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Andreessen on Charlie Rose: "I Am Creating A Fund." (Full Video)

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Marc Andreessen appeared on Charlie Rose last night. (The entire interview is embedded above). He gave Rose a primer on everything from Facebook and cloud computing to the mobile Web. But he also tells Rose: “I’m creating a fund.” Actually, Andreessen is creating it with his investing partner Ben Horowitz, and it will formalize the angel investing he has been doing on his own for the past several years. It will be called Andreessen Horowitz. From the transcript:

Charlie Rose:
Why are you doing this?

Marc Andreessen:
Because of the nature and the scale of the opportunities. We’re actually been investing ourselves with our own money for three years and we’ve invested in 36 — he and I invested together in 36 deals in three years so about one a month.

Charlie Rose:
Yeah, but I’ve read that you think that the normal investment for you to make, this may have been prefund, what, was about 100,000 to 200,000?

Marc Andreessen:
That’s right, and we’re actually going to preserve and extend that model in the fund. So historically we’ve only invested up to $200,000 total in a deal. We’re going to definitely bring that up in the fund because we’re going to raise more money, be able to put more money in. But it’ll be pretty typical for us to do a $500,000 investment or maybe down to 200,000 or maybe up to a million in a deal to start. And what we’re seeing is a whole generation of startups that actually don’t need very much money to get started, so the cloud computing example, or a mobile application, an iPhone developer doesn’t need very much money to get started.

Andreessen, who sits on Facebook’s board, also says that Facebook could be generating $1 billion in revenues today if it wanted to, and thinks the New York Times should go all digital.

Marc Andreessen:
There’s a lot of confusion out there. Facebook is deliberately not taking a lot of the kind of normal brand advertising that a lot of Web sites will take. So you go to — a company like Yahoo which is another fantastic business and they’ve got these you know banner ads and brand ads all over the place, Facebook has made a strategic decision to not take a lot of that business in favor of building its own sort of more organic business model and it’s still in the process of doing that and if they crack the code on that which I think that we will, then I think it will be very successful and will be very large. The fallback position is to just take normal advertising. And if Facebook just turned on the spigot for normal advertising today, it’d be doing over a billion dollars in revenue. So it’s much more a matter of long term strategy. Companies –

Charlie Rose:
So if you want to make a lot of money instantly, you could.

Marc Andreessen:
Yeah, oh, very easily. It could sell out the homepage and it would start making just a gigantic amount of money.

The full transcript is below.


Transcript

The Charlie Rose Show Session Two

Guest:
Marc Andreessen

Charlie Rose:
Marc Andreessen is here. He is one of Silicon Valley’s most respected entrepreneurs. He has already founded and sold two companies, each for over a billion dollars. The first was Netscape. It revolutionized web browsing before it was sold to AOL in 1999. His second company, Opsware, was bought by Hewlett Packard.

Charlie Rose:
Mark Andreessen is here. He’s one of Silicon Valley’s most respected entrepreneurs. He’s already founded and sold two companies, each for over a billion dollars. The first was Netescape. It revolutionized web browsing before it was sold to AOL in 1999. His second company, Opsware, was bought by Hewlett Packard in 2007. He has two new ventures, the social networking site, Ning, and a brand new venture capital fund. We want to talk about all of that. I am pleased to have him back on this show. Welcome.

Marc Andreessen:
Thank you.

Charlie Rose:
First just let me talk about something that has — you own 1.6 percent of it. It is Facebook.

Marc Andreessen:
Oh actually I own less than that.

Charlie Rose:
Did you? Oh, no –

Marc Andreessen:
Fortunate enough to be on the Board.

Charlie Rose:
Okay, fair enough, if you’re on the Board, I mean, why did I read that it was 1.6 percent? Somebody then –

Marc Andreessen:
Somebody’s giving me a –

Charlie Rose:
You can’t believe what you read.

Marc Andreessen:
— credit I don’t deserve.

Charlie Rose:
All right, because they said that you had invested at the same time $260 million, is that right or wrong?

Marc Andreessen:
No, no.

Charlie Rose:
None of my business.

Marc Andreessen:
No, I joined the Board later on.

Charlie Rose:
Okay, all right.

Marc Andreessen:
Yeah, last year.

Charlie Rose:
There is this sort of silly idea, but you want to speak to it, that Facebook is the next Google and Google is the next Microsoft. You’ve heard of that. Does any of it resonate with you?

Marc Andreessen:
I don’t think there are nexts, like so for example there was IBM and then people said here’s the next IBM and there never was the next IBM. I don’t think — Google’s a totally different business than Microsoft.

Charlie Rose:
IBM was not the next IBM.

Marc Andreessen:
IBM was not the next IBM. Microsoft wasn’t the next IBM. Google — Google’s its own company, it’s a fantastic company, it’s its own company with its own model. Facebook is a fantastically successful company with a huge amount of potential. Google is you know just a gigantically successful business you know I think for anybody to voluntarily step up and compare themselves to that I think would be hubris, I think that would be a bit much in general. But Facebook’s got huge potential and frankly I think it deserves to be evaluated on its own.

Charlie Rose:
Well, it is evaluated at $15 billion?

Marc Andreessen:
Well, there was an investment round at $15 billion evaluation which was for preferred stock.

Charlie Rose:
Which was the Microsoft investment?

Marc Andreessen:
Microsoft investment and some other investors. People are getting confused on that by the way because that’s preferred stock and there was an internal assessment, a valuation [spelled phonetically] that people have lots of rumors about that was lower than that which was for common stock. So people are getting the preferred and common confused. And of course this is all abstract, right, because the company’s private. You know someday the company will you know at some point –

Charlie Rose:
And because the company’s not making any money.

Marc Andreessen:
Well, company’s financials likely are private so it gets to keep that to itself but company’s [inaudible] –
[talking simultaneously]

Charlie Rose:
But you’re on the Board of Directors –
[talking simultaneously]

Marc Andreessen:
I am on the Board.

Charlie Rose:
— you can be here and tell us.

Marc Andreessen:
I know. Company’s doing very well. On its internal goals it’s doing very well. It’s passed 175 million active users. Half of those users use it every day. A lot of those users use it 50 times a day. It’s generating I think a substantial amount of revenue. I think it can be doing a lot more revenue in the years to come.

Charlie Rose:
Have you read this story? Fortune has marked on the cover how Facebook has taken over our lives then but is it a real business?

Marc Andreessen:
Yeah, sure. So I think people ask us about new companies all the time. They –

Charlie Rose:
They monetize it.

Marc Andreessen:
Yeah, [unintelligible] they monetize it. But look it’s got 175 million active users. It’s the sixth most populated country in the world right now if you compare it to countries. It’s on its way to 500 million users. I mean, it’s going to be a multibillion dollar success.

Charlie Rose:
So what’s going to be the trick to monetize it?

Marc Andreessen:
Oh, okay, so and this is where people are getting confused, is Facebook is deliberately, and this is actually very interesting.

Charlie Rose:
There’s a lot of confusion out there.

Marc Andreessen:
There’s a lot of confusion out there. Facebook is deliberately not taking a lot of the kind of normal brand advertising that a lot of Web sites will take. So you go to — a company like Yahoo which is another fantastic business and they’ve got these you know banner ads and brand ads all over the place, Facebook has made a strategic decision to not take a lot of that business in favor of building its own sort of more organic business model and it’s still in the process of doing that and if they crack the code on that which I think that we will, then I think it will be very successful and will be very large. The fallback position is to just take normal advertising. And if Facebook just turned on the spigot for normal advertising today, it’d be doing over a billion dollars in revenue. So it’s much more a matter of long term strategy. Companies –

Charlie Rose:
So if you want to make a lot of money instantly, you could.

Marc Andreessen:
Yeah, oh, very easily. It could sell out the homepage and it would start making just a gigantic amount of money. Yeah and so there’s just tremendous potential and it’s just a question exactly how they choose to exploit it. What’s significant about that is that Marc is very determined to build a long term company. And you know there’s as you know there are people in the Valley who like quick hits and like sell companies quickly and then there are people, Andy Grove for example, or Bill Gates, and I think in his own way now, Marc, and obviously the Google guys are other examples of this, who want to build a long term business. And so he’s got his eyes way out on the horizon.

Charlie Rose:
So when one others may have sold out to larger media companies –

Marc Andreessen:
Yeah.

Charlie Rose:
Mark insisted he would remain independent and develop his own company in his own way.

Marc Andreessen:
Yeah. And he had those turning parts presented to him. Any successful company in the valley gets acquisition offers and has to decide whether or not to take them. And he’s passed on some very lucrative offers and has a very big vision.

Charlie Rose:
Tell me what the big vision is.

Marc Andreessen:
So the big vision basically is — I mean the way I would articulate it is connect everybody on the planet, right? So I mean 175 million people –

Charlie Rose:
If you don’t think large, what the hell –

Marc Andreessen:
Exactly. 175 million people — 175 million people on the thing now. Adding a huge number of users every day. 6 billion people on the planet. Probably 3 billion of them with modern electricity and maybe telephones. So maybe the total addressable market today is 3 billion people. 175 million to 3 billion is a big challenge. A big opportunity.

Charlie Rose:
Let me remind you that you’re in the business of social networking.

Marc Andreessen:
Of course.

Charlie Rose:
That’s what your Ning is all about.

Marc Andreessen:
Of course, my own company Ning is about to cross 20 million users, and we’re adding 2 million users a month. We’re — and Ning is actually a business that lets you create your own social network, and we’re about to cross a million social networks on Ning that are –

Charlie Rose:
So you want to create a social network with your high school chums, then you can do that.

Marc Andreessen:
You can do that. And there is over a million of those. It’s easy, it’s free. Advertising — there is all kinds of ways. We make money on that, and that’s growing very fast. MySpace is doing very well for News Corps. LinkedIn is another company I’m an angel [?] investor in, you know, got north of 20 million resumes on it now. Everybody uses LinkedIn now to look for jobs and recruit. Which is a very hot topic these days.

Charlie Rose:
I would assume so. So social networking is hear to stay.

Marc Andreessen:
Oh, yeah.

Charlie Rose:
And it’s potential is just beginning.

Marc Andreessen:
Yeah.

Charlie Rose:
If you can connect everybody, then you have a huge opportunity to do a bunch of stuff.

