The a16z Podcast discusses tech and culture trends, news, and the future – especially as ‘software eats the world’. It features industry experts, business leaders, and other interesting thinkers and voices from around the world. This podcast is produced by Andreessen Horowitz (aka “a16z”), a Silicon Valley-based venture capital firm. Multiple episodes are released every week; visit a16z.com for more details and to sign up for our newsletters and other content as well!
State by state. So that's the very same argument that we have for this situation, artificial intelligence. So this is gonna be repeating a little bit, and I apologize. I just think this is so important. So many of the DC insiders here understand the chips act and why it's important. Yeah. A lot of people here that come from the investment committee or founders or whatever probably don't understand the implication. Yeah. I view it as literally one of the most significant pieces of legislation in in 50 years on on innovation. It's a huge, huge, huge benefit. It was the right thing to do. And so if you could just take just a couple minutes of describe at the highest level for those that are not insiders what it is, I think it's so important to get this message out. So the Chips and Science Act was, at once, it was a $53,000,000,000 investment in both research and incentives for the semiconductor industry. The incentives would be to reshore some of our manufacturing capacity so that our supply chains would not be as vulnerable to interruption as they, of course, were during the global pandemic, and they could be, god forbid. There was a geopolitical effort to interrupt those supply chains, say, by the Chinese Communist Party making aggressive actions towards Taiwan. It was also a national security effort because, of course, we need microprocessors, and we need our own radiation hardened, domestically manufactured microprocessors to go into nuclear weapons, to go into our radar systems, and all manner of other things. So that was the microprocessor piece, and we have been in the process now where some of that money starting to flow over $200,000,000,000 of private capital has been invested, and we're not even at a $1,000,000,000 or even close to it of federal monies that has been released. So it's paying handsome dividends. The market is responding, and we're becoming less risky in our supply chains. The idea was not to become independent of other countries. And then there's this whole other and science piece, which for the purposes of this conversation, big investments in research, which I mentioned earlier, Not
Goes that no one Bushnell dealt this founder of Atari, built the first pawn game, and he put it in a pizza parlor or Mountain Dew. And the owner of the pizza probably called him up a day later, and see how this thing's broken piece of junk, get this thing out of here. And he goes in, and of course, the problem is it's so jammed with quarters that it literally physically can't take quarters anymore. And so this was recurring phenomena. I I think it's a bunch of things. I think one is is say it's sort of founder market fit or people building for themselves and some people who are super rated computers tend to love gaming and they tend to wanna build great games. I think another part is the sort of both the need and the opportunity to kind of really jam the throttle forward on what the raw capability is of whatever the technology is. Remember with 3 d acceleration was new. The minute you have that as capability. It was just like what's the most sophisticated possible three d game you could build. And that happened before you started doing like CAD cam and all these other things. So I think it's that. There's also a great thing about it, which is games are a mass market phenomenon, especially these days. And so it lets you drive price points down. Right? It gives you like a direct sort of like a real path. Be able to take whatever the new capability is and drive it to the mass market super fast. And so, yeah, I fully expect this trend to continue, and that's obviously what we're seeing with AI right now. Yeah. With AI and whatever. And by the way, also mixed reality. That's what I was gonna ask. Yeah. It goes here in AR. It's crystal clear. The known killer apps right now are are games, like, by a very wide margin. Yeah. Well, it's it seems like so much of VR has been marketed as sort of productivity and being able to do meetings and so on, but all the data is saying that it's sort of high school super high retention. It's all kids basically playing social multiplayer, yep, gaming. Well, it's actually two tiers. It's the game games. Right. And then it's the social gaming environment. It's specifically the social gaming environments, not just social environments. Yes. That's right. The games are key to the experience. That's right. Everyone in audience has read your techno optimist manifesto And I have a couple questions on this. Right? So I think first is just you had to write it because obviously most people, for whatever reason, don't seem to be optimists today. And so why are there so many self hating technologists? What is the sort of root cause So there's this recurring phenomenon in the history of new technologies, which is every new technology tends to come with what's called a moral panic. Right? And a moral panic is basically this term for basically there's a new thing and so therefore it's evil and bad
The DoD contributed between 1 half and 2 thirds of all American research and development dollars. That same era birthed DOD's much loved multi year budgeting processes. In funding such innovation, it was easy and Washington got comfortable believing our processes and pace could dictate everything that followed. But since the 19 eighties, the script has been flipped with companies contributing 50 to 70 percent of America's R and D pie. Yet, DOD's rules of the game have not caught up. Not only are we seldom innovation pacesetters, too often, we can struggle just to keep pace with a dynamic US private sector that continues to out innovate the world. Of course, it's a much larger pie and we still invest a lot. In real dollars, DOD's 20 24 r and d budget request of a $145,000,000,000 is triple what it was during the Cold War. It's more than what Alphabet, Apple, Meta, and Microsoft combined spent on r and d last year. And our requested 2024 procurement budget, what's converted into fielded capabilities and services, is even more, a $170,000,000,000. Defense is not a small market. Likely one reason behind the recent surge in US defense tech focused start ups, scale ups, and private and venture capital. Some 2,000 deals, investing over a $1,000,000,000 since 2021 per pitch book in The Wall Street Journal. For 3 years now, we have taken a comprehensive, iterative, warfighter centric approach to innovation, recognizing we face an accumulation of challenges and barriers and there is no silver bullet that will lower them all. Along the way, we've never wavered from our ultimate objective.
