Ben Horowitz: bubbles burst when nobody believes it's a bubble — and right now, everyone's talking about one

this is uh going to be an amazing chapter.

Well, have a great rest of your day, David. Good to good. We'll see you. Cheers.

And up next we have Ben Horowitz, the founder of Andrews and Horowits. The Horowits in Andrews and Horwits. Ben,

how are you doing? Welcome to the show.

Good. How are you guys?

We're fantastic. Uh, massive news today. Uh, congratulations. Obviously, we'll get into the the uh the the the fun structure. I'm sure we'll have a bunch of questions there. I wanted to kick it off with a reflection on your book, The Hard Things. The Hard Thing About Hard Things. uh what is the one piece of advice that you think has aged particularly well from that? What has never changed? And then maybe you could take me through some things that might have changed in this era, bigger companies, AI. Uh what what uh what do you go back to and what do you maybe think uh needs needs an update.

Yeah. Well, I like I think it's still like really hard to be an entrepreneur. Um, and one of my favorite quotes in in the book is uh something uh Mark said to me um you know when things were extremely bad. He said you know one day we'll look back on this chuckle nervously and change the subject

I think how it felt. Yeah.

Yeah.

He would always say is things get darkest before they go completely black.

Yeah. I mean, I it's it's underrated how how long you two have been in partnership beyond just this uh this firm. Uh you've worked together for so long.

30 years.

30 years. What a run. An overnight success. A true overnight success if there ever was one. Uh how is how how do you two like to work together now? How how is uh how is the day-to-day working at the firm?

Yeah, I mean I think that uh it works uh pretty well. I mean we have pretty different roles. So I I run the firm and then um you know Mark is kind of uh in a lot of ways the face of the firm. Um and he also you know he gets very deep on specific things. So policy um AI are kind of the two things that he's like super focused on right now.

Yeah.

Um and you know he has many many ideas about you know running the firm and I have many ideas about things he does. Uh and so you know it's very collaborative I would just say and you know we we argue all the time about everything.

That's great. As any good

part some sometimes he's right sometimes I'm right.

Yeah. Well uh how is the structure of running the firm? How is the structure of the firm changing in this era? Obviously the numbers are bigger but on the fundraising side but maybe not on the team side. What's changing? uh is there anything that you've felt like this technology shift requires different management of the firm?

Yeah. No, for sure. I think that you know what's happened is where we have such a powerful new technology platform

that the number of uh really important companies that will be created out of it has just multiplied.

Interesting.

Um and you know look the the tech industry itself used to just not be that big.

Yeah. Uh and now the tech industry is all industry.

Yeah.

And that change has kind of what really changed the architecture of the firm. So originally, you know, we look like every other venture firm. We were, you know, a team of venture investors. You know, we were a little different in that we had a more elaborate platform.

Yeah.

Um but now what we've done is we've kind of subdivided the technology market into all of its submarkets. of you know infrastructure applications you know crypto uh early stage stuff bio these kinds of things American dynamism and each of those teams is basically looks like the original Andre Horowitz but they're independent of each other

and that enables us to both kind of cover the whole market in a very very serious way but also be nimble and not have I mean you don't want 20 people in a room talking about a Yeah,

like you're not going to get to the truth like that. You know, just uh in my management experience, it turns out you can't have a conversation with 20 people have a presentation. H how do you think about empowering the firm or the sub teams to become subject matter experts and actually uh investigate and prosecute deal thesis uh in entirely new markets where no one in the firm might have ever done an oil and gas deal or a solar deal or some bio thing that's entirely new and you have a team but there's you know new markets forming and new markets coming online as potential transformation targets for technology. ology, how are you keeping the firm sharp on every corner of the global economy?