Marc Andreessen:
Here’s the thing. If you can get 50 people or 100 or 150 million people to do something, then over time, you’re going to be able to get everybody to do it.

Charlie Rose:
Low politics –

Marc Andreessen:
Everything. Everybody. So there is huge potential, huge upside.

Charlie Rose:
The Obama campaign –

Marc Andreessen:
Yeah.

Charlie Rose:
Revolutionized politics, didn’t it?

Marc Andreessen:
Excellent example. The Obama campaign by far, like the most aggressive state of the art uses social networking approaches, right, and philosophies. Now, primarily, that was harnessed in the form of fund raising. Right? It was an engine to be able to generate just gigantic numbers of campaign contributions. So every new campaign is going to use these technologies and these approaches. We have a lot of politicians creating networks on Ning. There will be a whole new wave of social networking in politics, right? And also the Obama campaign was very good for volunteer coordination over this. But there is a whole aspect of this for getting the message out in how the campaign gets covered and how the debates happen and how communication happens, which has yet to come. And that will be in ’12 or ’16.

Charlie Rose:
And in fact, I think Obama now speaks — rather than using the radio program, speaks online.

Marc Andreessen:
On YouTube. Right. He puts the video on YouTube and then that spreads out all over the web. In politics that’s amazing. In the rest of the world, that’s how things work today.

Charlie Rose:
Does YouTube make money?

Marc Andreessen:
Google — I mean — I don’t know specifically. That’s a Google thing.

Charlie Rose:
You know.

Marc Andreessen:
Well, if they don’t –

Charlie Rose:
You know.

Marc Andreessen:
I’ll give you the same answer as I do on Facebook. If they’re not making money today, they easily could. These are all under-monetized, under-monetized assets. Give you an example. Every video on YouTube — Viacom. Viacom is suing YouTube, suing goggle for copyright infringement. It’s 180-degree the wrong strategy.

Charlie Rose:
On the part of Viacom?

Marc Andreessen:
On the part of Viacom to sue YouTube. They should be using YouTube as a distribution channel, right? They should let all the videos go on to YouTube, and then ever time there is a Viacom video on YouTube, there should be a buy button. And you’re driving traffic directly pack to the properties, you’re selling DVD’s, you’re selling music, you’re selling video games, you’re selling all the stuff that Viacom sells. These are the distribution vehicles of all time. These are nirvana. Right? It’s like Napster for the music industry.

Charlie Rose:
I should count my lucky day that all my programs are on YouTube.

Marc Andreessen:
Oh, yeah. Of course. Because you want people to see them.

Charlie Rose:
Right.

Marc Andreessen:
I mean you want people to see them. So you put them out there. Like I say, there should be a buy button. There should be an advertisement.

Charlie Rose:
Right.

Marc Andreessen:
It’s like with Napster with music, right? 20 million people lined up in 1998 and decided they wanted to start using Napster to start listening to music. If there had been a buy the CD but been there, or buy the digital track, it would have been a gigantic source of revenue for the music industry and the music industry would be far healthier today. And so when you get huge numbers of people lining up to do something, in my view, you figure out how to take advantage of that.

Charlie Rose:
In my view, you have a market.

Marc Andreessen:
Right. Yeah. A market. You know, magic markets don’t appear –

Charlie Rose:
No, that’s right.

Marc Andreessen:
— all the time, so you take advantage of them.

Charlie Rose:
Okay. So what about this other part of Facebook, taking over our lives? Not so good.

Marc Andreessen:
Well, obviously I don’t think that that’s the case. So everything on Facebook is put on Facebook, or any of these other sites linked in as put on voluntarily. People have a lot of control who gets to see it and who doesn’t.

Charlie Rose:
You don’t deny that, in fact, some employers go first to Facebook and therefore if they see something they may not like, they may not hire somebody?

Marc Andreessen:
Well, yeah, but if I put photos of myself dancing around at a party down here on the wall and then apply for a job with you –

Charlie Rose:
There are photos around?

Marc Andreessen:
Possibly. I would have to check your hallway. Check your entrance. Check your Facebook pages.

Charlie Rose:
Yes, exactly.

Marc Andreessen:
But –

Charlie Rose:
I’m talking with about you.

Marc Andreessen:
For me? I’m sure there is photos. Who knows what kinds of photos are out there on me. But, yeah. I mean people are going to check. People are going to do Google searches. But I’ll tell you, it’s the other way around also; right? You’re an employee, you get to learn a lot more about the company you’re going to go to work for.

Charlie Rose:
So you find out about them, too.

Marc Andreessen:
Sure.

Charlie Rose:
On Facebook?

Marc Andreessen:
On Facebook, on Google –

Charlie Rose:
But there is always this controversy just erupted, which is the idea of who owns the user’s profile?

Marc Andreessen:
Yeah. Yeah. So there was confusion, Facebook put out a new release to their so called terms of service. It was sort of legalese. And it caused a lots of confusion. So Mark has announced that they’re actually pulling those –pulling that off the site, referring to the previous version, and they’re going to write a new document which is in English.

Charlie Rose:
Which says?

Marc Andreessen:
Which says users own their content.

Charlie Rose:
But do they keep it though? Does Facebook keep it, even though users own it?

Marc Andreessen:
Well, there is –

Charlie Rose:
Do they keep it after you sign off? They still keep –

Marc Andreessen:
There is a technical definition of keep, and they be there is actually practical like would it ever get used for anything. And so –

Charlie Rose:
So the answer is they do keep it, but it will never be used for anything?

Marc Andreessen:
No. I’m not saying they do or they don’t. I’m just saying because there is a copy –

Charlie Rose:
You know they do. What are you talking witho about?

Marc Andreessen:
I don’t know there is a lot of reason to keep people’s drunken party photos –

Charlie Rose:
But they do.

Marc Andreessen:
I don’t know. Maybe in some cases there are copies. Maybe there aren’t. If it never gets used for anything –

Charlie Rose:
Why don’t they erase it all?

Marc Andreessen:
Why doesn’t Google erase everything in the cache once websites disappear.

Charlie Rose:
I don’t know. That’s a good idea.

Marc Andreessen:
Well, in general, you try to –

Charlie Rose:
That’s a good idea.

Marc Andreessen:
You try to clean it up. Well, you don’t always know what’s active and what’s not. You don’t know when a user is going to come back. You don’t know –

Charlie Rose:
Oh, you being one of the technology geniuses don’t know?

Marc Andreessen:
I’ll tell you what. If a website dropped offline and Google immediately cut it out of their index, everybody would complain because it will just mean if a website just crashed for five minutes, it’s gone –

Charlie Rose:
Yeah, right. Right. So what’s the answer to all this?

Marc Andreessen:
Well, the answer to this is there is, I think, always a middle ground. You have to be very respectful of privacy. You have to provide a lot of controls to let people decide. Have sliders, and let people decide how they want to set it.

Charlie Rose:
Okay.

Marc Andreessen:
Give people the tools.

Charlie Rose:
Back to Ning. How many networks do I want to belong to? There is Linkedin, there is Facebook, there is — on and on and on and on.

Marc Andreessen:
I would say how many things do you care about in your life?

Charlie Rose:
Oh, man.

Marc Andreessen:
How many things are you into?

Charlie Rose:
I don’t want to belong to that many social networks.

Marc Andreessen:
But I mean that’s where it’s going. You’re going to be interconnected. You’re going to be interconnected into a web –

Charlie Rose:
Of tennis players, of whatever in your –

Marc Andreessen:
Exactly. People you grew up with, people — you know, shared –

Charlie Rose:
How many do you belong to?

Marc Andreessen:
Oh, dozens.

Charlie Rose:
Dozens. What kind are they? Tell me what they are?

Marc Andreessen:
There are all kinds of things. For music, I like crime fiction, I like –

Charlie Rose:
Just — slow down. Did you create this on Ning, this crime fiction?

Marc Andreessen:
No, no, no. In that case somebody else created it, and so –

Charlie Rose:
And I joined it.

Marc Andreessen:
I’m watching it.

Charlie Rose:
Have you created any of them yourself?

Marc Andreessen:
Well, I’ve created networks — I haven’t created anybody that [inaudible] scale.

Charlie Rose:
[laughter]. [talking simultaneously]

Marc Andreessen:
I haven’t created any that I would tell your audience about.

Charlie Rose:
10 or 11 or –

Marc Andreessen:
Exactly. Exactly. Small. But we use them all. One of the nice things is we see all the new networks being created, so we sign up for a lot of them ourselves.

Charlie Rose:
When we interview people like you, we always have to ask this question. What is the hottest idea there and what’s the next big idea?

Marc Andreessen:
Yeah. Well, so I mean I think — maybe this goes off track from your question, but I think the hottest idea is innovation is actually alive and well. I mean there are more — I know. But look, there are a lot of people who are arguing the other side of that.

Charlie Rose:
That innovation is dead?

Marc Andreessen:
Oh, there is a lot of people — I mean a lot of people I have been hearing or reading. There is a lot of, you know — well, I mean –

Charlie Rose:
Saying what?

Marc Andreessen:
Innovation is dead or these things can’t be turned into businesses. One or the other.

Charlie Rose:
That’s not innovation. They got this great thing but they can’t monetize it.

Marc Andreessen:
There is even some very successful people out in Silicon valley who are arguing that innovation is dead.

Charlie Rose:
Like whom?

Marc Andreessen:
Two very good friends of mine, Andy Grove and Judy Estron [spelled phonetically].

Charlie Rose:
That’s true. They are saying — you’re right, you’re right.

Marc Andreessen:
There are actually people saying that. So what I’m actually seeing is an endless series of new ideas. We can name all kinds of — cloud computing is a fantastic new idea. It’s –

Charlie Rose:
That’s not a new idea. It’s been out there for –

Marc Andreessen:
Well, I started a company called Loud Cloud in 1999 –

Charlie Rose:
I know you did.

Marc Andreessen:
— which –

Charlie Rose:
10 years ago –

Marc Andreessen:
People didn’t know what we were talking about. But now, it’s a big deal. I mean it’s a legitimate –

Charlie Rose:
It’s been around for a while.

