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I recently posted "Feature Request: Transcripts or Summaries of Tech Founder or Investor Interviews". I decided to pay for a transcription service to transcribe a few startup videos/podcasts that I've been meaning to watch - and why not share them!
Please excuse the typos - I pay for these transcriptions and haven't combed through the errors on this one.
Marc Andreessen on Venture Capital and the Digital Future (EconTalk)
Russ R: Welcome to Econtalk, a library of economics and liberty. I'm your host Russ Roberts of Stanford University's Hoover Institution. Our website is econtalk.org where you can subscribe, comment on this podcast and find links and other information related to today's conversation. you'll also find our archives where you can listen to every episode we've ever done going back to 2006. Our email address is [email protected] We'd love to hear from you.
Today is May 1st, 2014 and my guest is Marc Andreessen, legendary entrepreneur and venture capitalist. He's the company-creative of Mosaic, the co-founder of Netscape, and more recently, the co-founder of the venture capital firm, Andreessen Horowitz. Marc, welcome to Econtalk.
Marc A: Russ it's great to be here, thank you.
Russ R: I want to start with your career. You were at the heart of the first browser war between Netscape and internet Explorer. That seems like hundreds of years ago. It's a little more recently than that but give us a quick thumbnail of what happened to Netscape and then how you escaped from that war.
Marc A: So, Netscape was founded actually 20 years ago this month. It's sort of a special time for me. Netscape is a company that grew incredibly quickly. We grew from zero 3500 employees in three years. [inaudible 00:01:25] Netscape was always thought of as this small little browser company and people used to come visit us on the campus and they would be completely flabbergasted at all the buildings and all the people. The reason we had all those people was because in addition to browsers, we built a very broad range of internet software and internet services at that time. We were one of the first companies that did internet ecommerce systems. We were one of the first companies that did internet publishing systems and software for a long time, powered actually a lot of the newspapers [inaudible 00:01:53] the Wall Street Journal.
We actually are the company that built photography into the web. The way that people do encryption now was us. We created core technology like JavaScript. For a couple years we were the largest internet advertising business in the world with a Netscape website and Netscape portal. That [inaudible 00:02:14] grew to about 600 million dollars a year in revenue, which in four years from start. Ultimately what happened was, we sold the company to America online in 1998. The entire thing was start to finish in four years. Felt like an eternity at the time, but in retrospect was the blink of an eye.
Russ R: What happened to Marc Andreessen at the time of that sale. Did you go with that sale or did you leave?
Marc A: I actually became the Chief Technology Officer of America Online. AOL at the time was the most valuable internet company. AOL within a year after our sale, was a company that was worth 170 billion dollars on the stock market. That was a company that was in a dialup ISP business, if you recall that, at 25 million dial up ISPs. That was right before they went over the broadband, which completely destroyed the dialup ISP business. For those who believe in the efficient market hypotheses, one of the [inaudible 00:03:18] examples would be a dialup ISP worth 170 billion dollars went straight into broadband; which made no sense at all.
Russ R: It didn't last that long.
Marc A: It did not last that long. In fact, what had happened was, the management team at AOL actually figured that out. They realized it. What happened was, they traded their equity which they knew was going to collapse in value. They traded it for Time Warner equity and they bought Time Warner. That led to the famous AOL/Time Warner merger which is one of the great catastrophes in business history. I stayed for about a year. We have a tradition in the tech industry where when your company gets bought, you have a period of indentured servitude where you stay for at least a while to help make sure the integration happens. So I stayed for a year and then went off and started my second company.
Russ R: Which was?
Marc A: Which was actually the first cloud computing company. this now big trend of cloud computing was something we helped kick off in 1999. That was a company called Loud Cloud. That was the first company doing it, but today it's done with things like Amazon Web services. That company actually grew very fast. We grew from a standing start to quite a large business in the course of a year. Then we hit the dot com collapse, like running into a buzz saw. Half of our customers were dot coms; which all went bankrupt. Then the other half were big companies who were in a panic because they felt they had to compete with the dot coms by launching all kinds of new internet efforts. When the dot coms went bankrupt, most of those big companies said, I guess this internet thing isn't serious and it's going to go away; they shut down most of those efforts.
We almost lost that company. My partner, Ben Horowitz, recently written a book which is now a bestseller called, The Hard Thing About Hard Things. It's a business book and it tells the whole story of Loud Cloud where he was my business partner and he was the CEO. It's a dramatic story because we almost lost the company. We almost went bankrupt. Then through a series of miracles, we were able to do what's called a restart. We basically completely restarted the company as a public company into a completely different business. Ultimately grew it to be a successful company. Hewlett Packard bought that company in 2007 for about 1.6 billion dollars.
Russ R: Was that your main use of time in that 99 to 2000 to 2007 period?
Marc A: Yeah, I started those companies basically back to back. Netscape was basically a company in the middle of a boom, 1994 to 98 and sort of rode the upper momentum of the 90s tech boom. Loud cloud was started at the very end of the boom. We started September of '99. We had about six good months before everything caved in. Most of loud cloud which became opsware, most of that company was through the bust. We just kept all the way through the clash and kept slugging away through 2002 to 2004 when things got really miserable in the tech industry. We sold the company right as the industry was coming out the other end in 2007, heading straight into the credit crisis. In retrospect, that was probably good timing to sell that company as well.
Russ R: At that point, when did you start Andreessen-Horowitz, the venture capital firm?
Marc A: We started the planning for the firm a year and a half planning it through. We started that process in 2007. My partner Ben and I sort of spent nights and weekends writing the business plan and thinking through all the strategic things that we had to work out. Then we kicked off the fund-raising process in March of 2009. I remember that very distinctly because March of 2009 was the low of the stock market after the credit crisis. Nobody was raising an venture capital funds in the spring of 2009. It was not a time when investors wanted to hear about any venture capital fund. In fact, many of the large investors in venture capital and private equity were in a liquidity crisis and [inaudible 00:07:28]; including the big [inaudible 00:07:31] of dominance where they were having a real trouble meeting their commitments back to their sponsored organizations.
people have told us it was the most hostile time to raise any venture capital fund in 40 years. Of course, contrary or perverse, depending on how you look at it; we said, that's probably not going to be a very good time to raise venture capital because ...
Russ R: ... You'll be alone.
Marc A: Exactly, we were. There were only two venture capital funds that got raised in 2009 in the entire year. One was ours and the other was [inaudible 00:08:03] where I [inaudible 00:08:06]. He's one of the top venture capitalist in history of all time.
Russ R: Who is that again?
Marc A: It's a gentleman named Vinod Cosla. He runs his own firm called Cosla Ventures. He previously was partner at [inaudible 00:08:18]. He was one of the partner at Kline-Perkins who made them so successful in the 90s. Before that he was company-founder of a company called Sun Microsystems.
Russ R: I've heard of them.
Marc A: Which was a big successful technology company. He's one of the legendary tech entrepreneurs and investors of all time. I think it was straight forward for him to raise the fund. It was a bit harder for us but we were able to raise it. In fact, that turned out to be a very good time to raise a fund because it put us in the position to invest when a lot of other people had stopped investing.
Russ R: you've been around now. the firm's been around for five years. It's been five of the least pleasant years in the American economy that weren't called a recession. Officially the recession ended in 2009 but it's been a pretty mediocre run for the us economy since then, but the technology world has been okay. You've invested, according to the internet at least, of course the internet never lies. You've invested in Facebook, Twitter, LinkedIn, Foursquare, and so on; which are pretty successful companies. My question is, does that make you feel smart or is investing still a very humiliating and uncertain process?
Marc A: Well, venture capital is kind of guaranteed to be humiliating because the most successful venture capitalists of all time typically tank about half their investments. By which I mean, if you taken any of the top performing venture capital firms over the last 40 or 50 years, if you get inside their portfolios and look at their portfolios. These are the top firms, the ones that return amazing returns over long periods of time. Typically they lose half their companies. In other words, half their companies go under and they either return nothing for the original investment or they return a fraction of the original investment.
It's a feast or famine business. In the same portfolio, you'll have both feast and famine. You'll have a company that gives you a 10 x , take AOL, a 100 x return and you'll have six other companies that are failing. The twist to how you spend your time is you spend most of your time actually dealing with your companies that are struggling and trying to help them. It's the companies that are struggling or failing that actually need the most help. The companies that are succeeding are generally doing just fine without you. The companies that are failing are the ones who really need help and support. A lot of what you end up doing on the job is supporting struggling entrepreneurs. It's kind of continuous [inaudible 00:10:44]. you're a troubleshooter. There's always something going wrong. We talk about this with partners, you have to be psychologically prepared for the opposite. It seems like it would be a life of glamour and excitement. It's more of a life of struggle and misery.
If you're okay with that, because it's part of the package, then the overall deal is pretty good.
Russ R: I still call it nice work if you can get ...
Marc A: ... it is. It beats all the jobs I had when I was a teenager.
Russ R: Exactly. What's interesting to me as an outsider, you learn things as you go forward. You still fail at least half the time. It's not like, well those five of the 10 were the losers; next time I'll miss those or won't invest in those. You still have to fail five out of 10. You don't know which five are going to be.
