00:00hi this is Chris Dixon this is the a 16z
00:02podcast today I'm with Benedict Evans
00:04and Balaji Srinivasan guys let's talk
00:08about the there's sort of this recurring
00:11idea that in the press for example that
00:15everyone in Silicon Valley is doing
00:17spending time on trivial things
00:20photo-sharing and you know funny little
00:23apps and not working on serious things
00:27so that Balaji what do you think about
00:30this yeah so I mean I don't think that's
00:32the case I think I think some extent
00:35there's a catch train to where if you
00:38certain czar people are working on
00:40social games they're working on you know
00:42social networking things like that and
00:44that that I would argue that some of
00:46those things are going to be more
00:47important down the line for example
00:49gaming led to 3d graphics and it's
00:52leading to oculus social networking has
00:54led to other services for example like
00:57lyft that are built on top of it that
00:58are much less you know a trivial than
01:01poking but even taking those and saying
01:04there may be more important than people
01:05think Twitter started as breakfast
01:07updates and now it's used for
01:08revolutions and breaking news
01:10so even given that those things are
01:11actually not as trivial as people think
01:12the other aspect other side of the coin
01:15is well those are things are easy to
01:16start there are applications in genomics
01:19and you know drones and Bitcoin and 3d
01:22printing and things like that that do
01:23runs regulatory challenges and so you
01:26know some of the reason that people see
01:28these things that are perceived as fluff
01:29that you know you get big fast is that
01:32it is non-trivial to build a business in
01:34the other area so there's I think a
01:35regulatory barrier as well I would argue
01:38that a lot of this is also the media
01:40just just sort of what's you know that
01:42it's it's much it's a function of the
01:44way media covers Silicon Valley so it's
01:47you know if you look at for example so
01:49we as our firm we were investors in
01:51Instagram we were also investors in ice
01:52Sarah both those companies sold around
01:55the same point for actually nice Sarah
01:57sold for more I think was one point four
01:58billion Instagram depending on Facebook
02:00stock price of 700 to a billion but if
02:02you go and do a Google News search there
02:03were literally a hundred to one articles
02:06about Instagram versus a nicer now
02:08Instagram is an amazing company they
02:09deserve the coverage but the point is no
02:11one the press doesn't really want
02:13about Software Defined Networking and so
02:15which is understandable like people who
02:17want to read that that's fine but don't
02:20then extrapolate from media coverage so
02:22that's actually what's going on in
02:23Silicon Valley so for example 70% of all
02:25venture capital goes into enterprise
02:27companies which you know more than half
02:29of which are infrastructure so it's very
02:31hard to argue just when you have the raw
02:33data that 30 to 40 percent of investment
02:36is an infrastructure that we aren't
02:37doing infrastructure what is easy for a
02:43journalist to write about and what is
02:45going to sell newspapers what's going to
02:47sit well to a general audience talking
02:50about consumer products is a lot easier
02:51than talking about b2b products b2b
02:54products tend to be in the business page
02:55in consumer products tend to be in the
02:57news pages and talking about 22 year
03:00olds who sell their product for a
03:02gazillion dollars kind of needs to be on
03:04the front page because that's newsworthy
03:06so that's fine but don't extrapolate
03:10yeah exactly it's the second order
03:12articles I object to not the first order
03:13alright the second order then
03:14extrapolate from that and say that's all
03:15that's happening like wait a second like
03:17yeah I think that's that's the thing
03:18that you know it's if you are not in
03:20immersed in you know the kind of the
03:24hardcore technology or the hardcore
03:25computer science or the infrastructure
03:27building that's getting done you can't
03:29see it now you can see that you've seen
03:32it like just being here for example like
03:3370 percent of the time we're talking
03:35about fixing healthcare fixing finance
03:38fixing you know better semiconductors
03:40better data centers this is what most
03:42people are doing here yeah I mean that's
03:44true but if you're trying to write it's
03:47easy to write about phenomena and try
03:51and construct phenomena and you know
03:54there's no question that compared to you
03:56know 10 years ago there are a lot of
03:58people creating companies with silly
03:59names that did things that didn't appear
04:01to be terribly important and that masked
