Venture capitalist Marc Andreessen, Palantir co-founder Joe Lonsdale and Goldman Sachs COO Gary Cohn sat down today at the Goldman Sachs conference in San Francisco, to talk about the thing investors always talk about: Tech.
The Netscape founder, taking the same stance he’s had for years, was ever the ebullient optimist. (Because what else are VCs paid to do?)
He argued that advances in mobile and chip-making technology signaled exponential expansion of the market. He said tech isn’t overhyped and could have “decades” of growth ahead of it. Echoing economist Carlota Perez’s research, he said world-changing technologies like the web usually settle into a more mature deployment phase after an initial period of hype and investor frenzy.
Andreessen was hopeful about how the Internet of Things could transform the way people live, and credited Moore’s law with the potential to put a chip in everything: “What if we chipped every kid? What if we chipped every dog?”
Both Andreessen and Lonsdale said this Cambrian explosion of software and hardware companies like Anki and Oculus VR (both A16z investments) is a boon for big data and security startups.
Andreessen was basically repeating his famous argument that “software is eating the world.” So Cohn took a moment to remind him that the financial-services industry was the only thing that Andreessen said software couldn’t eat.
Cohn asked if Andreessen has reevaluated his stance, because the investor’s new pet technology is Bitcoin. Cohn said the crypto-currency was like “a pure attempt for software to eat the financial-services industry.”
Andreessen is famously bullish on Bitcoin.
“I would not encourage your grandmother to put her life savings in it,” he said. “[But] every single smart computer science person I’ve had look into it has reached the same conclusion — it’s a fundamental breakthrough in technology.”
He gushed: “For the first 20 years of the Internet, you couldn’t do this … Bitcoin is the first Internet-native approach of dealing with money. He said that corrupt governments and flimsy central banking systems would be Bitcoin’s true test.
“The prospect of a new technology is a big deal once you get out of the West,” he said.
Lonsdale used Bitcoin as an example of “how industries work” and “how they should work” and views healthcare and education as some of the biggest targets for reform.
“It’s very clear that all these systems were built back in the 70s and 80s. You’re seeing these giant gaps that are being filled in.” He was also weary of social media investments in 2014, because he wants entrepreneurs to make bigger bets.
“Is this something that’s pushing the world towards the way it should be?” he asked.
Andreessen said our current moment in time fits right into Perez’s model of technological and societal change. (She wrote a pretty influential book in the investor community called “Technological Revolutions and Financial Capital.”)
Andreessen said we’re in the “deployment” phase. He brought up Perez’s cycle of new fundamental technologies: At first they’re not taken seriously, then way too seriously, then there’s a financial crash and then the same amount of seriousness.
“Tech is recovering from the depression,” Andreessen said, referring to the 2008 financial crash, and insinuating that we are now in a sweet spot. “The ratio of public tech PEs [price-to-earnings ratios] versus public industrial PEs, tech is undervalued. Relatively, tech PE ratios are really low. I know a tech company with a PE of six. We’re so far away from bubble territory that it’s unfair to compare this to the late 90s.”
Andreessen touched briefly upon recent strife between the tech industry and longtime San Francisco residents. He called recent protests “misguided,” but he seemed sympathetic.
“They are attacking the demand for housing [whereas the discussion should be] around the supply of housing,” Andreessen said. “Market forces want the Valley to expand; if our politicians show leadership, we have decades of growth ahead of us.”
When asked by Cohn the loaded question: “When does a venture fund know when it’s gotten too big?” Andreessen again referred to the broad potential of venture investing.
“For top tiers, the investable universe is only 100-200 companies,” he said, emphasizing that only about 15 of those are hits. “Perhaps that’s the rate in which the economy can support new ideas. Right now we’ve got 15 good ones, but that number could double and VC would need to increase to support it. I can’t wait to see what the answer is,” he said.
Neither can we, Marc. Neither can we.