroy the startup ecosystem underneath. They're going to establish an OPEC of AI from the get-go. This is one of those things that I have a really big question about: Is this ignorance or malice? Right, do they not understand what they're doing, or are they doing this on purpose to set up a cartel? In either case, I find it completely unacceptable.

Ben Horowitz:This kind of ties into something we talked about before, which is the idea that you can predict the future, kind of like the precautionary principle. The trouble with predictions, as Yogi Berra said, is that they're hard, especially predictions about the future. And if they could predict the future, obviously the future is unpredictable, because if they could, they'd be richer than Elon Musk or anybody. Of course, nobody can predict the future, especially about these things. We know we can't predict the future, and our whole job is to try to predict the future. But it's very dangerous to make policy before the future arrives. We saw this in Europe, where they basically eliminated almost all innovation through this idea of the precautionary principle, trying to stop the future before it happens. That's probably what I'm most concerned about.

Marc Andreessen:I need to emphasize that AI is really just math. I mean, like, just math. They're just big mathematical models. Huge equations. Specifically, it's an area of math called linear algebra, and there's a key algorithm called gradient descent. And, these things, by the way, these things are taught at every university. Ben Horowitz: It's kind of like something we talk about a lot, you go into these laws. There are laws and there's enforcement. If you make a law that's impossible to enforce, you end up in what's called anarchy, which is anarchy for people who don't follow the law. They can do whatever they want. And then there's despotism for law-abiding citizens. Because no matter how carefully you follow the regulations of a Byzantine government, you're going to screw up something and get punished. It's a very bad policy idea. That's another concern we have as we approach these things and how we come to these policy conclusions.

Marc Andreessen:If I hadn't seen what blockchain is doing, I wouldn't necessarily feel this so strongly. But I see where this path is going. You can see this in adjacent industries right now in real time. And it's already been catastrophic. We can't let this happen again in our country.

Ben Horowitz:We're still very early in this industry. We're seeing really important innovation across the industry. People from all walks of life and all countries are doing amazing things in AI. It would be very irresponsible to say right now that I know where the industry is going to go in 20 years. My biggest concern is the foreshadowing we've seen in crypto. This is going to happen in AI. This unleashes the administrative state to do their thing. While I have no confidence that they will stand with us, some of them are not the entire administrative state, but there are certainly parts that affect us.

Marc Andreessen:But if the government clamps down on AI like it has on blockchain, then the country is in deep trouble.

Ben Horowitz:That's the default path. It's completely unacceptable. It's very concerning. This meeting is very concerning. The outcome is still undecided. As I said, there are a lot of people in the White House who need to continue to fight, and we'll see. But it's really very concerning. And then let's talk about what Trump is proposing. We actually discussed this when we had dinner together. We talked about all of these topics and confirmed this.

Marc Andreessen:Including building the greatest economy in history, supporting innovation, supporting artificial intelligence. We will repeal dangerous executive orders that hinder AI innovation and impose radical ideas on technology development. We will support AI development based on free speech and human flourishing.

Ben Horowitz:I think it sounds like a good plan. When we met with him, I thought his comments were very insightful and funny. I would contrast the Biden administration's approach, especially the core of the White House with Trump's approach. The White House has a very complex model. I would say they think they know a lot. They know that startups are not going to be important, and only a few companies will be able to provide large models. They know all the things that we don't know, they've never heard of distillation, or how AI actually works. But it's a very complex view of the world. Whereas Trump has a very simple view. He said to us, AI is very scary, but we absolutely have to win, because if we don't win, then China will win. It's a very bad world. That's actually a more correct view, it's the basic truth. Look, things do need to be regulated when they start happening, and we should regulate them. But anticipating it, the car is coming, and we think someone is going to build a car that goes 500 miles an hour and no one can control it. We're going to ban cars now. I mean, it's kind of like the attitude towards AI, we think there's going to be a sentient model in the future. Right now, it doesn't seem like anyone has built anything that's heading towards sentience. Doing that, we have these great things that can tutor children. No, you can't tutor children because someone might come up with an idea and make a sentient AI. We have to cut off the tutoring. That way of thinking is very scary, I would say that.

Marc Andreessen:One of our arguments is because we're not against regulation, as we described in the blockchain section, there's obviously regulation.

Ben Horowitz:Or a model that can self-construct into a super genius, nobody knows how to do that.

