20VC a16z Partner Frank Chen on The Future of Car Ownership, Whether The High Employee Attrition Rate in The Valley Is A Feature or A Bug & His Biggest Lessons From Netscape, Loudcloud & Opsware



In a dynamic conversation with Harry Stebbings, venture partner Frank Chen from Andreessen Horowitz delves into the transformative potential of AI, automation, and self-driving cars on society, the economy, and urban infrastructure. Frank, who brings a wealth of experience from Netscape to HP, discusses the importance of responsible AI system design, the changing nature of job markets, and the future shift towards non-ownership of vehicles in urban settings. He foresees cities reimagining their use of space as self-driving technology advances, with parking lots and other car-related infrastructure becoming obsolete. Frank also touches on the challenges of venture capital, such as the difficulty of turning down passionate entrepreneurs and the need for transparency in investor-entrepreneur interactions. Highlighting Branch, a company leveraging machine learning to provide loans to the unbanked, Frank illustrates the profound impact of AI on traditional business models.

Summary Notes

Introduction to the Episode

  • Harry Stebbings introduces the episode of "The 20 Minute VC," highlighting the focus on innovation, entrepreneurship, and society.
  • Frank Chen, a partner at Andreessen Horowitz, is introduced as the guest.
  • Chen's background includes VP roles at HP Software and Opsware, and Director of Product Management at Netscape.
  • Thanks are given to Marjit and Maya at Andreessen Horowitz for facilitating the episode.

"The 20 minutes VC is back for another week with me, Harry Stebings at H debbings 90 96 with two B's on Instagram. I would love to see you there where you see all things behind the scenes."

Harry Stebbings introduces the podcast episode and his Instagram handle, inviting listeners to engage with behind-the-scenes content.

"Frank is a partner at Andreessen Horowitz, one of the world's most prestigious venture firms with a portfolio including the likes of check this out, Airbnb, Coinbase, GitHub, Lyft, Slack and many more incredible companies."

Harry Stebbings provides an overview of Frank Chen's current role and the prominence of Andreessen Horowitz in the venture capital industry, listing some of their notable investments.

Sponsorship and Partnerships

  • Brex is highlighted as the first corporate card for startups, noting its founders' experience and benefits.
  • Terminal is introduced as a solution for building remote engineering teams, emphasizing its comprehensive service.
  • Cooley, a global law firm, is mentioned for its history with startups and venture capital, being the most active law firm representing VC-backed companies going public.

"Brex founders Henrique and Pedro built a payments business in Brazil, but found themselves rejected for a corporate card when they were in Y combinator."

Harry Stebbings discusses the origin story of Brex, emphasizing the founders' entrepreneurial journey and the challenges they faced, leading to the creation of their product.

"Terminal is your dedicated partner in quickly building skilled remote engineering teams."

Harry Stebbings introduces Terminal, focusing on its role in facilitating the hiring and management of remote engineering teams for startups.

"Since forming the first venture fund in Silicon Valley, Cooley has formed more venture capital funds than any other law firm in the world."

Harry Stebbings provides background on Cooley's significant history and expertise in the venture capital space, underlining its contributions to the industry.

Frank Chen's Journey to Venture Capital

  • Frank Chen describes his path to venture capital as accidental, following Mark Andreessen and Ben Horowitz into the venture.
  • Chen's curiosity-driven personality aligns well with the venture capital industry, where learning is constant.
  • Chen has worked with Andreessen and Horowitz for over 25 years, which influenced his decision to join Andreessen Horowitz.

"Well, I kind of did it by accident, which is unlike many of my peers, I had not plotted a lifelong path to get to venture."

Frank Chen explains his unanticipated entry into the venture capital world, contrasting it with the deliberate career paths of his peers.

"For somebody with that kind of innate curiosity, this is the best job ever, right? Because you're going to learn something new every hour if you do your job right."

Frank Chen describes the venture capital role as ideal for someone with his level of curiosity, emphasizing the continuous learning opportunities the job provides.

Lessons from Netscape and Opsware

  • Building a business is challenging and often involves overcoming numerous obstacles.
  • Loyalty is a critical value in a company, especially when facing difficulties.
  • Chen learned the importance of inspiring loyalty to retain key talent and maintain continuity within a company.