Marc Andreessen:
But at scale, as a big thing — let me tell you what’s happening. So Amazon has this so-called cloud service. And so companies instead of needing their own servers, they can just upload their software code into the Amazon cloud and it will actually return their application or their site on Amazon servers. So you’ve got a whole generation of startups that are basically just a couple of programmers with a couple laptops, and they upload everything into the Amazon cloud. It’s pay by the drink like utility. So all of a sudden, you have this whole new wave of Internet startups getting started for practically no money, right? So there is a level of innovation. Every kid coming out of Harvard, every kid coming out of school now thinks he can be the next Mark Zuckerberg, and with these new technologies like cloud computing, he actually has a shot.

Charlie Rose:
There are more opportunities today than there have ever been.

Marc Andreessen:
Oh, yeah.

Charlie Rose:
Because of all the different kinds of things that are possible?

Marc Andreessen:
Yeah. It’s a cascading. It’s a layering effect. Every layer of new technology makes another layer of innovation –

Charlie Rose:
Exactly.

Marc Andreessen:
— possible on top, and that just keeps roll.

Charlie Rose:
All right. Let’s talk about mobile for a second, because you’ve said some interesting things about that, cell phones and mobile. There was a big meeting, I guess, over in Spain, Barcelona or somewhere –

Marc Andreessen:
Yep.

Charlie Rose:
— right? Did you go to that?

Marc Andreessen:
No, I didn’t.
I read about it online.

Charlie Rose:
So did I.

Marc Andreessen:
There we go.

Charlie Rose:
So tell me about it. What came out of that, and so — what can we say about where we are and where we’re going in terms of mobile? And later, this whole idea of another company you have called Quick or something.

Marc Andreessen:
Qik –

Charlie Rose:
Okay So take off.

Marc Andreessen:
So the big thing is mobile has arrived. So you have these technology friends that people talked about, and talked about, and talked about, and talked about, and talked about, and they never quite happen. And then all of a sudden, they happen. And they’re a big deal. The Internet was like that. The Internet took off in ’94, ’95. The Internet had much getting built for 25 years up to that point. But it took off in ’95.

Charlie Rose:
It took off because of you in part, because of the browser?

Marc Andreessen:
Because the technology got right. The technology of the browser. But the browser became possible because the windows interface, the windows and Macintosh user interfaces became mainstream. So the technology comes together, and all of a sudden the market takes off. So in mobile, you’ve now got the 3G networks.

Charlie Rose:
Right.

Marc Andreessen:
You’ve got really super sophisticated handsets. You’ve got application developers, you’ve got content, you’ve got all this stuff, and it’s just catalyzed, and it’s just gone boom. And so here in the US, we see it with the iPhone.

Charlie Rose:
Right.

Marc Andreessen:
Right? And now the iPhone is a template that every other technology vendor is going to copy, right, or base ideas off of.

Charlie Rose:
Explain that.

Marc Andreessen:
Right. So the iPhone is the first true cell phone that is actually a full computer.

Charlie Rose:
Right.

Marc Andreessen:
It has a full operating system. It has the ability to support a large number of applications. It has a software development kit that you can use to build applications. It has a way to distribute applications over the network onto the phone.

Charlie Rose:
It’s a whole business. It’s a new venture, in fact, for people to provide applications for the iPhone.

Marc Andreessen:
Exactly.

Charlie Rose:
It’s a big venture capital business.

Marc Andreessen:
Yeah. And in fact, actually, there’s thousands of iPhone applications. But –

Charlie Rose:
Exactly.

Marc Andreessen:
— [unintelligible] in the last 12 months.

Charlie Rose:
Exactly.

Marc Andreessen:
And some of them are free, and some of them you charge money for.

Charlie Rose:
Right.

Marc Andreessen:
And there’s just enormous diversity of application. So whether you’re a doctor, and you’re reviewing X-rays on the thing, or whether you’re a caterer listening to music, or whether you’re sending — you know, you’re on the FaceBook application or you’re on a Ning application, it can do anything. So it’s a full general purpose computer. And that’s the first time that somebody has actually delivered that product with a fast — with relatively fast AT & T 3G network.

Charlie Rose:
What was so different about the iPhone that made it sort of a game changer?

Marc Andreessen:
I would say two things. One is, it’s the first real operating system. And I say that’s a sort of — sounds like it’s a technical concept. But it’s the first operating system that really makes a lot of applications possible. And there’s a whole bunch of technical details for that, but it’s a real [unintelligible]

Charlie Rose:
A big system within a phone.

Marc Andreessen:
It’s actually unism. It’s actually the same operating system –

Charlie Rose:
Right.

Marc Andreessen:
— that runs banks and airlines.

Charlie Rose:
Right.

Marc Andreessen:
Just shrunk down to run in the phone. And that’s part of the brilliance of what Apple did is it’s a real operating system. And then also, they packaged the whole thing together, including the tool kits to build the applications and then the way to actually distribute the applications onto the phone. And that had never been done before. So you could have bought a Microsoft phone or a Rim phone or whatever, and they just — they never had it quite put together right so somebody could build an application, distribute it, sell it and get it down to [unintelligible].

Charlie Rose:
In fact, you have said that iPhones are the demarcation point between operating systems. And the other problem we had is that from were so many different standards.

Marc Andreessen:
Right, right, of course.

Charlie Rose:
In America, unlike Europe, and so they got a — and Japan, they had a huge –

Marc Andreessen:
Yeah.

Charlie Rose:
[unintelligible] Asia, not Korea.

Marc Andreessen:
For building proprietary systems, they had a big advantage because there was a single network.

Charlie Rose:
Right.

Marc Andreessen:
Basically a single kind of network. Now in the US, the networks have also consolidated down.

Charlie Rose:
Right.

Marc Andreessen:
So there’s a much smaller number of networks. But now the iPhone is a point, sort of a central point whereas a developer, you can rely on the iPhone being a stable platform for development. And so a lot of developers are doing that. And then the other significant thing is now that the iPhone is successful, it paves the way, much like the MacIntosh paved the way for Windows PCs.

Charlie Rose:
Right, right, right.

Marc Andreessen:
It paves the way for another set of companies, whether it’s Microsoft or Rim or, you know, dozens of others who are startups to create new devices.

Charlie Rose:
By the way, you are one of the people who really do — and I think that this is enormous, to give credit to Bill Gates for developing an operating system that was the standard.

Marc Andreessen:
Yes.

Charlie Rose:
And things happened because of that.

Marc Andreessen:
That’s a big deal.

Charlie Rose:
You know.

Marc Andreessen:
That’s a very big deal. And it’s a very serious commitment for a company. Apple’s had this commitment, Microsoft’s had this commitment. You have to commit — it’s actually a commitment to what’s called backward compatibility. See, if you have to commit to never break anything. So you load up Windows Vista, and you can still run the original Visical [spelled phonetically] from 30 years ago, which was the original killer app on the PC, original spreadsheet. And so that is a long-term institutional commitment that takes a very serious company to be able to do. And then the opportunities, I mean, Netscape was an application that got built on top of that kind of platform. The Macintosh is that, the iPhone is that. And it’s sort of a responsibility for the next set of vendors to do the same thing.

Charlie Rose:
I just read I think this week where Microsoft has an operating system that they’re — a mobile operating system that they’re now going to work with LG and a whole new phone. I mean, other people will be doing that.

Marc Andreessen:
Well, they’re doing a rethink.

Charlie Rose:
Trying to create new operating — what?

Marc Andreessen:
They’re doing a rethink. They’ve had a mobile strategy for years, right, and they’ve had a mobile, Windows Mobile. They’re doing a rethink of it because they’ve seen the iPhone, right? So the iPhone is like –

Charlie Rose:
They’re doing a rethink because they saw Google, too.

Marc Andreessen:
Well, and also — another good reason to do a rethink. The iPhone is liked beam from the future, right? The iPhone, when it landed was like beamed in from five years in the future. And so it has — it itself is fantastic, and it has inspired a level of creative thinking around it that we’re going to see the results from over the next two, three, four years. And there’s lots and lots — I mean Samsung obviously is very serious about this, Nokia is very serious about this. You know, and then there’s a lot of software developers. Ning is very serious about providing the software for this. FaceBook is as well. And Google is as well. And so there’s going to be just a tremendous amount of innovation, and then actually a lot of people using it. It’s going to be a real thing.

Charlie Rose:
What is this idea you have for what is it called Qik?

Marc Andreessen:
Qik, yeah.

Charlie Rose:
Qik, is that way you can do live streaming wherever you are?

Marc Andreessen:
Any cell phone with a camera.

Charlie Rose:
Yeah.

Marc Andreessen:
Can be a source of live streaming video straight onto the internet or onto everybody else’s phones.

Charlie Rose:
All right. Just explain to me the potential of this.

Marc Andreessen:
So basically, 3 billion phones in the world. They all have cameras. 3 billion sources of live streaming video.

Charlie Rose:
Right.

Marc Andreessen:
Anybody, at any time can pull out of their pocket and can start streaming video live. They could be at a political protest.

Charlie Rose:
Right.

Marc Andreessen:
They could be at a — you know –

Charlie Rose:
So we can go live anywhere in the world now –

Marc Andreessen:
— bank robbery.

Charlie Rose:
— at anyplace.

Marc Andreessen:
You could be doing an interview.

Charlie Rose:
Right.

Marc Andreessen:
And it goes live. And of course, it goes live which is a big deal, but it also gets recorded, and so it can be streamed. It can be played back later. And so it streams up onto the web. You can embed these videos into your blog –

Charlie Rose:
And what’s the quality of this –

Marc Andreessen:
— your YouTube video.
[talking simultaneously]

Charlie Rose:
–video?

Marc Andreessen:
Well, it depends, there are phones actually that actually don’t have camcorder functions yet and so it actually stitches together a video stream out of individual frames, which is a neat trick by itself. And then now there are cell phones coming out — there are cell phones coming out now that have high def camcorders built in. And so you’re going to have in a couple years it’s going to be fairly common to have a little phone and it’s going to have high def camcorder and it’s going to be streaming high def video over either 3G or the new 4G networks straight onto the Web.

Charlie Rose:
And you know what they’re going to do? They’re going to be able to inject these little devices inside us you know a live stream what’s happening in our body so they’ll tell us exactly how everything is functioning.

Marc Andreessen:
I can’t wait.

Charlie Rose:
I can’t either. No, I’m serious.