Marc Andreessen:We're actually trying to pass a regulation law. It's Act 21. We're actually trying to create regulatory structures because the government won't do it, we're actually trying to create new regulations. One of the arguments we made in the meeting with the White House to discuss AI policy was that problems will come from AI, but the assumption is that they should be regulated. Regulation should happen at the application level, not at the technology level. The reason is basically because regulating AI at the algorithmic level is regulating mathematics. It doesn't make any sense. Of course, we're not going to do that, do you remember what they said? No, actually, we can classify mathematics. Literally, they did classify entire areas of physics in the nuclear age and make them state secrets, like theoretical physics, science, physics. We completely made it a state secret, and that research disappeared. We are perfectly capable of doing that again for AI. We will classify any area of mathematics that we think is going in a bad direction and shut it down.

Ben Horowitz:That's interesting too, because now there's this thing called the internet, it's very hard to keep mathematics secret. There's no information secrets anymore.

Marc Andreessen:Some people might say, well, that's crazy, and they certainly wouldn't do that. But the problem is, I've seen so many crazy things by now. I no longer believe, I feel like I can no longer predict which of these crazy ideas will be implemented. I personally cannot tolerate the idea that, like literally we might make linear algebra a state secret. That's out of bounds.

Ben Horowitz:You're getting excited. Okay, I just want to briefly mention fintech because fintech is almost a subcategory of crypto in some ways, in terms of regulatory approaches. But I want to tell a story because it really impacted me personally. We invested in a company called EarnIn, and the founder is Ram, and I didn't invest in it, but I talked to Ram almost once a month. We had dinner together every two weeks because, first of all, what he was doing was a mission for him, and it was very closely tied to my life. The fact of the American financial system is that it's extremely bad for poor people. If you're poor, you pay more for banking services than rich people. You and I don't pay anything for overdraft protection. And people in the lower income brackets spend more on overdraft fees than vegetables. It's very bad.

There's a huge portion of the population in the United States that doesn't have a bank account. If you don't have a bank account, you're usually in the underground economy, and you don't have credit. My wife's family is in this category. The only credit that a lot of people have access to in this situation is payday loans, which have extremely high interest rates. There's no business that can grow with payday loans or credit card loans. That basically means you lose your freedom. You don't have credit. If you look at countries that don't have credit, they don't have job growth. Like Argentina, which is a big problem that Malay is working on, because there's no consumer credit, they haven't had job growth in a decade. It's a very bad thing for certain segments of society. A lot of blacks and Hispanics are in this category, and they can't get out of this, they don't have a bank account. Ram came up with this most amazing solution, where if you're in an hourly job, they can track if you go to work and you need a loan because you haven't been paid for two weeks. Let's say you don't get paid until Friday and your daughter's birthday is Saturday and you want to have a birthday party. He'll lend you the money interest-free. You can choose to tip him or not.

So you start building credit, and then he’ll bank you. And his interest is much higher than normal. It’s finally a gateway out of the underground economy and giving opportunity to people who have been systemically oppressed by the financial system, and it’s a great mission, a great guy. His story, he’s doing this. He’s providing these loans, from police officers to McDonald’s employees and so on. No company is more loved by customers than EarnIn. And then COVID comes, and this is what startups are like. You have this great mission, you’re growing like crazy, everything’s great, you hired all these people. COVID comes, the government sends these stimulus checks, and people don’t need to work. Everything disappears, and he has to lay off people, and it’s very difficult. His dream is dying and so on. But eventually, it’s over, and he’s back on his feet. Like he’s now ready to grow his business, but he’s being attacked by the administrative state, specifically the CFPB. They send him threatening letters demanding that he waive attorney-client privilege. How can that be legal? And then they demand that he submit to the jurisdiction of the CFPB or they’re going to sue him. I'll never forget this, we asked, sue us for what? We won't tell you. Like that kind of harassment. It's just crazy.

We talked about, and I feel like it's important to point out, this isn't the Democratic Party. This isn't all Democrats. This is really a far-left, totalitarian branch of the Democratic Party that's taking some of these things under Biden. Part of it is because Biden delegated it. I'll put it mildly, he delegated it, but it has real implications. Anyway, then, we have this situation in biotech as well. Biotech is in an incredible position with AI, and all of a sudden we have the potential to cure all kinds of diseases that were previously untreatable. But like these limits on AI, these arbitrary limits, 26. How many floating point operations is that? 10 to the 26th power. If you exceed that, then what if that's the size of the model you need to cure cancer? It's a similar struggle.

