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Silicon Valley top venture capitalist a16z founder: Why did we turn to support Trump after the shooting?
Podcast: Ben, Marc Show
Compiled by: Lv Dong Xiao Gong, BlockBeats
Translator’s Note:
The bullet that grazed Trump’s right ear was like a dividing line, not only continuously increasing the probability of Trump’s election, but also separating the attitudes of Silicon Valley giants towards Trump. When the richest person in the world, Musk, openly supported Trump, and top investor Peter Thiel supported J.D. Vance as vice president candidate, the opinions of Silicon Valley leaders diverged, such as the transformation of A16Z.
Marc Andreessen, co-founder of one of Silicon Valley’s most famous venture capital firms, A16Z, has been a Democrat for most of his life. He has supported and voted for Clinton, Gore, John Kerry, Obama, and Hillary. However, he says he is no longer loyal to the Democratic Party. In the 2024 presidential election, he will support and vote for former President Donald Trump. The reason he chose Trump over Biden boils down to one important issue: he believes Trump’s policies are more favorable to technology, especially the startup ecosystem.
Marc Andreessen has always emphasized the importance of technology to society. Last October, he issued a ‘technological optimism manifesto’, calling on technologists to ignore critics and pessimists, and to regard technology as the ‘only eternal source of rise’. According to Pitchbook, A16Z is one of the largest venture capitalists in Silicon Valley, managing over $42 billion in assets.
In the latest episode of the ‘Ben & Marc Show’ (hosted by A16Z co-founders Marc Andreessen and Ben Horowitz), Marc and Ben discussed their recent article ‘Startup Tech Agenda’ and why the future of American innovation is at a critical juncture. They also addressed the reasons for their shift in support towards Trump, and this podcast episode was also highlighted on Musk’s Twitter homepage.
In a one-on-one conversation, Ben and Marc compared Donald Trump and Joe Biden’s policies on startup technology, explored the potential future of blockchain, Cryptocurrency, and artificial intelligence, and studied how tax policies shape the future capital of startups and venture capital. They also discussed the recent assassination attempt against President Trump.
Left: Marc Andreessen; Right: Ben Horowitz
TL;DR
The following is BlockBeats’ compilation and translation of this podcast episode:
The importance of startups
At the intersection of technology and politics, the challenges faced by startups are particularly complex and important. In this section, Ben Horowitz and Marc Andreessen explore the unique value of startups and why they believe Trump is the right choice for supporting startup technology companies.
Ben Horowitz: There will be many frens who are angry because I spoke well of President Trump. You know, what I least want is for our company, employees, and the companies we invest in to be involved in this matter, because it would be very emotional. It’s difficult. But in reality, the future of our business, the future of technology, the future of new technology, and the future of America are all at stake. We’re here. For startups, we believe Donald Trump is actually the right choice. Sorry, Mom. I know you’ll be angry with me for this, but we have to do it.
Okay, today we are going to discuss the agenda for early-stage technology companies, especially the upcoming presidential election’s impact on early-stage technology companies, and how we perceive it, as well as how you perceive it, as things are about to become very real for early-stage technology companies and the presidential position. Sometimes I feel we are too focused on following negative news in politics. It feels good to have some understanding of this. Perhaps we should make a little summary.
The US election has entered a heated phase.
One of the reasons we do this podcast is that there are people who know more about foreign policy or the rights issues of various groups, or economic theories or various other things than we do. But when it comes to startup companies and the policies surrounding them, there may only be one or two people in the world at our level, because we do this every day. We work with startup companies. We see the impact of policies. And then we do a lot of work in Washington. That’s why we do this podcast. So, listeners, you know, we spend a lot of time talking to senators and representatives from both parties. Marc mentioned that we met with President Trump. We did meet with White House officials, many White House officials, including Chief of Staff Jeff Zeitz and National Security Advisor Jake Sullivan, Secretary of Commerce Gina Raimondo, and others.
We have not met President Biden. We tried but failed. But we do have a good feeling about working with the government. We are indeed deeply embedded in politics.
We focus on one issue, the agenda for startup tech companies. On this agenda, we are quite bipartisan, as we have donated a lot of money to both parties. On the Democratic side, we have excellent supporters of startup tech companies. On the Republican side, we also have excellent supporters of startup tech companies. We are simply focused on this issue. Marc, perhaps you would like to talk about your background and your political story, as this is different from your experience inventing the browser that we discussed last time. You entered presidential politics at a young age. I would have to say, obviously you must be a Democrat, because you must be a good person. That’s the fundamental reason.
But especially successful businessmen can basically become successful philanthropists. This is the path paved by Gates and many others. Then you can make progress on social issues, and you can stand on the right side of these social changes. At that time, everyone was following these. All of this seems completely obvious, completely, completely simple. So, I embarked on this path, frankly, and it continued until 2016. Looking back, I would say that there were probably signs of anti-technology sentiment in the early 2010s, and anti-business sentiment was also on the rise. By the way, one thing that bothers me is the rise of anti-charity sentiment, which we may not discuss today.
Marc Andreessen: I usually don’t talk about this unless it’s related to the presidential campaign we’re discussing on this podcast. It’s relevant for people to understand my starting point, our starting point, at least in terms of thinking about the origin story of these questions. I have an unusual career and life in many ways, one of which is due to the things I got involved in early on. The first time I saw a US president in a business context was when I was 23 years old, 30 years ago, in the summer of 1994, and it was President Clinton. Bill Clinton and I did the first-ever presidential webcast together. I’m very familiar with technology. I was the third participant in the first-ever presidential webcast, with Bill Clinton at the White House and me in an auditorium on the Google campus. I think I met Bill in 1996. And then there’s Al Gore, who, obviously, I know. I mentioned this last time, but Al Gore was hugely important in creating the internet and making all of my work possible.
I know him very well. I know them, communicate with you, cooperate with you. And they are right. By the way, there are various political issues in this process. The encryption war at that time was actually a big issue. There were many interactions with the White House, and in the end, they made the right decision in this regard. I know them very well. In fact, I supported Clinton politically in 96. I supported Al Gore in 2000, and I was very disappointed when he lost. Then, through all of this, I also got to know Senator Kerry, John Kerry, and supported him in 2004. I met Obama, and I want to thank Dan Rosenzweig, who took me to meet early Obama. I wrote a wonderful support for him in 2008. You can still find it online now.
In 2016, I publicly supported Hillary Clinton and have never been more deeply involved in politics than I am today. But I’ve always been involved, off and on. In the 1990s, I was a Gen Xer, a young adult entrepreneur in the '90s. And like almost everyone I knew, including myself, you were naturally a Democrat. Of course, you supported the Democratic president. The answer is that it basically solved the basic formula. The formula boiled down to a simple answer: Democrats in those days supported business at the presidential level. They supported technology, supported startups. They supported America winning in the tech market. They supported the entrepreneurial spirit. You could start a company. They supported business. You could do business. You could be successful in business. You could make a lot of money. And then you donate that money to charity, and you get huge recognition for it. And this solves all your problems. I was going to say that obviously you had to be a Democrat because you had to be a good person.
Marc Andreessen: This is a potential idea. But especially successful businessmen can basically become successful philanthropists. This is the path that Gates and many others have paved. Then you can make progress on social issues, stand on the right side of these social changes, and people were following them at that time. The whole thing seems completely obvious and simple. So, I embarked on this path, which lasted until 2016. Looking back, probably in the early 2010s, anti-tech sentiment and anti-business sentiment began to emerge. Then, there was something that bothered me, which is the rise of anti-charity sentiment, which we may not discuss today.
Ben Horowitz: However, oh, those who have earned a lot of money and donated it, are criticized for donating to charity instead of long paying taxes. I just want to give a specific moment, like envy pushed to the extreme.
Marc Andreessen: The specific moment that made me realize that the situation was changing was when Mark and Priscilla Zuckerberg established the Chan Zuckerberg Initiative. They pledged to donate 99% of their assets to the Chan Zuckerberg Initiative. However, a political faction strongly criticized them. The theory is that they should pay taxes and the government should distribute the money. They should not control where the money goes. Another criticism is, ‘Oh, they are just doing this to reduce taxes.’
Ben Horowitz: This is not true. It cannot be true because you cannot obtain tax deductions by donating 99% of your assets.
