Bill Gross: A Devotion to New Ideas [Entire Talk]

We are really, really happy to have a Cal Tech grad and have a Los Angeles resident come all the way up here to Northern California to share his wisdom. So give a big welcome to Bill Gross. Well, thank you very much for inviting me here. It's an honor to be here. I'd like to talk to you both about entrepreneurship and about my dreams for powering the planet sustainably. I've been starting businesses all my life, ever since I was 12 years old. I'd like to share some of the painful lessons I've learned over those years with you and at the same time, hopefully inspire more of you to take an entrepreneurial path because of how ridiculously rewarding that can be. Well, first, let me go back to 1973. It was the energy crisis. I was 15 years old. I grew up in San Fernando Valley. And while this energy crisis was going on, I was taking physics and trigonometry in high school. So I, I was learning about heat engines and parabolas, and I got very excited about conic sections. And fortunately, my high school had a metal shop and I took metal shop and was trying to figure out how can we make devices that could possibly help the planet in this energy crisis at that time. So I started making little engines and parabolic concentrators. And my very first sketch, this was the very first sketch I found of a compact Stirling engine that I wanted to make. And this was the actual engine running after I took a whole term of that metal shop class and I took that engine and I took a little parabolic concentrator that I made to be able to make it run off the sun. And I started making plans and kits for them. And I actually started my first business then, little company called Solar Devices. And I took out ads in the back of Popular Science magazine and Scientific American magazine, little $29 classified ads. But I sold these $4 plans and I sold 5,000 of them, and I sold kits, and it actually helped me pay my way through college. It was a really significant experience for me. I learned a lot about mail order. I learned about a lot about testing. And I went to go to the library then and read every single book I could on direct mail and direct marketing to try and learn how to figure out what was effective in convincing people to buy these products or not. And that turned out to be very useful for me later in my career. And I'll talk more about that. But one of the things I learned back then was to test the different ads I ran in the magazine. I would put a Different address, a different return address in each ad. So it would say sterling engine kits A Gross. And then try these new parabolas B Gross. And that way I could check from which magazine it came from and actually compare from the cost of the ad to how much early version of click throughs to try and figure out which ads were getting more response rate. Because I was really, really concerned about minimizing my costs and maximize my sales. That was a very, very valuable experience for me. So then I got into Caltech and I continued the business when I was there. And I was selling these kits and plans from the student houses there and from the labs that I was able to use at Caltech to improve my designs. But by the time I graduated in 1981, the price of oil had completely collapsed. There had been all kinds of cartels formed to drive down the price and stop all interest in renewable energy. All the research stopped, all the interest stop. And fortunately when I graduated there was no interest in energy. But it was the year the IBM PC came out. So I ran down to my computer land in Pasadena and bought an IBM PC and taught myself to program. And I had a 15 year detour in software products. I really really loved what was possible with that and try and abstract some lessons from some of the things I learned on that as well. So I started making a whole bunch of different software products. The very first one was the CPA plus product. It was a product that worked with Lotus 123 which had just come out at the time. And then after that company I started got acquired by Lotus. I made this product, Lotus HAL, which was a natural language interface to 123. I really wanted to enhance the power of 123, reach more users. Then I made a search product called Lotus Magellan. And then in 1991 my son started kindergarten. He was 5 years old at that time. And I got really passionate about making sure he fell in love with learning. I was worried about that. I had a wonderful fourth grade teacher that made me become very passionate about learning and really was a turning point for me. I was worried that he might not have that teacher. So I wanted to try and make software that could do that. I'd seen this product, this amazing product in 1991. We might even be at the conference together. I think it was Stuart Alsob's agenda conference. Someone demonstrated a product called Multimedia Beethoven. It was a really, really amazing product at the time. It was a CD ROM product with a HyperCard stack on a Mac. It was really, really Incredible at how beautifully it was able to express the power of Beethoven's ninth Symphony. And I said, if this product could move me that much, relatively jaded individual, if this multimedia product could have that much impact, you can probably do that for children with educational software. I like to do that for my son and his generation and try and make an impact there. So I quit Lotus in 1991, originally, actually after Lotus had acquired our company, they had signed me to a one year contract. But I ended up staying there for six years. It was a really, really tremendous opportunity to learn at a big software company how to work as well as from the companies I started before that were small. So I started this company called Knowledge Adventure. And our first product, we came