What potential national disaster—one that threatens to destroy the United States—keeps you awake at night? For some it might be the climate crisis, as record heat and storms show us that the clock is approaching midnight on saving the Earth. Others are distressed by the precarious state of our democracy. Still other citizens are haunted by issues of crime, immigration, race relations, or income inequality.
But if you are billionaire venture capitalists Marc Andreessen and Ben Horowitz, apocalypse looms in another form: a proposed tax on unrealized capital gains that affects households worth more than $100 million.
I’ll explain in a second why the cofounders of Silicon Valley’s preeminent VC firm insist that their opposition to this idea isn't totally self-interested, and why their analysis on how it would destroy the country is alarmist twaddle. But it’s significant that in the tone-deaf 90-minute podcast they released this week, they cite this part of Joe Biden’s budget proposal as the “final straw” that led them to support Donald Trump for president. Far from a clinical analysis of the issues that separate the two leading candidates for America’s top job, their take on Biden’s policies actually provides a useful window to explain why certain wealthy Silicon Valley luminaries previously known as Democrats are suddenly leaning Trump. (That list also includes Chamath Palihapitiya, a 2020 Biden donor who recently cohosted a huge fundraiser for the former president.)
According to Andreessen and Horowitz, the point of their podcast is to explain why they changed sides, especially when they know it means alienating some friends, employees, and even Horowitz’s liberal mom. The longtime partners seem to strive for relatable candor as they detail their disenchantment with Biden. They seem totally unaware that they come off as a Gen-X version of the two soulless plutocrats in the movie Trading Places.
Andreessen and Horowitz say that in making their choice, they are not looking closely at human rights, foreign policy, or other typical policy stuff. Since they are experts in startups—and that’s their business—they insist that the agenda of what’s called “little tech” will determine who they support. This term has become a sudden buzzword among the Trump-ites in the Valley. It refers to innovative startups hoping to become giant companies themselves but that might be thwarted by the powerful firms dominating the field, or even worse, by regulation. J.D. Vance, Trump’s VP pick and a former VC himself, has championed this cause. Andreessen and Horowitz think that the government itself is the biggest threat to little tech.
There’s a problem with this argument: No one has seemed to inform founders. This year, 50,000 companies are applying to the startup incubator Y Combinator to fill around 500 slots. And while the collapse of Silicon Valley Bank made 2023 a down year for investment, VCs still managed to invest $170 billion in over 15,000 deals. Andreessen Horowitz raised a $7.2 billion fund just this April. Where’s the crisis?
Andreessen and Horowitz do enumerate several points of disagreement with Biden that affected their decision to go Trump. First, they are outraged that the administration is actively policing cryptocurrency and the blockchain, an area where Andreessen-Horowitz has huge investments. Horowitz, with typical hyperbole, calls the regulation lawless and nefarious. Strike two against Biden is the provisions in his executive order that attempt to rein in negative effects of huge artificial intelligence foundation models. But the “final straw,” they say, is a budget proposal that would tax unrealized capital gains at 25 percent, affecting only citizens worth over $100 million. Biden's goal is to prevent some (non)-taxpayers from working it so their investments are never realized, allowing them to endlessly monetize their earnings by borrowing against them.
Andreessen talks about the proposal as if it were Putin himself invading Atherton, California, the elite zip code where he resided until recently. If this tax is imposed, he says, investors will exit the market and innovations won’t be funded. “Number one, you kill startups and venture capital. So congratulations, you kill the technology industry, essentially,” he says. “Number two, you kill the California tax base—California is done!”
But the carnage doesn’t stop there, says Andreessen. Once the government gets a taste of this new tax on the rich, it will want more, more, more, until eventually this endangered class of wealthy investors will be sucked dry. Then the government will go after the wealth of people who aren’t super rich but merely very rich. Sooner or later, we’ll all be paying wealth taxes! “Presto, chango, we’re Argentina!” says Horowitz, with Andreessen quickly seconding this doom scenario.