Marc Andreessen: You donated 99% of your assets for tax reduction. This simply doesn’t make sense. It’s like people talking behind your back and being jealous. Exactly. This formula is starting to break down. Like many of us in the tech industry, it has become a more difficult problem to solve over the past eight years, especially in the past four years.
Ben Horowitz: We both have realized that it’s much more complex than we thought, long. And I’ve had similar experiences, or perhaps even stranger ones. My grandparents were communists. My father, whom I always refer to as the communist tiger Woods, was raised from an early age to be like the greatest communist ever. He was an editor for Ramparts, a very left-wing magazine. He did long work with the Black Panthers in the early 70s, which had a big cultural impact on me. So, all my cultural references are mostly from that era. Then I grew up in Berkeley, which was basically a communist city. And all my fren growing up were of course very, very left-wing. And my mother is still very left-wing. But my father eventually turned to the other side, if you are interested in this extreme right-wing, you can read all about him. I always heard intense debates between the two viewpoints growing up, and it’s still the same today. But actually, it wasn’t until this process that I truly understood all the details.
Moreover, there are significant differences not only between the Democratic and Republican parties, but also between politicians, especially when it comes to technology. This is one of the big issues. We have now met with forward-thinking people on both sides, but there are also people on both sides who don’t understand anything. There are also some people, almost with a dark agenda, inevitably related to the control I mentioned. Can they control power? When you enter politics, you enter power, and if people pursue power by any means necessary, it can be very, very dark. Okay, so let’s discuss why start-up technology is important for the United States. We have such pressing issues, such as competition with China, potential wars; our wars with Russia; our wars in the Middle East; we have all these issues of equality and fairness. So why should anyone care about technology, let alone start-up technology as an agenda, and how should it influence how they view policies or politics or who they should vote for?
Marc Andreessen: Okay, I’m going to break this down into three parts. First, why is technology important? Second, why is startup technology important? And then, which startup technologies are important? So, is technology important? My view is that if you look at the long arc of history, we Americans have been lucky in many ways. And one of the ways we’ve been lucky is that our country has basically been the world’s leading or dominant country since World War I. In fact, it was America’s entry into World War I that really turned the tide for the Allies. And then again, America’s entry into World War II turned the tide in that war as well. And in that period, America was also the leader of the so-called Second Industrial Revolution, which was basically the diffusion of all the modern technologies that we have today in our lives. Basically everything that makes our lives livable and comfortable, from cars to railroads to telephones to logistics to air conditioning, was from that era. And America was far ahead in all of that. And we continued to be ahead after World War II. We were the dominant country on earth for the next 50 years. And that proved to be critical for the Cold War because there was this hostile ideology of full-fledged communist capitalism embodied in the Soviet Union. People who didn’t live through that time don’t have that feeling, but it was really a life-and-death matter. I grew up thinking that there was a good chance we were going to die in a nuclear war until the end of the war.
Ben Horowitz: We used to have to do those drills. Remember when we hid under the table?
Marc Andreessen: You hide under the table. When the bomb falls, hide under the table because it helps. Since the late 1980s, this has been a very real thing for our generation and older generations. Basically, for over 110 years, the United States has been the most important country in the world. There are many criticisms you can make about what the United States has done. But in terms of basic economic development, technological development, and military power, by the way, mentioning the United States’ foreign policy again, you can have a long discussion about this. But look, the past 70 years have been an unprecedented period of global peace compared to any historical period. This is largely due to the technological and military dominance of the United States. We have become accustomed to this situation. Frankly, we have taken it for granted. We inherited it and took it for granted. But this is not a given, and it wasn’t the case before. The world used to be more divided and more violent.
Ben Horowitz: I mean, this situation didn’t last long. But that’s the problem, this situation can easily change again.
Marc Andreessen: It may indeed change. We live in this world. We really take very seriously that we don’t want to live in another world. We hope this situation continues. There is a very popular saying that the best days of America are over. We have lost control, and so on, and so forth. And, so far, this is not true. But, it is still pending.
Ben Horowitz: And the United States still has real advantages. People underestimate this. It’s a bit like how we treat politicians. It’s easy to see all the mistakes the United States makes. But we take for granted the things the United States gets right.
Marc Andreessen: I call it the triangle. Basically, there are three areas where we are the best in the world. These three areas happen to be very important. These areas are technology, economy, and military. If you imagine them as a triangle, it’s interesting because each one depends on the other two. This goes back even before Silicon Valley. It actually goes back 100, 110, 120 years to the creation of any modern system of warfare, including ancient Japan and other places.
We have maintained technological leadership and technological advantage throughout the entire period. The fact that we have the technological leadership basically gives us the economic dominance. The cornerstone of America’s economic success over the past century has been obtained from wave after wave of innovation, tracing back to the second industrial revolution, continuing to the computer era, the internet era, and now the era of artificial intelligence and all other accompanying biotechnologies. Therefore, technology and economy are intertwined in Depth. Only when you are the world’s leading technological power and the world’s leading economic body can you have the world’s leading military power.
Because you need technology to actually develop the world’s leading military system, you need economic strength to pay for these costs. Basically, the greatest success story we have seen from a global perspective in our lifetime is the failure of Soviet communism in 1989. Basically, if you read about what happened during that period, they basically capitulated. They basically gave up. By the way, this happened in a way that shocked almost all experts. One day, the Soviet Union just appeared and they said, we’re done. We’re not fighting you anymore. We’re done. Basically, what happened is that they fell behind technologically. They fell behind economically. And then they concluded that it would be impossible to win the war and there was no point in trying to fight again. This was one of the most extraordinary events in world history. This global empire, with great ambition, power, and massive records of brutality, just gave up.
Ben Horowitz: Hundreds of millions of lives have been saved and improved, getting out of that situation.
Ben Horowitz: I know. It’s interesting because there’s always this communist movement in the United States, especially among young people. The response to this is always, as long as you’ve met anyone who has lived in a communist country, you will be cured.
Marc Andreessen: I completely agree. Basically, any criticism of capitalist society or economy can be magnified tenfold under communism. Whether it’s environmental destruction or quality of life, any problem is worse under communism. This is a great moral victory, but it is thanks to that triangle, namely technological strength, economic strength, and military strength. That’s why technology is important. If you don’t have the technology part of that triangle, you won’t have the economic part. You won’t have the military part either.
Ben Horowitz: Moreover, this strength is built by small tech entrepreneurs, such as Thomas Edison, Henry Ford, who built these technologies and companies, and this manufacturing capability, ultimately helping us win World War II and build the economy. These same entrepreneurs still exist today, or their descendants. These are the interests we care about and try to protect.
Marc Andreessen: Yes. And this leads to the role of startups and startup technology. On this issue, what I want to say is, this may be the point where I disagree most with my close fren Peter Thiel. He famously wrote in his book that innovation requires a monopoly. This may be the point where I disagree with him the most, that monopolies prevent innovation. Monopoly is death to innovation. Because as you like to say, the motto of any monopoly is “we don’t care, because we don’t have to.” You just need to observe the behavior of any monopoly, they just don’t innovate. The answer is because they don’t have to. It’s difficult, it’s risky, it’s dangerous, you might get fired, people might laugh at you, they just won’t do it. So basically, innovation comes from startups, and it comes from startups in two ways. It comes directly from startups. As you mentioned, there is a long list, for example Lockheed, Lockheed was once a startup. Hughes, all the core technology defense contractors that won World War II and the Cold War, they were all startups when they started.
When they succeed, they are startups. You have the contribution of startups, but you also have another important part, which is that the existence of startups keeps big companies on alert and motivates them to take action. Of course, a classic example that is currently playing out is that Google invented Transformer in 2017 and then put it on hold. Then startups came in, picked up the idea, and ran with it. OpenAI, Anthropic, and many other companies. Now, as a result, Google is now forced to react and is now doing amazing technological developments, making new breakthroughs using Gemini, but this is clearly a result of the pressure from startups. So even if you think all innovation will come from big companies, they still have to be motivated to do so, and they are motivated by competition from startups. So basically, the survival of America’s technological advantage depends on whether startups can succeed and whether there is a fertile ground. Finally, I want to point out which startups, because one answer I heard is, Marc, obviously this is true for things like autonomous drone software because it has military applications, but how can you say that for other XYZ things?