"It is a lot harder to build a big durable business than it looks from the outside."

Frank Chen reflects on the underappreciated difficulties of building a successful business, as revealed by his experiences and Ben Horowitz's book.

"Loyalty is sort of, I think, an underappreciated value here in the valley."

Frank Chen emphasizes the importance of loyalty in Silicon Valley, where frequent job changes are common but can be detrimental to a company's stability.

Attrition Rates and Loyalty in Silicon Valley

  • The average duration at a company in Silicon Valley is 1.4 years.
  • Frequent job changes are seen as both a feature and a bug of the Silicon Valley ecosystem.
  • There is a need to balance the free flow of ideas and people with the stability required to build enduring companies.

"It is both a feature and a bug. As I pointed out, if you're looking at it as a feature, you think, look, we have a free flowing set of ideas and people moving between companies."

Frank Chen discusses the dual nature of Silicon Valley's high attrition rates, acknowledging the positive aspect of a dynamic exchange of ideas and talent.

"And so if you've got people leaving every 1.4 years, it's hard to keep people in those seats."

Frank Chen highlights the challenges companies face due to frequent job changes, stressing the importance of retaining key personnel to ensure the company's growth and knowledge retention.

Frank Chen's Content and Upcoming Discussion Topics

  • Harry Stebbings expresses admiration for Frank Chen's content and sets the stage for discussing major topics.
  • The conversation is set to cover automation and the future of work, self-driving cars, and the reinvention of cities.

"And as I said before the show, massive, massive fan of the content."

Harry Stebbings compliments Frank Chen on the quality of his content, setting a positive tone for the upcoming discussion.

"Starting on automation and the future of work, then moving to self-driving cars, and then finishing on the cities that those cars drive in and how they maybe need to be reinvented. Does that sound good?"

Harry Stebbings outlines the key topics for the episode, indicating a comprehensive conversation on significant technological and societal trends.## AI Ecosystem Excitement

  • The Neuroinformation Processing Symposium, a major AI conference, sold out in just over eleven minutes.
  • Paul Doherty, CTO of Accenture, noted unprecedented growth of AI in businesses, surpassing the rise of client-server computing, internet computing, and mobile.
  • Political interest in AI is peaking, with countries offering incentives for AI research and startups.
  • Responsible and empathetic AI design can lead to the best version of humanity.

"This year it's sold out in a little over eleven minutes. It's like a Beyonce concert." "It's faster than the rise of client server computing. It's faster than the move to Internet computing, it's faster than shifting to mobile." "There will be tax breaks, there'll be regions, there'll be collaborations with universities, and I will be the best country or region on the planet to bring your AI research or to build an AI powered startup."

These quotes highlight the current high demand and excitement surrounding AI technology, comparing it to a popular concert, emphasizing its rapid growth in the business sector, and noting the political incentives being offered globally to attract AI development.

AI's Impact on the Economy and Jobs

  • AI is expected to turbocharge human capabilities and create new jobs, similar to the effects of spreadsheets and databases.
  • AI can perform dangerous and dirty jobs, improving safety in industries like trucking and mining.
  • Machines excel at repetitive tasks, while humans will focus on creative and non-repetitive tasks.
  • AI will not eliminate jobs but will shift the nature of work towards more creative human endeavors.

"We've actually created more white collar jobs post the spreadsheet than we have in the decades before the spreadsheet." "So I think there's a bunch of jobs we don't want to do because they're dangerous."

These quotes suggest that AI, like previous technological advancements, will not result in a net loss of jobs but will instead change the types of jobs available, shifting away from dangerous and menial tasks towards more creative and fulfilling work.

Importance of Large Data Sets in AI

  • Deep learning, a popular AI technique, relies heavily on large data sets for tasks like image recognition.
  • Alternative approaches to AI can circumvent the need for large data sets, such as machines generating their own data or using reinforcement learning.
  • Large data sets are not universally necessary for effective AI implementation, but they are crucial for certain applications.

"So if you think about deep learning in the context of self driving cars, they're using deep learning to figure out, is that a stop sign, is that a pedestrian, is that a biker." "Another is to use a set of techniques that does not depend on big data sets."