out with Dinosaur Adventure, Knowledge Adventure, Space Adventure. We worked with Buzz Aldrin to make a product called Space Adventure. These were all CD Rom products, multimedia products in the early 90s. And the company made an amazing pivot. And there's an important story in the pivot that the company made. We were selling a lot of products, thousands, tens of thousands. We were making a little bit of money. We got a Silicon Valley investor, Moore Davidow, really, really great person on our board. John Fiber joined our company and really, really helped us. And then from Mayfield, Mike Leventhal. So those were our two partners to help us grow the company. But we were really challenged to try and explain to people who the product was for. And one Christmas we really wanted to make our sales numbers. And my brother who was in the company with me as well, said we should do this thing where we go into stores and really try and move the products ourselves. We had 65 people in the company at the time. And each one of us took a laptop and a stack of products and would go to a compusa or an Egghead software or Fry's or whatever in like 100 mile radius of Pasadena where we were based. And we would go in on a Saturday morning and set up, bring in a box of donuts to bribe the salespeople to let us set up at the end of the aisle. And we called it Weekend Warriors. Everybody in the company had a volunteer to take two weekend days. They get a day off during the week to make up for it. This was really to try and make our numbers at Christmas time. And we went in and we demo all day at the end of the aisle, showing parents the product with their kids in the software aisle. And we sold a lot of products. And the great thing about it was we would boost the sales in the stores. We were at by so much that someone at headquarters, like in Texas, at CompUSA, would say, this big thing happening in California, they couldn't figure out what it was because we hadn't told them. But then they would order more for all of their stores. And that really, really boosted our sales. And eventually we got Walmart to carry our product because our numbers were going up so much from CompUSA. But one thing that we learned after doing this for about four weeks, every Monday morning after the weekend warriors, we'd sit down at the company and we have everybody tell stories, war stories about what happened in their stores and funny stories about parents with their children, what people liked. And we really had great sessions where we would learn more about the customer. And that's what's so powerful about companies that can be developed today with the Internet. We had to go out and meet customer firsthand on the pavement and then come back and tell stories about it. But now you can be in contact with all of your customers. It's obviously so incredible today. But let me tell you one of the things we learned. We found one of the people who went out to one of the stores saw that in the aisle, parents were confused about which product to buy for their particular child. They would look at their child, they'd pick up boxes. We'd see them turn the boxes over, they'd read the back. They'd try and figure out. And they were so confused because the products had a wide age range. We were competing against EA and Broderbund and other companies who had products as well as. And there was Dr. Seuss products and others. It was very hard to figure out, is this one going to be age appropriate for my child? And everybody to try and make their product more broad, us included, would put the widest age range we could on the box. In fact, I think one of our products, Knowledge Adventure, said Fun for ages 8 to 108. Kind of trying to say this would be good for everybody. Well, it turned out by saying that it wasn't good for everybody, people couldn't figure out if it would be good enough for their particular child. What the idea we came up with was, what about if we make a product that was just for one year age range? What if we made something called Jumpstart Kindergarten that was just for kindergarten? So just parents who had preschoolers or people in kindergarten or just before kindergarten would know this would give their kids a head start in kindergarten. And we had a big argument at the company about this. We had an argument with the sales team because they thought, I can't convince a store to take a product that's for only one year age range. It's not going to move enough. I can't convince distributors to take it. But we talked about it more and we really felt this was going to be a worthwhile experiment and we should make Jumpstart Preschool and Jumpstart Kindergarten, put them in the stores. We'll take the risk. It'll cost us 250 grand each to make them and let's just find out. And it was a pretty big risk. But we did it. The thing sold probably 20 to 50x our other products just because parents would come in, pick up the box. There was an aspirational aspect to it where people would say, hey, I have a three year old, I want him to do really well in kindergarten, I want her to do really well in preschool. And they would buy up. Even when we eventually came out with Jumpstart first grade, parents with preschoolers were buying that because they wanted their kids to have a. And we eventually made all the way from toddler to sixth grade. We had jump start, toddler preschool, kindergarten, and then one through six. And we sold 20 million copies of that. It was a wild, wild success for it. And we would have never ever discovered it had we not been in the stores seeing the confusion of parents in the aisle. And it was an enormous risk for our company. Maybe not that big of a risk because the expense wasn't that great, but it was a big. We would have probably gotten a pretty big ding had the product not worked out. But