Marc Andreessen:
[unintelligible] for healthcare?

Charlie Rose:
Technology is changing medicine more than any other particular thing that I know of or it has the potential to change more than anything else.

Marc Andreessen:
It really should.

Charlie Rose:
I mean imaging and the rest. Imaging is like just the beginning of the potential and you’ve seen it now with the brain in extraordinary ways.

Marc Andreessen:
Yep. Absolutely.

Charlie Rose:
All right, so is this thing working now, this [unintelligible] thing?

Marc Andreessen:
Yep, yeah, this works, so you download it, you install it, you use it, you stream it, people are –

Charlie Rose:
How much does it cost?

Marc Andreessen:
Well, you know they’re working on that.

Charlie Rose:
You’re so evasive.

Marc Andreessen:
They’re working on that. There’s a bunch of you know there’s a bunch of –
[talking simultaneously]

Charlie Rose:
Your reputation is being very candid and outspoken –

Marc Andreessen:
They’re working on that.

Charlie Rose:
Everything is you’re working on it, I can’t tell you.

Marc Andreessen:
They’re working on it.

Charlie Rose:
All right.

Marc Andreessen:
So the thing with these things is that actually makes sense, people actually laugh about this, but it actually makes sense, if you can get the scale, you can figure out a way to build a business around it.

Charlie Rose:
Of course.

Marc Andreessen:
If you can’t get it to scale, it doesn’t matter how many creative ideas, you have to build a business. And so you raise venture capital. You get it to scale and then you build a business around it.

Charlie Rose:
Let’s talk about venture capital. You’re starting a new fund.

Marc Andreessen:
I am starting a — for the first time in my life –

Charlie Rose:
You and — for the first time?

Marc Andreessen:
I’m crossing over into the dark side. I’ve been an entrepreneur three times. I started three companies.

Charlie Rose:
Yeah, and I mean that was — you’ve been the guy who’s out looking for venture capital.

Marc Andreessen:
I’ve always been the guy raising money.

Charlie Rose:
Yeah, and so now you’ve got a bunch of money and you have a partnership or a fund and you’re raising money from all your friends.

Marc Andreessen:
I’m creating a fund. I actually — it’s a friend of mine, friend of mine is a long term colleague, Ben Horowitz and I, who have worked together for 15 years, he and I are going to –
[talking simultaneously]

Charlie Rose:
So what’s your history with him because I’ve read of it?

Marc Andreessen:
Oh, he was one of our first guys at Netscape.

Charlie Rose:
That’s what I thought, right.

Marc Andreessen:
So he was one of our key product leaders at Netscape and he’s just coming off of a job at Hewlett Packard. We sold our second company to HP and he was running 3,000 people there and was very successful. So he and I are going to start it. And it’s going to be sort of a — it’s going to invest in a lot of early stage — lot of companies like the ones we’re talking about. And you know our claim to fame is we’ve actually you know by entrepreneurs for entrepreneurs, we’ve done it, we’ve been on that side of the table for a long time, we know what it’s like.

Charlie Rose:
Why are you doing this?

Marc Andreessen:
Because of the nature and the scale of the opportunities. We’re actually been investing ourselves with our own money for three years and we’ve invested in 36 — he and I invested together in 36 deals in three years so about one a month.

Charlie Rose:
Yeah, but I’ve read that you think that the normal investment for you to make, this may have been prefund, what, was about 100,000 to 200,000?

Marc Andreessen:
Yeah, we –
[talking simultaneously]

Charlie Rose:
You’d have to make a lot of small investments.

Marc Andreessen:
Right.

Charlie Rose:
So that if anything goes bad or there’s no –

Marc Andreessen:
That’s right, and we’re actually going to preserve and extend that model in the fund. So historically we’ve only invested up to $200,000 total in a deal. We’re going to definitely bring that up in the fund because we’re going to raise more money, be able to put more money in. But it’ll be pretty typical for us to do a $500,000 investment or maybe down to 200,000 or maybe up to a million in a deal to start. And what we’re seeing is a whole generation of startups that actually don’t need very much money to get started, so the cloud computing example, or a mobile application, an iPhone developer doesn’t need very much money to get started.

Charlie Rose:
What’s not very much money?

Marc Andreessen:
Very much money might be anywhere from 200,000 to say a million and a half.

Charlie Rose:
Really?

Marc Andreessen:
Right.

Charlie Rose:
To get started to –

Marc Andreessen:
To basically to prove that the product can work, right? To basically give you something that you can use, right? And then based on that you then often go raise a traditional venture capital route.

Charlie Rose:
I heard the other day a story of someone who went out to prove a product that did not exist online to see if there was a market –

Marc Andreessen:
Mm-hmm, oh, right exactly actually that’s — I think it’s the same guy, it’s the guy we’ve actually invested in.

Charlie Rose:
Right.

Marc Andreessen:
Who actually is raising money himself for his own company now.

Charlie Rose:
Right.

Marc Andreessen:
From a venture capitalist.

Charlie Rose:
Right.

Marc Andreessen:
Very close to getting that deal done. And so he had this very clever idea which was you can actually launch — he used Google Ad Words, right? So he was buying little ads on Google. He said the great thing with Google Ad Words is you put up an ad and people click and then even if there’s nothing on the other side they didn’t know that and so you can actually test how often they click and so you can test what the response rate is and so the really, really smart marketers are doing this now, you run Google Ad Words campaigns, or the equivalent thing on other systems, and you check the response rate for different words, different value propositions, different markets, different nationalities, different languages, and you see the response rates. And you don’t even have to [unintelligible], you don’t have to have the product. And you basically build the product after the fact and you back into –

Charlie Rose:
So if there’s enough support for the product, then you go make it, right?

Marc Andreessen:
But what I’ve heard is in the old days really smart book authors used to put classified ads like in literary journals and say you know new book you know poetry for sale, $30, and then they would you know if they got like 500 orders they would actually write the book.

Charlie Rose:
Oh, yes, yeah.

Marc Andreessen:
And if they didn’t, they’d return the money. And so you can just basically do a much more sophisticated version of that online. And so this guy, Andrew Chen [spelled phonetically], is the guy I’m thinking of.

Charlie Rose:
Yeah, what’s his idea?

Marc Andreessen:
So it’s a new kind of — you’re going to hate this — it’s a new — it’s undisclosed — it’s a new kind of viral consumer internet service, by viral, meaning it’s going to — it’s a service like a Facebook or a Twitter that spreads from user to user on its own steam, where he has a –
[talking simultaneously]

Charlie Rose:
Why am I going to hate this?

Marc Andreessen:
Because I’m not going to tell you what the idea is.

Charlie Rose:
[unintelligible]

Marc Andreessen:
Or I’m also not going to tell you how he’s going to make money. But he’s still –

Charlie Rose:
Or how much money he’s made or whatever.

Marc Andreessen:
Or how much money he’s made. He’s getting started. But it’s this approach. He stakes this analytical marketing approach and runs the ad campaign before the product exists.

Charlie Rose:
Tell me about Twitter.

Marc Andreessen:
Twitter.

Charlie Rose:
You’re invested in that, too?

Marc Andreessen:
Yeah. Exactly. That’s the kind of company — I’m an angel investor in that, and that’s the kind of company — that’s exactly the kind of thing that we want to do in the funds. So –

Charlie Rose:
Are they making any money?

Marc Andreessen:
Not yet. Not yet. Actually Twitter — I believe Twitter’s current revenue may actually be zero.

Charlie Rose:
Yes, exactly. Explain what Twitter is and why everybody is talking about it.

Marc Andreessen:
So Twitter is a new kind of messaging system, or sort of a combination of an SMS sort of short messages, a little bit like blogging. So basically, people can post either from their PC key board or from their cell phone. They can post these short updates. And it actually limits the updates to 140 characters.

Charlie Rose:
Right.

Marc Andreessen:
And when you go to the Twitter home page, it just has a simple question which says what are you doing? And then you type in 140 characters, and it says that. And you been subscribe on Twitter to people you’re following. And they could be people who are friends of yours, or people who don’t know who have public feeds. So for example, you could have a feed on Twitter, if you don’t already, that has a notification of the guests on each show and a link to the video.

Charlie Rose:
Right.

Marc Andreessen:
And the thing is growing like wild fire –

Charlie Rose:
I know it is. It’s just amazing.

Marc Andreessen:
Exactly. So it percolated along for about a year, and then it took. The last two or three months, it’s growing vertically. And so — and the uses are nearly infinite. It can be used for news, like you can — there is a whole API –

Charlie Rose:
As long as you can keep it within 140 characters, you got –

Marc Andreessen:
Yeah. But 140 characters, you can headline and link to a news article. You can do a headline and a link to a video. You can do a notification — the other thing is like real time reporting –

Charlie Rose:
You can do a synopses and a link to a website?

Marc Andreessen:
Link to a website. A link to a Qik video. Exactly. You can do all these things. And you can search on it, right. So you can see what’s happening in real time. So the next time there is a, you know, next time a plane lands in the Hudson, this actually happened with the plane that landed in the Hudson, all these people are doing Twitter. Is there are actually people on the plane with their cell phones doing Twitter updates saying, well, I’m hoping they get the rafts deployed. Oh, good, they got the rafts deployed.

Charlie Rose:
Water coming in the plane, what do I do now?

Marc Andreessen:
Exactly. And so it’s basically — it’s sort of — think about it as sort of a real time electronic nervous system for lots and lots of sort messages to be accept all over the planet for all kinds of people to all kinds of other people for all kinds of uses.

Charlie Rose:
So when did you become an angel for this?

Marc Andreessen:
When it first got started.

Charlie Rose:
Really? Why? Tell me the process in your little mind that made you think that this was a big deal.

Marc Andreessen:
Okay, so two things. One is the entrepreneurial I’m a huge fan of. So the entrepreneur is a guy by the name of Evan Williams. He created blogger, which is one of the big blogging services.

Charlie Rose:
Right.

Marc Andreessen:
He created a company called Odeo. This is a good example of what’s happening. He created a company called Odeo for podcasting. He raised 3 1/2 million dollars. Turns out the idea didn’t work. He did something revolutionary. He gave the money back. He went back to the investors, he made them whole, he gave the money back. He had this little side project –

Charlie Rose:
He’ll earn a reputation right there.