Marc A: The reason for that is we think you can draw a two by two matrix for venture capital. This is probably true for all investing but it's certainly true for venture capital. You can basically draw a two by two. On one axis you could say, consensus versus non-consensus. On the other axis, you can say successful or failure. Of course, you make all your money on successful and non-consensus. Definitionally the reason is because it's very hard to make money on successful and consensus because if something is already consensus, then money will have already flooded in and the profit opportunity is gone.
By definition in venture capital, if you're doing it right, you're continuously investing in things that are non-consensus at the time of investment. When we translate non-consensus to [inaudible 00:12:19] terms, it translates to crazy. You're investing in things that look like they're just nuts. Who would believe this PC thing would work at the time? When the VC's were investing in PC companies, the whole thing was considered to be a joke. When I started with internet startups, the one thing everybody knew for sure was that nobody would make any money with the internet. There would never be a business.
Russ R: Right, it's just a toy for communicating a little bit and interacting but there's no revenue stream that's going to come from it.
Marc A: Certainly not, obviously the one thing you know for sure is certainly nobody's going to buy anything from over the internet. That would be crazy because hackers might steal. You go on and on. EBay looked non-consensus right at the time venture capital firm called [inaudible 00:13:08] made EBay investment. A lot of people at eBay was like, that's crazy. Who is going to buy something from a seller somewhere around the world who they never met before? Like, that's just nuts.
Russ R: And it's used. It's not even a new thing. It's often a piece of ... it's garage sale material.
Marc A: Yea, exactly. That's exactly right. That continues through [inaudible 00:13:28]. More recently you have these things, AirBnB we're very involved in. AirBnB is this idea that you're going to rent out the back room in your house and a random stranger is going to show up and stay in the room. That's crazy. You would never do that. You would never rent out the room. Of course, you would never stay in a stranger's house. It turns out at AirBnB that people love this. It's growing like crazy. The revenue's exploding. The corollary to this is that crazy does not mean correct.
Russ R: That was my next thought.
Marc A: Crazy often just means crazy.
Russ R: Darn.
Marc A: Yea, exactly.
Russ R: I used to teach a business plan class in a business school. One of my students submitted a business plan that in the financials over the life of company made no for the money for the foreseeable future. I said, that's a bit discouraging to a potential investor. The student said, all the best companies don't make any money, so that's a plus not a minus. That's the challenge. Every crazy idea is not successful. It's a reverse causation confusion there. Despite all that, you've made some very successful bets presumably on non-consensus companies that at the time 140 characters as communication seems like a ridiculous idea. Are there some you missed that you regret that you want to talk about? Are there some lessons you learned that now you can't believe those were the mistakes you made back then?
Marc A: Sure, the corollary of this is the mistakes that we make in a field like venture capital; the mistakes generally aren't investing in something turns out doesn't work. This is something [inaudible 00:15:20] struggles to figure out. You put all this money in something and it failed [inaudible 00:15:23]. That's generally not the problem. The problem is what you decide. It's the big hits that you missed. Every venture capitalist that had opportunity to invest in Google and didn't just seems like an idiot. Every venture capitalist that had the opportunity to invest in Facebook and didn't feels like an idiot. The challenge in the field is all of the great VC's over the last 50 years. The thing that they have in common is they all failed to invest in most of the big winners.
This again is part of the humility to the profession. You literally, as an investor in any of these things, even if you've invested in some of the hits, you've made a long list of the hits you missed. Those are the ones that drive you crazy. I was not a professional investor prior to five years ago. We'll see in the fullness of time which ones I missed in this period. One of the things we do a lot is we try to back test our theories against history. We sit around all day long and talk about what are we looking for and how do we know if [inaudible 00:16:22]. We sort of [inaudible 00:16:26] criteria for investment all day long. One of the questions I always ask and I'm not sure of the answer is, would we have investing Google when they were raising venture capital?
I actually wonder if that's the case. the reason is, a good friend of mine was at another venture firm that passed on Google when they had the chance to invest in it. I said, why'd you pass on Google? This was back right around the same time that it happened so I know it's kind of accurate as opposed to just [inaudible 00:16:51] history. We passed on Google for three reasons. There are three reasons, number one, absolutely no business model. They had absolutely no idea how they were going to make money. Number two, the two most arrogant founders we'd ever met in our lives. Number three, very high premium valuation. Had there been only any two of those three problems, they would've still invested but all three problems together prevented them from doing it.
In venture capital, that's a 20 billion dollar mistake.
Russ R: But, if those are your three rules, you might save enough money on the other 30 billion that you might've thrown away. Well, 30 billion's hard to throw away. That's not a good answer maybe. I don't know. You see my point though.
Marc A: You identify the exact problem and then the problem with the problem; which is, the key characteristic of a venture capitalist is the returns are on a power [inaudible 00:17:54] distribution. Here's the way I think about in the math. There's about 4,000 startups a year that want to raise venture capital. Of those, maybe 400 will get funded by top venture capital firms. Of those, about 15 will be responsible for about 90% of profits for that entire year of companies.
Russ R: That says it all.
Marc A: It's a feast or famine business. If you do invest in Google and you invest in a hundred losers you're a spectacular success. If you don't invest in Google and you invest in a hundred losers, you're a horrible failure. It turned out the only decision that mattered was did you invest in Google or not. Of course, the corollary to it is you never know when Google's going to show up. one of the weird things about Google was they showed up 1999. A couple things about google that would've made it hard at the time ... If you believe there was a bubble in 1999, which a lot of people think that they believe, at least in retrospect. That would've been the last time that you would invest in a money losing company run by arrogant founders at a premium valuation. Yet, that was the one to do. The second thing is, google was like the 36th search engine.
There was this whole thing about first to market and the innovator, the whole thing. There had been six years of search engines before google. Many of whom, at that point, were large public companies and were considered very successful companies; yahoo, Lycos, a whole bunch. Google was late to the game. Turns out they were late to the game with a fundamentally better product. My friend, peter keel, likes to say; he says, it's not first to market that matters. It's last to market. You want to be the last company because you want to be the company that basically [inaudible 00:19:28] all following competition.
Russ R: Yeah, if you can do that.
Marc A: Exactly, but what he says is, that's the key to getting all the investment returns. You want to be the one that basically is so good that it foreclosing all future competition. That often is not the first company. If you think bout the decision path, a lot of people think that if they saw google in 1999 [inaudible 00:19:50] they would've been smart enough to make the investment. The actual decision path that you've have to follow in your head to get all the way to investing in these guys with no business model at that time, in a field that had all types of competition was a good idea, that was a leap. It's no coincidence, by the way, that that investment was made by two of the smartest VC's of all time; John Door and Mike Morris.
That was a leap. That required real foresight, deep thought process, and a risk tolerance that most people simply don't have. So, on our best days, that's what we aspire to be like. We aspire to take the bets that other people won't make. We aspire to go way out on the edge of risk. Another friend of mine, said you'll never been able to work in any other area of financial services investing because every other area of investing is all about reducing risk whereas in venture capital, it's all about increasing risk. The big danger is you're not far enough out of the risk group.
Russ R: How much did Door and Morris put into Google at that point? Do you know?
Marc A: They put about 25 million dollars between the two of them. They bought, I believe 25 million bought somewhere between 15 and 20% of the company. That would have gotten diluted down over time. That would've translated to 10 to 12% of the company today. Google today is worth 340 billion dollars.
Russ R: It's a good deal.
Marc A: 25 million turned into ... if they held stock, which some of them didn't. If they held the stock all the way through, 15 years later, 25 million turns into somewhere between 25 and 50 billion.
Russ R: That'll pay for a lot of mistakes. you're suggesting that what made google better than ... I'm old enough, as many of our listeners are. That's what's great about the internet. I'm not talking about the Korean War now. I'm talking about the 1990's. I remember Lycos and Yahoo as search engines. People still use Yahoo sometimes as a search engine but you're suggesting that Google dominated that market because they had a quote; better product. What was better about it?
Marc A: My friend, Bill [inaudible 00:21:59] says, the key difference is that it had the it works feature. It had the feature where it worked. If you remember doing searches on [inaudible 00:22:11] back in those days on most [inaudible 00:22:12]. You would do the search and you would very often get back useless results. The programmers of those companies worked really hard to get you back quick results but a lot of the times you got back [inaudible 00:22:25]. What had actually happened was users had gotten trained to not expect much from their search engine. They had gotten trained that the results weren't going to be very good. Users didn't do that many searches and when they did, they would spend a lot of time going through it trying to find a lot of the results. [inaudible 00:22:44] or something like that.
The people who really understood this stuff; number one, you could use google early on if you had access to it. You could compare the results and could see that they were better. It was very visible and very visceral. Of course not only better results, it means people are going to be using it a lot more than they would use the other ones. If you were a computer scientist and you had access to these guys and you could talk to them; what you would find out was they had a completely different kind of approach than the previous search engines. They had this innovation that became famous called page rank where they basically had a computer science breakthrough; an actual technological breakthrough in how to do the scoring to get to the best search results.