Another problem we have in this administration is that it's almost impossible to cure rare diseases from a venture capital perspective because it takes a billion dollars to bring a drug to market. And they don't always work. Multiply that amount. And there aren't that many patients with rare diseases. You can never get your money back. But we had a company with an incredible drug platform. They cured a rare disease, got it through Phase 1 clinical trials, cured it. Sold the drug to Sanofi so that they could get some money back to develop more things. The Biden administration sued them and scuttled that deal. That basically made it almost impossible for us to fund any company that's trying to cure rare diseases. It's an arbitrary clampdown on startups. Maybe you could talk a little bit about the vitality of the United States. We do a lot of work in the defense sector, as you mentioned, my work. Maybe talk a little bit about why the way we're building our military right now is unlikely to be competitive if it's not upgraded. And then what some of the barriers to that are.

QSBS is the lifeblood of innovation

Marc Andreessen:Exactly. The most important part of the tax code for startups and innovation is called the QSBS, the Qualified Small Business Stock Exemption. It's been around for quite some time. It's a bipartisan measure, one of the few that has been passed and signed into law by both Democratic and Republican administrations over the years. What it basically says is that if you start a company from scratch and hold stock in that company for at least five years, then when you sell those shares, the gain on the sale will be tax-free or taxed at a very low rate. It's the fundamental incentive for people to start companies, invest in companies, hold those investments, and then eventually sell those investments and roll the proceeds into new companies. It's the reason we have the Silicon Valley we have today. It's the reason we have the entrepreneurial culture we have. It's the reason the United States has 50% of the world's venture capital and 90% of the world's most valuable startups. It's a very critical thing.

Ben Horowitz:It's not just for the tech industry. It's also for biotech, clean energy, and all industries that require starting from scratch, taking a lot of risk, and taking a long-term view to build something that's really valuable. It’s also important to note that the vast majority of the benefits from QSBS go not to founders or early employees, but to investors, pension funds, university endowments, and foundations that are LPs in these venture funds. When you crack down on QSBS, you’re really cracking down on the entire structure of American innovation.

Marc Andreessen:Absolutely right. The Biden Treasury, in a fit of fury, decided to propose a rule to eliminate QSBS. Completely eliminate it. It’s incomprehensible. It’s the most destructive thing that could be done to American innovation, entrepreneurship, startups, and venture capital. It’s like taking a sledgehammer and smashing the fundamental incentive structure that underpins the entire ecosystem. And by the way, they did this without any consultation, without any engagement with industry, without trying to understand the impact. We need more revenue, let’s smash this thing and see what happens.

Ben Horowitz:This is not a theoretical concern. This is a real, existential danger. We have companies in our portfolio right now that are making decisions about whether to start new projects, whether to expand, whether to hire more people. And this kind of thing creates huge barriers to doing work. It creates uncertainty, it creates fear, it creates a sense that maybe we shouldn't do this. Maybe we should just lay low and wait and see what happens. This is the worst thing to do if you want to promote innovation and growth.

Marc Andreessen:Exactly. That's why we're saying again, we're not trying to take partisan positions. We're not trying to take sides. We're just looking at the policies, at their impact. What we're seeing from the Biden administration is a relentless attack on the fundamental structures that support innovation and entrepreneurship in America. And it's not just us. It's not just the tech industry. It's not just Silicon Valley. It's the entire ecosystem. It's the universities. It's the research institutions. It's small businesses. It's the entire network of people and institutions that have made America the world's innovation leader. We can't sit back and let this happen. We have to speak up. We have to fight back. We have to fight to preserve the fabric that makes this country great.

Ben Horowitz:That's exactly right. That's why we're here. That's why we're doing this. That's why we're speaking out. Because we believe in this country. We believe in its potential. We believe in its ability to innovate, to grow, and to lead the world. But we also believe that that potential is under threat. We can't sit back and watch that happen. We have to act. That's why we're here. That's why we're doing this.

Marc Andreessen:That's the debate you can have. People who own big houses, I'm not targeting you. Just to put some context in perspective. So one common criticism you'll hear about the American economy or the capitalist system, whatever it is, is that there's a lack of long-term investment. Everything is short-term trading. There's not enough long-term building of big, important new things. So the tax that's relevant to the idea of building big, new things is the capital gains tax. Capital gains taxes, by the way, apply to tech startups. Apply to small businesses. Apply to housing, actually. Apply to commercial real estate. Anything you build.