Before we cue up the soundtrack to Evita, let’s back up a minute. There’s no evidence that a tax on unrealized gains would end venture capital. If Andreessen and Horowitz packed it in for tax purposes, others would jump at the chance to play the lucrative startup lottery—even if, god forbid, they had to pay some taxes pre-IPO on spectacular gains.
But there’s also little reason to think this tax will happen at all. The Biden proposal is just that—a proposal. Changing the tax code requires Congressional action. At the very least Congress would address some of the reasonable objections that Andreessen raises, like the possibility that an investor gain might be measured in a temporary peak of a company’s valuation. But it’s much more likely that Congress will reject this, even if the public wants to see the very wealthy pay their due. Consider the totally indefensible carried interest loophole, which allows fat-cat hedge fund and private equity executives to escape taxes. Despite near-universal agreement that this is a total scam—even Bill Ackman called it “a stain on the tax code”—and Biden’s vow to eliminate it, it’s still with us. The idea that a brand-new wealth tax desperately opposed by the nation’s biggest political donors will get through a divided Congress is a hallucination that even ChatGPT wouldn’t propose.
Andreessen and Horowitz are smart enough to know this, so their objections come off as both paranoid and self-interested. But I think there’s something more happening, an element that’s often cited to explain why some Silicon Valley people have turned to Trump: They resent how the media, some of the “woke” population, and left-leaning politicians don’t appreciate them, and even vilify them. In Trumpland, their wealth and the wisdom supposedly associated with it is respected.
To his credit, Andreessen expresses this grievance out loud. He fondly looks back to the days when Democrats catered to his cohort. “They were pro-tech, they were pro-startup,” he says. “You could make a lot of money, and then you give the money away in philanthropy, and you get enormous credit for that. And it absolves you of, whatever.” He was on that path himself, he says, until critics turned on billionaires who were giving away their money. His eyes opened when he saw what happened after Mark Zuckerberg announced his intent to give away almost all his money to his foundation; people thought he was doing it for himself, to boost his company’s reputation. What’s the point of giving all that money away, Andreessen seems to be saying, if you aren’t celebrated for it? (Um, to do good? To pay society back for all that money you made and paid minimal taxes on?)
Andreessen feels that the Biden administration in particular doesn’t give him and his cohort their due. He concedes that he has personally argued for his business positions to many of Biden’s appointees, including cabinet members and Biden’s chief of staff, Jeff Zients. But he’s livid that Securities and Exchange Commission head Gary Gensler won’t accept his request to meet with him to hear his demands that the commission rethink its crypto policy. Worst of all, Biden himself hasn’t honored their request for a personal meeting with him and Horowitz.
Again, kudos for expressing such entitlement out loud. Few of us can even get a meeting with a lowly federal bureaucrat to lobby for our personal issues. This guy gets access to multiple top officials and is embittered because he doesn’t get into the Oval Office! You can’t help but feel that Andreessen, who boasts of relationships with previous presidents, is outraged at this perceived disrespect.
That leads to the biggest tell of this podcast. It slowly unfolds that these two pugilistic masters of the universe adore and identify with Trump’s personality. Andreessen aggressively blocks critics on social media; Horowitz is a student of warfare and boxing. Toward the end of the podcast, they turn into fawning fanboys when discussing Trump’s defiant raised fist after last week’s assassination attempt. They gush about this as a sign of superhero strength, and trade confessions that neither of them in that situation would match the fortitude Trump displayed. It also turns out that Horowitz’s family has bonded personally with the clan of Trump daughter Ivanka and her spouse Jared Kushner. Their kids play together, he says. Another black mark on Biden: His grandchildren don’t do playdates with tech mogul offspring! Unlike Biden, the VCs boast, Trump recently had dinner with them at his golf club in New Jersey. For three hours!
