Most people probably don't know who Marc Andreessen is. But in Silicon Valley, he's considered royalty, having arguably eclipsed demi-gods such as venture capitalists Michael Moritz and John Doerr. Andreessen was co-founder of Netscape (which raised money from Doerr's firm, Kleiner Perkins) and helped launch the modern internet era—and an insane stock market boom along with it—but he switched over to venture capital in 2009. In so doing, he checked the two boxes needed to garner infinite respect from the Valley: engineering credentials and vast amounts of money.
Being an American oligarch makes Marc a prime target for a skeptic such as myself. And having already sued Marc's funds once before for brazenly violating federal financial statutes, I am indeed more skeptical than ever. His recent essay, "IT'S TIME TO BUILD," is a compendium of inspiring thought leadership that we can all expect to see digested into a TED talk soon. So let's think through what it actually means.
Marc begins his musings with a lie and a blatant false equivalence. "Every Western institution was unprepared for the coronavirus pandemic," he tells us, ignoring countless preparations that the Obama Administration made for exactly such an eventuality. He continues by insisting that it's not one political party's fault or the other's, sounding alarmingly like the mentally ill individual currently occupying the White House, who has insisted repeatedly that the spread of the novel coronavirus is "no one's fault."
But it is someone's fault.
It's the Republicans' fault, because they refused to remove Donald Trump from office despite an explicit warning from Adam Schiff about his future behavior, and because they have denied science repeatedly in every context imaginable, from evolution and natural selection to climate change and now epidemiology. Now we are approaching 50,000 dead in the United States.
Marc then puts forth the thesis of his piece: that we have an "inability" to build things here in America. Strictly speaking, this isn't true. We build lots of things, and we have plenty of raw materials (capital) and plenty of people (labor). Any inability to build comes from a lack of political will, and as we all know, politicians aren't usually the type to think for themselves. Later in his essay Marc acknowledges this, but without going into much detail. Some color on that point would be fascinating, because politicians are by and large tools of lobbyists, and lobbyists (as well as business gurus) have been encouraging rapid globalization since a young man named Marc Andreessen introduced the world to something called the web browser.
Marc goes on to lament that we did not have a vaccine prepared in advance for a virus that until late 2019 no one knew existed; that we do not have enough "manufacturing factories" (as opposed to some other kind?) for the rapid production of Personal Protective Equipment (PPE), medicines, and so on; and that "it took scientists 5 years to get regulatory testing approval" for the Ebola vaccine. These complaints prove rather conclusively that Marc has absolutely zero knowledge when it comes to vaccines or biology. He's not alone. Like many loud commentators of late, he has no qualifications when it comes to the topics he is opining on. He's simply used to being taken seriously because he is rich.
To be clear, what is happening surrounding COVID-19 absolutely is a tragedy on a grand scale, which all of us see playing out daily. The United States, a supposed global "superpower," is scrambling to find basic supplies to cope with a pandemic that virtually everyone paying attention predicted would come to pass. It should not be this way, and I take no issue with anyone who merely finds it incredibly frustrating. But Marc does not only find it frustrating. He finds it frustrating for all the wrong reasons: a false lack of foresight and global outsourcing that until lately, people like him championed. That his analysis is complete nonsense is fully exposed by his next point.
"In the U.S., we don't even have the ability to get federal bailout money to the people and businesses that need it." That's how a venture capitalist who has funded numerous financial startups begins his next paragraph. He almost certainly knows this is a lie. The Automated Clearinghouse (ACH) system, old though it may be, actually does work to get money from the government to individuals. It's commonly referred to as "direct deposit," and despite its many flaws, it is incredibly reliable. There's even a federal government website that individuals can use to link their bank accounts to their Taxpayer Identification Number (TIN): EFTPS. It's true that we haven't heard Treasury Secretary Steve Mnuchin or really anyone talk about EFTPS, encourage people to sign up with EFTPS, or provide any useful guidance of any kind really, but that doesn't mean that the infrastructure does not exist. Yet again, Marc conflates a decided lack of political willpower to help the lower- and middle-class with a general failure to "build." This time, a lack of domain expertise is no excuse. Marc's statement that, "A government that collects money from all its citizens and businesses each year has never built a system to distribute money to us when it's needed most," is simply false. The system exists, our political leadership is just too stupid to use it.
Facebook Director Marc Andreessen might also be familiar with the privacy debate that has taken place in this country for years, and which might have caused people to be afraid of submitting their bank account information on-line to a site they had never heard of (such as EFTPS). Technology is full of trade-offs, and this is one of them. If you are worried about the government knowing your bank account number, you may not want to provide it electronically if you are willing to suffer the consequences. (You might also not realize that the government probably already knows your bank account number.) Rather than a message from Marc helping people to better understand the nuances of the payment system and associated privacy concerns so that they can get their $1,200 faster—or at least make an educated decision—we get a screed falsely suggesting that the payment system does not even exist and it's all our fault.
To the extent that the point Marc hammers home, that "we chose not to *build*," is true, it is because of investors like Marc who have ruthlessly emphasized efficiency over all else for decades. Why build a team of devoted customer service employees when you can outsource to a call center in India for pennies on the dollar using VoIP magic? Why build a business that makes a profit when the heroes of the modern age are men (yes, although they shouldn't be, they are still mostly men, which is not a coincidence) who lose money year after year after year, propped up by the corrupt and the gullible in public markets? To build a profitable business requires real investment in a stable foundation. As they teach at every business school worldwide, why build? Delegate. Outsource. Profit.
