Marc Andreessen Interview, productivity, outcomes vs process

Famous for essays decades old, more recently famous for his “Let’s Build” essay and generally famous for one of the most successful VC companies in the world, Andreessen gives an interview with Sriram Krishnan.

Out of many thoughtful points I’d highlight two.

-Personal productivity and the unstructured model vs the structured model.

-Process  (inputs) vs Outcome (OKRs/metrics) models

On productivity 

Andreessen moves from an unstructured model - that he blogged on previously (see below) - where he argues for trying to never put anything in the calendar…. To a very structured model that he articulates in the interview and highlights the pro/cons to both. It’s a 180 change in model - worthy of a hedge fund manager reversing his trade.

A highlight of the structured model (or his one but others are similar)  is that everything goes on the calendar - and you have to calendar “free” and “open/thinking time” and protect it.

Also worth looking at is Paul Graham on these areas. His 2006 blog still relevant on how insiders/outsiders and productivity can work.

As an aside, it’s why I remain suspicious of any claims to one “correct” way of thinking about personal productivity. Marc is extremely successful and has used model that are 180 degrees different.

On outcomes vs process

There are broadly two schools of thought. 

One which emphasises metrics... Only items that can be measured can be managed… and using KPIs (key performance indicators) and OKRs (Objectives and Key Results).

The other emphasis processes and inputs as important and outcomes come out of that.

Poker (and by extension investing or enterprise that has a decent mix of chance/random/luck as well as skill, and further it’s hard to know what exact mix causes an outcome) is suited to input and process. 

Sure you can measure your win/loss but it only improves via the process.

VC investing has a decent dose of luck and long horizons, say 10 years is common, which makes it suitable to the process method and Marc mentions this and his emphasis on process.

Endeavours which have very low random chance elements may be more suitable to OKR management - and say the lean type manufacturing processes (although lean itself has a lot of focus on process, it also has a big part on measurement).

As a final code... On let’s build... he would build in the areas of healthcare, education and housing.

Interview here: https://www.theobservereffect.org/marc.html

On Let’s Build:  https://a16z.com/2020/04/18/its-time-to-build/

Previously on productivity: https://pmarchive.com/guide_to_personal_productivity.html

Paul Graham on being marginal, inappropriate and outsider: http://www.paulgraham.com/marginal.html

Annie Duke on poker / process (also see Michael Maboussin). https://www.annieduke.com/

http://michaelmauboussin.com/index.html

Mission/Impact in private markets may have lower financial returns

-Paper suggests social/environmental impact VC/PE private market returns are lower than mainstream

-Results are different to public equity market ESG strategies.

There’s an ongoing debate in “impact investment” between those who argue impact or deep impact where you are gaining measured social and environmental return will typically not give market rate risk-adjusted financial returns (this tends to be in private equity or venture capital type investments).

Others argue that market rate risk adjusted financial returns are possible alongside measured social / environmental returns. (Let’s avoid the debate about ex-ante risk measurement for now).

Investors do differentiate between concessionary capital where below market rate returns or (partial) default is expected and commercial rate capital but argue over whether deep impact always has to be concessionary.

This differs from “Integrated ESG (Environment Social Governance)” techniques in public equity markets where in general the mass of studies (although not all) seem to show that integrated ESG - where material - leads to (or can lead to) better returns or at least not worse than the market average. (Note this differs from exclusionary strategies, which are now known as SRI - socially responsible investing - or ethical exclusions).

Measurement in private markets is harder, but this recent NBER paper suggests that private equity and VC which have explicit social  or impact objectives do return less than mainstream PE/VC funds. This would be evidence for those who argue that impact will return less in private markets. Debate goes on.

Barber, Brad M. and Morse, Adair and Yasuda, Ayako, Impact Investing (December 12, 2019). Available at SSRN: https://ssrn.com/abstract=2705556 or http://dx.doi.org/10.2139/ssrn.2705556

“We document that investors derive nonpecuniary utility from investing in dual-objective VC funds, thus sacrificing returns. Impact funds earn 4.7 percentage points (ppts) lower IRRs ex post than traditional VC funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5-3.7 ppts lower IRRs ex ante for impact funds. The positive WTP result is robust to fund access rationing and investor heterogeneity in fund expected returns. Development organizations, foundations, financial institutions, public pensions, Europeans, and UNPRI signatories have high WTP. Investors with mission objectives and/or facing political pressure exhibit high WTP; those subject to legal restrictions (e.g., ERISA) exhibit low WTP.”

Blog on some ESG studies here.