Marc Andreessen:
Yeah. Exactly. He actually made up the difference out of his own pocket and gave the money back. He had a side project that spun out Twitter that he and another guy named Jack Dorsey were working on as a sort of a side project, which was Twitter. It started to take off. So they said, you know what? It’s that, not this. Shut that down, return the money. This. Raise new money for it. All the investors who were in the first company were delighted to come into the second company because he had the reputation for being somebody who either wins or treats you fairly. And then, you know — for those of us in the industry just looking at the dynamics of how he put Twitter together, it was pretty obvious that it was going to work at all, it was going to be viral and it could get big. So, you know, he placed the bet early, relatively small amount of money. I don’t know what he raised in the first round, a couple million dollars or something.

Charlie Rose:
When did you appreciate the idea of [unintelligible] viral?

Marc Andreessen:
Oh, viral? I don’t know. Probably — I would say probably post Netscape. We saw it with Netscape a lot, but we didn’t really have the terminology to describe it. But I would say especially PayPal and the PayPal guys who are friends of mine have been very, I think, advanced thinkers on that topic. And especially in 2000, 2001, 2002.

Charlie Rose:
I think Peter is on the board of Facebook.

Marc Andreessen:
Peter Till [spelled phonetically] is on the board of Facebook with me. And so he is — he’s just — they’ve developed a very sort of rigorous way of thinking about this concept, and so I’ve learned from that, and been involved in much of these businesses.

Charlie Rose:
Here is what I have never understood, I want you to explain to me at this mom. Microsoft decides that Netscape has a good idea. We’d like to be in that business.

Marc Andreessen:
Sure, yep.

Charlie Rose:
They go to the University of Illinois where they have the code.

Marc Andreessen:
Yes.

Charlie Rose:
Which you –

Marc Andreessen:
Wrote.

Charlie Rose:
— wrote. You wrote the codes.

Marc Andreessen:
Yeah.

Charlie Rose:
University of Illinois insisted on keeping the code that you –

Marc Andreessen:
We didn’t take it with us.

Charlie Rose:
Was that a voluntary choice by you?

Marc Andreessen:
Oh, yeah, that was voluntary.

Charlie Rose:
So you could have taken it with you, but you didn’t.

Marc Andreessen:
We knew it was no good.

Charlie Rose:
Wait a minute. Let me finish the story. So they had it and so Microsoft went and bought the code.

Marc Andreessen:
Mm-hmm.

Charlie Rose:
From the University of Illinois, right?

Marc Andreessen:
Actually indirectly.

Charlie Rose:
Okay. They got it.

Marc Andreessen:
Illinois licensed it to a startup company which then licensed it the Microsoft, and then was surprised when Microsoft decided to actually do something with it.

Charlie Rose:
And what they did was created Explorer?

Marc Andreessen:
Yes.

Charlie Rose:
Right?

Marc Andreessen:
Which is why I now take credit for both, Firefox –

Charlie Rose:
[laughter]

Marc Andreessen:
— and Internet Explorer.

Charlie Rose:
And Mosaic became –

Marc Andreessen:
Mosaic –

Charlie Rose:
Became Firefox.

Marc Andreessen:
No, Mosaic became IE.

Charlie Rose:
IE, right.

Marc Andreessen:
Netscape became Firefox.

Charlie Rose:
Right. Right. Right. That’s right. Because AOL and then –

Marc Andreessen:
As a matter of fact, if you go to the about page on IE, if you go to about IE up in the menu there, you’ll actually see down at the very bottom, developed at the University of Illinois.

Charlie Rose:
Amazing.

Marc Andreessen:
Actual center for computing applications.

Charlie Rose:
You’re a big guy.

Marc Andreessen:
I take credit for that. Exactly.

Charlie Rose:
All right. Let me talk about where this — this whole thing in the world is going in terms of Facebook. Newspapers.

Marc Andreessen:
Yep.
I’ve heard of them.

Charlie Rose:
What is it between you and the New York Times?

Marc Andreessen:
You want to know what really pushed me over the edge?

Charlie Rose:
What?

Marc Andreessen:
Judy Miller.

Charlie Rose:
Really?

Marc Andreessen:
Just –

Charlie Rose:
Explain who Judy Miller is.

Marc Andreessen:
Technology. She’s the national security reporter who covered the run up to the Iraq war and the WMD topic. And I just — I took –

Charlie Rose:
She was wrong on the question of WMD and people thought her sources –

Marc Andreessen:
Completely, completely incorrect. And I would normally cut somebody slack for something like that, but then the folks at Knight Ridder at the time, Knight Ridder, now McClatchy got it completely correct.

Charlie Rose:
Right, they did.

Marc Andreessen:
So I actually got to know a couple of those folks, and I asked them like what was the difference, how did you get it right? They said, oh, we talked to the colonels. The Times had access to all the generals and all the politicians. We talked to the colonels. We talked to the guys that were actually in the field doing the work. They said, we don’t see any of this. We don’t understand what these guys are talking about in Washington. We don’t see any of it. So they said to us was totally obvious. So like at that point –

Charlie Rose:
At that point what?

Marc Andreessen:
At that point, I didn’t know this at the time, like a lot of people, so I read the Times, and I said, hey, you know, war with Iraq, great idea. Right? Existential threat, weapons of mass destruction. He wants to kill us. We have to go kill him first. So, okay. I’ll give somebody one shot at that but not two.

Charlie Rose:
And then?

Marc Andreessen:
And then –

Charlie Rose:
That happening turned you against the New York Times because you created a thing called New York Times death watch.

Marc Andreessen:
In fairness, I’ve actually totally dropped that. I think at this point it’s become unfair.

Charlie Rose:
To the New York Times?

Marc Andreessen:
Well, because –

Charlie Rose:
Your sense of fairness overwhelms me.

Marc Andreessen:
I know. Things — events are playing out.

Charlie Rose:
So you’ve got the New York Times death watch is no longer there.

Marc Andreessen:
That was a blog post that I did. A blog post that I did that I was kind of — it was a little bit tongue in cheek and a little bit serious. But with an underlying point.

Charlie Rose:
Here is where you go — what’s the under underlying point?

Marc Andreessen:
Well, the underlying point is fundamentally, there is a structural change happening in that business, so –

Charlie Rose:
In the newspaper business.

Marc Andreessen:
In the newspaper business. Well, in the entire media business. In all branches of the media industry, but the newspapers are sort of front and center topical. And the reason I bring up Judy Miller is because the typical — there are exceptions to this. There are friends of mine who are trying very hard to grapple with this. But the typical sort of newspaper industry response is, you know, we just got to figure out a way to kind of gut through it, like if we can — if we can get through the advertising recession, if we can downsize the paper, if we can downsize the news room –

Charlie Rose:
I don’t think that’s what their idea is, but go ahead.
[NE] .

Marc Andreessen:
Start returning ads on the front page, if we can just figure out some kind of combination of things, then we can keep printing the paper and delivering it as a physical medium, and this Internet thing will kind off stay off to the side.

Charlie Rose:
No, I think that’s not true. I think they’re trying to survive until the Internet thing pays off. That’s how they’re doing it.

Marc Andreessen:
But this is — this is playing offense versus playing defense. Their revenue today is still, in most cases, 90 percent print.

Charlie Rose:
Right.

Marc Andreessen:
10% online.

Charlie Rose:
Right.

Marc Andreessen:
That means they spend 90 — I can tell you. I have been involved with a lot of companies, right? Ninety percent — if 90 percent of your revenue is coming from something, 90 percent of your time is being spent on that. So they’re spending 90 percent of their time –

Charlie Rose:
And the future 10 percent –

Marc Andreessen:
Future 10 percent, and spending very little time playing offense. For the most part, they’re Internet divisions have been off to the side, often with different news rooms. I mean just like bizarre separation.

Charlie Rose:
So to play offense for a newspaper for you means what?

Marc Andreessen:
Oh, you got to kill the print edition.

Charlie Rose:
You would stop the presses tomorrow?

Marc Andreessen:
You have to kill it.

Charlie Rose:
Stop the presses tomorrow.

Marc Andreessen:
You have to kill it.

Charlie Rose:
Stop the presses tomorrow.

Marc Andreessen:
Stop the presses tomorrow. I’ll tell you what. The stocks would go up. Look at what’s happened to the stocks. This investors are through this. The investors are through the transition. You talk to any smart investor who controls any amount of money, he will tell you that the game is up. Like it’s completely over. And so the investors have completely written off the print operations. There is no value in these stock prices attributable to print anymore at all. It’s gone.

Charlie Rose:
So you would recommend to the owners of the New York Times, stop printing papers.

Marc Andreessen:
Yeah, absolutely. You have to. You have to –

Charlie Rose:
And take your losses –

Marc Andreessen:
Yeah. You have to.

Charlie Rose:
Like a courageous person.

Marc Andreessen:
Chronic pain? Acute pain. How many years — music industry, same thing. How many years of chronic pain do you want to take to avoid taking a year of acute pain?

Charlie Rose:
Right.

Marc Andreessen:
And by the way, the acute pain would be acute. Like this is a big deal. I’m not saying that this –

Charlie Rose:
[talking simultaneously] revenues have gone away, then you’ve got a problem.

Marc Andreessen:
You’ve got a problem. But you have to build for the future. I mean if you’re — if you’re the guy delivering ice to people’s ice boxes, at a certain point, you better go into the refrigerator repair business or you’re going to have an issue. If you’re the village blacksmith and a model T comes along, you better become a mechanic. People’s lives are better when they get news online versus having to wait for the morning paper. It’s a lot more efficient, a lot more real time, a lot less waste. It’s actually — like everything about the airline experience is better. And at some point, you have to — I believe, as a responsible manager, reorient –

Charlie Rose:
Do you read anything on paper?

Marc Andreessen:
Well –

Charlie Rose:
Anything.

Marc Andreessen:
I’m weird. I read everything. So I subscribe — I’m a huge consumer of media.

Charlie Rose:
You’re just like me. I go online. I get it — I touch it, I want this, I want this.

Marc Andreessen:
I tell my friends, I own 6,000 CD’s, like music CD’s. Like I buy CD’s all the time. I love CD’s.

Charlie Rose:
I do too, yes.

Marc Andreessen:
All they need are another million people like me.