if we hadn't heard from the parents so directly what they were looking for and what they were needing to make a decision, we would have never come up with that. Well, I've tried to reuse that lesson as much as I can in other companies going forward. And it's what got me so excited about the Internet a number of years later about how you could have the real time interaction from a web browser. And now without apps, you can have unbelievable real time interaction with customers to find out what they like to iterate and really deliver what they want. So I had this big detour in software and I had been starting all these companies. We sold this company in 1996, but every time we had a company and Knowledge Venture was one example of it, I always had these other ideas for things I wanted to do. Even at Knowledge Venture, right around this time, 1995, Netscape had its IPO. There were 30 million browsers out there. I was getting really excited about doing things for online. I had this idea for a company called City Search. I really wanted to do it. I brought it to my board at at Knowledge Venture and I said, I have this other idea. We could do it in this company. And I said, it's going to be a distraction to try and do this other idea. It's just not on focus with Knowledge Venture. Bill, don't you see how the more and more we focus the company, the better and better have we done? The fewer and fewer things we've done, the better the company has done. And I really sort of painfully learned the lesson that focus is always better unless you pick the wrong focus. Now you have to really think about that. You really have to evaluate. A focus really is always better as long as you pick the right focus. But you really have to evaluate if you're really going down a path that is a focus that matches what customers want. But if you do, I think focus always wins. But I was very unfocused personally, so I couldn't resolve that problem. And that's what led me to start idealab. So idealab was this technology incubator where I could be unfocused, but I could tell all the companies to be very focused. And what I would do is get a separate CEO for each company. And I would have them do as I say, not as I do. I would be able to participate in many, many different ideas and brainstorm new ideas, but each company would have a laser like focus on their 1 target market and not try to do too many things. It was kind of a weird experiment. I didn't know if it would work, but we tried it out and I got a few investors to go alongside some money I put up myself from having sold Knowledge Venture. And we started developing a process, important part of the process that I realized. One other thing I realized back from Knowledge Venture as well, on motivation was that if whenever we start a new division inside Knowledge Venture, it was very hard to come up with the incentive structure to not have that incentives for that particular group conflict with the incentives of the overall company. And I really felt that equity is such a great driver of performance and such a great motivator that I really wanted to have the most equity available for someone. But at Knowledge Venture, once we had grown to 250 people, almost by definition, the maximum number of equity someone could have is 0.4%, just taking the whole 100% and dividing evenly, and you can't do that and you have investors and so on. So there's a magic that happens when you can get people above 1% in a company. People really feel like they have a significant stake when they have that. One of the other ideas of Idealab was by starting these separate independent companies, it was sort of like manufacturing a new 100% equity pool for each project. Each new project that would form. As a company, I have a new 100% to play with, so I can start bringing in people with higher equity stakes, albeit of smaller companies, but of things they have more control and impact over. And that was very motivating to them. So we started Idealab and we came up with this process, and we would start out and look for big problems and challenges that the world would face, try and brainstorm technological solutions to them, and then start prototyping the idea like crazy and then kill a lot of things that don't work. And the particular idea that I had at idealab was to be able to kill things with no negative impact to people. Because as much as you say that you want to encourage risk and take chances and all that, if people see people getting fired or laid off, when they take a risk that doesn't pay off, they won't do it. I mean, it doesn't matter what you say, everybody sees what's going on. So the structure of Idealab was I could hire a bunch of great people in Idealab who are always going to be working on new ideas. And then the ones that don't work out, we just shelve and work on a new new idea. And the ones that pass will form a company and that will get handed off to new people. Sometimes the people who worked on the product might want to go with it, but new people would come to it. We'd have to recruit those new people to come to it. But in that way, it made it very easy for people to see that they can take chances on things and try new, risky things and they're not going to get fired. And that's a really crucial thing if you want to really have some breakthrough new thing. You can't have someone worrying about their job, being on the line about taking a risk to try something bold and new. So that was one of the important structural things we realized when we set up for IdeaLab. So in IdeaLab, we've done 100 companies over the last 15 years. Tom, you said earlier those companies I had on the screen right now are just the ones in the portfolio today. But over 15 years, we've done so many different things, and we've had some wild successes and some wild failures. We