Why The Laws of Startup Physics Have Changed | Ben Horowitz Interview

When Ben Horowitz and his partner Mark Andre came into the venture capital industry, it was very different than it is today. You can argue that it is them more than almost anyone else that has reshaped this industry and matured it so much ever since. Andre Horowitz has become one of the most important institutions, not just investors, but institutions in the private investing landscape, having achieved a scale that no one thought was possible in venture, which was always supposed to be this small, tiny niche corner of the world.

This conversation is a bit unique relative to some of the other ones that Ben has had more recently. I tried to understand the shaping forces and influences in his life and the ways that he thinks America most needs to change. He's taken this as his life's mission to build a firm that affects outcomes in the country, not just in a small niche part of the market, but very broadly, even having discussions in this conversation about his work with, say, the Las Vegas Police Department, which he's tried to infuse with technology to lower crime rates across the system. I hope you enjoyed this great and wide-ranging conversation with Ben Horowitz.

I think a fun place to begin, Ben, would be your take on the state of the country. Like what does it feel like to you in 2026? I know part of your mission is to like directly impact the trajectory of the country. We'll talk about that a lot. But begin with what does the landscape, the playing field like to you today?

I think the tech sector is very very healthy. America's competitiveness is very very good. The entrepreneurship culture is outstanding. That's the main thing I look at from my lens. If you look at and I go kind of all over the world and everybody wants Silicon Valley like how can we have Silicon Valley in the UK? How can we have it in France?

The thing that's lacking so they have a lot of the ingredients right they have great talent, they've got great universities, they have definitely a worse regulatory environment in EU increasingly bad regulatory environment for entrepreneurship but there there's a cultural challenge where succeeding doing something larger than yourself making the world a better place like those aren't things that young people feel like society values.

And so the likelihood if you're building a company of getting people to kind of work for you and dedicate their life to a mission like that is just not that great. Whereas in the US, it's amazing. I think the economy is in much better shape than people realize and start to see that.

Well, we're getting, you know, we've done a lot of kind of things to stimulate it. You know, we've got lower energy prices. We've got much less regulation. We've got kind of a more user-friendly tax code. And that's all starting to kick in now.

And then, from our perspective, I think the bigger thing is AI is going to impact everything. There's almost no problem you can think of that you can't go, well, we have a real shot at solving that with AI. It's from what were the big problems in the US? Auto deaths. Well, we got an AI solution for that. Cancer, we have an AI solution for that.

So, the fact that we've got a technology where we can address everything is a real new phenomenon and and all that's I think going to kick in like in a fairly major way over the next 12 to 24 months.

Why do you think 12 24 months is a time frame worth mentioning that some of this stuff will start to be felt more broadly?

It's all kind of starting to take effect now and you know it's got to roll out get deployed. Now you know deployments of technology in particular in the past have taken a long time. But you know you had to build out the infrastructure to do it.

So like for cars you needed things like roads and traffic lights and all that kind of thing. And for the internet, you needed, you know, fiber in the ground and, you know, people to have smartphones and you needed to do a lot just to get going. The internet is here.

So, if you want to use AI, if you want to apply it to your business, you just do it. Like there is no infrastructure that needs to be built to adopt the thing.

What could most interrupt this good trajectory that America is on where we are building solutions using technology? Like what are the biggest risks?

I think policy. One of the things my father said to me was a bad government, no matter how many smart people you have, no matter how great a culture you have, no matter how great the country is, can ruin the whole thing. Venezuela was the fourth richest country in the world.

Crazy, you know, and then like, you know, communism and and that's that. And you know if you look at how little comes out of so many of these countries in Europe that have so many smart people and then you know and then the ones that went into communism and there's so many like genius Romanian entrepreneurs John vonman and the number of great genius scientists that came out of Hungary like this little country and then like it was just gone once the communists took over is like completely like nothing from from inventing everything to nothing overnight.