Yeah, so a lot a lot of times, you know, there are super experimental things that we'll look at, um, but we don't necessarily kind of build the organization around yet. Um, and then, you know, but once we commit the flag, uh, then that, you know, our big commitment would be, okay, we'll create a fund around it. So, you know, we did that with crypto. We made the Coinbase investment before we had the crypto fund, but then we as we got into it, we said, well, like this is going to be a larger market and it's super different than everything we're doing. So, uh, we need to commit around that. More recently, you know, with AI, um, AI like the way you build AI companies, the nature of the AI founder is just so different than everything that we've seen before that we ended up bringing in a lot of expertise from the outside. We um kind of reoriented everybody on the inside. Like we we actually had um you know a huge amount of training materials and like you know basically exams to make sure that you know everybody who was work on that was what we call a AI native and understood like all aspects of it before getting into it. just because you know uh the these things do tend to be different and this is why you see a lot of uh people age out of venture capital and then a lot of kind of firms um be not what's they once were you know they they were very important in 2015 but uh they didn't necessarily make the transition they didn't bring in the right kind of talent.

Yeah. H uh do as as when you're managing the firm, how do you think about uh the dividing lines and the walls between different funds, we've seen just with just with the Neoclouds, a lot of those folks started as crypto companies. Uh then they became AI companies, but they're building things at such massive scale. I wouldn't be as surprised to see them in an American dynamism portfolio because they're kind of sort of re-industrializing. So do are you the person that the firm that one of the subdivision leaders comes to to say I want this in my fund. Um how does that work?

Yeah. So so there's not that much conflict in that you know the categories are pretty clear. Um there are you know it happens occasionally where where they bump into each other but

you know for the most part it's like what are you really trying to do? Uh and then the entrepreneur will gravitate towards one of the funds um based on what they're trying to do. Like it we want to sell things to the government.

Yeah.

Okay. That's likely going to go into American dynamism whereas like okay we've got you know eight PhDs in AI that's almost certainly going to end up in infrastructure.

Yeah.

You know kind of model world and that kind of thing. Yeah. And so you know it's really matching the the funds are you think about markets of entrepreneurs and the funds are designed to address that market of entrepreneurs and those tend to be fairly distinct. Now sometimes uh you know people will try to game us and they'll get rejected by one part and then they'll go to

okay

we we have very very very good comprehensive data on everything we've seen. We've got extremely good systems. So we c we catch those people that's good to know.

When did you realize a $15 billion fund was possible? Was it was it did you did you imagine this kind of scale was possible from from inception or or was it a did you build?

Yeah. You know, our first fund was $300 million. So we definitely weren't thinking about it then. You know, we thought 300 million was a lot. And people, you know, thought we were raising too big a fund in 2009.

Yeah. Um but no like what we've done is we we've kind of looked at the markets and said okay you know how big is this market and then what kind of fund do we need to kind of win in that market um and generate a large return and yeah we tend to have a a relatively optimistic view of the future. I think there are some like cynical VCs out there and like when I was a boy valuation weren't this high. Yeah. She's like, "Play the game on the field."

Yeah. Yeah. We we like to look forward and not look backwards. And so, as a result, like something, you know, I think we have done a good job of getting ahead of the game. Like when we raised fund three, which was a billion dollars, we got a lot of criticism from other funds going like that's crazy. You know, no billion dollar fund has ever returned money. Y. And we're like, well, okay, but like the world didn't look like this and software is eating the world and things are getting bigger and we think that like we can deploy a billion dollars and you know that fund um you know had Coinbase and Data Bricks and uh and Lyft and um Digital Ocean and uh GitHub and like a lot of you big outcomes

and if we didn't have that much money it'd be a problem.

Yeah. Uh on that on that note of optimism and understanding the scale of the internet as it eats the entire world, how did you process the bubble talk that took place uh in the back half of 2025?

Well, you know, I was a CEO during another bubble. Yeah.

So, I know a lot about bubbles.

Look, I I think that um so there's a couple things that that I learned from the bubble that we were in. One was

Sorry. Sorry. bubble gun.

We keep a bubble gun handy.

Yeah. Look, well, you know, one of the things um if you look back at that bubble, there were there were a lot of things that um were present then that are definitely not present now. So, like probably the biggest being the internet. Everybody knew the internet was going to be giant.