learned a Lot more from the wild failures. I can tell you one of the most impactful companies we had was a company called Goto. I told you, our first company was citysearch. Goto was a really great company that we started Pay Per Click. We created Pay per click in 1998. People thought that was a terrible idea. In fact, one particular quote when we first came out with it in the Wall Street Journal, I think interviewed by Don Clark, someone from Yahoo said, that is the most awful company I've ever seen. We would never do that in our search results. And five years later they bought the company. But we really thought it was a good idea and we stuck with it, even despite some people not liking the idea at the very beginning. Turned out to be a very big success for us. Another company that we started way too early, a lot of companies we started way too early, but at the right time, the market grew. In 1999, digital cameras were just starting to really make an impact. They were really, really early. But we really felt there was going to be a day when people were going to have a challenge managing all their photos, managing all their images. We started a company called Picasa and it was way too early, and we really struggled at the beginning, but we stuck with it and stuck with it and built it. And then eventually Google saw it and Google bought it in 2005. And I'm so thrilled. One of the reasons we sold it to Google is they said they would keep it up. They weren't going to buy it to kill it. They were going to buy it to grow it and really build on it. And we're so happy they did. They've done a great job with it. It's still the program that I use today. And some of the ideas we started were way too early and they were just way too early. And we couldn't survive until the market came and the market was ready for it. We started some companies in 1999 that were really, really great companies in new media and entertainment. But they were so early because there was too small broadband penetration and too many of our customers were using dial up and it was too slow. And the products and offerings were great. And the companies decided to spend their money too fast to try and grow market share. And when you're spending your money against the will of what the customer wants, you can't convince them to come if they don't have the right equipment or the right mentality. And the companies went out of business. That was a really big lesson I learned, is to try and take your Cash if you have something that's really great and survive until the market is ready for you. Because almost by definition, if you're coming up with something that's novel or breakthrough or ahead of the competition, it's too early. And sometimes you could be early enough that they're just not ready for you yet. Now you could give up too and decide to wait. You could shelve it and wait, or you can stick it out. There are some companies that seem like overnight successes, but they really stuck it out until the market was really ready for them. And that was a very painful lesson we learned with a lot of companies from some of the failures. Besides those, we learn things about management teams and what kind of skills you need on management teams, and I'll talk a little bit about that as well. So the biggest pieces of advice I could give on company, starting from some of these lessons. First, follow your passion. So one common trait of all the things that I started doesn't mean you're going to succeed, but I think it's almost a necessary condition for success, even if it's not sufficient, is that you absolutely have to be so crazy in love with what you're doing. And I say that because every startup is going to face hardship times, really deep, dark days, and the only way you make it through it is if you and your team is passionate about it so that you have a reason to continue through those. Otherwise you give up. If I didn't love all the things I was working on, I wouldn't have done those things in the tough days at Knowledge Adventure to make it through. If I didn't love the things I was doing on the energy stuff, I wouldn't have stuck it through. So it really, really, I believe it really matters that you're unbelievably passionate. The second one, sharing your upside. I talked about that earlier. I think that you unlock so much human potential when you give someone a significant equity stake and give everyone, everyone in the company. The teamwork that is engendered and the human potential that is unlocked when people have a big equity stake is unbelievable. And that's a really important thing that we do in all of our companies. And the receptionist, everybody in the company has equity in the company and the early receptionists of the company might make 50 times their salary when the company has a big success. And that's a great thing to happen. And everybody loves seeing that happen. And it's just incredible how emotionally gratifying that is to watch and be part of. And I really strongly recommend that and then on the complementary skills, on management teams. Let me talk to you about that a little bit. So there are obviously a million ways of measuring the different personality types of people. This is one particular taxonomy. The entrepreneur, the producer, the administrator, and the integrator. And no person is just one of those four. Everybody's a blend of all of these talents, but everybody's dominant in one and has weaknesses in the other. So I'm clearly an entrepreneur. I really love inventing the new things, seeing things in the distance and trying to do things ahead of their time. The producer is the person who actually makes things happen, who actually takes a product and executes on it, who sells it, who all the execution stages to get it in customer's hand. And I'm very high on the E. I'm