Here I want to say that, look, historically, it’s really impossible to predict which innovations will be truly important. The personal example I discussed in the last podcast is that in 1993, no one in the expert class would say or didn’t say that the Internet would have strategic importance. If you look back further, my favorite book that I recommend to people is a book written by a professor at MIT 50 years ago called ‘Man, Machine, and the Modern Age’. In the book, he goes through the history of new technologies and how they are adopted and popularized. One example in the book is a person named Sims who invented the first naval gun about 100 years ago. This was about 120 years ago. The first gun that could automatically compensate for the rolling of the ship in the waves. This gun could maintain its aim even when the ship was rolling. Basically, every step he took in trying to promote this idea was mocked, scorned, ridiculed, and obstructed.
This is a magnificent story. But any of these new things always have such a story, always have a story that this thing is not supposed to be important, not supposed to be meaningful. And then it turns out that some things may not be important in the end, but many things turn out to be very important. Now some people think they can predict in advance which new technological trends, which new wave of startups will be strategically important. This is a deeply misleading view. They have no ability to predict this. And if they apply this judgment, they are very likely to be wrong. People like them have been wrong on these topics in the past. Now this tendency, applying this, how should I say, perverse industrial policy, you say, this department will be allowed to succeed, but we will strangle this department in the cradle, this is extremely destructive.
Marc Andreessen
Blockchain, Cryptocurrency, and Stakeholder Capitalism
Ben Horowitz: The strength of the United States lies in the fact that all our talented people are contributing. You’re right. Anyone talented and ambitious can try to build something. In contrast, in Stalin’s Russia, if Stalin doesn’t allow you to build, you can’t. That’s the problem, when you start applying this approach, you get all the weaknesses of the United States, our crazy disconnected culture, all the decadence, drug addiction, but without the thing that makes it all work, which is the ability of all our talented people. We, as a country, are so talented, talents from all over the world are contributing. Whereas in top-down governments, communist societies, dictatorships, and fascist societies, it’s not like that. In those worlds, talents are destroyed. Interestingly, we spent some time with Malay Yu, but I just met him at a conference in Argentina. The story of Argentina is that it’s one of the most talented countries in the world. But all these talents have been completely destroyed by a terrible government. That’s the concern we have in the startup tech agenda.
So should we get into the topic and compare and contrast the two campaigns? We certainly know more about Biden because he’s been crafting policies for the past four years. But we do know what Trump’s agenda is and what he’s done in the past. Some of the technologies are not highlighted, but some are very important. Alright, the first topic is blockchain and cryptocurrency, which is one of the most long-standing fields we interact with the government. First, let me explain why we think this is a very important technology. Going back to the internet, one of the reasons why the internet is so special and important is the so-called permissionless innovation, or a network that no one owns. Microsoft doesn’t own it. AT&T doesn’t own it. No one owns it. It’s the community that truly runs the network, runs the internet. Anyone can participate, set up nodes, and move forward. The result is that anyone can build a business on top of it, anyone can create on top of it, without having to pay large amounts of taxes to some companies. I remember all the companies that were built. But I also remember Prince putting his work on the internet. It’s amazing because he could, he changed his name to get out of a record contract and did all these things. It’s an exciting place where everyone can participate without going through big industry. You can go do your thing. If you have talent or ideas, you can put your ideas out there. You can write and put it on the internet. You don’t have to find a job at The New York Times, etc.
But what happened later is that the history of technology is somewhat similar to the history of networks and servers. In the end, the servers were owned by big companies. There are many reasons in terms of technological architecture. Therefore, the winning companies eventually have all the data in the discovery layer (such as Google), social network layer, or business layer. Therefore, these companies become extremely powerful, more powerful than most governments. Google, I think we all agree, is more powerful than 95% of the countries in the world in controlling information and having funds. This has various adverse effects on people. First, in establishing a business, you now rely on them, and they can eliminate your business by making it impossible for you to find it. If you are an artist, the percentage of your work on Instagram or TikTok is very high. You upload content, and they get 99% of the revenue. There is nothing else in the world that can do this. Even a company like Apple, if you develop an application, they also take 30% of the revenue. This is a very high concentration of economic power, information control, and so on.
We have not had the technology to deal with this. But now we have blockchain. This is an amazing breakthrough where you can build the same services. But instead of being owned by companies, they are owned by the community. Just like the community owns the internet. This is a very significant breakthrough, crucial for the functioning of a healthy society. We hear words like ‘stakeholder capitalism.’ This is indeed stakeholder capitalism, where customers participate and people in the community run the servers. Everyone is involved. If you look at early services, creators receive 90% or 95% of the profits, not 1%. This is truly an amazing potential.
In addition, it addresses some real social issues we face, such as who controls the truth. This occurs in depth forgery, right? You have AI now, and AI can create a video that looks like Joe Biden. How do we know if it’s real or fake? Who tracks this? Who owns the truth-source database? Is it the Republicans? Is it the Democrats? Is it Google? Whom do you trust, or should it be a community-run utility? That’s what blockchain solves. We believe that for our country, for our society, this may be the most important technology we deal with. It needs immediate collaboration with the government because it does require regulation, as the community pays for the electricity used to run ETH services. There are about 10,000 people running the Ethereum blockchain, and they get these tokens. These tokens are their rewards. And the thing about tokens is that it could be a stock certificate or a Pokémon card. It can be many things. It’s a computational structure. There needs to be a regulation that says in this case, it’s a stock certificate, and in that case, it’s a Pokémon card. That’s how the industry can operate and eliminate the problem of scammers or people attempting to secretly take your money.
And then we go to Congress and say, maybe we can pass a law that clarifies when something is a security and when it’s a commodity. The administration, in the form of the SEC, specifically, the White House appointees, is already opposing us every step of the way, using very vicious means. Just to name a few. First, they refused to issue any guidance. And then they go after the company without the law, without guidance. As a result, they sued more than 30 of our companies. They issued Wells notices, which we’ve never seen in our entire careers, which is a form of SEC announcing that they’re investigating and pursuing any private companies. These are private companies. Specific to this industry. They almost lost all of these lawsuits, but the problem is, when you’re a startup, you don’t have the money to fight the United States government. They’re destroying the industry like that. They also make it impossible to have a bank account, although it is perfectly legal to build this technology as a company. The FDIC said to the banks, look, if you provide banking services to these companies, we’re not going to let you borrow money at the federal window. We’re going to attack you, it’s a similar technique, you can read about the technology they’re using in the cannabis industry, why you have to pay in cash in a cannabis shop, it’s the same thing they do in the encryption industry. You can read this if you’re interested. They call it Choke Point 1.0 for cannabis and Choke Point 2.0 for the encryption industry. Beyond the law, the use of the administrative state essentially tries to destroy an industry.
Then we tried to do it through the law. There’s something called SAB 121, a crazy rule made by the SEC, saying if you hold someone else’s encryption assets. If I have some BTC and I give it to you for safekeeping, then as a bank, if the price of BTC falls, you are responsible for it, even though it’s my BTC. You can imagine, oh, the bank stores gold, if the price of gold falls, they have to bear the responsibility for what their customers own, not what they own. Well, this means that banks cannot hold Cryptocurrency. So, the Senate, Democratic senators like Chuck Schumer said, come on, this is too absurd. They voted to repeal this rule. Then Joe Biden vetoed the bipartisan conclusion of the Senate and kept this rule. That’s their radicalism. It’s really frustrating and difficult for us and the whole industry, and this is such an important technology.
This has always been one of our biggest battles. To give you an example of how long destructive this is. We have a company, Worldcoin, that solves a big AI problem, which is proving you are human without revealing your identity, social security number, or driver’s license, just like the strength of a hard password, proving you are human and not a robot. They have launched their product worldwide, except in the United States, because of this behavior and these laws. To let you understand how important this product is long, I mean, this is something recognized by the Malaysian government. This is something that half of the citizens of Buenos Aires often use. This is a very great, useful, and important product that can make everyone’s life better, and we just banned it in the United States. This is a huge blow to startup technology.