Ben Horowitz:Anything you build. Anything you're going to build for a long time. Right.

Ben Horowitz:If you're building new housing, we have a huge homelessness problem. We need to be careful about who's building housing and what they're paying on these capital gains tax rates because that's going to impact how much affordable and unaffordable housing we have in the world, in cities and in countries. It's very important. Exactly.

Marc Andreessen:Basically, what happens is there's a capital gains tax, which is basically a tax on gains on invested capital. The long-term appreciation of an asset that you've built like a business or a building. And the way the tax code has always been set up is basically that capital gains tax applies when the asset is sold. That's called realization. When it's sold. You can build a business over 10 years. You can compound the value of the business internally. And then at some point, if you take the company public, sell stock, or sell the company to an acquirer, whatever. That's when you pay the tax, and then you pay the tax on the entire gain.

Ben Horowitz:It's a little like if you buy a house and it goes up in value, but you don't pay taxes on it until you sell it because, among other things, you need the funds. It could also go down in value. Exactly. Exactly.

Marc Andreessen:The current president has a very radical idea in the anti-capitalist radical wing.

The billionaire tax is a complete lie

Ben Horowitz:This is a proposal in the reelection plan that's in the budget for next year. The proposal is to change the tax structure to tax unrealized capital gains. It sounds esoteric, but it's ultimately very important. It means that anybody, I'll start by saying, it was billed as a billionaire tax from the beginning. But it's not just about a tax on the rich, but it was always billed as a billionaire tax. They were lying from the beginning.

Marc Andreessen:It's written in black and white in the document. This is a complete lie, this is not a billionaire tax. It's at a threshold of $100 million. That's obviously a lot of money. I'll come back to why this is important in a few minutes. But for anybody who's in that category, what you need to do is pay taxes every year on unrealized capital gains. If you own a building, or if you own a company, here we're talking about tech startups, this is our space. If you're a founder of a tech startup and your stake in that company is worth more than a threshold that they set. Or if you're a venture capital firm and you have a fund that has an aggregate pool that's worth more than that threshold, you have to start paying taxes, you have to pay annual taxes on unrealized gains. Now, the thing is, the IRS only accepts cash, they don't accept shares of private stock or buildings.

Ben Horowitz:They only take cash, and you have to find a way to get the money.

Marc Andreessen:They only take dollars. They only take dollars. You have to find a way to get dollars with unrealized gains on an illiquid asset. Right. Where are you going to get the money in the first place?

Ben Horowitz:The good news is that house prices and building prices never go down. They only go up. Startups certainly never go up and down like a roller coaster. They never get overvalued. There's no bubble. I saw a lot of this in the black and white documents on the tax proposal. You're going to like this section.

Marc Andreessen:They say that for the purposes of calculating earnings, the valuation of a startup is the largest of multiple options, especially the valuation of the last round.

Ben Horowitz:Everybody in the world loves to keep saying that every round of startups is always overvalued.

Ben Horowitz:Well, usually they are, and that's why it's a very risky business.

Marc Andreessen:The problem is that you're paying taxes on something that you're actually never going to deliver on and realize, because sometimes these things will go really well and then they won't. There's that problem. We'll come back to that in a minute. But there's a more fundamental problem, if you're a founder of a startup, the initial tax rate that they're proposing is a huge percentage, a minimum tax rate of 25% on day one. We'll talk about how the tax rate changes over time, starting at 25%. Every year, 25% of your earnings are taken away. Basically you're working, your team is working, everything is running.

Ben Horowitz:Your unrealized gains, the 25% appreciation in valuation that you don't have the money for.

Marc Andreessen:What happens is your equity, every year, gets stripped away. If you're a venture capital firm, every year, your portfolio gets stripped away.

Ben Horowitz:That's actually irrational. 25% annual unrealized gains tax for 10 years.

Marc Andreessen:You're done. Your business is done. Your business is done.

Ben Horowitz:For new companies and investors in new companies.

Marc Andreessen:For venture capital firms, you lose your equity. It's systematically stripped away. You lose it. It leaves you with nothing. It makes startups completely impossible to exist. Because why would anyone do this instead of going to work at Google and getting a ton of cash every year? Why would anyone put themselves through all this just to have their equity stripped away?