Charlie Rose:
I know. I know.

Marc Andreessen:
And there aren’t enough of me. And, you know, DVD’s –

Charlie Rose:
I buy DVD’s, too. I thought I was the only one. I kept beating myself up because I thought there is no one like me, an how stupid. I’m just stupid.

Marc Andreessen:
Exactly. I have a huge collection of DVD’s, and it’s essentially –

Charlie Rose:
Exactly.

Marc Andreessen:
I got on [talking simultaneously]

Charlie Rose:
This is no reason to buy DVD’s?

Marc Andreessen:
So DVD sales are collapsing. DVD sales are caving in. So yeah. We need more of me and you.

Charlie Rose:
All right. Exactly.

Marc Andreessen:
We’re all set.

Charlie Rose:
We’d have a –
[talking simultaneously]

Charlie Rose:
All right. So looking back over the last 15 years.

Marc Andreessen:
Yeah.

Charlie Rose:
All right, what’s been the biggest surprise for you?

Marc Andreessen:
Oh, well, so the biggest surprise, by far is that, you know, we started out this internet thing looked like an academic experiment at first and turned into something a bit — you know, a billion and a half people are using today, and it’s changed everybody’s lives. And I don’t think — there’s no way on earth that we ever anticipated that. And I don’t think there’s any way that you could. I think you would have to be a megalomaniac –

Charlie Rose:
Okay. So the power of the internet and the range of the internet and the impact on everything.

Marc Andreessen:
Yeah, impact on everything. It worked. It actually worked. It actually played out. And so — and it played out through commerce, it’s playing out through media, playing out in politics.

Charlie Rose:
What are the constraints of the internet? I mean, what –

Marc Andreessen:
Oh, boy. Excuse me. I — you know.

Charlie Rose:
Can it get too big or something like that.

Marc Andreessen:
No, no, no. It’s just going to keep getting bigger. It’s actually a so-called network effect, right? So the more people who use is, the more people — the more reason there is to put new things on the internet, right? And it just keeps going. And so every day, think about what’s happening. And old friend of mine used to call this. It’s the magic box. Every day that you’re on the internet, there’s something new to do that you’re going to enjoy or you’re going to like or it’s going to be relevant to you, right? Every day. And that’s going to be true from now for the next 50 years, hundred years, I mean until some, you know, far point in the future when we’re all up in space or something. Every day it gets better and better and better and better and better. Every day, as a consequence, right, it eats different industries.

Charlie Rose:
Right.

Marc Andreessen:
It colonizes and then takes over different industries.

Charlie Rose:
Right. Apple [unintelligible] mentioned newspaper industry.

Marc Andreessen:
Newspaper industry or, you know, I — you know, banking. There’s financial services. There’s all kinds of things happening in all of these different sectors, photography, obviously, that are being sort of taken over by the internet, being pulled into the internet, being made eight part of the experience. And it just keeps growing. And observationally, people love it. People love using the internet, you know? And especially, you know, a kid these days. Any kid these days lives on their laptop. You know, their laptops are –

Charlie Rose:
Is that good?

Marc Andreessen:
It’s fantastic.

Charlie Rose:
Now, wait, wait. Is it good?

Marc Andreessen:
Yeah. It’s –

Charlie Rose:
You see no downside to that?

Marc Andreessen:
Okay. I grew up –

Charlie Rose:
Living on your internet.

Marc Andreessen:
I grew up in rural Wisconsin.

Charlie Rose:
[unintelligible]. Yes.

Marc Andreessen:
I grew up in rural Wisconsin, okay? No access to information relating to rest of the world except for whatever was in the public library, right, for which I could probably thank Andrew Carnegie or somebody like that way back when.

Charlie Rose:
Right.

Marc Andreessen:
But like no connection to current events, no connection to the idea that you can start your own business. No connection to new technology. No connection to anything. I mean, you know. So you take every kid living in a rural community in the US, you take every kid living in the inner city, you take every kid growing up in the developing world, and you give them access to the world, they will be so much better educated. They’ll be so much more aware.

Charlie Rose:
I couldn’t agree more.
[talking simultaneously]

Charlie Rose:
But there is a downside. There is — it may be tiny.

Marc Andreessen:
Okay.

Charlie Rose:
It may be tiny.

Marc Andreessen:
Yeah.

Charlie Rose:
There’s something valuable about what’s going on right here. You and I having a conversation, that’s important. It would not be the same conversation if you were in the next room, and we were doing it with a keyboard, I promise you.

Marc Andreessen:
Yes, but I’m here today because your producer emailed me.

Charlie Rose:
Oh, that’s true.

Marc Andreessen:
And if she had tried to call me, I don’t know whether I would have picked up the phone. And if she had — and if she had had to travel by horse –

Charlie Rose:
Yeah, I know.

Marc Andreessen:
— to talk to me –

Charlie Rose:
Don’t minimize the human value.

Marc Andreessen:
Oh, yeah.

Charlie Rose:
Of personal contact.

Marc Andreessen:
Yeah, yeah, it’s great.

Charlie Rose:
I don’t want you to do that. But I think the –

Charlie Rose:
If you learn nothing else here, learn that.

Marc Andreessen:
I think the internet is sort of an overlay on top of — on top of –

Charlie Rose:
Let me tell you a small story. The other day, this was like a week ago. I am in a car riding from Miami to Marcos Island to do a thing on biotech. In the middle of the everglades, I take out my computer, on battery now, operating on battery.

Marc Andreessen:
Right.

Charlie Rose:
It’s a two-hour and a half trip. I take my little thing and put it in there so, you know, I can access the internet. I am then on a cell phone talking to someone in New York City, and I’m looking at the BBC and the New York Times just to catch up on the news.

Marc Andreessen:
Right.

Charlie Rose:
I’m saying, how good is this. If you are a news junkie –

Marc Andreessen:
Yep.

Charlie Rose:
— an information connoisseur –

Marc Andreessen:
Yep.

Charlie Rose:
— this is heaven.

Marc Andreessen:
Yeah.

Charlie Rose:
This is heaven.

Marc Andreessen:
Yep, right.

Charlie Rose:
All right. Let me do this finally. People you admire the most. Just list these people in terms of what they have contributed, okay? Just list them for me. Who’s first, who’s second, who’s third and fourth. This is easy. Okay. Marc Andreessen, Bill Gates, Steve Jobs, Sergey Brin and Larry Page, Andy Grove.

Marc Andreessen:
I agree.

Charlie Rose:
No, you agree what? Who is the most important?

Marc Andreessen:
Who is the most important out of those?

Charlie Rose:
Yes.

Marc Andreessen:
If you had to pick one I think you’d — if you had to pick — I mean, if you can’t do the ranking, it’s impossible. If you had to pick one, probably Andy Grove.

Charlie Rose:
Really?

Marc Andreessen:
Because the microprocessor, it –

Charlie Rose:
Fueled. It was the brains behind it.

Marc Andreessen:
The silicone needed to exist for the software to be created. And everything that we’ve been able to do in the valley and on the internet, it’s all been based on that. And so, you know, Andy, all right, is a good friend of both of ours. But you know, going back to everything from his origin story through to when they started Intel in the late ’60s, you know, and then they built that company, that company is now a 40-year-old company, and it’s just as vital a 40-year-old company, and it’s just as vital and vibrant as the [unintelligible] and he ran it for you know a good part of that history, most of it.

Charlie Rose:
What a great man, I know.

Marc Andreessen:
Yeah. And like that technology changed the world. And that was hard. I mean that was difficult I mean –
[talking simultaneously]

Charlie Rose:
Well, he took the risk you talked about.

Marc Andreessen:
Yeah.

Charlie Rose:
I mean, here’s a guy who –

Marc Andreessen:
Well, here’s a good example, right?

Charlie Rose:
Take the story, tell us. Tell us the story.

Marc Andreessen:
Right, so Intel’s main business from like 1969 until the mid-’80s was memory chips, so chips going in computers, store data. Microprocessors were kind of a side business. And then in ’82 IBM released the IBM PC and then the Intel microprocessor. And then the microprocessor business started to take off. But in 1985 there was this big crash in the PC market and there was just generally the tech industry had been expanding and then just all the sudden started to crash. And the PC wasn’t quite right yet for mainstream adoption, bunch of other things were going on and the Japanese were — that was when the Japanese were just a unbelievably powerful economic force. And Japanese electronics companies were creating memory chips in huge scale, subsidized by the Japanese government, and they were just under pricing Intel on every market and they were basically in the process of crushing Intel out of business. And Andy and his partner, I believe at the time Gordon Moore, famously –

Charlie Rose:
You believe was a partner?

Marc Andreessen:
Well, no, I mean –
[talking simultaneously]

Charlie Rose:
[inaudible] was Gordon Moore.

Marc Andreessen:
No, it was definitely Gordon Moore. [unintelligible] at all to that point, but I think that — or maybe I’m wrong, maybe it was –
[talking simultaneously]

Charlie Rose:
— three of them –

Marc Andreessen:
— three of them, but –

Charlie Rose:
I just thought you doubted that Gordon Moore [inaudible].
[talking simultaneously]

Marc Andreessen:
No, no, no, no, definitely Andy and Gordon so you know they famously essentially killed their main business in order to get out from under the overhang of having –

Charlie Rose:
That plan was killing –

Marc Andreessen:
That plan was killing –

Charlie Rose:
— big revenue stream.

Marc Andreessen:
Yeah, provide a huge revenue stream, it was some huge percentage of the revenue, you know, well more than half. And they bet the company on the microprocessor at a time when that was not an obvious bet to make because the PC was still very new and unproven as a mass market thing. And you know then the rest of the story’s obvious. Intel became gigantically successful. But you know that’s like a 16-year-old company which in the technology industry right like dog years, 16 years is like a seven-year-old company in the rest of the economy.

Charlie Rose:
[inaudible] the nature of this business with great — I love Andy Grove and I have great respect for Intel, but Nvidia came along with graphic computing, you know with a new [unintelligible] –

Marc Andreessen:
Yep.

Charlie Rose:
You know, now they’re fighting.

Marc Andreessen:
You want to know the irony of that?

Charlie Rose:
Yes.

Marc Andreessen:
The core engineers at Nvidia are the core engineers from Silicon Graphic.