Challenges Facing the encryption Industry
Ben Horowitz: We should continue to explain. We are trying to meet with Gary Gensler, who is the chairman of the SEC. He is leading the campaign against Cryptocurrency. We are the world’s largest Cryptocurrency investors or the largest Blockchain investors. We have requested to meet with him at least six times. I even contacted his office colleague at MIT, who said, “Gary will definitely meet you. It’s so important, he has to meet you. You know all these things.” But he couldn’t arrange a meeting.
It is said that his appointment was not made by Joe Biden, but by Elizabeth Warren, who also refused to see us. She is the only senator who has refused to see us. Of course, we cannot meet with the president himself. It’s really very frustrating and difficult. In contrast, when we are pushing for this legislation, the market structure law determines what is a commodity and what is a security. We have been cooperating with Congress, and some outstanding Democrats in Congress have been helping to support us. Richie Torres has always been an absolute hero. Chuck Schumer has been great. We have been working with them all along. When we are doing these things, Donald Trump has put forward his Cryptocurrency position, you can read it, but the current contrast is really crazy.
Marc Andreessen: This came out before we met with him, which is a stark contrast. But he publicly talked about this issue, and he will actually give a speech at the BTC conference after the conference. He will have a longer record on this issue. But one of the things Trump did was rewrite the Republican National Committee’s platform for this conference, and he rewrote it himself. It is a very clear and simplified version of the intended statement. You can download and read it, it’s worth reading. I will read a paragraph directly from it. This is Chapter 3, Building the Greatest Economy in History. Point 5. We all support this. We all support this. Point 5, supporting innovation. These words only come from him now. And then, paving the way for the future’s great economy, leading the world’s emerging industries. The first industry is Cryptocurrency. We will end the suppression of Cryptocurrency that is illegal and inconsistent with the American spirit. We will oppose the creation of central bank Digital Money, which is another part. We will defend the right to mine BTC. We will ensure that every American has the right to self-custody digital assets and trade without government surveillance and control. It’s like full support for the entire field. It’s like a complete embrace of the whole thing. He has talked about this issue on other occasions and confirmed this. This is a complete 180-degree turn we have experienced.
Ben Horowitz: I have to say, our experience in this area has personally shocked me. This idea. And, to reiterate, I come from an era, the Clinton administration would never do this. I don’t think the Obama administration would do this. Absolutely not. This is new behavior.
Marc Andreessen: Well, whether you like Obama or not, he’s always interested in the opinions of business and technology experts, whether he agrees with them or not. He wants to learn. He’s not the kind of person who is unwilling to listen, and that’s exactly the problem we’re facing now.
Marc Andreessen: This is difficult. This is really bad. This is a brutal blow to the entire industry, and I have never experienced such a situation. I am completely shocked that this happened. It is really frustrating that we cannot make progress with the White House in this regard.
Ben Horowitz: This is completely an intolerable situation. And it’s really interesting, because our old friend Reid Hoffman wrote an article defending the Biden administration. He said that businessmen should support Joe Biden because the most important thing for businesses is the rule of law. I think, wow, this is really ironic, because they basically subverted the rule of law to attack the Cryptocurrency industry. I mean, we are dealing with this issue now. This may be the most emotional topic. Let’s move on to artificial intelligence. Why is artificial intelligence important to America?
Marc Andreessen: Look, this is actually a question that nobody argues about. People in the Cryptocurrency community will argue about whether it is important. And obviously, we firmly believe that it is important. As for artificial intelligence, there is no doubt that it will become the cornerstone technology for the rise of the economy. If it is allowed to develop in the way it should, what will happen next will be at least equivalent to the prosperity of the Internet in the 1990s, if not the prosperity of the computer industry since the 1950s, which will also have a huge impact on the United States. Then look, artificial intelligence is powerful enough, perhaps even bigger than these two. This could be the biggest technological boom ever. Therefore, it is extremely important economically. Then look, the entire military theory, military warfare, everything will change. All of this will revolve around artificial intelligence. By the way, this is already happening. The Pentagon has already classified artificial intelligence and autonomy as what they call the third offset, which means it is basically the cornerstone technology of the next generation. There have only been three offsets in the history of the post-World War II era.
The first one is nuclear weapons. The second one is mobile warfare and related matters. The third one is artificial intelligence and autonomy. Therefore, there will be a complete revolution in military affairs, and the way the US military and global military operate will be completely restructured. The Department of Defense, yes, they have confirmed this. We have worked with them a lot in this regard. They are pushing hard in this regard. We have funded many companies. So, this will be very important. And China has already announced the exact same thing. So, they are completely reshaping their military in the same way. This is a huge national security priority for them. They have complete control over their domestic technology industry. So, they are using the abilities of their smart people very targetedly to do this. This is the technological race of our era. This will determine the world order for the next few hundred years. This will determine the way governments operate. This will determine the way surveillance operates. This will determine who wins the war.
Marc Andreessen: You can see it. Absolutely correct. I don’t know why you’re so excited about this issue. Well, look, you can already see it. You can see it on the Ukrainian battlefield. Yes, I won’t go into detail here, but it’s a huge shift. All of this is happening on the Ukrainian battlefield now. And obviously, it will have a significant impact on what happens in the Middle East and elsewhere. This is a core and foundational technology, as you would expect. The United States absolutely has to win this game.
Regulatory Storm of the Biden Administration
When it comes to the development of the technology industry, tax policies are a key factor. Marc and Ben discussed some of the tax proposals of the Biden administration and their potential impact on startups.
Ben Horowitz: So what have we seen from the Biden administration, especially from the White House, so far? I’d like to start by saying that Congress has been trying to find answers under bipartisan cooperation. The approach of the Biden administration has been different. Perhaps you can briefly introduce their actions up to now.
Marc Andreessen: There are different branches. The Secretary of Commerce you mentioned is an example, someone we’ve been talking to.
Ben Horowitz: By the way, Gina Raimondo’s thinking on AI policy is excellent, especially when it comes to issues involving China and CFIUS. National Security Advisor Jake Sullivan is also the same. When we talk about the White House, we are actually talking about executive orders from different parts.
Marc Andreessen: And, there are also many very smart people working in the Department of Defense and intelligence agencies, I want to emphasize that they have done a lot of good work. There are many positive aspects, and many people are really working hard to solve this problem.
Ben Horowitz: Okay. We are trying to figure out the idea in the executive order, which is basically allowing you to do how much mathematical operations in life, limited to within 10 to the power of 26 floating point operations (flops). You and I have done a lot of research. We talked to White House advisors. We talked to White House policymakers. It ultimately boils down to a belief that we think is very wrong, basically, if I can summarize, there may only be three to four basic models in the world that are relevant, because only a few companies can afford the number of GPUs needed to produce the relevant models. This idea has several problems. First of all, there are already many technologies that indicate you can make a very outstanding model on someone else’s model. There is a technique called distillation that we have discussed before. Secondly, it now appears that annotated post-training data is more effective than adding GPUs. Scale may be the only important thing, or it may not be. But many very important basic models are not large now, but are getting a lot of use, and they are not in those three typical models. The idea is that if there are only three models, and they all come from the world’s largest companies, then you can set some obstacles in front of them, and they will jump over them without any problem. But for startups, by the way, almost all the basic models we invest in are rising rapidly and performing very well. These will be killed by this type of regulation. Maybe you can talk about why the restriction on floating point operations is so strange.
Marc Andreessen: For those who don’t know, floating point operations per second (flop) is a technical term in computer science that represents the number of floating point operations performed per second. I know that doesn’t explain much. Basically, it’s a way to measure the speed of a computer, how many operations it can perform per second, how many mathematical problems it can solve per second. Nowadays, computers are very fast at performing mathematical operations, they can solve millions of these operations per second. The idea of 10 to the power of 26 floating point operations in the executive order is, as you said, only achievable by the largest models. The problem is that our industry has a well-known phenomenon with a 50-year history, which may be the clearest thing we know about predicting the future of our industry, and that is the so-called Moore’s Law. It is a well-known phenomenon that computing power gets faster and cheaper every year.
I have one more thing to say about Moore’s Law. Companies like Nvidia, now one of the most valuable companies in the world with a market cap of about 30 trillion dollars, are incredible success stories. The reason for their existence is that their chips are now standard chips. This is the biggest profit incentive in the global chip industry ever, and we must find a way to compete with Nvidia by applying longer chips, dropping prices, and increasing production. Even Nvidia’s CEO, Jensen Huang, is a good friend of ours. He is working hard to push this forward. He predicts that the speed of these chips will increase significantly and costs will drop significantly from now on. Therefore, the cost of chips will drop significantly in the next decade. So, what seems very expensive and difficult today will become very easy and very cheap. There are long historical precedents for this. Let me give you one of my personal favorite examples, the original Sony PlayStation, which is a gaming console.