It turns out those things are discoverable. This is one of the things we find. You had to be very close to the company to realize this. This was very hard to call from the outside. A lot of people who passed on Google, passed on Google without even getting to the point where they learn these details. It turned out the details really mattered because they really made a big difference.
Russ R: Right, the elevator pitch I have a better search engine is not that compelling. The question would be how much better and who cares? Then what? They answered all those questions. Like you say, from the outside that was probably very hard to discern. Especially the, and then what, because the ability to monetize that product was not obvious at all. Even if you [inaudible 00:24:11] the guts of the algorithm.
Marc A: Yeah, and then by the way even then, you would have to invest not knowing how they were going to make money. They didn't have that second part. They [inaudible 00:24:18] that second part out. One of the things I like to say is, we live in one of many parallel universes and we know how this one played out but there [inaudible 00:24:28] universes where [inaudible 00:24:29] played out. There are many other universes in which Google never figured out how to make money. If it crashed and burned, it'd be a cautionary tale today. There are just flips of faith that happened along the way where they were able to figure out this AdWords algorithm to be able to make money.
Had they not figured that out, and a lot of people didn't think they'd be able to figure that out, we would be having a very different conversation today. So, it's one of those things that goes back to what's humbling about what we do. It's limits of knowledge. There are real limits to what you can know. Which, by the way, means that if you're going to operate in this field and if your requirement in investing with something, backing something, or going to work for something is you're going to know for sure [inaudible 00:25:10] succeed; you're never going to do anything. There is no return without the risk.
Russ R: One of my favorite stories is how Fred Smith, supposedly ... It may not be true. After he got turned down for the last time by Chicago banks borrow money to keep FedEx afloat was in the Chicago airport, ready to return to Memphis to tell his employees that it was over; instead took a plane to Reno and put all of his money which included, I think, his sister's trust fund money on red or black or whatever and made enough money to cover his payroll that week. They made it. I always think what would've happened if he hadn't looked up at the board of departures and noticed a flight going to Reno.
If Door and Morris hadn't made that investment, would Larry Page and Sergey [inaudible 00:26:00] being doing something different right now or would they have eventually gotten to where they are? I don't know.
Marc A: The other thing was, nobody will admit today; but that company was very acquirable in the beginning before they had a business model. There were any number of other big technology companies that could have bought Google for small amounts of money. Larry [inaudible 00:26:20] could have gone on to be mid-level engineers at Yahoo. It's a twist of fate [inaudible 00:26:27].
Russ R: A fate worse than death.
Marc A: That's what some people would say.
Russ R: [inaudible 00:26:30] mid-level engineer at Yahoo but compared to what they became, that's all.
Marc A: That's exactly right. Again, that comes back to [inaudible 00:26:41]. How many great entrepreneurs are there who just haven't realized that they had a path that didn't involve [inaudible 00:26:46] company. How many of the business failures that we can all name were one step away from success and they just didn't figure out that one step? Those are the questions we'll never know the answer to. [inaudible 00:27:00]. They cause us to be ... We have this theory at our firm, it's a software term called [inaudible 00:27:06]. We [inaudible 00:27:09] buying decisions; which is to say basically, delay making decisions until as late as possible.
Russ R: Sure.
Marc A: Because you really never know. There's a very high risk that your early decisions are going to be incorrect and you really want to delay making a decision until you get every piece of data you possibly can because the future's so hard to tell.
Russ R: In 2011, you wrote a piece for the Wall Street Journal called Why Software is Eating the World. Explain your argument and why the evidence continues to accumulate that you were right.
Marc A: Yea, the argument has to do with the evolution of the computer industry. The computer industry is one of the industries where it's trickled [inaudible 00:27:46] for a long time. Computers, historically, would get built for the biggest customers which were big companies and big government agencies. They would cost tons of money. Then 10 years, 20 years later, someone would package them up and do a cheaper form factor and make them available to smaller companies. Then 40 years into the computer industry, the PC came along which was the first thing that individuals could buy. 20 years after the PC, the smartphone came along. The smartphone is the big breakthrough because the smartphone is the first computer that is packaged and delivered in a form that everybody on the planet can have one.
The way I think about it is the two giant twin dominant stories of our era are; number one, the enormous rise of the developing world and the introduction of billions of people into what we would consider to be the modern economy. Then in parallel, intertwined with that, is the smartphone revolution which is everybody on the planet getting what is the equivalent of a super computer, from 20 years ago, in the form of a smartphone in their pocket.
Russ R: That they have with them all the time. Everybody has it and has it all the time.
Marc A: Have them all the time and they're all on the network. They're all connected. They're all on the internet. We've gone from a world where most people didn't have computers. The PC only ever got to about a billion people out of seven billion people. The smartphone is going to get [inaudible 00:29:12] billion. Two big things happening right now in real time, one is that in both India and Pakistan, the price of smartphones now has plummeted to $35. All of a sudden, it's a $35 consumer purchase which is within reach to a large number of people. Second is, even in the poorest parts of the world, [inaudible 00:29:32] considerable preferences. Even the poorest people in the world will choose smartphone and internet access; even over indoor plumbing and electricity given the choice.
You hear about people working in the field in the most poverty stricken parts of the world who would not [inaudible 00:29:49]. You really do have this universal computer for the first time. Everybody's going to have one. These things are shipping in the billions now. By the end of the decade, everybody on the planet's going to have one of these things. Everybody's going to have a computer. Everybody's going to be on the internet. That's a new world. That's a world that we never lived in before. We have no idea what that world is like. It's brand new.
One of the thing that you know is that, all of a sudden, [inaudible 00:30:15] conceivable way to take a product or a service. If you could take a conceivable way to deliver it through software, you can actually do that. I'll give you an example. Let's just talk about banking as one example. Which is, historically the idea of having an online only bank that was only delivered through software would have been considered lunacy because most people don't have computers so you need branches. You need tellers. You need ATM machines. You need this big physical footprint to build a bank. Today you can just make the simplifying assumption. You could say I'm only going to make the bank available online. It's only going to be available for people through their smartphones. It's just going to be software. There won't be anything else to it other than software.
All of a sudden, you could have a bank with an [inaudible 00:30:55] of seven billion customers entirely in software without any of the physical overhead of how today's existing banks operate. This is the software eating the world piece. We now, for the first time can basically go field by field, category by category, industry by industry, product by product; and we can say what would they be like if they were all software? Then, entrepreneurs in virtually every field we're talking about are attempting to do that. There are entrepreneurs attempting to do software only financial services, software only education, software healthcare, obviously then the media industry is being transformed with software, e-commerce. Retail is being transformed with software.
This is sort of where I disagree so much with people who are worried about sort of innovation slowing down. I think the opposite is happening. I think innovation is accelerating because the minute you can take something that was not software and make it software, you can change it much faster into the future. It's much easier to change software than it is to change something with the big, physical real world footprint.
Russ R: If only we could stay in digital hotels, because the biggest cost of hotels is they got to replace the furniture every once in a while. For so many other things, the furniture's digital so it's a piece of cake.
Marc A: Exactly, what's happened is all of a sudden, software professionals, not just in the US; all over the world, software professionals, software entrepreneurs are looking at industries that have not been tech driven, industries that have not been in that space. They're looking at those industries and they're saying, now is the time to build this software bank. Now is the time to build this software school. There are entrepreneurs all over the plant that have figured this out. They're going straight for it. Of course, our job as venture capitalists is to fund them. What are the consequences of this? Many things; number one, consumer welfare is on the rise way more than I see people are willing to give it credit for. I think that the universe of opportunity that opens up to you once you have a smartphone in terms of your ability to get to all these services, get information, get access to global markets, get access to education. From a consumer welfare standpoint, this is nirvana.
This is like, everybody has the magic box to which they could get access to all this software. That's amazing relative to all the physical limitations the way things used to work. Consumer welfare is on the rise very fast and on a much broader footing than people believe. Even in the poorest, rural villagers now have access to resources that the national security agency didn't have access to 10 years ago. That's an enormous consumer welfare change. Rate of evolution increases in a lot of industries because software can mutate much faster. Prices can come down very fast in a lot of industries. One of the things that I think is very interesting economically. I think price deflation across the economy is a much bigger factor than people think. you take a product that use to hardware and you make it software or it used to be a retail store and you take out huge parts of costs, which means prices fall. The final thing is entrepreneurship is on the rise, because everybody in the world with the right software, which is a large number of people, can now be an entrepreneur if they want to and can go after these opportunities in many different fields.
Russ R: So you've been very enthusiastic about Bitcoin. We recently did an episode about Bitcoin. You've actually compared Bitcoin to innovation such as the personal computer and the internet. Very bold claim; what's the source for that enthusiasm?
Marc A: This is not a claim that I have made about anything else in the last 20 years. This is the first time I've said this. That indicates the depth of seriousness which I take it. Bitcoin and the ideas underneath Bitcoin ... Bitcoin is this broad topic which in the computer science world is called crypto currency. [inaudible 00:34:55] this area of R&D that's been going on for 20 years. One of the things about Bitcoin that's important to understand is it's not just an overnight thing that somebody just dreamed up. [inaudible 00:35:02] 20 years of really hard work on the part of a lot of brilliant computer scientists. They finally catalyzed in the form of this Bitcoin thing. There's very deep, intellectual background behind Bitcoin.
