Ben Horowitz on AI Infrastructure, Economics and The New Laws of Software

**Ben Horowitz** (0:00)
America has got to rebuild its entire infrastructure, like right now. We don't have enough rare earth minerals, we don't have enough electricity, we don't have enough manufacturing capacity. NVIDIA will make enough chips, but then we won't have enough memory. Almost everything is a bottleneck.

**Alex Rampell** (0:15)
The China graph is like this, and the US graph is like that. How do we make this seem less scary?

**Ben Horowitz** (0:21)
The history of technology is, things have always gotten better. Humans are kind of unbelievable in their ability to come up with new things that they need.

**Alex Rampell** (0:28)
Now 8 billion people that might have an idea in their head can get it out of their head.

**Ben Horowitz** (0:32)
I do think what's going to happen is...

**SPEAKER_3** (0:35)
For 50 years, one rule in technology was almost sacred. You cannot buy your way out of a software problem. Hire a thousand engineers and you still won't catch a faster competitor.
Fred Brooks called it the mythical man month, and every engineering leader believed it.
That rule no longer holds. With enough GPUs and the right data, companies can now compress years of development into weeks. But the disruption cuts both ways. The same forces that let startups move faster are dissolving the motes that protected incumbents. Customer lock-in, proprietary data, switching costs, all eroding at once. So in a world where the old defenses no longer work, what actually makes a company worth building, funding or keeping? Ben Horowitz, co-founder and general partner at a16z, speaks with a16z general partner, Alex Rampell, at FinTech Connect Conference in Deer Valley.

**Alex Rampell** (1:35)
So you've been doing this for a long time. And I thought maybe I'd start off, and it's funny, we actually didn't rehearse this at all, because I thought that way would be more real, right? More unique. But let's talk about, you have this book where you talked about, how hard it is to be a CEO and everything that you went through at LoudCloud and Opsware. That was a giant shift where it's like the market kind of collapsed, the financial market collapsed. And you had a really pivot and just changed the company. And there are new age companies that are popping up right now, AI First, it's like, they hopefully have their shit together. They're off to the races building something new. But like a legacy company, or five or ten years ago, where there's this great opportunity, but also great challenge, what does a five or ten year old CEO do? Where it's like, they're pre-AI.

**Ben Horowitz** (2:19)
Yeah.

**Alex Rampell** (2:20)
They got to figure out what they do.

**Ben Horowitz** (2:21)
Financial markets hate them.

**Alex Rampell** (2:23)
Yes. So there's the financial markets hate them.
Yes. So, I don't know, maybe riff on that. I'd love to hear your thoughts.

**Ben Horowitz** (2:29)
Yeah. Well, I think the first thing you have to recognize in a kind of huge dislocation like this is some very basic axiomatic, like laws of physics are different. And the two that are really different with AI compared to how companies have been built in kind of technology forever is, one, it used to be very well known that you cannot throw money at the problem. So, for example, if I had a product and I was two years behind, I could not hire a thousand engineers and catch my competitor. Like, it's a mythical man month, nine women can't have a baby in a month, everybody knows that, it never works, no problem.
That's no longer true.
You can throw money at the problem. If you have enough money and some good data, you can buy enough GPUs and solve basically anything in software. So that's gone. The second thing that we knew for sure is like in software, possession is nine-tenths of the law. So if you have the customer, you have multiple lock-ins. You have the migration pane lock-in, you've got the data lock-in, you've got the user interface lock-in, those are pretty much gone, right? So it's very easy to replicate the code, it's very easy to move the data, and then it's not even going to be a human talking to your software, it's going to be an AI, and AIs are really flexible on how they use user interfaces. So that mode is gone. So I think that's just like the first thing you have to recognize as a CEO that, like, okay, that's going away. So then what is it? Where is your value? What are you delivering? And it turns out, there are many things that are of value, but if you're trying to get good pricing through any of those things, you're going to be under tremendous pressure. Your price has to be a function of some other value that's much more distinct that you provide.