Ben Horowitz & Steve Stoute on the Nexus of Tech & Culture | Fortune

Steve Stoute and next to him ben horowitz it's gonna be a really fun session ben horowitz is was a software executive at Netscape and that Opsware and is the co-founder with Marc Andreessen of andreessen horowitz one of the hottest venture capital firms in Silicon Valley next to him is Steve stout who is the founder of translation which is an advertising and marketing agency he's a former record label executive he headed by the way I like the if I read it correctly you were the head of urban music at Sony Music is that correct yes and and I find that it's a helpful term because I always write I don't I don't understand we can get into what the differences are among these descriptions he also is the author of tanning of America and I'm gonna read the whole title because it's instructive for us this morning how hip-hop created a culture that rewrote the rules of the new economy so welcome to both of you thank you then you're all gonna see in a few minutes that Ben is the less loquacious of the two fair statement for starters well it depends the situation on this the subject matter Ben would you sort of guide us through this notion that you two both have of the relationship between technology and culture sure so and we're talking about really computer science technology and the thing about computer science technology that a lot of the people aren't fully aware of is it's been only very recently that it's produced broad-based consumer products so if you go back kind of to the origins the first there was only one customer for the original computer that was a US government and then over time as the products evolved they became you know they went to consumers first as opposed to the government first and business first and that's really changed how technology gets adopted today which is you know one of the reasons why like if you watch the old James Bond movies he's got all these weird tech like the shoe phone and so forth and then if you watch 24 he's using an iPhone and that's because it used to be technology went to the government first now technology goes to consumers first and that's changed the way it gets adopted and made adoption much less predictable and much more tied into the culture and cultural adoption and so you know as we've been looking at this and we mark and I first ran into it at Netscape when Netscape was actually one of the first companies that had a product that was broadly adopted by consumers and how that adoption went we've been studying it carefully and then when I met Steve and Steve came from another point of view where he was there when a band that you know nobody in kind of broad stream culture know about called Run DMC completely turned around the adidas brand you know in a song and so you know he developed a kind of mastery of how culture adoption works at the same time we're building a theory of how technology adoption works and so that's how the company share with everyone you have a you have unique cultural interests you've been a hip-hop fan for a very long time we didn't just explain how you got interested and I'd like to hear from you how and why hip-hop is important to you well so it was what I listen to as a kid so I grew up you know I went to college in New York during the golden era of hip-hop 1984 through 1988 when all the kind of bands broke but it you know it was like being around rock and roll when rock and roll came out like it was a big deal and so that's how I got interested in it but the thing about hip-hop that is different than rock and roll are a lot of the popular music before it is it's super aspirational and very kind of entrepreneurial in nature so the things that the artists talked about are things about like you know how do you make it how do you compete how do you succeed in this world and so in in writing about entrepreneurship and being part of entrepreneurship it turned out to be at least for me like super inspirational Steve you two have discussed the fact that entrepreneurs and celebrities artists have a lot in common have more in common than people would think well to Ben's point early on in hip-hop you were you had to be resourceful the industry didn't believe in it there was no investment in the artform so guys were pressing records up putting it out at selling it out of their own trunks doing everything they do to get on go to radio stations to promote themselves so they were actually building their business building their persona as entrepreneurs and what they did differently then the rock artist was Michael Jackson Oh Madonna would they would never sell the jacket that they would wear that mean that they made popular why not it was bad form they thought it was bad form I thought it would be like it fell on that it fell under the moniker of selling out but hip-hop artists from day one they would sell the pants to close the Hat sure socks snake is the car to rims size the 10 it didn't make a difference they would sell it all and it just became part of what they were doing that resourcefulness just went that far in and the public at large bought into it and I want you to keep running with that because that's essentially correct me if I'm wrong that is your that is your business today with your with your agency you work with artists and with other brands right well I work with artists that work with brands when give us a give us an example that you're excited about there's so many things that we've done that's made tremendous impact whether you were talking about sports stars or athletes but one of our big clients that we work