Ben Horowitz:First of all, then venture capital was over. It was over. Companies like ours didn't exist. They disappeared because the structure didn't work. We had a similar experience, actually. During the dot-com bubble, do you remember the dot-com bubble? I do. The so-called bubble. The so-called bubble. During the dot-com bubble. As the CEO there, it was a very violent period in the stock market, at least. One of the things was, Cisco was probably one of the most stable companies in the industry, and the employees did something called exercising their options, which converted into capital gains.

When you do that, you get hit with something called the alternative minimum tax. Basically you pay tax on the difference between the fair value and the exercise price. And then the market crashed. They couldn't sell the stock to pay the tax because the price of Cisco had fallen below what they'd paid. They had no money. There were actually tow trucks in the Cisco parking lot towing employees' cars. We know who lost their homes. And then of course, people lost their homes and everything else. It made it impossible for startups to exist.

It was very obvious, it was a known fact, all of these things. It's amazing that this would become a formal proposal. Biden, by the way, has been campaigning on this, and when he says I'm going to get a fair share from billionaires, he's actually talking about unfulfilled.

Marc Andreessen: That's the form of the promise. Here's the problem. What happened here. First of all, you killed startups, you killed venture capital. Congratulations. You killed the tech industry. Well done. Number one. Number two, by the way, you killed the tax base of California. Oh, California is done. California is done. I'll give you an example of why California is done. In the peak year for capital gains realized in the California high tech industry. In the peak year, half of California's total tax revenue came from the top thousand individual taxpayers.

Ben Horowitz:This is basically all high tech.

Marc Andreessen:If you eliminate the high tech industry in California,

Ben Horowitz:And the tax base in California, you've taken out half of the funding. Over 60% of the funding goes to schools. It's a complete devastation. Complete devastation.

Marc Andreessen:There's a huge population in California, including a lot of people who don't pay taxes. A lot of very low income people and all the support networks that take care of those people are going to be completely destroyed. It's like a direct hit to California. It looks like a bad idea. It looks like a very bad idea. I haven't even finished saying how bad an idea it is. Thirdly, the problem you mentioned is that you end up paying taxes on some unrealized issues, like how much debt you took on. There are all kinds of crazy questions. Are you allowed to sell stock in a company that's not yet public? When will the SEC come after you? I mean, that part is completely crazy. But what happens next, there's a long history here about what happens with taxes in the United States. Basically, the income tax was not a 30% or 40% tax when it first started, it was about a 3% tax. Once that structure was established, politicians did their thing, which was to raise the tax rate. First of all, if this starts out as a 25% annual unrealized capital gains tax, it's not going to stay at 25%. It's going to go up. Especially because it's going to destroy the tax base. They need to tax the remaining taxpayers more. Because there's not enough total income, which is a very predictable thing.

Ben Horowitz:It's absolutely, absolutely, absolutely devastating.

Marc Andreessen:One more thing, I mentioned that they advertised it as a billionaire tax, and the threshold was very high, it was $100 million. People say, look, I'll never be in that category. But it's not going to stop at $100 million because there aren't enough people at $100 million. They're inevitably going to lower that bar.

Ben Horowitz:Because you're going to run out of money. It's like the Kulak, when the Bolshevik Revolution happened, Lenin's first idea was to kill all the rich people. But it turns out that you pretty quickly run out of rich people, especially if you're killing them, and then there's no more money. He ended up killing the Kulak, who were peasants with two horses, two cows, because obviously you needed more people to kill so you could take more stuff.

Marc Andreessen:The final dividing line is whether you own one cow or two cows.

Ben Horowitz:One cow or two cows determines whether you are a kulak or a proletarian.

Marc Andreessen:It's basically inevitable that this threshold will go down and it will end. You can see what's going to happen. It's going to go down to 50 million, then 20 million, then 5 million, then 1 million. It's going to go down and down, first of all, it's going to affect everyone in high tech. It's going to affect everyone who works in tech startups. And then number two, it's going to affect every homeowner in California.