And I think that that can absolutely happen here. We could outlaw AI. Like I think there there were like pretty aggressive proposals. The last Biden administration executive order said that you could not sell a GPU without federal government approval. Like that was a real executive order and it got reversed. But like we were that close to being basically out of the global chip game. So it's it is fragile.

By the way, like technology solutions work much better than policy solutions. That's the other thing. Like policy solutions is very hard to make anything work. So if you think about you know co we could tell everybody to stay in their house. Well that's got some like extremely bad side effects.

You know, turned out not to work that well or like, you know, we could invent a drug that cures it or like a vaccine that works. It's just hard to have or a policy solution like, you know, all the policy stuff on climate change, you know, and Europe actually, you know, reduced emissions and all that, but it didn't do anything because like China didn't reduce emissions.

But if you build a technology a really safe nuclear efficient or nuclear fusion facility then like that that would have a big effect and I think in general that's true that you know and police like defund the police did not make anybody safer technology does and so you know if you really want to change the world if you really want to make it a better place I think you can build a solution for darn near anything.

If you want to change the world for the better, it's never been a better time to be an entrepreneur. I was with a local restaurant tour yesterday here in New York, one of the best, for a couple hours having him describe to us how he is planning on using AI tooling to improve everything about his restaurant business.

How do you think about the way all of this is changing the sort of potentially large attractive businesses that you want to invest in? Because there's been stick with the restaurant example. Toast is a great there's many great companies that have been built in and around restaurant software businesses.

It seems like this restaurant owner is going to be able to have his own spun up operating system specific to him not going to need any of that stuff. How how is this changing the way in which you view investment opportunities on the positive?

One everything is up for grabs, right? I I think people are kind of over reacting to that in the stock market and so forth and that if you look at existing software companies like people think, oh, they're all dead. Well, some of these guys are extremely hard targets. Like it's not that easy to take out Salesforce or SAP. You you would be surprised even with AI like how much heavy lifting that is.

Having said that, it is true that you know a lot of these things, yeah, you can just make your own, you can do it yourself. It's going to be a lot easier. That's a just like the number of possible interesting companies I think went up a lot.

I think the other thing we're seeing is the products work so much better than any technology products we've seen in the past that revenue growth is so much faster for these AI companies and there's many such cases of companies coming out you know cursor which is ostensibly an IDE like what's the biggest ID before cursor like I don't know but it wasn't big and it took probably 12 or 15 years to get to that revenue level and you know they went over a billion dollars in revenue like in no time. So that's super interesting.

I would say though from an investing standpoint, the laws of physics of company building changed which is going to in affect investing in what's currently I would say an unknown way. So if you look at the one thing you knew if you'd ever built a software company is you cannot throw money at the problem.

Like you know what's a man year? you know, 700 IBMmers before lunch. Like that uh you know, that phenomenon kind of everything was built on because you knew if somebody built a great product and it took them three years and they did it with a small team, Google's not going to hire 2,000 engineers and catch them. It's just not going to happen. That was a law of physics.

Now, if you have the data and you have enough GPUs, you can solve damn near anything. and kind of we've seen that with Elon catching the big models in no time. I mean, he just took a lot of money and a really good data center design and some smart engineers. He's in the game, you know, like he got in the game very fast. That would have never happened in the past.

The markets are also seem to be much much much bigger than anything we've ever seen. So it would cause you to think about valuations and kind of long-term value and other sorts of things in a different way than we have in the past. On the one hand, it's like, well, when you calculate the long-term value, what if this market wasn't, you know, $50 billion? What if it was $5 trillion?

And then on the other end, well, what if somebody could catch you? These are just concepts we've not dealt with.

So how would the conversations feel different to me if I came in you've got all these great investors working at Andre and Horovitz the the the nature of the conversation amongst your teammates as they're debating this sort of stuff versus four years ago or something where where does it feel most materially different internally?

