Thursday, May 16, 2013

Andreessen on the "Tech Depression"

 

Tech Pioneer Marc Andreessen was on CNBC earlier this week.

Andreesen is co-founder of Andreessen Horowitz, a private equity firm in Silicon Valley, and is widely regarded as one of the leaders in the technology space.

I thought his comments were very interesting.  He notes that in "old days" private companies were started with the goal of eventually going public.  However, the collective impact of burdensome regulation (e.g., Sarbanes-Oxley; Reg FD) has made being a public company more trouble than its worth.

Andreessen notes that in 1997 there were close to 9,000 public companies, but today is just over 4,000.  This in his opinion is not healthy for our economy:

What's with this war on public markets? Basically we seem to have collectively decided as a society we want to strip risk out of the public markets.  We had the dot com crash, financial crisis.  We decided we don't like risk.  There have been a series of regulatory reforms, corporate governance movements.  The result has been a huge disincentive for public companies to go public. The problem is if new companies don't go public you get what we're seeing, the number of public companies falling.  The result from that is we're stripping growth out of the public market.

This strong aversion to risk, Andreessen believes, is that reason that the stock market has struggled over the past decade or so to make any real gains:

The result from that is we're stripping growth out of the public market... I believe that the S&P 500 stock performance is flat, adjusted for inflation, right?  Since 1997 to 2012.

Interesting stuff.