**Ben Horowitz：**I have one, playing “Call of Duty”.
Marc Andreessen: People know all of this. When those were first shipped, they were export-controlled. So Sony wasn’t allowed to send them to countries that might have their own nuclear programs, like Iraq, because the chips were considered too powerful and could be used to make nuclear weapons. This illustrates a fundamental issue of why that happened, because someone had set floating-point operation limits for supercomputers in the past. Then Moore’s Law kicked in, and Sony PlayStation came out as a $300 consumer device with that floating-point operation capability. Suddenly, you’re export-controlled. The magic of the GPU. PlayStation was one of the earliest GPUs, and it had a GPU in it. These seemingly reasonable limits became unreasonable very quickly. Let me give you another example of how deflation happens. When OpenAI first released GPT-2, which was probably the first effective LLM, they initially refused to release it because they had all these warnings about its dangerousness and safety. And now today, GPT-2 is open source.
Ben Horowitz: Andrej Karpathy is a co-founder of OpenAI. He has already left, and now he has an Open Source version of GPT-2. You can train your own GPT-2 from scratch with a computing cost of less than $100.
Marc Andreessen: It’s like, I don’t know, they go from around 10 million dollars to 100 dollars. Right, that order of magnitude drop. What seems extremely expensive and rare today will become mainstream, then become cheap, and then everyone will have them. By the way, every computer science student will have this kind of model on their laptop. You will have this kind of model on your phone. Within five years, you will have this scale of model on your phone.
Ben Horowitz: This Deflation effect will be very significant. These things will happen, and they will be like microprocessors.
Marc Andreessen: These will become universal products, basically built into all devices, and everyone will have them in every device. Basically, the institutions that the government threatens to implement will be limited by using this, basically establishing the two or three companies they consider to be the only important ones. It’s kind of like a permanent monopoly. They will basically destroy the underlying startup ecosystem. They will establish an AI OPEC organization from the beginning. This is one thing I have a big question about: is this ignorance or malice? Right, do they not understand what they’re doing, or are they intentionally doing this to establish a cartel? Either way, I find it completely unacceptable.
Ben Horowitz: This is a bit related to what we talked about before, which is the idea of predicting the future, like a principle of prevention. As Yuji Bera said, the trouble with predictions is that they are difficult, especially when it comes to predicting the future. And if they could predict the future, obviously the future is unpredictable because if they could predict it, they would be richer than Elon Musk or anyone else. Of course, no one can predict the future, especially when it comes to these things. We know that we cannot predict the future, but our whole job is to try to predict it. However, it is very dangerous to make policies before the future arrives. We have seen this in Europe, where they basically eliminate almost all innovation through this principle of prevention, trying to stop it before it happens in the future. This might be the issue I care about the most.
Marc Andreessen: What I need to emphasize is that artificial intelligence is actually just mathematics. I mean, it’s just math. They are just large-scale mathematical models. Huge equations. Specifically, it is a field of mathematical linear algebra, with a key algorithm called gradient descent. And, by the way, these things are taught in every university. These things are everywhere. They are in YouTube videos. They are all over the internet. They are talking about standard textbooks. This is not rocket science. It’s not hiding. Nuclear physics. This is being operated openly. The idea of being constrained, by the way, relates again to the relationship between national and global policies. We deliberately constrain ourselves with cumbersome regulations, while the rest of the world is lighting up on this, and China is also lighting up on this idea, and there are few secrets in this field. So basically, any limitations we impose on ourselves will only put the United States at a disadvantage relative to other countries in the world.
Ben Horowitz: This is a bit like what we often talk about, you get into these laws. There are laws and enforcement. If you make a law that is impossible to enforce, you will eventually be in a so-called anarchic state, which is an anarchic state for those who do not obey the law. They can do whatever they want. And then it is a dictatorship for law-abiding citizens. Because no matter how carefully you comply with the Byzantine government’s regulations, you will mess up something and be punished. This is a very bad policy idea. This is another issue we are concerned about in dealing with these things, and how we come to these policy conclusions.
Marc Andreessen: If I hadn’t seen the performance of the blockchain, I might not have felt so strongly. But I saw the trend of this road. You can now see this in adjacent industries in real time. And this has been disastrous. Our country cannot let this happen again.
Ben Horowitz: We are still in a very early stage in this industry. We have seen very important innovations throughout the industry. People from all walks of life and from all over the world are doing amazing things in the field of AI. It is irresponsible to say that I know the direction of the entire industry’s development in the next 20 years. My biggest concern is the signs we see in cryptocurrency. This will happen in AI. This will release the administrative state to do their thing. Although I am not confident that they will stand with us, some are not the entire administrative state, but certainly part of it will affect us.
Marc Andreessen: However, if the government suppresses AI like it does blockchain, the country will be deeply troubled.
Ben Horowitz: This is the default path. This is completely unacceptable. Very worrying. This meeting is very worrying. The outcome is still uncertain. As I said, there are many people in the White House who still need to continue to strive, and we are waiting to see. But this is indeed very worrying. Then let’s talk about Trump’s proposal. When we had dinner together, we actually discussed this issue. We discussed all these topics and confirmed this point.
Marc Andreessen: Including building the greatest economy in history, supporting innovation, and supporting artificial intelligence. We will abolish dangerous executive orders that hinder AI innovation and impose radical ideas on technological development. We will support AI development based on freedom of speech and human prosperity.
Ben Horowitz: I think this sounds like a good plan. When we met with him, I thought his comments were very insightful and funny. I will compare the approach of the Biden administration, especially the core of the White House, with that of Trump. The White House has a very complex model. I would say they think they know a lot. They know that startups are not very important, and only a few companies can provide large models. They know everything we don’t know, they have never heard of distillation, or how AI actually works. But this is a very complex worldview. Trump’s view is very simple. He told us that AI is very scary, but we absolutely must win because if we don’t win, then China will win. This is a very bad world. This is actually a more correct view, it is a basic fact. Look, when things start to happen, regulation is indeed needed, we should regulate them. But to predict it in advance, when the car is coming, we think someone will make a car that travels at 500 miles per hour, and no one can control it. We should ban cars now. What I mean is, this is a bit like the attitude towards AI, we think there will be a perceptual model in the future. Now, it seems that no one has built anything that is heading towards perception. By doing so, we have these good things that can guide children. No, you can’t guide children, because someone might come up with an idea to create a perceptual AI. We must cut off the guidance. This way of thinking is very scary, I would say.
Marc Andreessen: One of our arguments is that we are not opposed to regulation, as we described in the Block chain section, obviously there is regulation.
Ben Horowitz: Or a model that can be self-constructed into a super genius, and no one knows how to do it.
Marc Andreessen: We are actually trying to establish a regulatory framework through a regulatory law. This is the 21st bill. We are actually trying to create new regulations because the government won’t do it. In a meeting with the White House to discuss AI policy, one argument we made was that the problem will come from AI, but assuming they should be regulated. Regulation should occur at the application level, not the technical level. The reason is basically that regulating AI at the algorithm level is regulating mathematics. It doesn’t make any sense. Of course, we won’t do that. Do you remember what they said? No, in fact, we can classify mathematics. Literally, they did classify the entire field of physics during the nuclear era and made it classified as national secrets, such as theoretical physics, science, and physics. We completely classified it as a national secret and that research disappeared. We are fully capable of doing this again for AI. We will classify and terminate any mathematical field that we believe is developing in a negative direction.
Ben Horowitz: This is also very interesting because there is now something called the Internet, which makes it difficult to keep mathematics secret. There are no more information secrets now.
**Marc Andreessen：**Some people might say, this is crazy, they certainly wouldn’t do that. But the problem is, so long, I’ve seen too many crazy things. I no longer believe, I feel I can’t predict which of these crazy ideas will be implemented. I personally can’t tolerate the existence of such ideas, just as literally we might classify linear algebra as a state secret. This is out of bounds.