Charlie Rose:
Which is your old — which is Jim Clark?

Marc Andreessen:
My partner, Jim Clark, sold first. Silicon Graphics was a fantastically successful computer company in the late ’80s and early ’90s that actually got put out of business by the PC. The engineers got freed up as a consequence of SGI being put out of business by the PC, went to work in among other things are now companies like Nvidia and ETI that make these graphics chips and pose a significant challenge to Intel. And so the cycle repeats. And the key thing happening there is innovation happened right? And in that case right somebody benefited, somebody got damaged. But the process of damaging right at that point, Silicon Graphics, was a tragedy as far as Silicon Graphics was concerned, but it freed up those brilliant engineers to go on and create the next generation of technology. And a big part of what makes the Valley so vital is that these engineers can actually recycle multiple times through different companies in different ways. And a lot of the best engineers out at Google for example are people who actually were in the previous wave or even the wave before that of technology. And it’s that level of sort of you know turnover in dynamism and spinoffs and startups in venture capital that keeps the whole thing going.

Charlie Rose:
Assess Google for me. I mean, well go ahead I mean it may be obvious but go ahead.

Marc Andreessen:
Yeah, fantastic company, great business.

Charlie Rose:
What have they done right? A, what is it they have done right in terms of taking a good idea and managing it shrewdly?

Marc Andreessen:
So I’d say two things –

Charlie Rose:
And then using the advantage to get into all kind of other business including cell phones and everything else.

Marc Andreessen:
Yeah, exactly. So two things, so one is there were a lot of search engines before Google, there were probably 35 different venture-backed search engines before Google. My friend, Bill Joy, has this term he uses where he says, sometimes products have the “it works” feature and as compared to all the other products that actually don’t really work and our industry sometimes produces those products, the Google search engine was the first one that it worked, it really worked, when you did a search on it you got what you expected to see and that was actually not true of the ones before it. So they really nailed the core technology, and you know these are you know Ph.D. students in computer science at Stanford, these were hardcore technologists building this. Then they built the service and by the way you know it was not obvious at the beginning how they were going to make money on it. In fact, there was an early –
[talking simultaneously]

Charlie Rose:
— [inaudible] not advertising.

Marc Andreessen:
Well, at the beginning they didn’t think that advertising was viable because it turned out advertising had actually not been very effective on the previous generation of search engines because nobody wanted to advertise against bad search results. So it turns out when you have good search results it turns out they were able to develop and Overture with another company that Yahoo later bought that you know sort of the idea crystallized. I think Overture might have originally invented it and then Google picked it up and refined it and adapted it, but this idea that you could target a text keyword [unintelligible] and see search results. And so once they unlocked that, a friend of mine from Netscape, [unintelligible], became the head of sales. It’s one of the guys who helped them figure that out. Once they unlocked that then they unlocked a magic business right? And about once every 10 years in tech you just see a magic business and a magic business is one where the market turns out it’s just infinite, it’s just gigantic, and so Cisco was the magic business. Intel was a magic business, Microsoft was magic business. Amazon increasingly looks like it’s a magic business. When you have a magic business, you go for size. And you go for scale. And they’ve just done a fantastic job of scaling that thing up and having it be gigantic and having it generate huge amounts of cash.

Charlie Rose:
Which raises another topic. Amazon, first of all. I mean at the time of the last bubble bursting, that was 2001, was it?

Marc Andreessen:
Yeah, right.

Charlie Rose:
You should know.

Marc Andreessen:
Oh, yes. That was 2001. Took my second company public in 2001.

Charlie Rose:
Exactly.

Marc Andreessen:
Which I would not recommend.

Charlie Rose:
I had smart people saying to me — and I’ve known Jeff Basos [spelled phonetically] for a long time.

Marc Andreessen:
Yep.

Charlie Rose:
Smart people saying to me they’re not going to make it.

Marc Andreessen:
Oh, yeah. People had written him off.

Charlie Rose:
They’re not going to make it.

Marc Andreessen:
Absolutely. He remembers that, by the way.

Charlie Rose:
I know he does.

Marc Andreessen:
He has not forgotten. I saw people — I was at conferences where I saw very sophisticated investors walking out of his presentation in that era just shaking their head.

Charlie Rose:
Yeah.

Marc Andreessen:
They thought he was crazy. And he was absolutely correct. Here is where it really made — Andy Grove. He had the fortitude and the foresight to stick with it and stick with it and stick with it, and, you know, he pursued his core long term vision. He did not give up. He ran the company himself, pretty much continuously through that whole period. I think so he had a CEO for a brief period of time. But then he came back in, and he’s run the company himself all the way –

Charlie Rose:
Right.

Marc Andreessen:
— the brilliant founder. And he stuck with it. And along the way, he tried lots of different ideas. Some of them didn’t work. He got criticized for them, and then a lot of them, it turns out, worked really well. Now the thing is just a monster.

Charlie Rose:
So Kindle represents what?

Marc Andreessen:
Oh, Kindle is gigantic. I mean it’s several things. It’s a huge business for Amazon. It’s the — it’s representative of the future of publishing.

Charlie Rose:
Do you know how many books the new one — I’m sure you’re getting the new one like I am.

Marc Andreessen:
Yeah.

Charlie Rose:
1500 — 1,500 books, and it’s smaller than the Kindle 1st. I.

Marc Andreessen:
Yeah.

Charlie Rose:
And you can get your newspapers and your magazines.

Marc Andreessen:
Yep.

Charlie Rose:
And you can do all kinds of other things. I don’t know even know yet, because they’re not shipping them until February 24.

Marc Andreessen:
Yep. Yep. Everything. And, you know, by the way, the Kindle is a new form factor, right? So you’ve got the iPhone with sort of the three or four inch screen. You’ve got the laptop or now the net book with a 12 or 14-inch screen. Now you’ve got the Kindle with a sort of 7-inch screen. And so there is going to be a whole market, I believe, for these sort of web pads that are going to be sort of 7-inch screens. The Kindle is one. You can actually buy — there is a bunch of these on the market, but none of them have taken off. The Kindle has.

Charlie Rose:
The Kindle took off because?

Marc Andreessen:
Well –

Charlie Rose:
Cell phone connection, one.

Marc Andreessen:
Well, cell phone connection. They nailed that. Provision. Content. You can buy the book, it’s super light. It uses this electronic ink technology so it’s easy on the eyes. Battery lasts –

Charlie Rose:
And they try to make it feel like a book as much as they could.

Marc Andreessen:
It’s great.

Charlie Rose:
Is the idea of a book, experience of a book.

Marc Andreessen:
Exactly. Right. It’s look like the iPhone. They packaged the whole thing together. But there will be — again, it points to the future. There will be a generation of these kind of pads. And so like let’s suppose some day Apple might make a — think about the iPhone, scale it up so it has a 7-inch screen. Like think about how great that would be.

Charlie Rose:
Do you think they will?

Marc Andreessen:
I think –

Charlie Rose:
Of course they will.

Marc Andreessen:
Put it this way. I will be the first person to buy one.

Charlie Rose:
Of course. I will, too. There any doubt that they’ll do that?

Marc Andreessen:
I don’t know. I mean –

Charlie Rose:
Why do you say I don’t know?

Marc Andreessen:
Until they announce it, I don’t know. I don’t know. I don’t know. That’s a very — they’re a very private company. I don’t know. But somebody will figure it outout.

Charlie Rose:
No kidding.

Marc Andreessen:
Somebody will figure it out. I mean the Kindle books and magazines and newspapers, but that form factor and that shape of device and that weight in a couple years is going to be video, going to be music, going to be doing video conferencing, it’s going to be doing telephony, it’s going to be doing web browsing. It’s going to be doing everything. Right? And so that’s the next — one of the fascinating things is that’s the next screen size and the next device I think that’s going to happen.

Charlie Rose:
Thank God I’m only 26. [laughter]

Marc Andreessen:
You have a lot of this to look forward to.

Charlie Rose:
Exactly. There is this also, which I don’t know anything about. This shows you how really stupid I am. Games.

Marc Andreessen:
Yeah.

Charlie Rose:
You have said — and other people have said, take all the old media, all the people that used to go to old media are spending all their time now — whatever time they used to spend on old media, or whatever — however, you mark a person’s life depended on media, is now going online or to games.

Marc Andreessen:
That’s right.

Charlie Rose:
Do you go to games?

Marc Andreessen:
Oh, yeah, yeah, yeah. My XBox and I have a very close personal relationship. We spend a lot of quality time together.

Charlie Rose:
Do you really? Do you hug and kiss her and everything else?

Marc Andreessen:
Oh, yeah. She’s a very good friend. I take very good care of her.

Charlie Rose:
So why?

Marc Andreessen:
Oh, it’s just tremendously stimulating.

Charlie Rose:
Stimulating?

Marc Andreessen:
It’s a core human experience. Especially dopamine.

Charlie Rose:
Is it really?

Marc Andreessen:
Mm-hmm.

Charlie Rose:
But explain that to me. I’m not doubting you. I’m just asking.

Marc Andreessen:
It’s like playing sports, but it’s for everybody.

Charlie Rose:
Tell me — if you tell me it’s like playing sports, I get it.

Marc Andreessen:
It actually is. It’s competitive. It gets your adrenalin up. It’s a lot of fun. And by the way, all of the new games –

Charlie Rose:
Not a lot of exercise though, is it?

Marc Andreessen:
Well, the Wii.

Charlie Rose:
Tell about the Wii.

Marc Andreessen:
The Wii.

Charlie Rose:
I know about the Wii.

Marc Andreessen:
Innovation, right? Innovation. Nintendo, fantastic company. Like Japan needs 100 times more Nintendos. The rest of the world, we need 100 times more Nintendos. I think they’re a company absolutely to be admired.

Charlie Rose:
People don’t know how well they have done against Play Station –

Marc Andreessen:
Phenomenal.

Charlie Rose:
And XBox, Do T do they?

Marc Andreessen:
People had written them off. People had concluded that they were toast, because the capital cost, the amount of money is that Sony and Microsoft put into the Play Station, the XBox weren’t in Nintendos budget, and Nintendo has outsold them, I don’t know, five to one or something with the Wii. And it’s brilliant. It’s this new motion controller. So it’s this new gizmo and basically, you can play tennis, And you stand in front of the thing and you whack the tennis ball around, or boxing, all these different games.