with on the music side is Budweiser and we created a festival for them last year called made in America which is actually a trademark that they own and we brought 90,000 people out to Philadelphia and we had Ron Howard shoot the documentary so it went from you know an idea to a concert festival that had you know Pearl Jam and jay-z headline it and and Mike snow and hives and this whole 27 bands and now it's a film coming out in the fall and I think that was a perfect integration of using musicians big brand to create content that's just one of the executions that we've done you've been a Budweiser I think that makes perfect sense to me you know big big beverage company have always been big spenders on events like this State Farm is one you clance what are you doing for State Farm well State Farm you don't fall into my head in the same category of Music Festival well well I tell you what happened in the State Farm fell into a very a trap where the industry was changing Geico and progressive did a very good job of convincing consumers that especially young people what do you need insurance for it might as well just get it cheap and easy and they convinced people that insurance didn't matter you needed it because it was legal so State Farm had 18,000 agents and that's their big investment that personal touch and agents started becoming dinosaurs because people would just get insurance online so our job was to make agents valuable again make agents a valuable part of the insurance decision so what we did was we created this we use their jingle like a good neighbor State Farm is there and we used it in scenarios and then the agent showed up and it kind of had a membership had its privileges sort of thing the agent came we could get you whatever you want and then we tied that into very smoothly into assist because that's what they do and then we hired Chris Paul and we created this character with Chris and his twin brother cliff and they run around assisting the world and it's a very successful campaign and State Farm over the last three years have grown more in their new business than they have in the last 70 years as a result of the work that we've done but been you you make the case that entrepreneurs there young entrepreneurs are more in tune with culture then I don't know what then entrepreneurs were a generation ago what what do you mean by that I think it's out of a necessity is it relevant to you as an investor so if you do and it's easy to see right look at the old pictures of Bill Gates and then look at the new pictures of Jack Dorsey ones in the culture one was kind of outside the culture and that's because entrepreneurs today because their mainstream consumer products and because they're following consumer adoption curves have to be a lot more in tune with what's going on culturally and the rate of product adoption ends up being as important as anything and we saw this at Netscape if you remember in 1993 people thought the internet was nonsense or was a toy like it was not going to be the information superhighway the information superhighway was a proprietary product that was going to come from Microsoft or Oracle and the internet couldn't possibly make it because tcp/ip was fundamentally insecure and it did not have the feature set to be adopted by the kind of for broad business use well it turned out that the technology features were kind of X in the equation and and the culture was x squared and when people started adopting the internet it did not matter that you know the Microsoft Network had ten times the features that teeth that the internet had because the internet you know tcp/ip was software we were going to evolve it we put SSL in like we were going to make it secure and making tcp/ip secure was much easier than getting somebody to adopt MSN and that's why the Internet one and so in a lot of these things the rate of cultural adoption ends up being much more interesting than say the technological feature set you can take the executive out in Netscape but the the old Netscape executive will still bash Microsoft when given the Opera at was pretty funny so as technologies become much more consumer friendly and consumer focused that's where culture plays a very important role I remember early on when I first started the company it was just back in o4 I would ask companies that meet why is the name of your product to excel for for 3q like how was somebody supposed to remember that why would they walk in I mean and we would actually walk in the store and try to say can I get the Excel the new thing you know the Excel with the screen and consumer adaption and and needing culture allowed brands to like give product names give products personalities and it's we've seen this in time early on in the internet you know everybody was developing the tools that we needed the basic tools that were needed and everyone made a lot of money doing that but now you have two or three companies doing the exact same thing so now it's about marketing culture in order to cause better adaptions Steve your you're close to a Shawn Carter you have been for a long time jay-z talk about talk a little bit about how he uses technology and how you work with him to use technology well the Samsung thing is a great example the Samsung exercises that just took place where they got the right to release the content of his album four days before it came out in brick-and-mortar and on iTunes and as a result of it 20 million people went to go download the album on July 4th of course that causes the internet to crash and all the things that took place but as a result between the album itself