These quotes explain the role of large data sets in training deep learning models, particularly for self-driving cars, and also introduce alternative AI techniques that do not rely on massive data sets, highlighting the versatility of AI approaches.

AI Misconceptions and Real Applications

  • There has been a trend of companies rebranding themselves as AI startups, leading to skepticism about the authenticity of AI applications.
  • Despite some exaggeration, there are genuine AI advancements enabling new capabilities and solutions.
  • AI is answering questions and solving problems that were previously impossible with older technologies.

"Everybody became an AI startup." "The types of predictions we can make, like do you have cancer or not?" "We just need a set of machine learning algorithms and we can identify fashion trends."

Frank Chen counters the claim that AI is a scam by acknowledging overuse in marketing but also providing examples where AI genuinely offers new solutions, such as medical diagnostics and trend analysis, demonstrating its transformative potential.

Self-Driving Car Industry and Ownership

  • In urban and suburban areas, car ownership is expected to decline as autonomous vehicle services become more prevalent.
  • The cost of drivers is a significant part of current ride-sharing services, and removing drivers from the equation will make these services more economical.
  • Autonomous vehicles will likely lead to a service-based model for transportation, rather than individual car ownership.

"I think that in most urban and most suburban settings, people will stop owning their cars."

This quote predicts a shift in car ownership patterns due to the advent of self-driving cars, suggesting a move towards transportation as a service model, which will be more cost-effective and convenient for consumers.## Cost of Car Ownership vs. Self-Driving Services

  • Current cost to own and operate a car is estimated at $1.50 per mile.
  • Self-driving services are estimated to operate at around $0.50 per mile.
  • Price parity or cheaper costs of self-driving services will lead to a significant shift from car ownership to being chauffeured.

"a buck 50 a mile for you to own and operate your own car... Most of the self driving estimates put the cost of operating a profitable self driving service at around $0.50."

The quote highlights the cost difference between traditional car ownership and the projected cost of self-driving services, emphasizing the economic incentive for consumers to switch to self-driving services once they become cheaper.

Ownership of Self-Driving Cars

  • Manufacturers like Tesla and BMW may transition from selling cars to operating driving services.
  • Car manufacturers face an innovator's dilemma in shifting from sales to service models.
  • Ride-sharing companies, leasing companies, or private equity funds could potentially own self-driving cars.
  • It is too early to determine who will ultimately own the self-driving cars, but it is unlikely to be individual consumers, especially in cities and densely populated suburbs.

"It's certainly possible that the owners are the manufacturers... I think the manufacturers are going to have a hard time making the transition... It's possible that the ride sharing companies, Lyft and Uber, get there... It's possible that their ultimate ownership is by leasing companies... It's possible that there will be private equity ownership."

Frank Chen discusses the various potential owners of self-driving cars, from manufacturers to ride-sharing companies and leasing or private equity firms, while expressing skepticism about manufacturers' ability to adapt to the service model.

Evolutionary Phase of Self-Driving Technology

  • Current self-driving technology requires human input and is in an evolutionary phase.
  • Driver assist features may be dangerous due to skill atrophy and attention issues.
  • Full self-driving will likely start with long-haul trucking and geofenced areas before expanding.
  • Deployment may occur through technology development by companies like Waymo or regulatory changes in cities, particularly in China.
  • The transition to full self-driving may be more binary rather than gradual.

"So I'm thinking it's going to be more of a binary shift... I think from a skill atrophy point of view and from an attention point of view, we're in this transition phase... I think in terms of full city deployments, there's sort of two races."

Frank Chen predicts a binary shift towards full self-driving technology, outlining the dangers of the current phase with driver assist features and the potential paths to widespread deployment in cities.

Impact of Self-Driving on Car Parts and Servicing

  • The supply chain will shift significantly with a larger portion of car costs going to hardware and software.
  • Electronics and software will account for up to half the price of a car.
  • Traditional car components like internal combustion engines, steering wheels, and exhaust pipes will become obsolete.

"I think you're going to see half the price of a car go to hardware and software... All of those will go away because the self driving cars don't need rear view mirrors, they don't need steering wheels, they don't need brake pedals."

Frank Chen discusses the transformation of the automotive supply chain with the rise of self-driving technology, forecasting a decline in traditional car parts and a surge in the importance of hardware and software.