Airbnb is a perfect example. In 2012, my freshman roommate pitched a company that would sell the use of other people's assets to Andreessen Horowitz, Marc's esteemed venture capital firm. Imagine, profiting from the sale of something that isn't even yours! Andreessen Horowitz loved it. It invested $112 million, an unprecedented sum of money that was enough to make the company important and fearsome no matter what it did. This new kingmaker strategy, which Andreessen Horowitz pioneered, screamed the question from the limited mountaintops of Menlo Park and Los Altos Hills: WE CAN MAKE YOU A MONOPOLY OVERNIGHT WITH 100X AS MUCH MONEY AS ANYONE ELSE, SO WHY BUILD?
Of course, the fact that there might be serious consequences stemming from such concentrated deployment of capital wouldn't occur to someone like Marc, or if it did, he surely wouldn't shoulder the blame. Housing problems? Someone else's fault. We don't know why all of these programmers are flocking here. (Did we mention that we'll give you 100X as much money as other VC firms to prop up money-losing businesses?) Education problems? Government doesn't do anything well, so let's de-fund it. Taxes and regulations are for little people. As Marc once told a rapt audience regarding payments: one of his lawyers once advised him, "The good news is they're going over who gets to regulate it. Um, and so your job is to sneak through the fight, while they're battling it out to see who's in charge!" Laughter ensued. "Indeed," the audience seemed to be saying. "Why pay one's debt to society when one can just 'sneak through?'" To do otherwise would be madness.
"Why aren't we building Elon Musk's 'alien dreadnoughts'" for manufacturing? Probably because Elon Musk is a scam artist, and anyone who respects him is either themselves a scam artist, uninformed, or an idiot. (The "alien dreadnought" factory was a massive failure, requiring Musk to replace useless robots with human labor. It was also entirely avoidable, as Musk was warned that his plans made no sense for automotive manufacturing.)
"Where are the millions of delivery drones?" Still fortunately stuck in some other dystopian nightmare. As for the "hyperloops" and "flying cars," it's hard not to conclude that Marc Andreessen is simply a disingenuous fool. After all, this started out as the plea of someone concerned about a pandemic. A few paragraphs later, we're already talking about science fiction as the messiah: technological solutionism at its most manic.
The problem, Marc concludes, is "regulatory capture." He would know; his businesses are expert in that department, as is his idol Elon Musk. Musk's lobbyist Dan Chia convinced the City of Fremont to give Tesla extra time to infect its workers in its Fremont factory, to say nothing of similar practices by SpaceX that led to multiple COVID-19 illnesses. And Andreessen Horowitz payment startups piggybacking on the ACH system—the very infrastructure Marc now pretends doesn't exist—relied on the wisdom of the former Commissioner of the California Department of Financial Institutions after he retired to Promontory Financial Group. This allowed Andreessen Horowitz portfolio companies such as Coinbase, Ripple and Dwolla to evade financial regulations without anyone worrying about being thrown in prison, even after Dwolla was directly implicated in the failure of the Mt. Gox bitcoin exchange, in which hundreds of millions of dollars were lost.
"We need to build these things" and "both sides" need to contribute, Marc implores us. But what things? Hyperloops? For-profit universities? Massively unprofitable, law-breaking sharing platforms? Please. Marc is right that the "incumbents" are the enemy, but it's not 1994. He's no longer running the scrappy startup. He is the fat cat, the oligarch, with his hand on the levers of power. He is the incumbent. He invests in political connections on both sides of the aisle, because if anything is true of the ultra-wealthy it is that they have no allegiance to any side, country, or philosophical belief system aside from money. So when Marc tells the right what it "must" do, and challenges the left to "prove the superior model!" as though this is some sort of grand performance for the entertainment of him and his ultra-wealthy friends, the proper response is a firm person-specific expletive.
We should all ask ourselves what we're building, he says.
For now, I'm building consensus. The consensus that after this latest crisis, in which Marc's monopoly-in-a-box strategy has led to even more inequality and instability, perhaps it's venture capital that needs to be regulated. The consensus that when you look at the actual record (never reported on by the mainstream media, of course), it's evident that people like Marc Andreessen belong in jail.
But while it would be a start, throwing Marc in prison will not alone solve the problem. The problem is not that we don't build in the United States; it is what we build and the rules and incentive structures that govern those decisions. We build businesses that don't make money. We build businesses that compound indebtedness for millions, and rely far too much on debt themselves. We build businesses that waste time. We build businesses that exploit loopholes. We build scams. If it's steel mills, trains, construction firms and other outtakes from Atlas Shrugged that Marc and his brethren so desperately want for America, that's fine—no one is stopping them from funding such enterprises. They have the cash. But actions speak louder than words, and there's a good chance we'll see another ten dating sites before Andreessen Horowitz risks its precious capital on a company it can't flip to the Greater Fool down the street.
Venture capital may have once been about building, but it's not anymore. It's about monopolies, leverage and arbitrage: pump-and-dump on a massive scale. In fact, given the prominence of VC-backed firms in capital markets, that applies to all of America. If Marc wants to know whose fault that is, all he needs to do is build himself a mirror.
But I hear prison cells have those.