and then the the brick and mortar he sold 1.7 million albums in 10 days and that's phenomenal so putting again tech and culture together caused an unusual circumstance people were buying the phone just to get if you weren't shopping for a phone during that period of time you would actually buy a phone and get the album first so again culture causing consumer adaption and and and been you know I made a joke about Microsoft but you made a really interesting point which is to paraphrase what you said that the the the the great entrepreneur of that era was Bill Gates and Bill Gates was a nerd that's not a put-down that's what he was and Jack Dorsey is cool he dresses cool he looks cool and you're you're making the King but he's also nervous I he didn't alter a nerd in the culture he's addressed well nerd I understand who you're making the case that that being in tune is is critical has this work for the arch for entrepreneurs who are investing into who are doing technology that is in the culture can you point to an investment this is informed for andreessen horowitz well actually there's a have an interesting example which you interviewed Mike Martz a great Mike Moritz the couple days ago great sir Michael sir Michael and one of the things that sir Michael said at the end was kind of Bitcoin it's got some flaws that we've studied which will prevent it from ever being a mainstream payments mechanism and I couldn't tell if he was like had faking everybody so he could go buy a lot of Bitcoin or whether was actually serious you're shocking you would suggest he would do that but he's a he's the Grandmaster of all that stuff but the flaw in what he said which I suspect he knew is okay saying that bitcoin is flawed now and which would prevent it from being broadly adopted is probably not the right thing to look at because the right thing is will the current bitcoin feature set what is the cultural rate of adoption of that and if it's fast enough then you know bitcoin a software like I mean it's not actually stone tablets that came down from Satoshi it's software and so if it does have a fast enough cultural adoption rate it's going to metamorphosize into something that's going to take the entire market and that's really what you ought to be handicapping as opposed to the current feature set and that's that's one of the ways we think about investment decisions is is through that lens and have refreshed my memory has andreessen horowitz done a done an investment of but we've been doing some some small things but obviously where you want to polish on Bitcoin anything you want to and that you're bullish on Bitcoin yeah but currency cryptocurrency in general but Bitcoin specifically you've made some investments but we don't we don't know what they are is that is that what you're saying right mm-hmm Steve real quickly would you um real quickly tell everybody the thesis of the tanning of America and I want to ask you the you know this the state of play in your opinion of race relations in America with what's been going on in the business world the culture I know that's a lot yeah no it's not that much good sure I could do it the tanning of America is a very simple philosophy that just says that there's a generation that grew the tan generation their mental complexion is tan we're no longer do they look at each other and telegraph what one wants because of their race or creed of religion we look at each other on a shared values basis now not based off a color line so you can't look at an african-american guy who's 22 years old and like in 1980 you could target how you go to market to that kid because he fit a certain archetype that archetype in those boxes have been broken down and that's the tan generation and what I discuss in the book is the philosophy on how that came to be and how it came to where it is today and how we have to shift how we market how we speak how the census counts data as a result of this new day I walk down the street you can walk around LA you have no idea what anybody is you don't know if they're Spanish African American light-skinned a tan white man you can't tell what's going on and that's that's that's a beautiful thing based off of what's taking place over the last thirty years in America but the way you describe it is far more optimistic than the way for example President Obama described it just a week ago yeah he said we are the that's that these that this is not broken down at all it's broken down but it's not gone I guess would have been the president's point III see a very bright future for young people who grew up in a day and age where there is an african-american president they're seeing African American figures on television Hispanic figures on television people they're looking at this I mean there's a whole generation that doesn't even know what we're talking about and and and I'm looking at that generation as our future inventors and and philosophers and writers who are going to create the culture around that you know so you know as much respect if I had for the president I think that he was facing a tough thing with the case in Florida I think there's an issue in Florida that needs to be dealt with not race relations in America right now questions raise your hand and we'll get a mic to you please yes right there fellow fellow advertising industry colleague hey guys please please please identification Steven Wolfe Pineda from Stark our media best group Steven been you know it's versions to you both on stage you know when you look at America about 70% of the population is Hispanic 13% African American and five plus percent Asian so you