I would say one of the most different things is when you look at AI researchers it is really a different kind of thing if you haven't been at like Google or Facebook or open AI or anthropic and like somebody gave you hundreds of millions of dollars to try and build a giant model and you weren't like one of the main people, then you probably don't know how to do it because you can't learn it in school.

And you can't learn it in school because it's it's a little bit alchemistic in nature. You know, you are it's it's a little bit of an art. And so if you've never done it before, the chance of on your very first try of building some kind of large model that it's going to work well isn't that great.

Now that's, you know, people are coming up to speed more. There's more companies. People are learning it. But that's kind of why you got to this, which from the outside world probably looked absolutely bananas that, well, why is somebody paying a hundred million dollars for an AI researcher or a billion dollars for an AI researcher? Like, that's the craziest thing I've ever heard.

Well, what if there were only 40 of them like in the world? And you have a$4 trillion dollar company. Yeah, then it kind of changes the math on it a little bit. And I think that's sort of where we were because it's kind of the first time we've had a need for a technologist that academia could produce.

That is kind of probably one of the bigger things that changed in the conversation is like who are all these people? Like we track all of them and you know know what they're doing but it's very different.

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Everyone talks in venture about the power law. The thing underneath the power law is a sort of inequality. It seems like so many of the things that are happening are just massive multipliers on the trend of inequality in every way. the billion dollar researcher, the size of the biggest companies, the wealth of the people creating those companies.

I would argue that inequality is a feature, not a bug of the American system. But yeah, I'm curious for you to riff on like the nature of growing inequality and the the good and the bad associated with that.

what's happening in AI is sort of, you know, I I would just say an extension of the Kobe Bryant effect, which is um, you know, a basketball player in whenever James J. Nay Smith invented the game, you know, like there was a limited amount of money you could make because you basically played the game in front of the people who could show up for the game and that was it. That's the whole market.

Whereas once you add television and the global audience and these kinds of things, you can get to you know a much bigger you can be LeBron James, you can become a billionaire and that that just was not at all possible before. And I think that uh you know we kind of first saw that with the internet where okay now I can build a product and I can get to global distribution very fast then all of a sudden I can become like extremely rich and then AI is another layer on top of that and that okay now take that same product and make it just more a valuable thing and so whoever invents that is whatever the internet company was plus+ and so that's going to make them even richer.

That's the kind of bad part of it. I think the good part of it is it starting out day one like completely democratized like the AI anybody gets access to like very powerful AI you know anybody who has a phone and now everybody most people in the world at this point have smartphones and now you've got like super intelligence in your phone.

So that's a big it's an equalizer of the opportunity in a lot of ways that I don't think we've ever seen a bigger opportunity equalizer than AI. In that every child can have like a super advanced amazing tutor teacher. So like education great education is accessible to all now.

So I think it's an equalizing technology and uh you know there's some drive in inequality and this is another thing I I learned from my father. He said look son life isn't fair and that's extremely good advice because it's just not going to be fair. Like no matter what government or anything tries to do it's not going to be fair.

And the problem is if you create a system that tries to correct that it doesn't make things more fair. It just transfers all the power to the person running the system. And that's what happened with Stalin. That's what happened with Chescu. That's what happened with Pulp Pot. That's what happened with Mao. You know, not an accident that every single system like that went bad because it really ends up just being a power transfer.

When you think about, well, what do you want? You'd like everybody to have a chance, you know, like don't give me no chance. Give me some chance. Now, it may not be as big a chance as the other guy. It may not be, you know, like a perfect chance. But if I have the desire, if I've got some capability, give me a chance to be something like to make my imprint on the world.

And a system like that is going to end up with a lot of inequality. All, by the way, all systems end up with a lot of inequality. But you can try systematically to give everybody an opportunity. And I think AI does a really good job of that.

One of the memes that's very popular today is that you have a couple years to get some capital or you're going to be a part of the permanent underclass is like the is the phrase that is used on Twitter. And I certainly agree that now everyone has the best lawyer, accountant, you know, adviser in their pocket and that's amazing.