Um but, uh at the time that everybody was investing all the money, the internet was very very small. So if you go back to 1996 at Netscape, we had 90% browser share and you know we had $50 million in revenue.

Yeah.

So the entire or we had 50 million users, sorry, 50 million users. So that the entire number of people on the internet was 55 million.

Yeah.

So like so you're funding these companies and giving them a $10 billion valuation selling into a market of 55 million people like and then half those were on dialup. So was limited in what you could do.

And so those valuations were running way way way ahead of the technology uh is kind of what caused the bubble.

Mhm.

You know, if you look at AI, the technology is like working and getting to the world right now.

Like how many people are on chat GPT? And you know, how is that business going? It had I think zero revenue in November of 2022. And I don't know what the current number is, but it's probably between 15 and 20 billion.

Yeah.

Um like we've never seen that before. So the things are working like the things that that that

that were bubbleicious in uh 99 aren't quite the same. But you know, to me the biggest thing uh that I learned was right before the bubble burst, nobody thought it was a bubble.

Um Warren Buffett, who had never invested any in any tech in early 2000s, started investing in tech.

Wow. So everybody capitulated and agreed prices would never go down. Like that's what you need to get to a bubble. It's a psychological phenomenon, you know, not a uh not a financial phenomenon. And so, you know, right now with everybody talking about a bubble, it's like, "Oh, great. We're not in a bubble because it's when nobody believes it's a bubble that it becomes a bubble." Same with the financial crisis. By the way, if you look at the price uh you know, the kind of interest you'd pay on like home loan debt

in in uh in 2007, it was the lowest in history.

Yeah.

Right before it all came crashing.

It should have been the highest

right before everybody defaulted.

Yeah.

You know, it was the lowest in history. And that's because it was a bubble because everybody believed, hey, they're not building any more land anymore. You know, like that's that's what's going on. And so once you get into that kind of psychological convergence, yeah,

that that's when you really get into like a really crazy bubble. Now, look, in venture capital,

um, everything is always priced at either half or double what it's worth. Like that's the that's the steady state.

And so, are there going to be things that are, you know, priced way too high? Yeah, of course. Mhm.

Speaking of land, uh how are you processing the move out of California, the the news in California of the wealth taxes? It a lot of folks are saying, you know, California might shoot themselves in the foot, kill the golden goose. How have you been processing the news? Yeah. I mean, so it it's very kind of like an interesting kind of view of the world. I think that that that the you the groups in California have been kind of pushing this idea. So, you know, we I go all over the world. I've met like in the last year, you know, the president of Mexico, the president of El Salvador, um you know, the crown prince of Saudi Arabia. So, like I'm always with world leaders or I've spent a lot of time with them and they always want to know like how do we create Silicon Valley here?

Um, and when you look at

we want a golden goose.

We like your golden goose. We want one.

It's it's pretty remarkable that like we've repeatedly created companies with larger kind of GDP than most countries. Like routinely we've done that. Um, and so rather than asking like how did we do that? It's like, well, how can we like rearrange it and, you know, run an experiment and see if it destroys it or not.

And so I I think that's probably the weirdest part of it for me that people would think about it that way. Look, I mean it like look if you start confiscating wealth and you know taxing um unrealized capital gains for people who aren't liquid like so so actually we saw this in Norway. So Norway has an unrealized capital gains tax and if and Norway's got like a lot of extremely smart people, great entrepreneurs, but they all left. And when you talk to entrepreneurs in Norway, um they're like, "Well, I literally can't pay the tax uh because the the the company got marked up to whatever, a billion,$2 billion dollars and I own a lot of it and I can't get that money out. It's a private company." Yeah.