The big breakthrough that's underneath of Bitcoin that is called distributed trust. The idea is take seven billion people, put them all online with their smartphones. In theory, you have the ability to do business with anybody on the planet but how do you know who to trust, right? How do you do trusted transactions? How do you send money from point A to point B, right? Knowing who's sending it, knowing who's receiving it, knowing that the money is digital money, that it's not being copied along the way which is called the double spending problem. How do you do a transaction with digital money in a way where everybody else around you is able to verify that that transaction actually happened?
People can't say I was frauded or I never got the money or whatever. How can you do that in a way that doesn't require centralized institutions? How do you do that where it doesn't require a bank, credit card company, or a payment processor?
Russ R: or the Department of Justice; the police. it'd be great if you could avoid the police.
Marc A: That's exactly right. Let's talk about this for a second, the way contracts work in the US is you sign a piece of paper. Well, what happens if somebody forges a signature. Well, you call the cops. You take it to court. You have a lawsuit. You go through all this stuff. You're exactly right. You either are working with employees who are working with contract law and with courts. You immediately fall back on the centralized institutions. You hope they get you the right outcome. What if you had a digital contract that was unforgeable? Once you signed it, that was it. It was provable after you signed it and nobody else could've signed it.
Russ R: What you signed you had to keep. That there was no uncertainty or virtually no uncertainty that you'd keep the promise that your signature represented; because that's the other piece that's always uncertain.
Marc A: The first thing is just being able to interact. There are consequences to many of these things, but the first thing is to be able to interact. Let me give you a basic concept. [inaudible 00:37:15] cost of ownership; who owns what? Who has title to what? In the west, we take it for granted that we've got title. Real estate titles, we've got. We've got title agencies. We've got contract law around titles and all the rest of that. Ultimately, there's enforcement if somebody tries to squat at somebody else's house. It's unfortunate but we have very clear ways of determining what's what. Of course, ...
Russ R: ... they're very expensive those titles. When you buy a house, a frightening large amount of money goes to prove that you're actually buying and selling the house that you both have in mind. There's a big set of institutions around it.
Marc A: That's exactly right. In much of the rest of the world, in much of the developing world, there isn't clear title. [inaudible 00:37:55] written about his a lot. This used to be a problem in India. I don't know what the number is now, but there's some large percentage of real estate in India and it's just not clear who owns it. This is a generalized problem. If you can't have land, do you have the basis for capital and all the things economists talk about. Then you say, we need to have a system to which everybody in the world can establish ownership. Then have consensus too of who owns what and have a way to transfer ownership from one person to another in a way that can be validated and can be trusted without having to recreate these giant centralized institutions; which might either take decades to build in systems where the government's not strong enough to do that yet or might just be [inaudible 00:38:39] expensive. It may not be possible what we might consider to be a modern title system for land in the world where incomes are much lower.
It might be part of the development trap. It might just not be cost effective [inaudible 00:38:52] required to let people develop economically. What if we could just do that digitally? What if we could just do that on the internet for free? Well, we can send email back and forth for free. I can send messages back and forth. Why can't I send title back and forth? There were a set of breakthroughs that had to happen around trust and photography that had to happen that in fact happened over the last five or 10 years. The key breakthrough was the Bitcoin breakthrough by this anonymous inventor, [inaudible 00:39:22] who came up with this idea of the block chain, this trust model for establishing who owns what, who controls what, who has committed to what at different points in time. That's a really big breakthrough. You can think about that breakthrough. Bitcoin, people think of it as digital money. It is digital money but its deeper than that.
It's potential also digital contracts. It's potentially digital title, digital ownership, digital keys, digital assets, unique media files, which has always been a big problem on the internet, single copies of media could be done this way. Ultimately, digital stocks, bonds, loans, insurance contracts; you can kind of see where I'm heading with this. The distributed trust breakthrough is a a wedge that technology has now made possible. Now what's going to happen and is happening right now is hundreds and soon thousands of entrepreneurs starting companies to do software based contracts, software based keys, software based signatures, software based title, all these different categories using this underlying technology. That's what going to happen in the next five years and that's what we're funding.
Russ R: What could derail that? What do you think affects the viability, not of Bitcoin, but of this crypto currency distributed trust breakthrough. Is that breakthrough over? Is it over? we're done. It's solved. We don't have to worry about it anymore or are there things that you think are still uncertain about it?
Marc A: At the highest level it's hard to see it stopping. The reason it's hard to see it stopping is it's just math. It's just math. It's just bits. It's like stopping [inaudible 00:41:11]. For example, [inaudible 00:41:17] Turkey's going through this right now where something happens politically and they decide they don't want bad behavior on twitter or YouTube so they ban twitter. The next thing you know is hackers in that country find three different ways for people to still be on twitter or all the behavior on YouTube then they ban YouTube. Increasingly, they look like they're doing terrible things to their citizens. Then at some point they just turn the entire internet off. The problem is, if you shut the internet off you tend to drive everybody out into the streets. That's the last thing you want if you're trying to prevent a revolution.
If you're north Korea and you can prevent people from using the internet, you can stop all this stuff, but I don't know how modern countries can shut off the internet. I think we're past that point. Short of shutting off the internet, you'd have to take a very aggressive path to intercept these bits. It's like trying to prevent people from talking. You could try except there are an enormous number of people who want to make sure that the free [inaudible 00:42:18] of information doesn't stop. So ...
Russ R: ... you're talking about the government response, but what about the private hacking response? Do you think the ability to hack into someone's Bitcoin wallet, for example, is going to be a problem in the future or is that quote solved? Is that problem of duplicate money? I forget the technical term you used, the digital copy. I pay somebody and then they can buy two different rugs with the same coins. Are those technical problems over or solved or do you think there are other risks involved technologically?
Marc A: Those problems are solved in theory. This is a complicated question so I'll give a fairly complicated answer. Those problems are solved in theory. The reason we know they're solved in theory is because, like I said, this isn't just an overnight thing. This is something people have been working at for over 20 years. Every step of the way, they've been trying to break it at the same time they've been trying to build it. Bitcoin itself has been out for over five years and many of the best hackers in the world have spent five years trying to break it. There's been a huge financial incentive to break it. It has not been broken. Can I prove beyond a shadow of a doubt that it's never gets broken? No.
Do I know that many of the best hackers in the world have been trying hard for years and have been unable to break it? Yes. In the real world, how do you know that something's secure? At some point, you know something's secure because people have tried to break it and failed. How do I know vaults are secure? Well, people haven't been able to open it. Theoretically, it's in a very good place. [inaudible 00:43:51] by the way, we feel it's in a good enough place to [inaudible 00:43:54]. We watch. We're deep in this world. We're deep in the security world. We know a lot of hackers so we track this stuff very carefully and nobody's making any progress cracking it; so far so good.
Every year that goes by, you get more and more assurance. You have more and more evidence that it hasn't been broken. That's in theory and that's important. It's important that that be the case in theory.
Russ R: Counts.
Marc A: Then there's a practice, it has to get implemented in the real world to get used by normal people. There you get into things like your Bitcoin account is going to be protected by a password and if you pick the wrong password, and your password gets easily guessed by a hacker, then somebody could take all your Bitcoins. That's still the case, but in a sense, of course that's the case because that's the case with everything. If you do that with your email, people can read all your email. If you leave your car unlocked with the keys in the ignition in the middle of the street, come back in two hours, it probably won't still be there.
It sort of reducing down to this broader question of making sure that digital systems that we use are generally secure. There's all kinds of work into that throughout the industry using new kinds of authentication methods; using fingerprints, retinal scanners, all these different approaches to make this more secure. At some point, you do have the types of product issues, but it's certainly every bit as secure as an online banking system as an example. Well put it this way, it's more secure than [inaudible 00:45:21] online bank. It's more secure than the Obamacare website. It's more secure than most commercial websites. It's beyond the point where you usually worry about this in terms of building a business. You just need to work with your users to make sure they do the responsible things.
Russ R: If Bitcoin were widely used and accepted and it's on the road to being that payment system, would you be comfortable with large chunks of your wealth in your Bitcoin wallet?
Marc A: Yeah, definitely. [inaudible 00:45:53] very clever about Bitcoin. Money doesn't actually have to be online. One of the [inaudible 00:45:59] of Bitcoin is, you don't actually have the money in the wallet. Bitcoin is numbers. You can actually store your Bitcoin in a [inaudible 00:46:04] and print your Bitcoin on paper and store it in a safe deposit box. There's a variety, it's called cold storage. There's a variety of cold storage methods. There are actually companies that are going into this business of Bitcoin cold storage. It's almost like a safe deposit box business. The safe's to store your family's jewelry in a safe deposit box in a bank. Well, yeah, just buy the vault.
Russ R: More or less.