actually moderate on the P. There are some entrepreneurial types who have no P and they're just not good at that or even negative. They get in the way of getting things done. And that's actually okay as long as they find someone else to complement them who is good at getting things done and then have mutual trust and respect for them so that together as a team, they can get things done. But you have to get the P in the company as well. And then the administrator, that's a little bit more the bureaucratic. You have to have that in the company too to succeed. It sometimes gets in the way of things, but it also helps organize things. The administrator puts systems in place and helps the trains run on time and keeps the wheels on the bus when things are going crazy, when orders are going gangbusters and helps. Any one of these skills taken to extreme is a negative. But any one of these skills in the right balance with others is exactly what you want. And the final skill, the integrator, that is the person who is more of a people person, who understands the other three people there and helps those other three people, those three talents, get along. Because very often those other three talents hate each other's guts. And sometimes the E hates the A. Almost always the P hates the A. The P wants to get things done and the A is trying to put a system in place and you really need to have all of them. I'll just give you an example, just so you can sort of self classify yourself and your strengths and weaknesses on these different things. Imagine that there's those four personality types sitting together in a room. There's a window over there and we're looking out and the window's over there and there's some dirt on the Window. And the E looks at the window and says, look over there. There's a parking lot. We could build a building. Sees all this stuff in the future. Doesn't even see the window. The P looks at the window and says, there's a scratch in that window. That window's dirty. We've got to clean that, take care of that. The A looks at the window and says, we can make a form and people could fill out when they see something wrong. And then they'll turn that in and that will go in a queue, and then we'll get that taken care of. And the eye looks at that and says, I wonder what those three people are thinking. It really is true. There are many people. I don't do it enough on the eye. I have some eye, but not enough. I try and always hire an eye at the company where the eye is actually more worried about what other people are thinking and feeling than the actual product or execution or customer. But that's hugely important. And the I is the person who sits in a room when the P is screaming at the A and says, listen, you both have a point here. The P wants to get this done. And the A says, let's do this. How about if we. And bridges the gap? And that's an important skill for a CEO to have as well, of course, to try and bridge that balance. But it's really important to try and find balance in the company on all those skills. And let me show you an example of what happens in a company that doesn't have all those, because I've seen this many times, and this is one of the things we learned after so many companies. I mean, think about this. We've had 100 companies in 15 years, probably 150 CEOs, probably, say, three rounds of financing each. So 300 rounds of financing and all the problems and challenges and products and delays and all the things. And the companies that made it had all these skills and balance. And the companies that didn't, didn't. And let me give you the very specific example. So a company always starts with the E. An I can't start a company. An A can't start a company. The company starts with the vision of the E person, the entrepreneurial person. And the company starts out with that E. And it's sort of making forward progress. It's going up and to the right because there's a vision there. But then very quickly, if the E just has vision and can't execute anything, the thing just fizzles out and turns into nothing. And it has to bring this P skill into the company at some point. It could be in a week, it could be in a month, it could be in a year. But at some appropriate point, before the idea fizzles out, some P skill has to happen at the company. Now, it could be a solo entrepreneur who is an E who also knows how to program or knows how to build or knows how to do whatever. So that can be in the same person. But that skill's got to be there. And it's usually better if it's in another person who really gets along with the E. It really is great when there's a team who gets along. But then eventually, even if the company starts producing things and starts selling things and starts going, it eventually too will fail if it doesn't get some system in place to be able to handle the order, get the money in the bank, pay the bills, pay the employees. Those are all A like functions. But there's many other A like functions that have to happen to make the company get past that stage. But even then, a company will eventually fail because everybody will be at war with one another unless there's enough I skill in the company to keep the company going up. And one of the things that I wish I had learned when I was in college, in life anywhere, was what this I skill even was and how to learn more about it myself. And I never had a class on how to do the conflict resolution between people when they are having problems, or even to see good ways of giving people feedback. That's a very, very valuable skill to make a successful company. If you look at some of the really, really incredible companies, they almost always had great teams of people, sometimes a duo, sometimes more at the top, who really, really had opposite skills, but really, really got along, had such