Charlie Rose:
Then I have to get this.

Marc Andreessen:
It’s fantastic.

Charlie Rose:
You do that?

Marc Andreessen:
Oh, yeah. Yeah.

Charlie Rose:
What’s your favorite game?

Marc Andreessen:
Gears of War 2. I like that. I like the violent games.

Charlie Rose:
Do you really?

Marc Andreessen:
I like the bloody games.

Charlie Rose:
Why am I surprised?

Marc Andreessen:
Oh, yeah. It’s a lot of fun. And you can play multiplayer. And by the way, it’s all going online. That’s all going online also. So a big part of the XBox experience is XBox live. And then games themselves on the Internet now are a very, very big deal and a very big growth business.

Charlie Rose:
What has been the economic crisis impact on Silicon Valley?

Marc Andreessen:
Ah. So in the meltdown of 2000, 2001, 2002, we were the nose on the dog. So we were if not the cause, we were one of the main catalysts for the stock market crash at that point. This time around, we in the valley are the tail of the dog. So we have been affected at least so far out of I think all the sectors in the economy, and I think there is a couple reasons for that. But the big one is because companies in the valley generally don’t run on credit. We generally run on equity financing as opposed to credit financing, so my company has no debt. If somebody doesn’t want to role over our debt, we don’t have any debt to roll over. So we have been effected least. But there is no question that the big recession that has now developed from the credit crisis is going to have a big impact on us.

Charlie Rose:
What’s that impact going to be?

Marc Andreessen:
Sales are going to fall. For a lot of companies, sales are going to fall. For a lot of –

Charlie Rose:
A lot of people will lose their jobs?

Marc Andreessen:
There will be layoffs. There already are layoffs. There will be a lot of people losing their jobs. Our customers — Silicon Valley is dependent on its customer base. So when companies around the world are cutting their budgets, they’re going to buy less networking equipment and databases and everything else. And when consumers don’t have as much discretionary money, they’re not going to be spending money on much of anything, you know. The kind of stuff we sell. So that will have a big impact. I would make a couple of observations, though, based on that. One is, the innovation will continue, so at some point, the economy will recover again, and when that happens, there is going to be a ton of innovation in the next three, four, five — whatever period of time we’re talking about, years, that is going to be essentially bottled up in these companies that are getting funded today. Like with our new fund, if we fund a company today, we’re thinking about a return in seven to 10 years so we can go through three or four or even five years of economic downturn as long as at some point we come out the other end. And the innovation will happen in the meantime. And that’s what happened last time. Google developed through the bust. Facebook developed through the bust. YouTube developed through the bust.

Charlie Rose:
Because they had money and all they needed to do was keep working?

Marc Andreessen:
Exactly. Observation one. Observation two, we will be a sort of tragic beneficiary of the disruption happening in other markets that the Internet and technology industry is poised to colonize. So to the extent that for example, media companies were financial service institutions or whatever, real estate companies, whatever, are being damaged because the crisis, to the extent that the valley is creating the kinds of companies that are going to be in those markets in a big way, we will tend to benefit, because we will tend to be playing offenses rather playing defense. And worrying about, you know, whether we can pay off our debt or whether we can roll our loans over. And so generally speaking, from the valley, you know — and I say it’s a tragic opportunity. You don’t wish this kind of suffering on anybody. But, you know, if TV is in trouble or radio is in trouble, and it runs into a debt crisis or a newspaper is in trouble and can’t keep it going, there are new companies springing up all over the place that are going to be able to take a lot of those roles. Let me bring up one more thing. I think this is what should happen in banking. So Stanford economist, Paul Roever [spelled phonetically] who is a friend of mine, a genius economist, like a potential Nobel Prize winner, wrote an op-ed the other day, and he said, look. Good banks, bad banks, doesn’t matter. What we need are new banks. And I actually think what we need — and I think the valley can play a role in this, I think there should be a new wave of financial institutions that should be created from scratch today. And they should take the role. So instead of trying to unwind some big bank that’s underwater, and hundreds of billion dollars insolvent, let’s create a whole bunch of new ones. And by the way, let’s have them all be new and online. So instead of having all this infrastructure and all these old systems and these ATM’s and all this stuff, let’s do purely online, purely Internet banks. Purely virtual, much lower cost structure.

Charlie Rose:
So you’re saying the federal government should go out and create these new online banks. Take the money that you’re pouring into these old banks and instead pour it into new banks.

Marc Andreessen:
Help them get started.

Charlie Rose:
Banks fail and then –

Marc Andreessen:
Letting banks fail is the systemic risk issue. I don’t feel qualified to address that.

Charlie Rose:
You’re just saying regardless of what you do with the old banks, do this with the new banks.

Marc Andreessen:
Because it’s going to take — even if you can figure out a way to fix the old banks, it’s going to take a long time. I mean it is a very complicated and involved process. They are deeply broken in very fundamental ways. And create a new bank. I mean a bank is a simple concept. You can create a bank in software. As a concept, it’s a simple concept. So if you have a –

Charlie Rose:
You get deposits and you lend them.

Marc Andreessen:
You get deposits and you want money. It’s not that hard. I’ll give you an example of what’s happening. I’m on the board of eBay. eBay just bought a company called Bill Me Later. Bill Me Later is an adjunct to eBay’s PayPal business, which is a very big payment service. Bill Me Later is a service that lets you, when you pay for something with PayPal, it’s an option that lets you get credit for that specific transaction at the particular moment in time when you’re doing the purchase.

Charlie Rose:
Right.

Marc Andreessen:
So instead of being prequalified for a credit line, right, so a bank prequalifies you for a credit card, $5,000 credit limit based on your job today, you lose your job. They don’t figure it out until it’s too late. You try to put a bunch of stuff on your credit card and lose a lot of money for the bank. For bill me later, every transaction is credit scored individually. And so every transaction is scored at the moment it happens, based on all the data that’s in all the networks about all these people. And so it’s a brand-new way to provision credit. It’s completely virtual. It’s a fantastic business. It can go global. It can be gigantic. It can apply to any kind of persons. That’s the kind of new thinking and new approach that innovation can bring. I mean, it could or should be the new source of credit. And so the need to repair an old bank that has this outmoded credit card infrastructure that’s really nod needed any more.

Charlie Rose:
Right.

Marc Andreessen:
It’s not clear to me how many hundreds of billions of dollars of society’s resources we should take to try to keep the past sort of in business when there’s a better way to do things.

Charlie Rose:
Are you impressed with beyond how he used it in the political campaign, whether now President Obama is receptive to technology and who he is reaching out to in technology and science in order to make sure that the country as a nation, you know, maximizes its resources in science and technology and the future?

Marc Andreessen:
Yes. He is very smart on those things. He is very in tune with modern technology, much more so than any president we’ve had so far. Clinton was starting to get there at the end of his tenure, but he never really did get to see much.

Charlie Rose:
Embraced to the 21st Century and all that.

Marc Andreessen:
He was starting to get there. But Obama has actually lived it and actually uses the stuff. I mean, he’s actually — he can actually have –

Charlie Rose:
Really? He’s addicted to his library, is he?

Marc Andreessen:
He’s completely addicted to his library. I mean, you know, to the point where he actually still has one. He actually knows and understands this stuff. And he’s surrounded himself by a whole generation of people who know and understand it.

Charlie Rose:
And some people in Silicon Valley [unintelligible] him.

Marc Andreessen:
Of course there’s submit [unintelligible]
[talking simultaneously]

Charlie Rose:
Yeah, right.

Marc Andreessen:
So there’s no question he gets it. And then more broadly, there’s no question that he understands the role of science and technology and innovation in the economy, like for somebody who actually hasn’t worked in the –

Charlie Rose:
I thought innovation was dead.

Marc Andreessen:
It is completely. Toast. Dead man walking. That’s why I’m here today.

Charlie Rose:
One last quick idea, which is that you think that the people who are the most innovative are young because — well, you said something like this.

Marc Andreessen:
I’m thinking when I was young and foolish, I might have said –

Charlie Rose:
But the idea simply is that they don’t know the limitations.

Marc Andreessen:
Because I’m getting older.

Charlie Rose:
If you have gone through –

Marc Andreessen:
Right.

Charlie Rose:
— a crisis.

Marc Andreessen:
Right.

Charlie Rose:
If you’ve got through a meltdown, if you’ve gone through, you know, a complete collapse as happened in 2001, then you are more frightened, you’re more aware of risk and all of that. So therefore you don’t take as many chances, you know? Because how many people have we heard this explanation, if I had known how hard it was to do this, I wouldn’t have started. But I didn’t know, so I kept going, and eureka, it worked.

Marc Andreessen:
Exactly. With age comes experience, and that’s good and bad.

Charlie Rose:
So do you think you’re less innovative than you have been.

Marc Andreessen:
Well, as I say, I’m revising my opinion on this as I get older. Let me tell you, when I talk to a 24-year-old entrepreneur, and I tell him, you know, Well, this is what happened in 1997, this is what happened in 1999, he says, Well, that’s when I was in junior high.

Charlie Rose:
I know.

Marc Andreessen:
So he is completely like, those guys are completely unscarred by the crash. And it’s fantastic. They’re totally optimistic. They’re great.

Charlie Rose:
That’s the hope of the country.

Marc Andreessen:
Yes.

Charlie Rose:
It really is. Thank you for taking this time to visit us here.

Marc Andreessen:
Sure. My pleasure.

Charlie Rose:
Now, what’s the name of this fund you’ve created?

Marc Andreessen:
Andreessen Horowitz.

Charlie Rose:
Oh, my good.

Marc Andreessen:
It could be a venture capital firm –

Charlie Rose:
How innovative and original that is.

Marc Andreessen:
— or a law firm.

Charlie Rose:
How very creative that was to choose that as the name.

Marc Andreessen:
Exactly.

Charlie Rose:
Couldn’t we do better than that?

Marc Andreessen:
Actually, it abbreviates to A to Z, so we get listed first in the Yellow Pages. We might also have a [unintelligible]. We’re not sure yet.

Charlie Rose:
Marc Andreessen, thank you very much.

Marc Andreessen:
Thank you.

Charlie Rose:
Thank you for joining us. See you next time.

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