Ben Horowitz: You are excited. Well, I just want to briefly mention financial technology, because financial technology is in some ways almost a subset of Cryptocurrency, in terms of regulatory approach. But I want to tell a story, because it really has had a personal impact on me. We invested in a company called EarnIn, founded by Ram. Although I didn’t invest, I talk to Ram almost every month. We have dinner together every two weeks, because first of all, what he does is a mission for him, which is closely connected to my life. The fact of the American financial system is that it is extremely unfair to the poor. If you are poor, you pay more fees for banking services than the long. You and I don’t need to pay any fees for overdraft protection. And the low-income people spend more on overdraft fees than long. This is very bad.
There is a large population in the United States without a bank account. If you don’t have a bank account, you usually enter the underground economy and you have no credit. My wife’s family is one of them. The only credit many people can get in this situation is payday loans, with extremely high Interest Rate. No business can rely on payday loans or credit card loans to rise. This basically means you lose your freedom. You have no credit. If you look at countries without credit, they have no employment rise. Like Argentina, this is a big problem that Malay is working hard to solve because there is no consumer credit there and they have not had employment rise for ten years. For certain segments of society, this is a very bad thing. Many black and Hispanic people are in this category and they can’t get out of trouble without a bank account. Ram came up with this amazing solution. If you work hourly, they can track whether you go to work and you need a loan because you haven’t been paid for two weeks. For example, if you can’t get paid until Friday and your daughter’s birthday is on Saturday, and you want to have a birthday party, he will lend you money interest-free. You can choose to tip him or not.
This is how you start building credit, and then he will provide banking services for you. And his Interest is much higher than normal long. This is finally a channel that breaks away from the underground economy, providing opportunities for those who are systemically oppressed by the financial system, this is a great mission, a great person. His story, he is doing this. He provides these loans, from police officers to McDonald’s employees and so on. No company is more loved by customers than EarnIn. And then COVID came, this is what a startup looks like. You have this great mission, you grow like crazy, everything is great, you hire all these people. COVID comes, the government issues these stimulus checks, and everyone doesn’t need to work anymore. Everything disappeared, he had to lay off employees, it was very difficult. His dream is shattered and so on. But in the end, it all came to an end, and he bounced back. Just when he is ready to expand his business, he faces fierce attacks from the administrative state, especially CFPB. They send him threatening letters demanding that he waive attorney-client privilege. How can this be legal? Then they ask him to accept CFPB’s jurisdiction, otherwise they will sue him. I will never forget this, we ask, sue us for what? We won’t tell you. Like that kind of harassment. It’s really crazy.
We talk about, I feel it’s necessary to point out, this is not the Democratic Party. This is not all Democrats. This is indeed an extreme left of the Democratic Party, an authoritarian branch, and they have control over some of these things under Biden’s leadership. Part of the reason is because Biden delegated it. I would say, he delegated it, but it has a real impact. Anyway, then, we also encounter this situation in the field of biotechnology. Biotechnology is in an incredible position in terms of AI, suddenly we have the possibility to cure various diseases that were previously incurable. But with these limitations on AI, these arbitrary limitations, 26. How many floating-point operations? 10 to the power of 26. If you exceed this number, then, if this is the model size you need to cure cancer, what kind of struggle is this similar to?
Another problem we encountered in this government is that from the perspective of venture capital, it is almost impossible to cure rare diseases, because pushing a drug to the market requires $1 billion. And they are not always effective. Multiply this number. And rare diseases do not have that many long patients. You can never recover the funds. But we have a company with an incredible drug platform. They cured a rare disease, passed the first phase of clinical trials, and cured it. Sell the drug to Sanofi so that they can recover some funds to develop longer things. The Biden administration sued them, disrupting the deal. This basically makes it almost impossible for us to fund any company trying to cure rare diseases. This is an arbitrary crackdown on startups. Maybe you can talk about the vitality of the United States. We have done a long job in the defense field, as you mentioned, my work. Maybe talk about why our current military construction method is unlikely to be competitive if it is not upgraded. And what are some obstacles in this regard.
QSBS is the lifeline of innovation
Marc Andreessen: Absolutely right. The most important part of the tax law for startups and innovation is called QSBS (Qualified Small Business Stock Exemption). This has been around for quite some time. It is a bipartisan measure that has been passed and signed into law by both Democratic and Republican administrations as one of the few measures. Basically, it states that if you start a company from scratch and hold the stock of that company for at least five years, the proceeds from selling those stocks will be tax-exempt or taxed at a very low rate. This is a fundamental incentive for people to start companies, invest in companies, hold those investments, and ultimately sell those investments and roll the proceeds into new companies. This is the reason we have Silicon Valley today. This is the reason we have a culture of entrepreneurship. This is the reason why the United States has 50% of the global venture capital and 90% of the world’s most valuable startups. It’s a very critical thing.
Ben Horowitz: Not just for the tech industry. This also applies to biotechnology, clean energy, and all industries that require starting from scratch, taking on a lot of risk, and taking a long-term view to build something truly valuable. It is equally important to note that the majority of the benefits from QSBS are not for founders or early employees, but for investors, pension funds, university endowments, and foundations that serve as LPs in these venture funds. When you attack QSBS, you are actually attacking the entire American innovation structure.
Marc Andreessen: Absolutely right. The Biden Treasury, in a fit of anger, decided to propose a rule to abolish QSBS. Completely abolish. This is incomprehensible. This is the most destructive thing that could happen to American innovation, entrepreneurship, startups, and venture capital. It’s like taking a sledgehammer to the fundamental incentive structure that supports the entire ecosystem. By the way, they did this without any consultation, without any contact with the industry, without attempting to understand its impact. We need more income support, let’s smash this thing and see what happens.
**Ben Horowitz：**This is not a theoretical concern. This is a real danger. Companies in our current investment portfolio are making decisions about whether to launch new projects, expand, or hire more long people. And this kind of thing creates huge obstacles in the workplace. It creates uncertainty, fear, and a feeling that maybe we shouldn’t do this. Maybe we should be more low-key and wait to see what happens. If you want to promote innovation and rise, this is the worst thing.
Marc Andreessen: Absolutely right. That’s why we reiterate that we are not trying to take a partisan stance. We are not trying to pick sides. We are simply looking at the policies and their impact. What we see from the Biden administration is a relentless attack on the fundamental structure that supports American innovation and entrepreneurship. And it’s not just us. It’s not just the tech industry. It’s not just Silicon Valley. It’s the entire ecosystem. It’s the universities. It’s the research institutions. It’s the small businesses. It’s the people and organizations that make up the entire network that has made America a global leader in innovation. We can’t stand idly by and let this happen. We must speak up. We must fight back. We must strive to protect the structures that make this country great.
**Ben Horowitz：**This is absolutely correct. That’s why we are here. That’s why we need to do this. That’s why we need to speak up. Because we believe in this country. We believe in its potential. We believe in its ability to innovate, rise, and lead the world. But we also believe that this potential is under threat. We cannot stand idly by and watch this happen. We must take action. That’s why we are here. That’s why we need to do this.
Marc Andreessen: This is the debate you can have. Those who have big houses, I’m not targeting you. Just to let everyone know. So, you will hear a common criticism of the American economy or the capitalist system, whatever it is, it lacks long-term investment. Everything is short-term trading. There is not enough long-term construction of big and important new things. Therefore, the tax related to the idea of building big and new things is the capital gains tax. By the way, the capital gains tax applies to tech startups. It applies to small businesses. It actually applies to housing. It applies to commercial real estate. Anything you build.
Ben Horowitz: Anything that you build. Anything that you want to build for the long term. Yes.
Ben Horowitz: If you’re building a new house, we have a massive homelessness problem. We need to be careful about the people building the houses and the cost they pay on these capital gains tax rates, because it will affect the number of affordable and unaffordable housing in the world, city, and country. This is very important. Absolutely.
Marc Andreessen: Basically, what happens is there is a capital gains tax, which basically taxes the returns on investment capital. It’s the long-term appreciation of assets that you build, like a company or a building. And historically, the tax code has been set up so that capital gains tax applies when assets are sold. That’s called realization. When it’s sold. You can build a company over 10 years. You can increase the value of the company with internal compound interest. And then at some point, if you take the company public, sell stock, or sell the company to an acquirer, etc. Then you pay the tax, and then you pay tax on all the gains.