Ben Horowitz:Everyone who's building anything. In the real estate industry, I mean, anybody who builds houses, anybody. Entities that do that kind of thing are typically worth $100 million. It's a pretty radical idea. Now, look, by the way, this may, it won't make it all the way through the system, but it probably will, it's certainly what the current president is proposing. If the current president is reelected, he certainly has a mandate. It's what the people want. He did promise it. It's a real thing. All right. Look, now it's clear that at least on the small tech side, as we said, we're not experts on everything that government does, but we're certainly among the best experts in the world on startups and technology. We think that Donald Trump is a much better choice than Joe Biden on these issues, as we've described them. It's going to be better for us because we don't have to do this podcast. Number two, I'm going to have a lot of friends who are probably going to be mad at me for saying nice things about President Trump because I did grow up in Berkeley, and it would be tough, and I wish that wasn't the case. I wish that wasn't so extreme, and I wish we didn't have to pick sides because we're generally bipartisan. There are a lot of great Democrats, as I said. And, in addition to these policies, these policies are coming from the radical side, which is an important side in a Biden administration. But it's a powerful side, and they do hold power, I would say, far more than the centrists.

This is what we experienced. We were planning to do this, and we wrote a piece called The Little Tech Agenda, which we welcome you all to read, before the assassination attempt on the President took place. We hadn't planned this section, but we thought we'd give some brief thoughts because obviously since we're talking about policy and the President, people would be interested in this. Maybe I'll start first. You called me and you said, they just shot Trump. I don't know if he's dead or alive. I couldn't believe it. I was stunned. Quick background. Mark and I both met their family, especially Jared and Ivanka and their children, Arabella, Joseph and Theo. In fact, Ivanka and the children had just been at my house. We went to see David Copperfield, and my brain almost froze because I had a feeling of, oh my god, grandpa just got shot, not anything about politics. It was a little scary. Anyway, then you said, oh, he's fine.

I listened to the whole thing over the phone. You had CNN on speaker phone, and I listened. The whole thing was really bizarre and surreal and shocking. And then, once we knew he was OK, I watched the replay on TV. That was something I never thought I would ever see in my life, too, that he had been shot in the head, and he fell, and ducked, and was obviously wise. The Secret Service was trying to get him out. We now know that somebody had been shot, probably less than 20 feet from him. As they were taking him out, he said, stop, wait a minute. He stood up and galvanized the crowd, and told them to “Fight,” “Fight,” “Fight,” and that was a remarkable thing for anybody to do. When you’re being rushed out by security and the Secret Service, and there’s gunfire, and you don’t know if there’s going to be more gunfire, and you say, no, I have to talk to the crowd, that awareness is just amazing. I’ve heard of, we’ve talked about, Teddy Roosevelt doing something similar. But no president since has done anything like that. It was a remarkable thing. It was just a crazy experience that almost certainly affected the campaign and the vote. Marc Andreessen: We, Ben and I, had dinner with Trump at his golf club in Bedminster, New Jersey, ten days ago, for three hours. We had actually just spent time with him. Getting to know him as a person. He's a very complex person. People have a lot of opinions, but when you know a person like that, know his family, it really hits hard. I just want to say a few things. First of all, it's hard for me as a nation to express emotion, but it's just completely shocking, stupefying, and completely unacceptable that this could happen in the United States in 2024. I just can't believe that this could happen. And then, you mentioned his actions after he was shot. I can't stop thinking about it since I saw it. He's a 78-year-old man, and he was shot in the head. He was shot in the head. I believe this is true, by the way. People say he's the only head of state to have survived a pistol attack. Oh, there never has been one. There have been some failed pistol assassination attempts. I think he was looking at that chart of immigration. It was a split second thing, a slightly different wind direction or his head turned slightly differently, or if he hadn't, he wouldn't normally have shown the chart at his rallies. If he hadn't had the chart, he wouldn't have turned his head, and we would have a completely different world today. It's all very astonishing. And there's another thing, and I bring this up because I've never seen anything like it, but for a 78-year-old man to be shot in the head and then stand up with absolutely no idea that there was one or more gunmen, or whether the gunman who shot you had been subdued. No. I mean, you have absolutely no idea, and he's still shooting. And, we now know, three other people, one was killed, two were seriously injured. Bullets were landing in the stands behind him, landing all around him, literally, a man was shot right behind him, dead. What physical courage does it take to deliberately stick your head out from under the protection of the Secret Service. Or even think of that. The most shocking thing to me is the thought of that.

Ben Horowitz:Like, maybe if I had it all figured out, I would be like, oh, I'm going to inspire everybody. But that thought doesn't occur to me.