Marc A: By the way, the other thing is insurance. You can insure your jewelry. There will be a variety of different insurance methods through Bitcoin. Bitcoin wallet companies themselves are going to have insurance and then you yourself will be able to buy insurance against these kinds of risks. It'll be like anything in the real world. It'll be culmination of you don't carry all your money in your back pocket with you in the form of cash every day. You store some of it in a bank account. You maybe store some of it in gold in a safe deposit box. Maybe you store[inaudible 00:47:00]. Maybe if you're really paranoid you bury it under your front porch. It's kind of the same thing with Bitcoin. You put it on paper and bury it in the proverbial [inaudible 00:47:09] under your front porch if you want to.
Russ R: Well, let's shift gears. Let's talk about the news business. You've written about that recently. Most journalists are very pessimistic or worried about journalism. they're the people who work for newspapers that I talk to. Other journalists are less worried. You're optimistic about the future of journalism, why?
Marc A: Yea, I take a very different perspective on this. It's a perspective based entirely on business and economics. I'll kind of describe why. If you study the history, the news business is actually an old business. It's been around for about 500 years. [inaudible 00:47:45] through the first 450 years of the newspaper business, it was a brutally competitive business. one of my favorite books is a book called, Infamous Scribblers which was the history of the news business in colonial America. It's sort of a slice in time thing of what it was like to be in the newspaper business in colonial Philadelphia, 1770. Which was like when Ben Franklin was [inaudible 00:48:10] business.
What you realize is it was a brutally competitive business. Any given city would have 15 different newspapers. They would all have a different subjective point of view. Some of them would be political attacks [inaudible 00:48:25]. People were writing under pseudonyms. I think Franklin himself had a dozen different pseudonyms he would write under to [inaudible 00:48:33] different agendas. It was kind of this rolling free for all of activity, information, news, efficacy, and politics. It was kind of this zoo.
It ran that way for part of 50 years. By the way, it created very large empires in the process. The first empire [inaudible 00:48:49] were very big businesses based on that kind of approach. What happened, I think was, especially in the US after World War two, the news business consolidated into oligopoly structure. In particular in the newspaper biz, the consolidated into local monopolies. This was due to scale economics per city. In any given major city in the US, over the course of a couple decades, you went from 15 newspapers to five newspapers ultimately down to one newspaper. You had the Chicago Tribune in Chicago. You had the LA Times in LA. It was only the largest cities would have a few newspapers, but even there you'd have a dominate one like the New York Times.
Then 50 years passed where, if you were a journalist, by definition you were working for a monopoly. Those of us that have worked with companies over the years, there's a big difference in interacting or working for a monopoly versus working with a company that's in a competitive business. It's the difference between dealing with a company that has to compete everyday versus a company that doesn't have to compete. Every monopoly has the same model, which is we don't care because we don't have to.
You have these companies, they were business like any other and they had problems. They can act like monopolies. They had generations of managers; two generations, three generations passed. At a certain point, you only had people going to work for these companies who wanted to go work for a monopoly. By the way, it worked. These businesses got better and better. The newspaper business didn't actually start to collapse until after 2005. [inaudible 00:50:30] grew tremendously even though the initial phases of the internet boom. They had very big margins so the business executives certainly made a ton of money; [inaudible 00:50:42] expense account, big fancy buildings, lots of long lunches, the whole thing.
Then what happens of course, the distribution technology changes. The reason these all centralized in monopolies is because of the scale of economics distribution; having the printing press and the [inaudible 00:50:56] trucks that would actually get the newspaper out. You had a scale advantage if you were the sole provider. The internet striped the monopoly status on the distribution up from all these companies.
Russ R: Then they took the revenue stream away from them too. You had to [inaudible 00:51:11] in the classifieds.
Marc A: They did something very specific there. It wasn't so much that you had new online newspapers that did the same thing that the offline newspaper did. It was the product got unbundled. In the old days, people had this sort of romantic view of the newspaper was like this [inaudible 00:51:29] of democracy that the journalists liked to talk about. The reality was most of the newspaper was the grocery store ads, the car dealership ads, the want ads, the classified ads, the sports scores, the stock quotes, the funny pages, the horoscopes, Dear Abby, entertainment news, TV listings. It was this bundle of information and it made sense for all that information to be in a bundle. It made sense for all the revenue streams associated with all those components to be in a bundle because of the cost of distribution.
It didn't make any sense to have 20 different specialized newspapers covering all those different topics. It made sense to have one everything was funneled in. You put that on the internet then all of a sudden, to your point, Craigslist takes all the classifieds. Yahoo movies takes all the movie listings. Yahoo finance takes all the stock quotes. ESPN.com takes all the sports scores; and on and on. The product got unbundled. The distribution monopoly fell away. The competitive battle started immediately.
The competitive battle has been really fascinating. You had newspapers competing with newspapers who didn't used to compete. The New York Times and the LA Times never used to compete and today they do because users on the web can go to either one equally. The New York Times would have never viewed CNN as a competitor in the old days, but in the new world, New York Times.com or CNN.com; two different websites. You have competition across media channels. You have this great unbundling taking place and the revenue vanishing. It felt like the perfect storm.
If you're inside one of these media companies searching for a news publisher, it's like the entire thing is collapsing. There's a lot of truth to that, but the root cause is you were used to being a monopoly. You weren't used to competing. What's the answer to this entire thing going to be? It's going to be to compete. It's going to be a take a stance of every business in the world that actually has to compete for a living and figure out fundamental questions. What's my differentiation? What's my competitive advantage? What's the appropriate cost structure? Who are my customers? What do they want? Where am I unique? Where am I not unique?
It's a time when we need proprietors for news organizations that are like the proprietors from the [inaudible 00:53:48]. We need proprietors, owners, and managers who full on capitalists, full on aggressive business people who are very good at spicing up markets and identifying revenue opportunities, very good at rationalizing cost structures and all the things that you have to do in a normal business. Of course, this causes the journalists to freak out. They're like, my God. The whole point of objective journalism is you have this separation church and state and the business isn't supposed to affect the journalism. How are you going to fit all the business people [inaudible 00:54:15]? It'll ruin the whole thing.
I think the exact opposite answer, which is the way to guarantee high quality journalism is to have it be a business. If you don't have a successful business, you have a charity or in worst case scenario, bankruptcy. You have to solve the problem as a business. The good news is that the market is much larger than it used to be. This is something we think of a lot about in tech. We think that in venture capital. We think about what's the market size of what you're going after. The internet has caused you all these problems but the internet has given you a gift which is a much larger [inaudible 00:54:48] market.
Even the New York Times, historically its total market size for people it could distribute a physical newspaper to in New York. Today its [inaudible 00:54:58] market is the entire world. Hundreds and hundreds of million people around the world who need to know what's going on. These businesses need to be reconstituted around market segments that have a need for differentiated products, but many of those market segments are [inaudible 00:55:13] than it used to be.
Business and finance news will be the leader in the recovery because the rise of the number of people globally who need business and finance news is growing very fast. Of course, those people have expense accounts. They can easily afford to pay for information that valuable to them. I think the Wall Street Journal from here is going to do really well. I think that the Financial Times probably [inaudible 00:55:37] under a new owner, at some point is going to do really well. Then there's a variety of new startups in business and finance news that are growing very fast that are going to do very well. General news and other categories of news will follow.
Russ R: It's an inspiring story. I happen to agree with it. I think you're right. There's a lot of romance about being a journalist that I think isn't even true. The objectivity part and supporting democracy, we do need journalism to ... is journalism as useful for exposing tyranny and corruption? I think it will continue to do that. I'm like you, an optimist. How about ... We're low on time but I want to hear your thoughts about two areas that everybody cares about which are healthcare and education. We talked a lot about [inaudible 00:56:22] on this program. Do you think they're real or overblown? Are they going to revolutionize education in the ways that we've been talking about? Is software going to change healthcare in the next five to 10 years? I think it will but I'm curious what you think. You're smarter than I am.
Marc A: [inaudible 00:56:39] I think the answer to education is a broader question. I think the real question is a broader question. The existing education, especially at the college university level, actually works pretty well. I always tell people if you can go to Stanford, go to Stanford. My friend Peter [inaudible 00:57:00] was like, don't go to college. Go to Stanford, go to Harvard. I went to the University of Illinois; great school. Go to Purdue. Go to university of Washington. These are great. By the way, there are also great private high schools or public high schools that are very good. It's great, if you can get there that's great.
There's a very large number of people in the world and a large number of kids coming up who are never going to go to any of those places. We know that because the numbers just don't work. Run the math on how many people are there in the world today ages five and below who are going to hit the high school and college market in terms of age, five, 10, 15 years out. What I'm saying we know for sure is they're not going to be on a physical ivy league campus or a physical university state school campus. They're either not going to get education, which would be a disaster for the entire planet or they're going to have to get educated in a different way. The only way to scale the education system to meet the needs of everybody on the planet that needs to be education is through software.
It's a ridiculous cost prohibitive exercise to try to figure out how to replicate the campus model for the number of kids that's going to ned to be educated. You were asking about it over a 20 year period, we have to solve this problem of software. A large part of the future of the planet depends on solving this problem of software. It becomes a moral issue quite quickly. We have to figure out how to do that. The argument that's almost a complete waste of time is would you rather have a muke or boat sitting in the lecture hall at Harvard. That [inaudible 00:58:38].