But what do you think about this notion that we're just going because of that we need less labor. We need it's going to be harder if you don't have some capital to begin with to accumulate capital and break in. I don't I don't necessarily believe that. I'm just curious what you think about challenges we'll face because of AI society.

Yeah, I don't really think that's right. I think that I don't think like the the door is going to close behind you. I think like the opportunities tend to multiply when you kind of open up a new door and open up like a new way of doing things.

We saw that with crypto. So many people who made money on crypto were like people who, you know, literally didn't have much to start with. they just got into the technology early and then they kind of parlayed it up. And so if you have something that grows really fast, that's actually the opportunity for somebody with a little bit of capital to make a lot of money because it doesn't take much.

You know, if you bought Bitcoin for a nickel, you did really well. And all you needed was a nickel. And that's you know, I think that's the nature of these things that go hyperbolic.

And you know particularly if you create something I also think the the labor market stuff I think people are acting as though it's very predictable and when it's not at all predictable. So if you look at kind of the history of the of the world and automation and this is what it is. It's a kind of like an automation technology. We've been automating things since the agricultural days.

And in in those days, I think 95 or 96% of all jobs in the US were agriculture. Almost all those jobs have been eliminated. And the jobs we have now the people doing agriculture wouldn't even consider jobs. And so like the idea that we could imagine all the jobs that are going to come, you know, sitting here, you know, that AI is going to enable, I think is low.

I think the need for like more creativity jobs is going to go way up and the kind of need for kind of jobs to process work for the creatives will probably go down in some ways but I'm not even sure about that. You know, we've had AI going right imageet was what 2012 and then natural language stuff and Burton and all that was like 2015 and then you know chatbt was 2022 and like where's where's all the job destruction?

You know why hasn't it happened yet? And why are you so sure it's going to happen next? And why are you so sure no jobs are going to be created? I don't think it's nearly as predictable as people are are saying.

How would you describe the nature and scope of your ambition over the next 10 20 years?

One of the things that I learned so I had a mentor who's a a great great CEO by the name of Andy Grove. And he was the CEO of Intel and he kind of famously did the the major pivot of them out of the memory business into the microprocessor business. Maybe the greatest tech CEO we've had.

And one of the things that he he said that you know in a way is very obvious but I think is also profound is if you're the leader in the industry then the growth of the industry is dependent on you. Like you it's up to you to expand the market like nobody else is going to do it.

And so when I think about the firm I think of it a lot in those terms. The reason America is America and and there's many narratives on this, but like I think the factual one is like we won the industrial revolution. We really did. We had Henry Ford and we had Thomas Edison. We had like great entrepreneurs. They built great technology. The technology lead to a military lead, led to an economic lead, led to cultural dominance. None of that was by accident.

And had we not had all those inventions, had all those companies, which led to, you know, everything from like winning World War II, we just won't be, we'd be some other thing. We won't be America. So, we're there again. Like, this is the equivalent change of the industrial revolution in terms of how everything works, governments, societies, businesses.

And you know, we're either going to be uh the leader of that technology, the provider of that technology, or we're not. And if we're not, we're not going to be the economic superpower, the military superpower, the cultural influence, the kind of standard of the world that we are now. At least I think that would be bad.

I think you know uh America's been kind of good for the world and good for giving people a chance like we talked about before and so our role in that you know you know taking it try try and be humble with the role but our role is like from a policy standpoint from a funding standpoint from a helping people build standpoint to make sure that that next set of great companies comes out of America or allied nations a core ambition is to do our part in kind of helping that.

I want to ask about some of the ingredients to do that. Well, but just as a quick sidebar on Andy Grove, uh his book is incredible. Like everyone should read High Output Management. What was it about what what very specifically did you learn from him? Like what did you see him do that impacted the way that you think or behave?

Well, like I'm so overly influenced by him, it's hard to even pin it down. But so high output management, you know, I I actually wrote the new forward for it. Which I actually think that's the best thing I ever wrote was a forward high output management.