And so I'm stuck. So I I have to leave the country. And there are no entrepreneurs. There is basically no tech entrepreneurs in in Norway now. And if you wanted to get, it's been so hard to break the Silicon Valley network effect, but this is the best strategy I've seen. If you wanted to wreck the California tech eos,

how are you processing? How it feels like today we have this incredible optimism within the technology industry this incredible excitement and then outside of the technology you know your neighbor or somebody nearby has like this there's feels like this real tension and kind of fear from broader society about the work that is being done within the technology industry and you see interviews that uh you know AI leaders will give where they'll say we're we're summoning the demon or or they'll say you know you know

not the most optimistic story tellers we're going to end the the world will end, but we're going to create some great companies. So, I think people like this the these these interviews and these quotes spread so quickly. A lot of people have heard them and the question from the broader populace is like, hey, do we need to do this?

That's the optimistic vision.

Yeah. Do or can we stop? Right. Uh and and obviously technology is, you know, proven to be uh somewhat inevitable, relentless.

Yeah. Yeah. Yeah. So I I think the good news is it speaks to the importance of the moment. So this is on the order of the microprocessor, the steam engine or something or electricity or something like that. So and those things all turned out to be like really good for humanity.

Was there that much with with with electricity? Was there like the level of fear? Because there was people that would like go and obviously I know the stories of people that would like their job was to write the light the lamps, right? But Oh yeah. Like if you go back and read about the beginning of electricity, it's wild. Well, they made a law when automobiles first came out, there was a law in the United States that said if you're driving your car and you see a horse, you have to stop the car, disassemble it, and wait for the horse to pass.

Disassemble

like like it was that level. That was the regulatory idea. So yeah, I mean I think it by the way watches were the same. You know, when watches came out, there was like huge fear that like people would never be able to have a conversation again because they'd be just checking the checking the time always watch.

So, you know, these technologies like generate a lot of fear, but I think that,

you know, the good news on it is, you know, this one is really important. I think that the impact into the well-being of humanity is going to be bigger than certainly anything in my lifetime. And you know one of our bigger problems I think is there are people in the industry going for regulatory capture who kind of feed into the

fear to the fear and then look there are also people who have just you know it's moving so fast it is actually freaked them out who are working on it and that's um

how do you advise how do you advise uh portfolio founders or or even people at at the firm around processing noise I think historically you know uh there wasn't like this constant chatter right we have like X now which is like a constant you know stream of consciousness from millions of people that are sharing their opinion and uh it's you know I know a lot of entrepreneurs that uh you know one day everybody's saying that they're the greatest thing ever and then the next day uh you know people start to criticize and and how do you kind of like uh what's your what guidance do you give there?

Yeah. Well, I think that like the world of media changed and it's I I think it's tricky for people and companies to process because if you grew up in marketing um or in old media, your whole concept of the laws of physics is different. Um so in old world you were always thinking defensively because there were there were very few channels to get your message out. The format was very tight. Um, you know, you could get a quote in here, you could get a few sentences before the host cuts you off or whatever.

Uh, yeah. You know, you guys watch CNN from time to time.

And so, like, in that world, the way you would think about media is just like, let's make sure we don't say the wrong thing. Let's spend hours and hours crafting the message and so forth.

You know, in the new world, it's like wide open. Um, there's media everywhere.

Uh, the formats are whatever you want it to be. And so the right kind of way to think about it is you have to be interesting and don't worry about making a mistake because you can just come back tomorrow and flood the zone, you know, like just keep going.

Uh and that uh I think it's I found it very very difficult to reorient somebody who has spent a career in old media world kind of thinking in a new media way. Um, and so the biggest thing that like I really talk to our CEOs about is like you've got to approach the you have to approach new media with new media thinking, new media people, that kind of thing.

And uh it it really it it's a remarkably opposite world.

It's like, you know, it's like you're landing on Mars and you're like, well, what the [ __ ] happened to gravity? You know,

different

and you can't even say, well, no, gravity's different here. because it's like no no gravity just is like I can't deal with the fact that that's just that's just the truth.

Yeah.

Well, uh we would love to keep talking about media. Very few things that uh that uh that we should bring the gong

but we know you have a late you got late fees if you're late to meetings. So this gong is for the whole

A6 team.