Ben Horowitz: It’s a bit like buying a house, its value rises, but you don’t need to pay taxes until you sell it, because you need funds for other reasons. Its value may also decline. That’s absolutely right. Absolutely right.
Marc Andreessen: The current president has a very radical idea among the anti-capitalist radicals.
The billionaire tax is a complete lie
Ben Horowitz: This is a proposal in the re-election plan proposed in next year’s budget. The proposal is to change the tax structure and tax unrealized capital gains. This sounds esoteric, but it is ultimately very important. This means that anyone, and I have to say first, it was initially advertised as a billionaire tax. But it’s not just about taxing the rich, it’s always been advertised as a billionaire tax. They’ve been lying from the beginning.
Marc Andreessen: Black and white in the document. This is an outright lie, it’s not a billionaire’s tax. The threshold is $100 million. This is obviously a lot of money. I’ll come back to why this is important in a few minutes. But for anyone in this category, what you need to do is pay tax on unrealized capital gains every year. If you own a building, or you own a company, here we’re talking about tech startups, this is our field. If you are the founder of a tech startup, your stake in the company exceeds the threshold they set. Or if you are a venture capital firm, you have a fund, and there is an aggregate pool that exceeds this threshold, you must start paying taxes, you must pay annual taxes on unrealized gains. Now, the question is, the IRS only accepts cash, not private stock or shares of buildings.
Ben Horowitz: They only accept cash, and you have to figure out a way to get the money.
**Marc Andreessen：**They only accept USD. They only accept USD. You have to find a way to get USD with an illiquid asset’s unrealized gains. Yes. First, where do you get the money from?
Ben Horowitz: The good news is that housing and building prices never go down. They only rise. Startups, of course, never fluctuate like roller coasters. They are never overvalued. There is no bubble. I saw a lot of this in the black and white documents of the tax proposal. You will like this part.
Marc Andreessen: They say that for calculating returns, the valuation of a startup is the largest of long options, especially the valuation of the final round.
Ben Horowitz: Everyone in the world likes to keep saying that every round of startups is always overvalued.
Ben Horowitz: Well, they are usually overvalued, which is why it’s a very risky business.
Marc Andreessen: The problem is that you have to pay taxes on things that you will never actually cash in and realize, because sometimes these things develop very well, and then they don’t succeed. There is this problem. We will come back to this issue later. But there is a more fundamental problem, if you are the founder of a startup company, the initial tax rate they propose is a large percentage, the lowest tax rate on the first day is 25%. We will talk about the change in tax rates over time, starting from 25%. Every year, 25% of your income will be deprived. Basically, you are working, your team is working, everything is in operation.
Ben Horowitz: Your unrealized gains are the 25% appreciation portion of your valuation that you don’t have capital in.
Marc Andreessen: What happens is your ownership, every year, gets taken away a piece at a time. If you’re a venture capital firm, every year a piece of your portfolio gets taken away.
Ben Horowitz: This is actually unreasonable. Annual unrealized capital gains tax of 25% for 10 years.
Marc Andreessen: You’re done. Your business is done. Your business is done.
Ben Horowitz: For new companies and investors in new companies.
Marc Andreessen: For venture capital firms, you will lose your equity. It will be systematically deprived. You will lose it. It will leave you with nothing. This makes it completely impossible for startups to exist. Because why would anyone do this, instead of working at Google and making a lot of cash every year? Why would anyone go through all this, just to have their equity taken away?
Ben Horowitz: First of all, then venture capital is over. It’s over. Companies like ours no longer exist. They disappeared because the structure didn’t work. In fact, we have a similar experience. Do you remember the dot-com bubble? I do. The so-called bubble. The so-called bubble. During the dot-com bubble. As the CEO there, it was at least a very intense period in the stock market. One thing was that Cisco may have been one of the most stable companies in the industry, and employees did something called exercising Options to convert them into capital gains.
When you do this, you will be subject to something called Alternative Minimum Tax. Essentially, you have to pay taxes on the difference between the fair value and the exercise price. Then the market crashes. They couldn’t sell the stock to pay the taxes because Cisco’s price fell below what they paid. They had no money. In fact, there were trailers towing employees’ cars in Cisco’s parking lot. We know who lost their homes. And then, of course, people lost their homes and everything else. This made it impossible for startups to exist.
It is quite obvious, it is a known fact, all these things. Surprisingly, this will become a formal proposal. By the way, Biden has been campaigning for this, when he says I want to get a fair share from the billionaires, he is actually talking about the unrealized.
Marc Andreessen: This is the form of commitment. This is the problem. What happened here. First, you killed the startup, you killed the venture capital. Congratulations. You killed the tech industry. Well done. First. By the way, second, you killed the tax base of California. Oh, California is finished. California is finished. I’ll give you an example of why California is finished. In the peak year of capital gains in the high-tech industry in California. In the peak year, half of California’s total tax revenue comes from the top one thousand individual taxpayers.
Ben Horowitz: This is basically all high-tech industry. If you eliminate the high-tech industry in California,
Marc Andreessen: If you eliminate startups, you eliminate venture capital, and you eliminate at least half of California’s tax base.
Ben Horowitz: And California’s tax base, you take away half of the funds. Over 60% of the funds are used for schools. This is a complete devastation. A complete devastation.
Marc Andreessen: California has a large population, including many people who are long tax-free. Many people with very low incomes and all the support networks that take care of these people will be completely destroyed. This is like a direct hit on California. It seems like a bad idea. It looks like a very bad idea. I haven’t finished saying how bad of an idea it is. Third, the issue you mentioned is that you will eventually be taxed on some unrealized gains, such as taking on long less debt. There are all sorts of crazy questions. Are you allowed to sell shares of a company that has not yet gone public? When will the SEC hold you accountable? I mean, this part is completely nuts. But what happens next, there is a long history here of what happens with US taxation. Basically, the income tax didn’t start out as a 30% or 40% tax, it was about a 3% tax. Once this structure is in place, politicians do their thing, which is to raise tax rates. First off, if this starts out as a 25% annual unrealized capital gains tax, it won’t stay at 25%. It will rise gradually. Especially because it will erode the tax base. They will need to tax the remaining taxpayers more long because there won’t be enough total revenue, and that’s very predictable.
**Ben Horowitz：**This is absolutely, absolutely, absolutely devastating.
Marc Andreessen: There’s one more thing, I mentioned they promoted it as a billionaire tax, with a high threshold of one billion dollars. People would say, look, I’ll never be in that category. But it won’t stop at one billion dollars, because people with one billion dollars are not enough long. They will inevitably drop this threshold.
Ben Horowitz: Because you will run out of money. It’s like the Kulaks, when the Bolshevik Revolution happened, Lenin’s first thought was to kill all the rich people. But it turned out that you would soon kill all the rich people, especially if you are killing them, there would be no more money left. He eventually killed the Kulaks, who were farmers with two horses and two bulls, because apparently you need longer people to kill, so you can seize longer things.
Marc Andreessen: The final dividing line is whether you have one bull or two bulls.
Ben Horowitz: Whether you are a one-bull or a two-bull determines whether you are a Kulak or a proletariat.
Marc Andreessen: It’s basically inevitable that this threshold will drop and end. You can foresee what will happen. It will drop to fifty million, then twenty million, then five million, then one million. It will keep dropping. First, it will affect everyone in the high-tech industry. It will affect everyone working in technology startups. And second, it will affect every homeowner in California.
Ben Horowitz: Everyone who builds anything. In the real estate industry, I mean anyone who builds houses, anyone. The entity doing that kind of thing is usually worth a billion dollars. It’s a pretty radical idea. Now, look, by the way, this may not go completely through the system, but it may, and it’s definitely proposed by the current president. If the current president is re-elected, he will definitely have the authorization. This is what the people want. He did promise it. It’s a real thing. Okay. Look, now it’s obvious that at least in the small tech sector, as we said, we’re not experts on everything the government does, but we are certainly one of the best experts in the world when it comes to startups and technology. We think, on these issues, Donald Trump is a better choice than Joe Biden, as we’ve described. It would be better for us because we don’t have to do this podcast. Second, I will have many frens who may be angry because I spoke well of President Trump, because I did grow up in Berkeley, and that would be tough, and I hope it doesn’t come to that. I hope it doesn’t get so extreme that we have to take sides, because we usually have a two-party system. Like I said, there are many great Democrats. And besides these policies, these policies come from the radical side, which is an important aspect in the Biden administration. But it’s a powerful aspect, they do have power, I would say, far beyond the moderates.