04:04a lot of the interesting stuff today
04:05there's a lot of there's a lot of 22
04:07year olds creating companies that get
04:09lots of users and get interesting you
04:11know sexy valuations that appear to be
04:14doing stuff that isn't very interesting
04:15or isn't very exciting and so you can
04:17write about that the fact that there's a
04:19lot more 30 year olds or indeed 22 year
04:22olds creating companies like box or
04:24tarah all these other you know more
04:26profound more fundamental businesses
04:28just doesn't get covered I think you
04:30know you know in a sense every industry
04:32hates the press you know every industry
04:34thinks the press doesn't write about us
04:35the way it should write about us and
04:37they focus on the trivial stuff and they
04:38focus on the start ourselves newspapers
04:40and you know it's always true one other
04:44thing which is basically like it is
04:45certainly true that you know they call
04:47it the media because it mediates our
04:49interpretation of reality it's like a
04:50shimmery mirror and here's reality on
04:51one side then here's what you read and
04:53then there's this you know
04:53intermediating force um but in in the
04:57defense of the media one thing that is
04:59true is that consumer applications are
05:01tangible and used by hundreds millions
05:04of people and so there is a you know
05:06what people are familiar with what they
05:08perceive as technology is that which
05:09they can touch and feel and actually use
05:11on a daily basis the iPads and iPhones
05:13and Gmail's and dropboxes and Twitter's
05:17and things of that nature so thus what
05:19they see is usually consumer II and
05:22fluffy now once in a while there will be
05:24something by the way but my point I'm
05:25not objecting to the media covering it
05:27that way I'm objecting to is the second
05:28order articles which then scene that
05:31says that's what the media coverage is
05:32that that's actually what's happening
05:33right so my counter argument as to why I
05:36think that will is going to change
05:37pretty soon is kind of threefold first
05:39is a lot of things that were thought of
05:41as fluffy are actually something
05:42becoming very impactful for example even
05:44as like 12 months ago even eighteen
05:47months ago people who are calling
05:48Bitcoin and imaginary currency for crazy
05:50people on the internet and now Goldman
05:52Sachs is saying it can save people 200
05:53billion dollars so that's a enormous
05:55u-turn in like 12 months so number one
05:57these things that people think are
05:58fluffy are actually becoming real number
06:00two is there's a lot more physically
06:01tangible things like self-driving cars
06:04or delivery drones where whatever else
06:05you can say about them you cannot say
06:07they are like trivial advances or that
06:08they will not be you know
06:10earth-shattering and number three I
06:11think which is the least appreciated
06:13aspect of this is we are you know when
06:15we talk about consumer products I think
06:17a distinction which I noticed in some of
06:19the discussions I've had with people on
06:20Twitter is the consumer producer
06:23distinction is going away that is to say
06:26that was a very 20 century model where
06:28you had a big business and would sell
06:29things and there be consumers who would
06:31be passively consuming it but now you've
06:33got a developer who is neither really a
06:34producer nor consumer they're building
06:36something for themselves right
06:38and as software eats the world and
06:39hitting keys on the keyboard is a way to
06:40generate things of value for yourself
06:42then people you know many more millions
06:44of people start to appreciate those
06:46quote enterprise products as they would
06:48use them to build things for themselves
06:49right so that will never be the majority
06:51of people but it'll be a larger and
06:52larger fraction of people and I think
06:54that'll also change the conversation
06:55over time yeah I mean you could turn
06:56that the other way around and say that
06:57you know part of what you're seeing is
06:59that kind of the froth and triviality of
07:02popular culture that used to be you know
07:04songs or pranks or movies or fashions is
07:09also now being manifested in dating apps
07:12or photo sharing apps or all kinds of
07:14you know City random things you know you
07:15know maybe people in their early 20s
07:18quite often do things that are unserious
07:20yes and if their code is they're doing
07:22code that's kind of unserious right yeah
07:25good point I think also like in regards
07:29to sort of producer consumer distinction
07:30collapsing I think you know one thing I
07:33that I realized there days there's
07:35almost no Hollywood movies that I can
07:37think of at least that are educational