But the hard thing about the reason I wrote that forward was I, you know, it was my favorite book and I wrote the hard thing about hard things was basically intended to be the updated version of it. But the thing in high output management that he did so well that I I tried to you know kind of do my own version of is you know the the the concepts of management are easy like they you need an eighth grade education maybe to kind of understand management. It's not like physics. It's it's pretty simple.

But the psychological part of it is extremely difficult particularly for a young person to be able to do. You know it's it's super confrontational. You're having to kind of look through the conversation you're having to the entire organization. You really have to be confusion at times. The the good of the of the whole supersedes the good of the individual. and all these things are are really complicated to do.

His big influence on me was me trying to not only absorb that but then kind of tell it in a more up-to-date kind of modern way. I went to visit him. He had this award on the wall which was it was literally like manager of the year from for the Santa Clara facility of Intel and it was from I don't know 1992.

I'm like Andy we're like the biggest CEO in the world like why did they give you the manager of the year award for the Santa Clara facility? And he goes, "Oh man." He's like, "You know, Santa Clara was like the always scored like it was the lowest quality scores, the lowest score on everything at Intel."

And so I was just like, "I'm going over there and talk to them." So I go over there and he said, "I brought a roll of toilet paper and I put it under my desk, under my chair." And you know, I said like, "When are you going to get this facility up to code?" And they just started in with all this And I reached under my chair and put all the toilet paper up. I said, "Clean up your and tell me when the you're going to be up to code."

And in two months, they were up to code. and they were always the highest rated facility thereafter you know just on that. Uh so they gave them manager of the year for that.

When did you first experience the lessons that drove his success this confrontational psychologically difficult aspect of management yourself? How would you encourage other people to like get a get a taste of it? You can't just read about it.

Obviously what happens uh to founders is you invent something right now. I've got to build a company. you don't know what you're doing and you make mistakes and then those mistakes really cost the company and you lose confidence and that leads you to hesitate and that hesitation is what kind of causes the failure mode.

So then either like the company's indecisive or they get very open. All these guys got so open to input from their team and their executives and like but you know the team doesn't have the full context. Only the leaders got the context. So even if they're smarter than you, you still likely can have better judgment because you have all the knowledge.

But you know, they defer and then if you defer to people who work for you, then that kind of creates a weird political situation because people jump into the vacuum of like, you're not making the decision, I'll make the decision. And then that feels political to everybody else. And so that's the pattern people run into.

And so, you really kind of have to build up enough confidence in them to have that confrontation. The hardest version of this, by the way, is the reorg. Uh because reorg is basically you're redistributing power to make the company work better, to like have communication be better, to not have as much conflict.

But what's going to happen is somebody who's really good, who you've had for a long time, is going to lose power and they're going to be pissed. And so then if you compromise the organization so they can maintain their power then you've just kind of redistributed power from the people doing all the work to the executives and that's a catastrophe.

So it's always that kind of thing where people don't want to have that conver confrontation. They don't want to tell that person look the organization's here. you you helped us tell here, but like you either have to be happy in this new role or it's going to be a rap. When you're young and inexperienced, you know, it's going to hurt to like tell him that, but I don't know it's going to help me to do this reorg because I don't I'm not experienced enough to know that. I've never done that before.

And so I'm going to go with the known avoid hurt to the to the theoretical avoid hurt. And that's when you wreck your company. And and and so that's the pattern. And I, you know, I always do my best to like lend them my experience on that.

You you were lucky that when you started Andre and Horwitz, you and Mark had both had tons of operating experience both together.

Yeah. I still didn't know what I was doing as CEO. Fair enough. And he didn't know what he was doing either. Like his ideas now, like if you ask Mark about management now, like he's so different than how he actually did it. And it actually makes him mad if you talk about it too much because he's like, "I got such bad advice. They told me to hire all these guys."