actually have about a third of the country being multicultural and we know that multicultural consumers actually over indexed when it comes to technology adoption all that kind of what do you think is actually preventing a lot of the tech companies to really reach out to these consumers in a more aggressive way given that they are the future growth for a lot of these industries yes actually you said something that's interesting which is kind of true and false you said everybody knows that minorities over-index on these things I think a lot of people in tech don't know that I think a lot of people in tech think there's a digital divide and the did there was kind of pre mobile technology but there's not anymore and now you do have kind of what's referred to in the vernacular is underrepresented minorities or however you want to call it or over-indexing on these things and that's actually creating some very interesting opportunities one investment we made in a company called rap genius rap genius rap genius yes which kind of recognized that where they said look the mission of rap genius is to annotate the world so basically build the knowledge set about the knowledge about everything so everything from the news to literature to the law but by starting with rap music you one got to an audience that over indexes on social media and then also people who are on the leading edge of culture so people who listen to hip-hop turn out to be extremely interested in culture and so when you get into other cultural aspects like literature and poetry and news the editor is the editor community that they built is all over it and if you look at the numbers that they've been producing they've got exponential growth in every category catalysed out of hip-hop which is also the thing that kind of catalyzed music into endorsements and other sorts of things so we kind of were able to recognize that based on a lot of Steve's work in tanning in America and and I think you're gonna see it changing I think like if you young people have a very different view of this than old people well and I wanted to over-index it's so funny about I hear it all the time from marketers and you know they don't see a problem with over-indexing that's the issue minorities whether it be Hispanics African American or Asians they buy products are marketed to them so and everybody's fine with that so they over-index know if if market is technology companies and CPG companies for that matter realize that over-indexing isn't actually a problem that you need it's an opportunity to actually not have them over-index by marketing appropriately and growing within that market that's one thing but everybody's fine with over-indexing because I'm not even marketing products to them and they're buying it anyway that's great that's actually a problem and that's the problem I'm trying to fix other questions I Steve then my name is Steven nazeebo I'm with the government of Catalonia be following both your companies very closely with rap genius and translation just recently the rapper Nas had a fellowship named after him at Harvard and now we have the Nasir Jones fellowship at Harvard there's a lot going on with the positive externalities of hip-hop and globally - there's a lot going on with the negative externalities of hip-hop how are your companies looking at the international markets and seeing what the influence of hip-hop is doing their children in China who are learning English through jay-z videos their children in Japan who are learning how to dress through Run DMC videos from 1982 how are your companies looking at international markets and influencing culture there thanks Steven and by the way I'm not familiar I don't understand the negative externality season I don't know I don't know I don't understand them either but that's fine everybody have their point of view here the look people in America uh-uh young people in America grew up learning how to dress from watching music videos not necessarily rap videos with music videos anytime you have an art form that permeates culture the way it did or the way rock-and-roll did it's gonna affect vernacular the way people dress how they mingle how they talk honey how they relate to one another so that's bound to happen regardless of rap or whatever even if it's a local music form that that penetrates culture I think it's very important that what what rap culture has done to bring together individuals from around the world they see they see each other through that that same lens and as a commonality that has taken place as a result of that I don't see the downside and I think it's done a very good job of uplifting people and the aspirational aspects of it you know you look at a guy like Jay Z he's very easy to talk profoundly about his humble beginnings he's never hidden his humble beginnings and you get a chance to track him throughout his whole career you know that is the American dream that we've realized over the last 10 years that this guy's gone from you know what he was to what he is today and it also address his business question which is does Jay Z is he focused on international markets or the international markets coming to you know I think that you can't you have to be it's it's one market now music is global and cultures global so yeah he's focused on the international market because he's focused on you know growing his business you can't avoid that you just you simply can't avoid being international if you are going to be in a in a business that's global yeah and some of it just for those you're not familiar with Steve's work one of the kind of breakthroughs in