Redesigning Cities with Self-Driving Cars

  • The advent of self-driving cars presents an opportunity to redesign city infrastructure.
  • Parking lots may become unnecessary as self-driving cars will be in constant motion.
  • Cities can repurpose land currently used for parking to other uses, improving space utilization.

"Well, the super exciting thing is we've really only had three chapters of city design... when we have self driving cars, we'll get to design the next chapter... So first all the parking lots can go away because the cars will constantly be in motion."

Frank Chen expresses enthusiasm for the potential to redesign cities with the introduction of self-driving cars, highlighting the elimination of parking lots and the reclamation of urban space as key benefits.## Transformation of Cities with Autonomous Technology

  • Discussion on how the transition to autonomous cities can transform the use of space within established urban areas.
  • Transition will be gradual, occurring one parking lot, auto repair shop, and car dealership at a time.
  • Local decisions will be made about repurposing spaces no longer needed for car-related services.
  • Each city will have unique approaches to repurposing spaces based on their economy and social goals.

"So it's going to happen one parking lot at a time, one auto repair shop at a time, one car dealership at a time."

This quote highlights the incremental nature of urban transformation as autonomous technology becomes more prevalent.

"What do we do with that space? Because we don't need licenses anymore. We're being chauffeured."

This quote emphasizes the specific changes in urban infrastructure, such as the obsolescence of DMVs, and the need to repurpose these spaces.

Frank Chen's Favorite Books

  • Frank Chen's favorite book series are the Chronicles of Narnia and Lord of the Rings.
  • He appreciates the depth of the fictional worlds and the truths about reality they reveal.
  • Frank has visited the Eagle and Child pub in Oxford, where the authors used to gather.

"I love these books because they are what the authors would call sort of true myth, like the fiction that they created."

The quote explains why Frank values these books, emphasizing the concept of "true myth" and the deeper understanding they provide.

Challenges in Venture Capital

  • Frank finds it difficult to say no to entrepreneurs who are passionate about their world-changing ideas.
  • The decision-making process in venture capital requires careful consideration of which companies to invest in.

"Saying no breaks my heart every time."

This quote conveys the emotional challenge Frank faces when declining investment opportunities with entrepreneurs.

Learning Curve in New Verticals

  • Frank emphasizes the importance of initial self-education and then learning from experts in the field.
  • The learning process involves 20% from research tools like Google and 80% from conversations with knowledgeable individuals.

"We'll do 20% of the learning on Google and 80% of the learning with people that we can ask smart questions of."

The quote outlines Frank's approach to scaling the learning curve on new topics by combining self-study with expert engagement.

Transparency in Technology and Venture Capital

  • Frank advocates for greater transparency between investors and entrepreneurs.
  • He believes that hiding information is counterproductive to the partnership required to build successful businesses.
  • Transparency and mutual trust should be the foundation of the investor-entrepreneur relationship.

"Let's not hide things from each other. Let's get started on transparency and mutual trust."

This quote underscores the need for openness in the interactions between investors and entrepreneurs to foster successful collaborations.

Silicon Valley's Product vs. Distribution Advice

  • Frank disagrees with the Silicon Valley bias that building a great product is sufficient for success.
  • He stresses the equal importance of developing effective distribution channels for the product.

"Building a great distribution channel is equally hard, and we need to take that just as seriously, if not more seriously."

The quote challenges the common advice in Silicon Valley, emphasizing the critical role of distribution in a product's success.

Excitement for Branch's Future

  • Frank is particularly excited about Branch, a company providing loans to the unbanked using machine learning.
  • Branch's innovative approach to credit risk assessment challenges traditional methods and serves a social good.

"I love the sort of triumph of algorithms over judgment."

This quote reflects Frank's admiration for Branch's use of machine learning to improve financial services in underserved markets.

Acknowledgments and Further Engagement

  • Harry Stebbings expresses gratitude for Frank's insights on significant technological challenges.
  • The podcast encourages listeners to engage with behind-the-scenes content on Instagram and discusses sponsors such as Brex, Terminal, and Cooley.

"I so appreciate that, Frank, and it was great to have you on."

Harry's quote conveys appreciation for Frank's contribution to the podcast and the valuable discussion they shared.

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