I read through two Marc Andreessen interviews this weekend. There was the usual discussion around the dot-com era which offered a nice walk down memory lane having experienced it first hand.
But he also offered a different view from the general perception around internet companies after the dot-com crash, which struck a cord.
Andreessen ended one interview with this:
There are no bad ideas. There are only early ideas.
He briefly explains it in the first interview but actually expands on it further in the second interview:
So I will make maybe an audacious claim and then try to defend it. So I actually have reached a point where I think that all of the ideas in tech and all of the ideas in Silicon Valley are good ideas. I don’t think there are actually are bad ideas. Maybe we can pick a couple. They actually all seem to be good ideas. The reason I say that is they all seem to actually happen at some point. It’s a timing issue. It goes back to your question which is the timing is really, really hard. I’ll just give you one random example of that.
The poster child for excess during the dot-com era was Pets.com, and that stupid sock puppet became an icon. It’s sort of proof — it’s all the articles in Time — this is proof of how crazy all this stuff has gotten. It’s this idea that you would ship a fifty pound bag of dog food with online commerce is just nutty and that you would be able to make any money doing it, and then this company Chewy just got bought for $3 billion by Petsmart. Guess what? Online dog sales. So that works. Online pet food sales worked.
By the way, smartphones were invented originally in the mid 1980s, and then a lot of us had nerdy, weird versions of them in the 90s and early 2000s if you remember the Treo, and then the iPhone mainstreamed in ‘07. Apple invented the iPad in 1989. They called it the Newton. It became a laughing stock. It was a huge failure. The iPad is the Newton — everything other than the pen. They figured out you could just do it on the screen, but other than that it’s the exact same thing.
So timing is the hard part. I guess the answer is, I am generally always super dissatisfied. We have all these people with all these incredible ideas, and many of them are happening. Then there is going to be a whole generation of founders this time just like there were last time and the time before that where they actually have the right idea. They get the timing wrong. The startups can’t survive long enough. When you start a company, it basically starts a five year fuse. If the idea doesn’t hit critical mass sort of in society with the customers in the first five years, you basically lose the company, and then somebody else picks it up and runs with it. That is probably the single biggest thing that tortures us. I bring it up because so much of the dialogue when people comment on tech, so much is around good idea versus bad idea which I think is actually not the main question.
So all those failed internet companies were way ahead of their time, which makes sense.
The two big issues facing his examples were poor infrastructure (hardware) and a small user base. A general lack of trust was the third problem with the dot-com era. It took 15 years for the infrastructure and user base to reach a point where many of those early internet ideas could be profitable.
You might remember defunct dot-coms like Kozmo (offered 1-hour delivery) or Webvan (online grocer). Most people wrote them off as bad ideas because the companies failed. But really, both companies ran out of money before the ideas could succeed. Amazon successfully uses both ideas today.
As Andreessen points out, people love to label tech as “good” or “bad” based on what happened with it in the past. Investors do the same thing with assets based on recent performance. But they shouldn’t.
It reminds me of something Howard Marks said:
For a value investor, price has to be the starting point. It has been demonstrated time and time again that no asset is so good that it can’t become a bad investment if bought at too high a price. And there are few assets so bad that they can’t be a good investment when bought cheap enough.
There are no bad assets, just bad prices. “Good” or “bad” is dependant on price. Those prices float in a range from “good” to “bad” and rarely stay on one side very long. Meaning, the market regularly offers investors multiple chances to buy at “good” prices.
You only need patience, an open mind, and the stomach to stick around because as Howard Marks also says, “Being far ahead of your time is indistinguishable from being wrong.”