Russ R: I couldn't agree more. People say, face to face is so much better. I said, yeah, if you have a good teacher. How many people have a good teacher? It's much better to have a great teacher on the internet than an awful teacher face to face. There's no comparison.
Marc A: Or no teacher face to face.
Russ R: They don't show up in certain parts of the world.
Marc A: Exactly, that's the big thing that has to be tackled. The other thing is I think there's two kinds of students. The thing I hear from American educators, especially at top-tier institutions is, you don't understand. You're naïve. Kids don't want to get educated. They only got to class reluctantly and if you're not on their tails all the time, they won't even do their homework. They're out partying all the time. To me that's like a sense of people who are [inaudible 00:59:22] lazy. There's a much larger number of people in the world who do not have that problem and whose parents do not have that problem. The difference between educated and not educated is fundamental differences in quality of life. It's absolutely fundamental and everybody knows it. There's no [inaudible 00:59:38].
This whole thing where people lack motivation for an education. Yeah, rich [inaudible 00:59:44] might like motivation but like everybody else in the world he's got to have the motivation in spades [inaudible 00:59:49].
Russ R: Yeah, they're kind of [inaudible 00:59:51].
Marc A: We collectively have to figure out. This is a challenge. Companies play a role here. Governments play a role. Non-profits are playing a really big role. [inaudible 00:59:59] fan. A lot of people are. What he wants to do [inaudible 01:00:07] is going to be just tremendous. By the way, teachers play a huge role. One of the huge opportunities, you're obviously an example of this is, but the best teachers in the world are going to be able to have a much bigger impact as a result of this.
Russ R: Make more money.
Marc A: You need to make more money and [inaudible 01:00:19]. Exactly, this is one of those things where a lot of the best teachers are going to get really fired up by what this means for them and the impact this can have on the world. They're going to play a big role. That plays out. [inaudible 01:00:33]
Russ R: Healthcare.
Marc A: Healthcare, the challenge in healthcare is also the opportunity in healthcare which is to fix the incentives. The pessimistic view is that it's sort of an unfixable situation because the incentives are badly aligned and if you're not paying for your own healthcare and don't understand what you're buying, then you don't care what it costs. That's when you get this out of control thing. Even if in theory you could break the cost disease and bring productivity [inaudible 01:00:59]. Nobody has the right incentives to do it so it'll never happen. The two really positive things that are happening right now in the US that we're looking at very carefully are; number one, this dramatic rise in high deductible health insurance. A lot of this is being sparked as a consequence of ... This may be one of the big positive benefits of the Affordable Care Act. A lot of people now are going to be operating under healthcare plans that have two thousand dollar deductibles. All of a sudden, a pretty high percentage of the actual health events that you deal with, you're going to be paying significant amount of money out of pocket.
Russ R: That'll change behavior.
Marc A: Exactly, right. All of a sudden, it goes right back to the smartphone. If you give people the right kind of smartphone app, where instead just going to whatever doctor, paying for it and getting like you would in the old days, without of control costs; what if you could get the answer through your smartphone or could find it cheaper? For example, one of the big things in healthcare is a lot of people go to see doctors [inaudible 01:02:00]. Today's healthcare system, you have no reason to not go to the doctor. In the future, it's an easily diagnosed and resolved problem that a nurse can help you with. You'll be able to just do that.
By the way, you'll be able to do things like [inaudible 01:02:12] scoring on the providers so you could find a really good nurse or nurse practitioner to deal with whatever your minor problem is and pay a lot less money. That's one big opportunity. The other giant underestimated thing that's happening is more big employers are self-insuring their employee [inaudible 01:02:29]. These really big multi-nationals, they're actually footing the bill for their employee's insurance more and more. There you have very professional management teams, finance departments, HR departments that all of a sudden have a huge incentive to drive down costs. They can't drive down costs in a way that's going to damage their employees because that would be counter-productive.
They'll drive away the talent, but they have a big incentive to optimize [inaudible 01:02:54] straight to their corporate bottom line. We're seeing big companies as much more interesting adopters of new technology on behalf of their employees. There's a big opportunity there. Obviously this is a big one. This will take a long time, but you can envision a culmination of changing economic incentives combined with new technology, combined with increased role of individuals and big employers combined with technological advances. it certainly gives you wedges to come in and start having an impact.
I would say there's reason for mild optimism. Then hopefully over the course of the next 10 to 20 years we can start going after some of the really big [inaudible 01:03:36].
Russ R: Last question, are you worried about anything remotely like the singularity or the fear that technology is going to put everybody out of work except for the handful of people who can create the new software that's going to make our lives better? What's your feeling about that? Optimist or pessimist?
Marc A: Very optimistic as follows; we live in such a cynical and pessimistic time that nobody wants to think about the other side of this so I'll put it out there. We are, with the smartphone, with the internet, with google, with open source [inaudible 01:04:14], with all these things we're talking about; we're putting unbelievable tools in the hands of everybody on the planet to be able to do things in fundamentally better ways, get access to information, communicate, access global market, access up to date pricing for goods and services, open online storefronts, educate their kids, on and on. It's like the Swiss army knife of all time. You give somebody a smartphone all of a sudden the entire world opens up.
It's hard for me to believe where another three, four or five billion people are going to be able to be able to purchase a [inaudible 01:04:54] in a market economy for the first time ever in a fundamental integrated way and that's not going to lead to enormous economic growth. How could that possibly be the case? We basically have to believe that all these people are going to have all these tools, all these opportunities and they're going to do nothing with it, right? Which seems to me [inaudible 01:05:17]
Russ R: All the good jobs will be taken.
Marc A: Exactly.
Russ R: There won't be any news. Somehow there won't be any new ones.
Marc A: Right at the point of maximum opportunity, co-creation will come to a complete halt. I'm on the other side of it. I think we are on the verge of what could be globally a much faster rate of growth than we're anticipating because so much more talent is going to get unleashed. There's so many people all over the world who have not been able to participate in the economy at their full potential, who are now going to have the opportunity increasingly to do so. That means potentially a flowering of human creativity, innovation, entrepreneurship. You've got global spread of the entrepreneurship culture. You've got just what's happening in China alone with entrepreneurship is spectacular. You've got the global spread of venture capital. You've got the creation of all these new businesses, industries.
You've got fundamental breakthroughs happening in science and research; you've got all of these incredibly powerful changes happening and really human potential being unleashed. I think, the big questions are around institutions and leadership; which is, are the governments, the government's systems, and the economic systems going to be setup, reformed, structured in the right way so people can actually take advantage of these tools?
Are you going to be able to raise money for your company? Are you going to be able to keep money for yourself and your company or is it all going to be taken in taxes? Are you going to be able to hire employees or are you going to have European style labor laws everywhere where you can never fire anybody so you can't hire anybody? The sort of really big policy questions become even more important because they affect a lot more people. Of course, there are many countries in the world that have extremely ambitious and hungry, talented populations where the governments systems are still, at best, described as [inaudible 01:07:12]. They need to be reformed.
We need modern market-based economies. We need modern democracies. We need those ideas to spread as fast as possible. I think it will be a time of great political turmoil is probably my prediction. I think the number of government changes, government turnover, literally revolutions in the streets seems like it's on its way up. People are becoming less willing to accept a bad state of existence because they're becoming more aware of the alternative. I think they'll be a lot more political change, pressure, and strife. I think the stakes are going up.
Russ R: My guest today has been Marc Andreessen. Marc, thanks for being part of Econtalk.
Marc A: Great, thank you so much Russ.
Russ R: This is Econtalk, part of the Library of Economics and Liberty. For more Econtalk go to Econtalk.org where you can also comment on today's podcast and find links and readings related to today's conversation. The sound engineer for Econtalk is Rich [inaudible 01:08:17]. I'm your host Russ Roberts, thanks for listening; talk to you on Monday.
Coming soon: Book recommendations from Dustin Moskovitz. Follow me on Twitter for first notification!


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When: Sat., March 5, 10 p.m. 2016
A Lives Snakes event, presented by Really Nice Recordings, features performances by Malik Alston (Truth Manifest/Third Ear/Mahogani), MGUN (DBA/FIT/Wild Oats), :brownstudy (Planet E/Third Ear/Really Nice), and JTC (Ghostly/Bopside/Nation). Stay past 2am for the DATSWOTSUP! Afterparty with Wheez-ie, Calico, and Gin & Tronic.
Price: $10


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I am teaching one of my daughters how to drive with her learner's permit. My car, BTW, has a manual transmission. So, my daughter gets the additional benefit of learning the art of smooth, manual up-shifting and downshifting, etc. The enjoyable art of driving. I am very proud of how well she is doing.
The point of this post is that these driving lessons reaffirm for me (that I also share with my daughter) the notion that our driving ideally should mirror how we live, generally.
That is, during these driving lessons I suggest to my daughter that she needs always to be in control of her own driving framework. This means not hooking into some other driver's framework. This also means driving in a courteous, cooperative manner, but still only within my daughter's own framework.
Here is an example. There is a slow driver in the right lane, rolling along in an idiot-like manner (we have all seen this), slowing down and speeding up for no apparent reason, continuing to move along indecisively with a continuous left-turn signal on. Some drivers see this slow driver and themselves get distracted, yes distracted, by trying to get into the head of the slow driver, pondering or wondering: "I don't know what that driver is doing. Why do they keep moving along with a turn-signal but not making any turn or change? What do you think they are doing? Maybe I should slow down until I know what they are doing, etc.".