Congratulations and uh we won't keep you any longer but come back on again soon and and congratulations. Thank you so much for taking the time to see you guys.

We'll talk to you soon. Goodbye.

And uh with that, we need to check in on the Claude codes.

Eric just said that uh that they're good for the 10 bucks. Torberg,

he's got a you know, he's one minute late to his next meeting. Late

fee. Oh, yeah. Yeah, that's right. That's right. They have they have a late fee.

Yeah. For those for those that don't know, uh and partners, if they're late to uh if if they're late,

they have phones, too. If they have phones out, they get fined.

Yeah. No, but it's late. If you're late to a meeting with a founder that you're looking to invest in,

uh, or you're just meeting, you got to pay if you're late. So,

uh, well, we should check in with Tyler. Uh, there was some rumblings about a change to claude code. Can you

So, basically what happened was, um,

okay, so, so when you get a cloud subscription, right, there's pro and max. Yeah.

Um,

you get like, uh, claude code credits basically.

Sure. Um, and so what was going on was was there's like third party harnesses. So there's one open code. There's like a bunch of these. Um, and they would basically use the the credits that you get from cloud code or from your cloud subscription like use and it's like they're like um you know open source agentic harnesses, whatever.

Sure.

Um,

so Anthropic stopped that. So you can't use your bas you can't use your subscription uh as like the credit. So you have to use the actual API.

The actual API.

Um, okay.

That's like the main thing. It's like not to me it doesn't seem that crazy of a thing because you can still use it with API. It's more

Is it Is it an exchange rate thing maybe? Like if I'm on Claude Pro or Claude Max, am I getting uh on the on a per dollar basis more tokens than I would if I Okay.

Yeah. That's why um there's like a lot of arbitrage, right? Because

they were getting arbed. They said no more arbing us.

You can think of like uh cloud code is going to get much better if more people use it, right? Because it's like an RL environment, basically. For sure. So the the value of the data.

So they shouldn't be incentivizing people to go elsewhere, but they are still allowing people to go elsewhere just at the at the consistent API.

So you can still like it's like bring your own key. You can do that.

Okay. That doesn't seem like too

it's not that crazy, but people are very mad. They're canceling their cloud.

People are mad mad at Claude. So sad.

Uh oh well. Um I'm sure that they will figure it out and uh the uh the fun will um will continue. Uh, we do have to cover another story in the AI world. Uh, Logan Kilpatrick, friend of the show over at Google, he said, "I'm happy to share that we, the Google AI studio team, are now sponsoring Tailwind CSS, the project that had to lay off three people and it was very dramatic because it was 75% of the team, but their business model was not really working because they were selling templates, which of course could be assembled by AI agents in the modern era." I love this. Logan said, "Honored to support and find ways to do more together to help the ecosystem of builders." And I said, "You dropped this king." And I gave him the Mario holding the crown. If you scroll down, you should see it.

Uh yeah, this is great.

That's me.

I expected this I expected this to happen pretty quickly. I'm glad uh I'm glad Logan made this move and I think a handful of others did as well. So

uh hopefully Tailwind can hire back the uh handful of engineers that they were forced to let go. Yeah. Uh and uh yeah, this should give them some more predictability while they figure out uh the next chapter.

Yeah. Well, uh in other news, OpenAI is reserving $50 billion for a stock grant pool. Uh

Jack Rain says 500 billion company doing 13 billion in revenue, projecting 50 billion in equity comp is so good. So price

of SF real estate is going up. uh price of the the AI research are going up but they have the money to uh to distribute. Uh that is a big equity pool uh but it's an opportunity to join preipo get some shares and uh hopefully do well for yourself. Well, thank you so much for watching the show and tuning in today. We will be back in the books Pacific on Monday

only podcast and subscribe to our newsletter at tbpn.com. And with that, we'll say goodbye and have a great weekend.

Have an amazing weekend.

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