And so in effect of despite pouring all the money at it, I think there are, like, a few important issues around that. One is really arrogance in that. I think we in tech and a lot of the people who went in are like, oh, we're the good guys. We're for the good, and everybody will love us when we get there, and we can just push our agenda on the policymakers without really putting in the time and the work to understand the issues and the things that you face as somebody in Congress or somebody in the White House in trying to figure out what the right policy is. And I think that we are coming at that from kind of our cultural value, which is we take a long view of relationships. We try never to be transactional. And I think that's especially important on policy because these things are massively complex. And so we understand our issues and our needs, but we have to take the time to understand the issues of the policy makers and make sure that we work with them to come up with a solution that is viable for everyone. And so I think that's thing 1. I think Texas has been very bad on that. And the second one is I think that they've been partisan where it's been, like, not necessary or not even smart to be partisan. So people have come in with whatever political bent, mostly kind of Democrat Democratic party that they have. And, okay, we're gonna go in without understanding you and only work with Democrats because we're Democrats and this kind of thing. And I think, you know, our approach is, look, we are here to represent tech. We want to work with policymakers on both sides of the aisle. We want to do what's best for America. We think that if we can describe that correctly, then we'll get support from both sides. And that's just a really different approach. So hopefully, that's right and hopefully, we can make progress. Okay. Good. So let's go to the next question. So this is, again, a 2 part question. So Sheen asks, in what ways do you see the relationship between silicon
In every detail so that every small to medium or large business can copy exactly what we're doing. And we've filled millions of scripts, and we think we have 17% at cost plus 17% of the cash mail order market. And you know how much we've spent on marketing and advertising? 0. Because transparency is the best salesperson ever. When we start publishing all these contracts that we negotiated, your business is gonna blow up. So now we're in the process of finishing all those negotiations. And what we've done to the pharmacy side, we'll do to the health care side as well. And for each and every one of you out there looking to raise money quickly, cut your pharmacy benefits manager. Cut your big insurance company if you self insure. If you use a big 3 PBM, you're getting ripped off. So you asked the question, David, why are these prices so disparate? Because the big PBMs know that Can you explain can you explain what a PBM is? Pharmacy benefit manager. Okay. Because I think that's a term that most people don't know. It's part of that opaque middleman environment. Which is crazy. Right? Because all of your drug spend goes through a pharmacy benefit manager, PBM. And there are 3 of them that dominate the industry with 80, 90% market share. And you know what unique services they offer? None. More of the office space paper moving. More. Right? And initially, when they came into being, they went to companies and said, look. We're gonna negotiate the formulary because you don't want someone selling you drugs you don't want. Okay. Back then, maybe that was worthwhile. But now they use that to say, we don't carry that drug. So there's a biosimilar for Humira, which is the highest revenue generating drug called USIMRI that we sell. Humira is about 6 to $8,000 a month. USIMRI is about $700 a month. But they won't add USIMRI to their formularies because they don't wanna use the revenue in the margin. So what do they do instead? They take a chunk of that delta that they're keeping, and they get rebates from the