This can become a dangerous distraction. I tell my daughter not to waste her time or mental energy trying to ponder and get inside that other slow driver's head or try and guess what that other driver's framework might be, other than my daughter making sure she drives defensively past this other driver. The solution is to get away from that slow driver and move on without additional distraction.
Sure, my daughter needs to consider if this slow driver is a danger or threat (yes, he is), but then simply move on and get away from that driver. The main point: Don't get distracted and pulled into someone else's framing of any situation. Maintain your own framework. Continue with focus on your own perspective.
By analogy life requires the same focused, perspective. Don't get caught up, or waste your time, in another's (especially an idiot) framework or in that other person's head. It's dangerous.


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Saturday | Sunday
Since moving to Cromarty in 2012, while continuing to work as a choral conductor in Germany and The Netherlands, Edward has developed a reputation locally as a singer, teacher and adjudicator, and for Cromarty Youth Opera, which he founded with his wife Clare in 2013. Previously Edward sang extensively as a soloist and chorister; highlights included singing with The Monteverdi Choir during the Bach Cantata Pilgrimage and singing the role of Fasolt in the Grand Canyon Ring Cycle with Arizona Opera.
Later this year Edward will work with choirs in Leipzig, Dresden, Paris and The Netherlands, as well as leading workshops at the Leipzig Book Fair and chor.com in Dortmund. He will direct Cromarty Youth Opera in 'Elephant Angel' by Gareth Williams in August and this year will also see the release of his book 'it's always a pussycat: a singer's approach to choral conducting'.


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It has been a long time desire and a vision for me to bring churches in the State together. its not a movement to work towards unity of churches, though it would be. But an opportunity for us to come together in learning from one another and studying from the Bible. Not an academic training, but to encourage and train every member of the church in biblical exposition, also train leaders in Christ centred preaching.
A reminder verse:
[3] I thank my God in all my remembrance of you, [4] always in every prayer of mine for you all making my prayer with joy, [5] because of your partnership in the gospel from the first day until now.
(Philippians 1:3-5 ESV)
The pursuit is not to climb the ladder of hierarchy but to work on one platform (the Word of God)


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As our governments - local, state and federal - struggle to find ways to bring their budgets into balance, much of the conversation, indeed most of it, has centered on the cuts we must make to our social safety net. That metaphor is powerfully appropriate as I can visualize the very real people that will be falling through that net; to despair, to utter poverty, to exacerbated mental health issues, to a place of where no treatment's available for health conditions, to no heat/no electricity, to no unemployment benefits, to no food stamps, to no public housing because of a failed drug test, to sleeping outdoors . . . Need I go on?
Meanwhile, what have you heard about cuts to the largest welfare recipients*:
- Bank of America, with $4.4 Billion in profits last year, a $1 Trillion BAILOUT, and $1.9 Billion Tax Refund from the IRS
- General Electric, who has cut 20% of its "American" jobs in the past 9 years, while growing jobs overseas, received a $4.1 Billion Tax Refund, while making $26 Billion in profits over the past 5 years
- Goldman Sachs, made $2.3 Billion in profits, after receiving $800 Billion in BAILOUT money and paid . . . 1.1% in income taxes
- Carnival Cruise Lines generated profits of $16 Billion over the past five years, but paid less than $200 Million in taxes
- Citigroup paid ZERO taxes on $4 Billion in profits, after receiving a $2.5 Trillion BAILOUT
Our Lord and Savior, Jesus Christ, is shouting loud and clear!
Asking you to Imagine . . . People over Profits!
Rev. Otis Moss III
Senior Pastor, Trinity UCC
*Figures adapted from "Senator Bernie Sanders' Guide to Corporate Freeloaders"


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|Image: Unknown
I don't always love what Prada designs - this collection being a good case in point - but as she is so influential in the industry, no fashion week would be complete without a preview of her work. So for this season, Prada casts a spotlight on the chest and gives us sporty chic with an emphasis on underwear as outerwear. Bras (trompe l'oeil or otherwise) featured prominently layered on top of dresses and sweaters. Coats and dresses were covered with oversized portraits of women's faces. Athletic touches included ribbed leg-warmers and sports-inspired footwear.
|Images: Unknown


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Medical / Health Jobs In Pennsylvania, United States
Browse For Medical / Health Jobs In Pennsylvania, United States. Find The Job Of Your Dreams On HiringPittsburgh.com Today!
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- Company Confidential
- Washington, PA 15301 US
- 06/01/2018
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CORNERSTONE CARE IS SEEKING AFAMILY PRACTICE PHYSICIANTO JOIN US IN SOUTHWESTERN PENNSYLVANIACORNERSTONE CARE, INC. IS SEEKING A FULL TIME FAMILY PRACTICE PHYSICIAN TO JOIN OUR TEAM. WE ARE A FQHC NON-PROFIT ORGANIZATION WITH EIGHT LOCATIONS AND A MOBILE UNIT. THIS IS AN OPPORTUNITY TO PRACTICE IN A... More Details
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- Pittsburgh, PA 15219 US
- 06/03/2018
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BEHAVIORALNEUROLOGISTUniversity of Pittsburgh Physicians seeks a Behavioral Neurologist to work in Pittsburgh (Allegheny County), PA. Specialize in changes to a person's behavior, personality, or intellect due to brain damage; treat diseases and injuries resulting from head trauma, head injury, clos... More Details
- Northern Area Multi Service Center
- Cheswick, PA 15024 US
- 05/27/2018
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DISPATCHER Northern Area Multi Service Center (NAMS) is currently seeking to hire a dispatcher with ACCESS or DOT experience.We are located on Rt. 910 between Cheswick and Gibsonia. This is a full time position. We offer: major medical, vision, dental, PTO, and a 401K plan. An hourly rate is c... More Details
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- Gibsonia, PA 15044 US
- 05/27/2018
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FedExFreight Road Drivers Do you currently have a Class A CDL with endorsements? Want a job with comprehensive benefits including medical/dental/vision care, pension plan, tuition reimbursement and much more? Want a job where you're home every day? Our Gibsonia, PA center is looking fo... More Details
- Grane At Home
- Pittsburgh, PA 15226 US
- 05/27/2018
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Grane At Home Open Interview Day Thursday, May 31st 9am - 5pm Flexible Scheduling No Prior Experience Required! Grane At Home is currently seeking Certified Nursing Assistants (CNA), Companions, and Home Health Aides (HHA) to provide private duty, home care services to clients in the P... More Details


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History of Santa Clara County
The Sanitariums and Hospitals of San Jose--The Splendid Appointments of the O'Connor Buildings--Columbia Hospital and the Santa Clara County Medical Society--Dr. Ben Cory.
The O'Connor Sanitarium, on San Carlos Street, was erected in the year 1887 by Judge and Mrs. M. P. O'Connor, with the intention of providing an institution for the care of the aged, the sick and the afflicted. The Sisters of Charity of St. Vincent de Paul, at the invitation of the donors and suggestion of Archbishop Riordan, took possession of it on March 19, 1889. During the thirty years of its existence it has treated over 7000 patients.
It is advantageously situated in the beautiful and healthful Santa Clara Valley at San Jose. and within easy access of San Francisco. Fourteen acres of beautiful grounds surround the sanitarium and forever prevent the possibility of any adjacent structure crowding close enough to interfere with the present ideal conditions. The spacious grounds are tastefully laid out in lawns and orchard, orange plot and pinery. Traversing these are numerous concrete walks and driveways, which afford ideal opportunity for exercise and recreation.
The general plan of the building arrangement makes the most of the desirable location. The substantial brick buildings, grouped in architectural harmony, comprise a main building, two wings, chapel, kitchen, laundry, power house and stables. Isolated from these, stands the Isolation Building for contagious diseases. Numerous sheltered porches, a solarium, and a garden pavilion enable the convalescent to enjoy the benefits of the outdoor air. All the buildings are well lighted and ventilated.
The different departments are completely equipped, each to meet its own special needs. They comprise the surgical, medical, obstetrical, X-ray and electro-therapeutic departments, a clinical laboratory and pharmacy, and the isolation building for the care of contagious diseases.
The sanitarium is especially equipped for the care of surgical cases. The operating rooms are as complete and up-to-date in arrangement and equipment as it is possible to make them. The rooms are all sunny and well lighted. Owing to the favorable location of the Institution, the ideal climate, and extensive grounds, its facilities for the best treatment are ideal. Two large wards for male and female patients are maintaned and a smaller ward for chronic cases. In addition to these there is also a children's ward. Special attention has been paid to the needs of these little sufferers.
Extensive improvements have been made in the obstetrical division of the hospital. In addition to the private rooms, a newly remodeled and equipped ward has been arranged. Adjoining this is the delivery room with interior finish, furnishings, and equipment planned to provide every convenience for the physician and safeguard for the patient. The nursery, with its row of basket-beds, open grate fireplace and sanitary tubs, is ideally arranged.
