The other thing is the companies that people debate today, for the most part, have extraordinarily high customer count — user count. Market sizes have expanded gigantically. And so you’ve got these things now that people are arguing about that have, in some cases, a half billion users, on their way to a billion users. And if people want to take a position that you can have a large scale internet service that’s worth a billion users that’s not going to be worth anything, you could take that position, I’m not sure you would recommend it.
Interviewer: Yeah, no, that makes sense. As you say when you look at the cost per user, it’s actually only $36, which is much, much less than in many others for the WhatsApp deal. But another thing you previously mentioned was that, MBAs flocking into the tech sector is a sign of the bubble. So to play devil’s advocate, many of the people here are flocking to the tech sector. So, could that perhaps be a sign of a bubble?
Marc Andreessen: So things are heating up. And so, historically, there’s actually been — and I suspect everybody in the room knows this, there has been a direct correlation between PE multiples and MBAs tilting into the tech industry, for sure. So I think something different is actually happening. I think something different is happening with how companies are getting built. And maybe I can do the long version, kind of the — the slightly long version of this, which I think there’s actually a whole new way companies are being built in the last 10 years and, I think that business people and MBAs turn out to be very central to it in a way that’s different than the past.
So I kind of divide the story of how the great technology companies got built kind of in the three phases and I think we’re in the third phase now. The first phase was in the ‘40s, ‘50s, ‘60s, ‘70s. And it was so crazily hard. If you talk to people who were in business then or you read the stories, it was so hard to build a new tech company. It was such an unbelievably sort of exceptional thing to do that you only really have these really extreme characters who would do it. And there were a pretty small number of them. And they were extreme, extreme characters, like they were – they make all the current, like, high octane entrepreneurs look like wusses. And the ones I’m thinking of, Thomas Watson Senior. If you want to read, like, what it’s like to work for somebody who’s harsh, read the book on Thomas Watson Senior. He makes all of today’s entrepreneurs look like cream puffs. He would just literally sit in his staff meetings for like five hours and just scream at his guys, there’s just this — then he built this astonishing company, IBM, off the other side of that.
David Packard. David Packard actually was quite a character. David Packard, people now remember for the HP way and for kind of that whole warm and fuzzy kind of approach to running companies. When David Packard was actually running HP, he had two nicknames. One was Pappy, which is kind of what people remember in a kind of paternal instinct type. His other nickname was the Mean One. And he similarly would just tear people apart. And then Ross Perot is my favorite example. Ross Perot built the first great outsourcing company, one of the big tech successes in the ‘60s. And of course, he was fantastic as a business builder when he came into contact with the American public, people went, what? And again this sort of extreme personality.
So you get into this, this kind of – this sort of will to power thing that was happening. And by the way, the VCs in those days, I think, were very similar. Tom Perkins, who’s become re-famous again lately is the same kind of character. He’s a very, very extreme character and he always was. But that’s what it took for him to do what he did in the ‘70s, and ‘80s in venture capital. So those were kind of the extreme days and then I think both VC and entrepreneurship, tech entrepreneurship, sort of professionalized, and so you had a lot of VCs then. And this includes great VCs, John Doerr, Mike Moritz, Jim Breyer, who are business people or investors first, and never ran companies. And then you had this kind of move through the ‘90s where you had this kind of default model where the one thing everybody knew was that founders couldn’t possibly run their companies. And so you would have a founder and then you would basically promote or fire them to chairman or CTO and then you’d put in a professional CEO as fast as possible.
And I think what happened is that model just got extreme. And I think by the late ‘90s in the Valley, we were mostly building companies that were kind of shells, or, kind of like puff pastries of companies where they really didn’t have — at the height of the bubble in ’98, ’99, the products that were getting built for the most part weren’t very good. And these companies were kind of on this bomb run to get public as fast as possible, and you had all these catch phrases, like go big or go home. Or my other favorite one at the time which was, forget details, just do deals. And so you have this really kind of mercenary, hit and run approach to building companies. And then all those companies vaporized after the crash because it turned out they didn’t have valuable products. They didn’t have deep engineering capability. And then all the engineers who worked for those companies hated working for those companies, because they were completely sales-driven, sales-led, these kind of mercenary kind of exercises at the height of how bad it got.