Marc Andreessen:It's not incredible. And then, the other thing is, I just kind of, he went to play golf the next morning. Let me say, if I'd been shot in the head, you wouldn't go play golf. Not only would I not stick my head out and put my fist up, I wouldn't. I wouldn't. I mean, I would be on the ground in the fetal position for weeks. The whole thing was both heartbreaking and amazing and incredible. I feel like, it's a small fraction of events that have ever happened in history for those who have gone through it. I don't know about you. For me, it's like I remember the Challenger explosion. There's a small fraction of events that I remember. I actually vaguely remember the assassination of Reagan because I was ten years old. But I remember that. I remember the president being shot. There's a small fraction of moments like that that for the rest of your life you remember where you were at the time.

Ben Horowitz:I definitely remember where I was on this one. And this brings up a point that's actually really interesting, which is, this is just a long rant to say this guy is different. He's not like us. He's a different type of person. And this is one of the things that we spend a lot of time on in politics. And some of that gets overlooked because we always, and I'm definitely guilty of this, is that you always look at the flaws in people when they run for office. Like, he said this, that's stupid. Or, he has terrible policies that I hate. Or, he's associated with people that I don't like. But especially with people who have reached that level, any president, Trump, Obama, Clinton, Bush, Reagan, Nixon, Jimmy Carter, whatever you don't like about them, just know that whatever power they had was very special and extraordinary. And that's what our time in Washington reminded us of is what a special person Chuck Schumer is, and when you meet him, he's very special. He has an incredible memory, and he can remember every conversation that he has with you. And finally, why don't we talk about, what was this experience like for you? Like coming from your background, because it was a little bit of a shock to me. I'll talk about that, but it was both educational and strange and something I never expected. What was your experience like?

Obama, Bush and Clinton

Marc Andreessen:At first, I didn't even believe this was going to happen. I kept hearing these reports and hearing all these people and hearing all these plans. I just thought, that can't be true. No way.

Ben Horowitz:We actually went through a period like Clinton that was very tech-friendly, and we worked with him on a lot of things, like when they were crazy about cryptography. We worked closely with them on that. We also went through a huge tech boom under Obama. It's amazing. This is not a fundamental problem for the Democratic Party. This is specific to this administration.

Marc Andreessen:That's what we keep telling our Democratic friends, and I tell our audiences. That is, every single thing we mentioned is optional. It's an optional option for this administration. I don't think they need to have any of these policies.

Ben Horowitz:They could have an equally or even more successful presidency without these things. These things are not. They're not the core reason why people elected them.

Marc Andreessen:I don't think so. This is not about the big issues that people care about. This is not about the issues that are in the polls. These are secondary issues relative to the big issues of the country.

Ben Horowitz:It's not inflation. It's not the economy. It's not the border. It's not abortion.

Marc Andreessen:Again, as we said, the Clinton years and the Obama years proved that you can have pro-business Democratic administrations. That's actually great. Clinton, by the way, will tell you that, he said that a lot back then.

Ben Horowitz:The Democrats loved those presidencies. They loved Obama. They loved Clinton.

Marc Andreessen:It really is. Look, if you're a Democrat, this has always been Clinton's view, and, by the way, Tony Blair's view in the UK. If you're a Democrat, you want expansive social programs, and you need a lot of productive economic activity because you need a tax base that can pay for those programs. That's always been the formula, that you actually encourage business because it generates the tax base that pays for the program. There's a level of self-sabotage here from an instrumental perspective that's one of the reasons I never thought possible. It's crazy. It's insane. It doesn't make sense logically unless you just hate technology and capitalism. The good news, I think, is that all of these problems can be solved tomorrow.

Ben Horowitz:It won't. And that's part of the reason why we do this, by the way, is because we just encourage moderation or sobriety and things like that.

Marc Andreessen:But as you said, to talk about this honestly, it takes adults having sober conversations.

Ben Horowitz:The good news is that there are some adults having sober conversations, but we need more. I mean, that's the last thing I want to do. The fact is, we won. I don't want us to be involved in politics. We're kind of being dragged into it. My father went into politics. I can say that I watched him lose all his friends when he switched sides. It was a really surreal experience when I was a kid. And the last thing I want to do is for the company, for our employees, for the companies we invest in, etc. to be involved in this, because it's very emotional. It's hard. But the fact is, the future of our business, the future of technology, the future of new technology, and the future of America is really at stake in some ways.

All I can say is that these policies are really misguided and difficult. We are here. For startup tech, we think Donald Trump is actually the right choice. Sorry, mom. I know you're going to be mad at me for this, but we have to do this. That's it for today's show. Thank you. Thank you all for listening. We'll do a Q&A follow-up show, please ask your questions.

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