The department of electro-therapeutics and radiography has been fully developed and equipped with costly paraphernalia and will prove of the utmost value in facilitating the diagnosis and treatment of various diseases and injuries. The equipment is of the very highest standard and latest design. The X-ray department has been enlarged and transferred to a suite of rooms in the surgical annex, where its convenience will be greatly increased.
Special apparatus consisting of a Kelly-Koett eye localizer for foreign bodies, a bullet, or foreign body localizes, a Roentgen stereoscope, and numerous minor accessories, all tend to enhance the value of this department. The electro-therapeutic room has a complete equipment for the use of electricty as a medicinal agent. An elaborate Wappler cabinet furnishes all varieties of the electric current. A pneumo massage apparatus is included. Special diagnostic instruments, electrically illuminated, of the latest approved models, facilitate the diagnoss of the diseases of all accessible organs and tissues. A large Victor eye magnet for the extraction of foreign bodies has also been installed.
The chemical and pathological laboratory has proved to be of great value to the hospital and the attending physicians. A complete equipment of all the apparatus, chemicals, and biological supplies necessary for modern analytical, bacteriological and pathological work is at the service of the attending physicians who desire to avail themselves of its advantages for the benefit of their patients or for original research work.
An isolation building was erected and opened for service during the year 1910. All highly contagious and infectious diseases--measles, scarlet fever, diphtheria, erysipelas, etc.--cannot be admitted or treated in the wards and rooms of the general hospital, and through lack of such a building many persons have been deprived of the facilities offered for the scientific conduct and efficient quarantine of such diseases. The isolation building was erected through the beneficence of Mr. and Mrs. C. D. Blaney, and is conducted by the Sisters of Charity of St. Vincent de Paul. Surrounded by its own grounds it is entirely separated from the main hospital buildings. The interior arrangement is such that no mutual exposure of the patients suffering from different contagious or infectious diseases is liable.
The sanitarium is not endowed, the only income being from pay patients. Its ministrations are not reserved for any one class of patients. It belongs to suffering humanity, irrespective of creed. The physicians of San Jose of all approved schools of medicine, patronize the sanitarium, thus assisting very materially toward its support. It accommodates from seventy-five to ninety patients daily.
In connection with the sanitarium there is a training school for nurses. This school is incorporated and is conducted according to the best methods of the day. The usual curriculum of the general hospital training school has been adopted. Lectures are delivered semi-weekly by the training school staff and there are semi-weekly classes conducted by the superintendent.
Columbia Hospital and Branch
There are two large private hospitals in San Jose, both conducted by the incorporated Columbia Hospital Company, of which Ellen Kaiser is president, Dr. F. H. Paterson, vice-president, and Mrs. F. H. Paterson, secretary. One hospital is located at the corner of Market and San Carlos Streets, the other in East San Jose. Both establishments represent an outlay of $150,000. The Market Street hospital is a large, modern building on a fifty-vara lot. The East San Jose hospital was purchased in 1920 from Dr. L. J. Belknap, who had conducted it for twenty-three years. The buildings are of wood and the tract contains eight acres. Both hospitals are provided with laboratories and all the up-to-date appliances. Fifteen nurses are employed and an average of eighty-five patients are treated daily. The Columbia and East Columbia hospitals were combined in 1921, the Columbia located in San Jose going out of existence. In April, 1921, the combined hospital went out of the hands of Dr. Paterson and hereafter will be conducted by a group of individuals. The trustees will control the business interests of the hospital, formulating plans for extensions and enlarging the facilities of the institution so that the staff will have every possible facility for professional conduct of their work. A clinic has been opened to be conducted along the lines pursued by the larger cities.
The San Jose Hospital, the property of a corporation of local business men, is now in course of construction on Santa Clara Street, beteween [sic] Fourteenth and Fifteenth Streets. It will be a strictly modern, fire-proof structure throughout and will be equipped to provide the greatest possible comfort for patients, nurses and physicians and surgeons. The project is sponsored by sixty-six leading physicians of the county and the management will be in the hands of a board of directors of which S. G. Tompkins is president and J. L. Haskins, secretary. The total cost of the building will be $185,000. All the money for the site and building has already been secured.
County Medical Society
The Santa Clara County Medical Society was organized in 1870, reorganized in 1906, and is still in existence. Its objects are to create fraternal feelings among members, to advocate a high standard of ethics, to frown upon illegal practices, to safeguard the public health, to receive and discuss reports of interesting cases and to keep abreast of the times in all matters pertaining to the practice of medicine and surgery. The officers are: T. L. Blanchard, president; E. F. Holbrook, first vice-president; G. P. Hall, second vice-president; R. L. Hogg, third vice-presdent; H. J. B. Wright, treasurer; J. L. Pritchard, secretary; councillors at large, A. E. Osborne, P. A. Jordan, J. J. Miller; admission, M. D. Baker, J. J. Miller, L. V. Saph; ethics, A. E. Osborne, J. W. Thayer, R. G. Reynolds, E. A. Flipello, H. C. Brown, executive, Chas. M. Richards, J. C. Blair, Frank Paterson, L. S. Moore, F. S. Ryan; publication and library, C. E. Saunders, A. E. Dickenson, L. M. Rose; finance, P. A. Jordane, N. H. Bullock, J. I. Beattie; public health, D. A. Beattie, Jonas Clark, S. B. Van Dalsem, C. C. Ledyard, Bert Loehr.
It was through the instrumentality of this society that the city board of health came into existence. The society, however, has never left the full burden of the work to the health office, but by means of special committees has aided the board in exposing unsanitary conditions which have menaced the public health and demanded attentions and abatement.
Dr. Ben Cory was the pioneer physician of the city. He came to San Jose in 1847. He saw a few adobes scattered about the Plaza and believing that time would witness a material growth in population and business at once established himself in his profession. He witnessed a transformation of the valley and state, and his most extravagant dreams of its future growth in wealth, in adornment, and all that accompanies an advanced civilization were more than realized. Dr. Cory was a native of Ohio, and was born in 1822. He was a graduate of Miami University and commenced the study of medicine with his father, who was a prominent physician. Later he attended the Medical College of Ohio and received his degree in 1845. For two years he practised medicine with his father, and then started across the plains to the Pacific Coast. He arrived at Portland, Oregon, and from there came to San Jose. He performed much public service. He was a member of the first Legislature of the state, and was also a councilman and member of the board of education. He died in 1895.
Dr. Cory was very popular, both as a citizen and as a physician and surgeon. He was kindhearted, and generous to a fault. While his profession was lucrative, he was many times low in pocket on account of his inability to say no to the demands upon his purse. He lost many thousands of dollars endorsing notes for friends and it was while he was almost financially embarrassed on account of these losses that an old friend living in Sacramento wrote to him that he was in dire need of $700. If Dr. Cory would endorse a note to that amount for him he would be eternally obliged. Dr. Cory hated to refuse the request, but he felt that he must, so he answered his letter giving his reasons for the refusal. The Sacramentan wrote another letter, a plea so forcible that the good doctor could not muster up courage to say that he, too, was hard pressed and could not oblige his friend. Instead, he endorsed the note and the Sacramentan was profuse in his expressions of thankfulness. He appreciated the favor and would see to it that the note was paid before maturity. Time passed and Dr. Cory had forgotten about the affair when one day he received a note from the bank which had paid over the money, stating that the note was due, that the Sacramentan had failed to pay even the interest, and that it was now up to the doctor to step in and pay the $700 and interest. Dr. Cory was a very mild-mannered man, but it is possible that he used rather strong language when he realized that he had again been taken in. In his wrath over the duplicity of his former friend he sat down and wrote the Sacramentan a letter, winding up with the expressive phrase, "You are no gentleman."
A week passed and then a well dressed man walked into Dr. Cory's office and stated that he represented the Sacramentan and was the bearer of a challenge to fight a duel. Dr. Cory laughed and said he would accept the challenge. He was then informed that as the challenged party he had the right to name the weapons that should be used. "Shot guns at ten paces," was the reply. The Sacramentan's representative demurred at the choice, but Dr. Cory was not to be moved from the position he had taken. "Shot guns at ten paces--take it or leave it," he said, and the representative went out with a frown on his face. That night the Sacramentan left San Jose and no mention of duel or money was ever afterwards made by him.
Dr. Cory had a large professional practice, both
in the city and the country. One night, in the late '50s, an urgent case
called him to Alviso. While at the house of his patient he was presented
with a large sweet potato as a sample of what was grown on the marsh lands
near the bay. On the road home he kept the potato in his hand and when
about half way to San Jose was stopped by a highwayman with the customary
demand to throw out his money and other valuables. The doctor reined up
and then, unconsciously, lifted the potato and began to twiddle it in his
hand. The highwayman saw the tuber and did not identify it. To him it looked
like a pistol in the hand of a man who meant business. With a yell, "don't
shoot," he left the road, jumped over the ditch, and was soon out of sight.
For the moment Dr. Cory was amazed at the robber's action, but a glance
at the potato furnished the explanation needed.
Source: Sawyers, Eugene T. History of Santa Clara County, Los Angeles, Calif; Historic Record Company, 1922.