his thinking is like if you look at things along racial lines from a marketing perspective you're going to get yourself into a lot of trouble that the the actual right distinction is like people who listen to hip-hop is a much more interesting group than people who are african-american because the african-american person who doesn't listen to hip-hop has probably less in common in terms of driving the culture then maybe the Hispanic person or the or the Caucasian person who does and so looking at it through the lens of the culture and who's in the culture and who's driving the culture ends up being very important from a business context and and and also from a kind of the global culture question in the back there from Omnicom Group quick question Samsung interesting relationship with jay-z what do you think about this growing trend of celebrities as CMOS chief innovation officers heading up organizations now heading up these brand companies I think some of them are real and some of them are fake right so I think there's certain artists that are getting a check and as a result of the check they don't want to be called spokesperson because that's just passed say at this point so they give them some brand title to make them seem like they're an executive and that seems cool that's fine however there are certain relationships that make absolute sense because you see shared values you see what the brand has and what the artist has and the commonality and how those things can come together to create you know a value that's bigger than both of them individually so in the case of Samsung and jay-z you've seen that Samsung wasn't about endorsing jay-z there was endorsing his content running through their device that was more important to them than him holding the phone and I think as you start seeing more smart deals laid out whether it be sports stars or artists whoever it is celebrities that have a fan base that they can bring to that brand you're gonna start seeing a lot more of those deals you're going to start seeing bad ones as well I don't think all of them are good I think there's a couple ones that are great and then when we all look back as marketers or brand owners and we applaud them because they make perfect sense Steve so Ben and Steve were at the jay-z concert in Chicago on Monday night is that correct how do you know that because Ben told me oh he's an investigative journalist fun I thought it was about big data and Steve would you um would you share with everybody your your thesis on why jay-z and Justin Timberlake collaborate with each other and and the reason I want you to share this quick story is that it's a really interesting there's an interesting comparison with collaboration in the technology industry the frenemies you know well so hip hop culture just the culture and I keep stressing the culture because some of you guys in here may not like the music at all but if you focus on the culture I think we could all rally around the culture audience what makes you think that I have no idea I just a hunch the culture cause always was about collaboration so you would never see so Justin and jay-z are two big artists two big global superstars you would never see the Rolling Stones take Coldplay out on a stadium run you would never see you two and the Rolling Stones tour together but yet this generation you'll see Justin Timberlake and jay-z and the reason for that is it's just that the whole culture has been collaborative there's not been any funny frenemies that has taken place and as a result of that you have the value of what these guys both bring bring to the table and you have their fans now cross pollinating that doesn't happen in other industries as much as I've seen it with hip-hop with the hip-hop generation in the way they see in the world so I was asking Ben why doesn't that happen as much with technology in it I never got a clear answer on it but I think this is people Brian Chesky and John Donahoe it's like jay-z and Justin Timberlake I think that and maybe maybe I'm stretching but I think that young technology companies partner earlier and often than they did a generation ago you know I think that's right and I was just joking but but I think that that's right but I'm Brian Chesky is running like the biggest new market place and John Donne I was running the biggest existing and here they are on stage and they get together all the time and they trade notes and I think a lot of that you know it it comes from the change in the culture and just like how you think about the world and how you think about business and how do you think about the size of the opportunity and I think in music right the markets have gotten much bigger but much different and in technology that's happened as well much more people are kind of listening to music and into the culture now much more people are adopting technology in the old ways of a very kind of limited market that you were targeting where you've got to have your pieces just it's different um Ben Horne which Steve stuff thanks for showing us your friendship and your your partnership and collaboration thanks for being here thank you okay thank you

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Keywords: Fortune Magazine, Wall Street, Business News, News, Finance, Andreessen Horowitz, Steve Stoute, Translation Advertising, Ben Horowitz, Fortune.com, Aspen (City/Town/Village), Colorado (US State), Technology (Professional Field), Advertising (Industry), pop culture, Silicon Valley (Region), Innovation, Fortune (Magazine)

Id: HaxOWnpi6yA

Length: 28min 22sec (1702 seconds)

Published: Wed Jul 24 2013