How do you think he's most different? Like what would he say is or what do you observe to him to be the most different?

I just think he's like way more um in control of his own. Like Mark is super emotional person. And he's just way more in control of it than he was then. Just in terms of just like the personality. He used to be like zero or 100, right? Like so he would be like full of emotion like what the are we doing? or like I'm just not gonna say anything like but nothing in between.

Something I know the least about about your firm is like the first I don't know what period of time three days, three months, three years. And I'd love to hear about how you thought about the business right as it was getting started. Of course, we're I'm going to come back to what it is now and and those ingredients you mentioned for having the impact you want to have. But uh lots of this is an incredible part of the world. Silicon Valley, Wall Street, you know, these are institutions that make America great. Lots of people listening have ambitions to do this sort of thing. And I'd love to hear like the very very ear early primordial case study. Yeah. Of what it was like and what kinds of conversations you were having and what your initial ideas were.

So venture capital, first of all, you kind of have to understand the the context of it was there hadn't really been new top tier venture capital firms. So like the the last one before we started that you would say is top tier was probably Benchmark which ostensibly started in 1995 but it didn't really because all those guys came from another firm called Merryill Pickard and that firm was like from the 80s and there there hadn't really been a new one from the 80s and if you looked at why every VC was kind of reputationbased and so to be top tier you had to have invested in Apple and Cisco and Google and you know Yahoo and all the great companies and you can't from a standing start get to that and then if you're not top tier in VC you're not going to last because yeah in a super hot period everybody makes money but the best entrepreneurs will only work with the top tier firms because that's how you're going to recruit great engineers that's how you're going to get follow-on money like everything comes out of that so you'd never take money from a tier two if you could get it from tier one and so That's why the tier ones always have better returns.

So we knew we had to be tier one, but we had that problem. And the idea that we had was, well, venture capital is a great product for LPs, but it's not a great product for entrepreneurs. And so, if we could build a better product for entrepreneurs, then we could win. And that was like the the original kind of framework.

And the idea that we had for the product for entrepreneurs was you know because we had been entrepreneurs was around what you and I had been talking about which is well if you're like a founder who wants to run their own company you're not getting much like you need so much you don't have the confidence you don't have the knowledge you don't have the knowhow you don't have the network. What if we built a firm that like was designed to give you enough confidence, power, network reach, advice that you could actually be a CEO. And so that was the whole idea behind the firm originally.

And then the second idea we had, which was the other thing, like VCs didn't ever market themselves at all because if you're all based on your investing track record, it's best that it's just magic. Like why say anything? Like keep that a secret. And so they weren't talking. And so when we went out and talked, like everybody covered it. So we instantly everybody knew we had this product.

Where did that where did the germ of that specific idea come from? like let's be fairly loud relative to what others do from the very beginning.

Well, it's funny because you know Mark and I were talking about it. He said to me, he's like why don't VCs market and actually it the original thing went all the way back to kind of the first uh class of VCs which were the investor revolution VCs were JP Morgan, Rothschild, Goldman Sachs etc. right like they were the ones financing these things.

And it turned out that these guys were financing both sides of World War II. And so they really didn't want any publicity because that would have been like an extremely bad uh thing. To a large extent that just carried over all the way through Arthur Rock and and all these things and then, you know, the reputation thing clicked in and it was working, so there was no need to do it.

And we got a lot of criticism when we did it. our LPs would say, you know, like the other VCs say, you guys are egoomaniacs. You name the firm after yourself. You're marketing it like this. And it was so funny because the reason we named the firm after ourselves is when we try we raised money in 2009, which is right on the, you know, edge of the financial crisis.

And the big objection from LPS was, well, like you guys are like really good entrepreneurs. You're just going to leave this thing and go build another company and then we're going to be stuck with the fund. And we couldn't get them off of that. And so then I had the idea. I was like, "Well, why don't we just name it with our names and then they know we're safe."

Yeah. And and that worked.

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