07:39movies that is meant to train you to
07:41level you up to to add a skill for you
07:44right and there are some T because they
07:46were educational I guess in that narrow
07:48sense I mean in the Hollywood movie
07:51makers would argue they're you know
07:53educating your emotionals exactly
07:54telling a fable or something like that
07:56right but the reason I originally bring
07:58up that specific point is I think said
08:00one model for media which people do
08:02complain about is sort of the pager
08:04driven model which is based on an
08:05attention economy and you know it's a
08:07headline and if it bleeds it leads that
08:09kind of thing and you're basically
08:10monetizing on just pure volume it's
08:12Huffington Post model the page view
08:13model but there's another model which is
08:15not monetizing a very large mass that's
08:17monetizing those people who actually
08:18really need to understand and comprehend
08:20the article right this is a production
08:22versus a consumption model and so here
08:24for example you could imagine a site
08:27which is not initially about news it
08:29wasn't about the newest thing always but
08:31it was for example a site that say
08:33maintained and up-to-date things sort of
08:34like a Wikipedia but better maintained
08:36on say 3d printing and at all the
08:37companies there and so I'm almost like
08:39an investment research report and your
08:40goal in viewing this was to make an
08:42investment decision to join a company to
08:44download some programs to start
08:46something to build something right and
08:47in reading the second one you did not
08:50because the breeding the headline alone
08:52was not enough to do something so the
08:54real question is what are people looking
08:56at this media with intent to do we have
08:58a different perspective on because we
08:59have intend to do something namely make
09:00an investment or start a company people
09:02who are just consuming the media to be
09:03entertained do not have that incentive
09:05to actually understand it more deeply so
09:07I'd say that the latter kind of media
09:09kind of media where you can zoom it with
09:11intent to reproduce or intend to perform
09:13or intend to produce I think is going to
09:15be more important and it's a different
09:16monetization model for media as well I
09:17would also add that I think just my
09:20experience is that more and more
09:22entrepreneurs are doing it's actually
09:24the trend is actually quite the opposite
09:26of the media's impression which is I
09:28think we're entered we've entered into a
09:30period of significant gravitas and the
09:32technology world in the sense that yeah
09:34like you know we just announced our
09:35investment in altschool for example
09:37which is you know an attempt to rethink
09:40K through 12 education you have you know
09:44Tesla reinventing the car or SpaceX all
09:47the Elon Musk stuff in uber and lyft and
09:49transportation Airbnb in hospitality
09:51like like sort of you go through every
09:53major segment of the economy and you now
09:55have for the first time Silicon Valley
09:56could style companies trying to rethink
09:59how the traditional industries have
10:01worked we're seeing as you know balaji
10:05Paulo you're doing a lot of it for us a
10:06ton of interesting stuff in healthcare
10:08yeah I think we have a bunch of
10:09investments we made that we haven't
10:10announced yet but that people will see
10:12soon we've made whatever 10 10
10:14investments in healthcare recently or
10:16some so it's a very very serious stuff
10:18with you know like experienced
10:20scientists trying to solve big problems
10:22so I feel like it's the opposite trend
10:25is true yeah I think there's also like a
10:27gear change that's happening in
10:28technology now where we you know social
10:31networks and games and the kind of fun
10:32stuff will always be there but we do
10:34have a gear change where it is moving
10:36into drones and Bitcoin and genomics and
10:393d printing and you know all the stuff
10:41that is very important I think the Nour
10:43thing is that embedded it can probably
10:45comment on this just like you know by
10:48installing all these mobile computers
10:50around the world right mobile massively
10:51increased the size of the software
10:53industry like sort of horizontally in
10:55terms of the number of terminals and now
10:57we're increasing in a different
10:58direction which is or the number of
10:59verticals that we're going into right so
11:02the size of what software is going to
11:04is just increased tremendously over the
11:07last you know five years yeah I think
11:09that's right i mean you quote you gave
11:10and made a reference to newton early on
11:13you know the famous newton quote is that
11:14if i've seen far worse by standing on
