Reflections on: IT IS TIME TO BUILD
IT'S TIME TO BUILD
Marc Andreessen, the famed entrepreneur who brought us the first web browser and serial venture capitalist released an essay on Twitter called: IT IS TIME TO BUILD. Yes, all caps.
His central thesis is this:
In America and the West, we've seen the widespread failure of institutions.
This is a failure to build all the things we need in society.
He points to some "smug complacency, this satisfaction with the status quo and the unwillingness to build, in the pandemic, or in healthcare generally...You see it throughout Western life, and specifically throughout American life."
He adds, "Building isn’t easy, or we’d already be doing all this. We need to demand more of our political leaders, of our CEOs, our entrepreneurs, our investors. We need to demand more of our culture, of our society. And we need to demand more from one another. We’re all necessary, and we can all contribute, to building."
He lists the myriad of areas he thinks we need to build: housing, education, healthcare, manufacturing, transportation.
What do I think?
And this is a draft. And a bit of a rant. So comments and thoughts are appreciated. Also, to reiterate what one Declarative Statements reader told me, the influence of venture capital on the American economy and psyche merits more than 1,500 words and might not fit in full in one edition of this newsletter. Consider this a first gambit and the start of a longer discussion. If we are all sheltering-at-home for a while, we will certainly have the time for that chat.
I respect Marc Andreessen and all that he has built. He's had an incredible career and each time I've seen him speak and share ideas I've been impressed. He and the large 'tech community' and 'Silicon Valley' have added many great things to our world. That deserves acknowledgment and appreciation. I'm amazed at what has been built, in such short period of time.
I believe in building. Building is a fundamental part of the American spirit. Being American is a mindset even more than a nationality. Red, Blue, and everything in between, I see a nation of future-interested builders. We are the only thing standing in our own way.
Where is the failure? Where is the gap? It is a failure to listen. A failure to acknowledge failure and to learn from mistakes. A failure of our outsourced engine of growth and innovation 'Silicon Valley and VCs' to see anything valuable beyond their power-law, "let's build a monopoly," model. They are an important patch in a large interconnected quilt. But they are not the quilt.
Populism shows that Americans don't have widespread 'satisfaction with the status quo'. I don't see a lot of Americans who are 'unwilling to build'. I see some purposeless. Some desperation. And, I see a lot of Americans working quite hard. Here is a story of a factory in Southeast Pennsylvania where 43 workers keep the factory on around the clock, not leaving for a month, to produce over a billion masks, or at least four for every American.
When Andreessen launched the essay on Twitter, there was the predictable support and naysaying. Time to virtue signal tribal allegiances.
I’ve rarely met an engineer or data scientist who introduces herself by saying “I work in tech” like a badge of honor. The do’ers. The technologists. The people with Ph.D.s in science. Or engineers. They don’t say that.
Education
There are practical elements of Marc's essay that I could offer practical thoughts on. Particularly this line, "The last major innovation in K-12 education was Montessori, which traces back to the 1960s; we’ve been doing education research that’s never reached practical deployment for 50 years since; why not build a lot more great K-12 schools using everything we now know? "
I've been embedded in building many a school chain or improving a few school systems in my career. Not a singular school. A School Chain. So, like, more than 20. Around the world. SPARK Schools in South Africa. APEC Schools in the Philippines. The education system of Punjab, Pakistan. Kids show up and they go to those schools. Everyday. I know how to build school chains and good school systems. I did not dream as an eight-year-old that this would be my superpower, but life is full of surprises that way, and I have spent the last quarter of my life becoming an expert on this particular problem.
Now, I pound my chest because I feel like I must. There is an arrogance among those in 'Silicon Valley land'. A 'not build here' snobbery. If it's not 'tech', then it's not valuable. If it didn't happen from Y-combinator or with capital provided by Sand Hill Road, then it doesn't count. I haven't experienced this from Marc in particular. He may be open-minded. But I've had plenty of conversations with leaders in the Bay Area who back "world changing ideas" and "people who break the rules" only to have the discussion devolve the usual: we like people who graduated from Stanford; Product Management at Google; Growth at Uber; Early at Y, funded by Z. Those people are often quite impressive. But the model that is built doesn't always work. And creative, innovative, risk-seeking, or inclusive? No, that approach is not.
See, Marc Andreessen was an investor in and board member of a San Francisco-based company called AltSchool. AltSchool was founded by an ex-Googler that raised $174M and promised to "reinvent school" in the United States. The founder had a New Yorker Profile, the keynote speaking spot. He's not wrong about the problem. He was also by no means the first or the only one to point out the obvious. Yet he missed the basics. Unit economics. Rent. Student:Teacher Ratio and the cost implications. He shut their 6 pilot schools last year. It was a re-imagination of school (in a great way!) at a price point that was not going to scale.