In defending their decision to back Trump, Andreessen and Horowitz treat their defection from blue to red as simply a logical business matter based on patriotic concerns, and beg their friends and relatives to see their decision in that light. They also know this is not a typical election year, and Trump is not a typical candidate. Nonetheless, they do not spend a second acknowledging the unprecedented items in the former president’s résumé—that juries in separate trials have recently judged him to be a felon and liable for sexual abuse, that he is the only president in history to be impeached twice, and that he tried to overturn an election and stop the peaceful transfer of power. Ultimately, these powerful VCs seem driven by something profound they share with struggling heartland Trump supporters: a resentment of the “woke” forces that deny them respect.
If you want to be cynical about it, business does matter in their choice. If elected, Trump will not only instantly deep-six Biden’s proposed tax on the rich, but he also promises to cut their taxes. In the view of these two tech-giant former Democrats, Trump will save the country from the fate of Argentina. The climate? Maybe not so saved.
Time Travel
Two years ago, I interviewed venture capitalist and former AOL chief Steve Case on his new book about extending the tech boom to the heartland. One line of questioning that he didn’t quite welcome involved former colleague and sort-of mentee J.D. Vance, who now is Donald Trump’s pick for vice president. In 2022, Vance had already ditched his message of unity and was embracing Trumpism in hopes of an endorsement—successfully. I pressed Case for his views on the flip-flop.
Levy: The guy you picked to run the [Rise of the Rest venture capital] fund was J. D. Vance. But your book doesn’t have a single mention of him. Have you broken with Vance since he went MAGA?
Case: He was with us for about a year, but then he moved to Ohio. I haven’t talked to him since he announced he's running for office, and I haven't supported that campaign. I'm surprised by some of the things he's said.
Levy: You hired him in part because of his vibe of bringing the country together. But he seems to have used that to promote himself before adopting a totally different, divisive approach. Do you feel snookered?
Case: That word seems a little strong. Most of our conversations were about the fund and the companies we were backing. Occasionally we would talk about politics, and the things he talked about seem inconsistent with what he's saying now. In terms of what we asked him to do, he was helpful. These bus tours we did weren’t a red-versus-blue kind of thing. While our efforts are political in terms of which economies we’re rescuing, and in working on government initiatives involving innovation, I've always tried to stay out of politics.
Ask Me One Thing
Mattathias asks, “How has mobile/social-media app penetration changed the way that breaking news events are processed in real time?”
Thanks for the question, Mattathias. We had an unwelcome opportunity to answer that question recently in the shocking near-assassination of a presidential candidate. If you’d asked me this a decade ago, I would have said that mobile apps and social media upleveled the information flow. In addition to the tried-and-true reporting efforts of traditional media, apps like Twitter provided a real-time citizen-journalist component that allowed us to get a quicker picture. A great strategy for big events was to quickly compile a list of the most plugged-in reporters and follow them on the platforms where they posted.
Unfortunately, the changes in the past few years have somewhat eroded the quality of instant news. While the full-time cable news networks are still the best place to turn to, most seem to have doubled down on commentary and don’t seem to provide as deep a roster of active journalists. Also, many reporters have given up on Twitter, now called X. Meanwhile, forces of misinformation and disinformation have become savvier at finding their way into feeds—propagandizing comes in real time, quicker than actual news.
Ironically, the lasting images of the episode were captured by still photographers working for mainstream media. Pictures of Donald Trump, with raised fist and bloody ear, were so vivid that they provided no room for potential phony AI-generated shots to worm their way into the conversation. And they were best appreciated the next day, when embodied in print.
You can submit questions to [email protected]. Write ASK LEVY in the subject line.
End Times Chronicle
On East Coast and West, and in Europe, too, temperatures have reached record highs this summer. At least until next year.
Last but Not Least
J.D. Vance is a former venture capitalist, but he might need a refresher course in security: WIRED discovered that his Venmo connections are public—and very revealing.
OpenAI releases a low-cost version of its latest model. GPT-4o mini arrives just before Meta’s rumored release of a powerful new version of its own open-source LLM.
A hacker group is leaking what it says are over a million Disney Slack messages. Kind of a Mickey Mouse move.
Prime Day is over, but some deals are still with us. I’m good until Black Friday.
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