11:16the shoulders of giants and a lot of
11:18what we're seeing now is benefit that
11:21the last ten or fifteen years of hard
11:23work that you know a 22 year old now can
11:26go out and build a start-up and get
11:28millions of users with very little money
11:29very quickly which was impossible 15
11:32years ago you see what's that get to
11:34what's that was sending the same volume
11:36of messages as i'll sent in the global
11:38SMS system they were doing with that
11:40that with what two dozen engineers yeah
11:4155 people and like i don't know so many
11:43engineers yeah half of those were
11:45engineers and they'd raised you know
11:47they got halfway there one like 6
11:49million dollars yeah and so when you see
11:52them health case hidden all of the fun
11:54of things that we're talking about is
11:55the ability to create really significant
11:58and profound businesses on the top of
12:01platforms that have been built and
12:02achievements that have been created over
12:04the last 10 or 15 years and part of that
12:06is around things like open source
12:07software it's around the collapse in the
12:09cost of data centers which is what makes
12:11twitter and facebook possible among
12:13other things part of it is the explosion
12:16in mobile devices so there are as it
12:19might be 1.5 billion pcs on earth now
12:22maybe more maybe they're some kind of
12:23depends on whose guess is he believe and
12:25half of those are corporate and lockdown
12:27and half of those a consumer and an
12:29immobile and kind of stay at home and a
12:31shared and we will go to three to
12:34three-and-a-half billion smartphones on
12:35us and those are mobile and personal and
12:38taking everywhere and now you see
12:40android where they just came out
12:42yeah exactly i'm so and so you have
12:43proliferation with and indeed kind of
12:45innovation within that so you know one
12:47of the puzzles in mobile is although the
12:49aides are sort of at the Android Apple
12:50platform war was over and they both won
12:53nothing's actually settled in terms of
12:55what happens on top of those devices or
12:56what other devices there might be the
12:58still kind of massive change in
12:59innovation going on on top of that but
13:02but all of that comes in the context of
13:04this enormous scale so you know a 20
13:06year old can create a called dating out
13:08and get a million users and benchmark it
13:10for himself I mean you know this is the
13:12most extreme example at this is probably
13:14injure you know where they got having
13:15they got the god knows how many
13:17users with one person writing dollars
13:19and seven dollars and you see that with
13:23whatsapp you see it with all of the
13:25people who are now taking the whole all
13:28of the arm and all of the the chipsets
13:31that have been created for the
13:32smartphone business and that's now
13:33enabling the drain industry and enabling
13:35a whole bunch of other interesting types
13:36of hardware so it's like the romances of
13:39satellite companies were seeing that
13:41yeah exactly so it's like there was a
13:42nuclear winter after the knee after the
13:44last crash and then for the last ten
13:47years people have been building and
13:49slogging away and creating platforms and
13:51creating is the opposite of technical
13:55debt it's sort of technical savings and
13:56we've built up so much of it over the
13:58last ten years and now you're getting
14:00this kind of flowering of new things
14:02that can be built on that and you see
14:03that in really trivial things
14:04but you also see it in you know Tesla
14:07and hundred-dollar satellites yeah I
14:09think I think one way to think about
14:10that is like you know no one is going to
14:12say buy a computer just to use Twitter
14:14once they bought the computer there's an
14:15incremental zero cost of experimenting
14:18their Twitter and so on right so like
14:19installing that platform there has to be
14:21that killer app for it like for a mobile
14:22phone it's texting and it's visual
14:24voicemail it's all the things that the
14:25iPhone push people over their threshold
14:27but then after that it's just this
14:28deployment point where you can build
14:29billion-dollar companies on top of that
14:31install base so I think a very
14:32interesting strategic question just you
14:34know from investment standpoint is what
14:35kinds of platforms are there that are
14:36like that like what kinds of platforms
14:38you're such a pain point that then once
14:40we we get people in it then we can
14:42deploy lots more stuff on that I think
14:43one of the things is probably gonna be
14:44Bitcoin like getting lots of people
14:46Bitcoin wallets cuz you can deploy all
14:47kinds of software on top of that once
14:48they have the gun wads
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