This is our experience. We had a plan, and we wrote an article called ‘The Little Tech Agenda’. We welcome all of you to read it before the attempted assassination of the president. We didn’t plan this part, but we thought we should give some brief thoughts because obviously, since we are talking about policies and the president, people would be interested. Maybe I’ll start. You called me and said they just shot Trump. I didn’t know if he was alive or dead. I couldn’t believe it. I was shocked. A little background. Mark and I both know their family, especially Jared and Ivanka, and their children, Arabella, Joseph, and Theodore. In fact, Ivanka and the kids were just at my house. We went to see David Koch and my brain froze almost because I had this feeling, oh my God, Grandpa just got shot, not anything about politics. It was a bit scary. Anyway, then you said, oh, he’s okay.
I listened to the whole process over the phone. You were on CNN on the speaker phone, and I listened. The whole process is really weird, bizarre and shocking. Then, once we knew he was okay, I watched the replay on TV. That’s also something I never thought I’d see in my life, he was shot in the head, fell, dodged, apparently wise. The Secret Service is trying to get him out. We now know that someone was shot, probably less than 20 feet away from him. When they took him out, he said, stop, wait. He stood up and energized the crowd to “Fight”, “Fight”, “Fight”, which was an extraordinary thing for anyone. When you’re being rushed out by the security guards and the Secret Service, there’s gunshots, you don’t know if there’s going to be a longer gunshot, and you say, no, I have to talk to the crowd, that awareness is amazing. I’ve heard, we’ve talked about, Teddy · Roosevelt did something similar. But no president has ever done anything like that since. It’s a remarkable thing. It’s really a crazy experience that will almost certainly affect campaigning and voting.
Marc Andreessen: We, Ben and I, had dinner with Trump at his golf club in Bedminster, New Jersey, ten days ago, and had a three-hour dinner. We actually just finished with him. Started to get to know him. He’s a very complicated person. People have a lot of opinions, but when you get to know such a person, and his family, it’s really very striking. I just want to say a few things.
First of all, my nation is very difficult to express emotions, but in the United States in 2024, such a thing actually happened, which is completely shocking, stunning, and totally unacceptable. I can hardly believe such a thing could happen. Then, you mentioned his actions after being shot. Since I saw it, I have been thinking non-stop. He is a 78-year-old man, and he was shot in the head. He was shot in the head. By the way, I believe this is true. People say he is the only head of state to survive a long rifle attack. Oh, never before. There have been some failed attempts with handguns. I think he was looking at that immigration chart at the time. It was a moment, a slightly different direction of the wind, or if his head turned slightly differently, or if he didn’t, our world today would be completely different. It’s all very surprising. There’s another thing, I mention this because I’ve never seen anything like it, but for a 78-year-old man, being shot in the head, and then standing up in complete ignorance of whether there’s one or long gunmen, or whether the gunman who shot you has been subdued. No. I mean, you have no idea, he’s still shooting. And now we know, three more people, one killed, two seriously injured. Bullets fell on the platform behind him, around him, literally, one person was shot dead behind him, dead. It takes long courage to deliberately stick your head out from the protection of the Secret Service. Or even think about it. For me, the most shocking thing is such a thought.
Ben Horowitz: Like, maybe if I had thought everything through, I would say, oh, I will motivate everyone. But that idea wouldn’t occur to me.
Marc Andreessen: This is incredible. And then, the other thing is, I’m just a little, he went to play golf the next morning. Let me say, if I were shot in the head, you wouldn’t go play golf. Not only would I not stick my head out and raise my fist, I wouldn’t. I wouldn’t. I mean, I would stay in the fetal position on the ground for a few weeks. The whole process is both heartbreaking and amazing, incredible. I think it’s a small part of what happened in history for those who have experienced it. I don’t know what you think. For me, it’s like I remember the Challenger space shuttle explosion. There’s a small part of events I remember. I actually vaguely remember Reagan’s assassination, because I was ten at the time. But I remember that. I remember the president being shot. There are a few moments like this, in your lifetime, where you will remember where you were at the time.
Ben Horowitz: I will definitely remember where I was on this matter. It raises a really interesting point, which is that it’s just a long treatise on how this person is different. He’s different from us. He’s a different kind of person. This is one of the things that we spend a lot of time on politically. Some things get overlooked because we always, and I’m guilty of this, too, you always look at people’s flaws when they’re running for office. Like, he said this, that’s stupid. Or, he has awful policies that I hate. Or, he’s connected to people that I don’t like. But especially people that get to that level, any president, Trump, Obama, Clinton, Bush, Reagan, Nixon, Jimmy Carter, no matter what you don’t like about them, just knowing that they have any power is very special and extraordinary. That’s what our time in Washington reminds us of how special Chuck Schumer is, and how special he is when you meet him. He has an incredible memory and can remember every conversation he’s had with you. Finally, why don’t we talk about how this experience has been for you? Like from your background, because it’s a little bit shocking to me. I’ll talk about it but it’s both educational and weird, something I never expected. What has been your experience?
Obama, Bush and Clinton
**Marc Andreessen：**At the beginning, I didn’t even believe this would happen. I kept hearing these reports, hearing all these people, hearing all these plans. I just felt, that couldn’t possibly be true. Impossible.
Ben Horowitz: In fact, we went through a period like Clinton that was very friendly to technology, and we worked with them on many things, like when they went crazy about cryptography. We worked closely with them in that area. We also experienced a huge technology boom during the Obama era. It’s amazing. This is not a fundamental issue of the Democratic Party. It is specific to this administration.
Marc Andreessen: This is what we’ve been telling our Democratic friends, and I’m telling the audience too. That is to say, everything we mentioned is optional. This is an optional choice for this administration. I don’t think they need any of these policies.
Ben Horowitz: Even without these things, they could have an equally or even more successful presidency. These things are not. They are not the core reasons why people elected them into office.
Marc Andreessen: I don’t think so. This is irrelevant to the big issues people care about. This is irrelevant to the issues in the polls. These are secondary issues relative to the big issues for the country.
Ben Horowitz: This is not Inflation. This is not economy. This is not border. Not an abortion issue.
Marc Andreessen: As we said before, the Clinton era and the Obama era proved that you can have a pro-business Democratic government. This is actually great. By the way, Clinton would tell you, he used to say that a lot at the time.
Ben Horowitz: Democrats like those presidential terms. They like Obama. They like Clinton.
Marc Andreessen: That’s right. Look, if you’re a Democrat, this has always been Clinton’s point, by the way, it’s Tony Blair’s point in the UK. If you’re a Democrat, and you want to expand social programs, you need a lot of productive economic activity, because you need a tax base to pay for those programs. That’s always been the formula, you’re actually encouraging business, because it generates the tax base to pay for the programs. There’s a kind of self-destructive element here from a tool perspective, which is one of the reasons I never thought possible. It’s insane. It’s insane. It doesn’t make sense logically unless you’re just completely against technology and capitalism. I think the good news is that all of these issues can be solved tomorrow.
Ben Horowitz: It won’t have an impact. By the way, this is also part of the reason why we do it this way, because we just encourage moderation or sobriety, for example.
**Marc Andreessen：**But as you said, to honestly discuss this issue, it requires adult sober conversation.
Ben Horowitz: The good news is that there are indeed some adults having sober conversations, but we need more. What I mean is, this is the last thing I want to do. In fact, we won. I don’t want us to get involved in politics. We’ve been dragged into it a bit. My father went into politics. I can say that I saw him lose all his fren when he switched political positions. It was a surreal experience when I was a child. And I really don’t want our company, our employees, the companies we invest in, and so on to get involved because it’s very emotional. It’s very difficult. But the future of our business, the future of technology, the future of new technologies, and the future of America are really somewhat precarious.
I can only say that these policies are really misleading and difficult. We are here. For startups, we believe Donald Trump is actually the right choice. I’m sorry, Mom. I know you will be angry with me for this, but we have to do it. Today’s program ends here. Thank you. Thank you all for listening. We will have a follow-up Q&A program, please ask your questions.