When the reality distortion field runs up against actual reality, it's not pretty. Why are regulations on schools so strict? Because parents (read: voters) get upset when their kids' schools disappear. It creates stress, discontinuity that hinders learning, etc.
That’s why there are capital requirements and regulations with schools. You have to own the buildings, you have to have X in the bank - because companies like AltSchool have made gigantic promises about the future of education and then boom. Disappeared.
Yes, you can choose to educate your children however you want. If you want to run experiments, then have a micro-school whatever. That’s fine. Yet the bar should be different when it comes to other people's children.
Have you ever expressed doubt about a VC's portfolio company? You might as well have shot their dog. And it's like, half your companies will fail anyway. That’s the power law. That's the game. Anyway, as you can see in that New Yorker article, the challenges were apparent from the beginning. I don't critique the founders of AltSchool for their vision or for trying. Willingness to venture and to try is to be applauded.
So, Marc, why haven't we reinvented school across America? Because you (and capital allocators like you) backed (and then doubled down on) the wrong strategy and the wrong horse. Some people have been building. For a long time. Maybe it's time to admit the failures of the past and to listen and understand. Think, how do we scale what's working best? How do I lobby the public resources not for my portfolio company but for the best school chain models I see around the country? Let's set up the system to succeed, not a single company.
Now, I get it, the A16Z fund pitch is not the ideal capital structure to solve the problems you outline in your essay. I know that. You know that. You leave that part out. The $174M raised by AltSchool was an incredible investment for an education company. The combined capital allocations of the chains that I've invested in are less than a third of that. Given the reported returns, generally, of A16Z, I doubt the LPs noticed any blip from whatever AltSchool did or did not return. It can be swept away in the power-law model. But it'd be great to match words with tactics and suggestions. Particularly from a capital allocator such as yourself.
And I don't mean to pick on Venture Capital.
It's just one of many tools that have been swept up in a PR narrative overselling the social benefits and scalability of its narrow and important purpose. There is plenty of emerging evidence that Private Equity isn't necessarily a better capital structure to promote Building in the sectors you mention in America. Public markets or our modern banking system? The last 5 years of SEC and DOJ action against Wells Fargo suggests incentives aren't quite aligned there either.
I wrote this essay 100% Student Enrollment Will Not be Achieved in the Marble Halls of the United Nations. And these words ring just as true with all the areas listed in It's Time To Build:
There are plenty of speeches echoing round the hallowed, elegant marble halls of the United Nations or the sleek modern atrium of the World Bank. At these grand institutions, world leaders queue up to decry the shame of 57 million primary-age children around the world still not being enrolled in school and assert the moral importance of finally achieving the much-heralded goal of universal primary enrollment. Reports from the World Bank, UNESCO, and elsewhere add to the millions of words on the theme.
If speeches and reports made the difference every child would long since have been enrolled. Moral fervor has its place but it does not get the job done.
The battle for universal enrollment will not be fought in these halls nor will words lead to victory. No, instead, this battle is being fought day after day on the dusty roads, among the packed urban slums and in the humid hovels of Punjab and other places like it.
Words are cheap today; actions, however small, matter. No point talking about tomorrow; what matters is what we do today. There is no silver bullet of technology, no easy solution, no quick fix; only the relentless, uncompromising drive for results being instilled throughout the entire system.
In venture, we talk a lot about software and technological progress. Innovative and enabling technology is no doubt integral to the solutions of global challenges. But so, too, is bold, human leadership. No complex problem is solved in a cultural vacuum.
Find new voices, look at new choices. Listen to different faces, venture to different places. I and countless other Americans would love to build with you and be participants in a more inclusive community of ideas that aspires for financial returns in a fashion that is not zero-sum. And we will build the singles and doubles and triples that are accretive, albeit breaking from a model that prizes the proverbial, often monopolistic home-run. Solutions in sectors that are the bedrock of society - education, healthcare, public service - will require precisely that.
Capital allocators are in an incredibly powerful position – we are the intermediary that determines which teams get funded and which visions get a chance at changing the world. The boldest and most respected capital allocators crowd-in other investors and create the momentum to will the future into existence. Do we use our limited time and capital to prop up the existing order and economic structure? Or do we choose to be strong in our convictions and refuse to play it safe?
Summary:
Let's do capital allocation to build the future in ways that work for builders in all sectors, towards our common goals. Let's build that system of incentives.