mutual trust and respect for one another that, that you really got the best out of both of them. You never had any war between them. And that really is amazing when that happens. If I were to have any single thing that I would recommend for success in a company, it would be this. After, of course, having a decent idea. But I even think this is more important than having a decent idea, because this team working together can take a not so decent idea and turn it into a decent idea because they'll have a method to get from not decent to incredible. But whereas a great idea will usually fizzle if it doesn't have all this together. So that's one thing that I learned very painfully. I wish I had learned it earlier in my career. I could have made some Things that weren't successful successful, but I really urge it. A lot of this learning came to me from a consultant named Ichak Adizis, who first thought about this. In the life cycles of companies and the different stages that companies go through, you can plot this either in time or at stage of revenues or things like that. But there's a great degree of flexibility. I'm just saying I'm repeating it a lot of times because I think it's so important, get complimentary skills in your startup. It's very, very valuable. So now fast forward. After doing this for a while, year 2000 comes around starting many software and Internet companies and I realized that we're really going to have a big resource problem this century if we don't find a way to make our energy renewably. And this was pretty early. This was before a lot of the clean tech interest had started. But I started reading a lot about peak oil and things that were going on in the world and, and realized this wouldn't be a big problem. And it really brought me back to my passion that I had in high school. But now this much later I had a lot more resources available to me. I had a deal up available. I had a team of people. Now I learned how to make companies. I was doing solar devices, that little tiny thing, solo back then. Now I learned some of these lessons about putting teams together. So I got excited about going back and trying to tackle something in this energy challenge. My skill was in software and engineering. Mechanical engineering actually was my degree. But I had never built a real large solar energy or energy company before. But we built a shop at Idealab. Actually, ironically, Idealab was in Pasadena and next door there was a Korean restaurant. We were able to buy the Korean restaurant and turn the kitchen into a machine shop because it was already plumbed and everything and had all the concrete and ventilation. And that machine shop was where he began working on the solar energy research. And let me tell you why I thought it was such a big problem that the world was facing in energy and why it's been great, the movement that's been made, but how much has to happen in this next decade? So many of you have seen this before. This is symbolic of man's energy usage. Let me tell you some specific numbers. So the whole planet uses 15 terawatts in continuous use 24 hours a day. 15 terawatts are being used to provide the energy to all of humanity. If you divide that 15 terawatts by about 7 billion people, you get about 2,200 watts per person. So every single person alive on the planet is using 2200 watts all day long, 24 hours a day to power our lifestyles. Now, those of us in this room are using a lot more than 2200 watts. Many people in deep parts of India are using 50 watts. So those of us in this room are probably using more like 10 to 20,000. And if we fly a bunch, probably more like 30,000. And if we use a lot of air conditioning and drive a lot, maybe more like 50,000. So 50,000 watts all day long, just making our lives comfortable. And. And we're mostly burning stuff to do that and just to get a sense of the energy. A typical family has 24 horses running for them at full out all day long, producing energy. If you just convert it to horsepower, just to give you a sense of. We don't really think about the energy because it's burned somewhere else to make our electricity. The fumes go somewhere else. The electrons come over copper, so we don't see any of it. The big pipelines that bring stuff over, you know, it's mostly hidden from us. We go to the gas station. All the tanks are underground. You know, we fill our tanks and drive around. So we don't see it. If we were actually taking care of and feeding 24 horses constantly, we would sort of be more aware of the energy usage, but we don't. It's really. We've done a good job of making it invisible to us. And another interesting statistic on what's happened just in the last few years in the United states, there's now 1.8 people per household and 1.9 cars per household. So we have more cars per household than we do people. And that just shows our love of. We love taking our bodies, wrapping them in two tons of steel, and moving it somewhere else. And you think about how much energy we're doing to carry that 2 tons of steel along with our bodies. It's just unbelievable. And yet we just do it. Because it's relatively inexpensive. We've come up with a way to make it not cost that much. Now, the problem is, if we run out of this stuff, it's going to cost a lot. It's going to cause a lot of resource battles and a lot of fighting. And here's why I think we're going to have some of those challenges. Jump forward to 2050, and it's estimated that we're going to need 50 terawatts. And the 50 terawatts is not so much because of population growth, because people believe the population growth is going to slow down. And we're only going to be at about 9 billion people by 2050. So even with conservative population growth, we're going to need 50 terawatts because we're lifting so many people out of poverty. And the first thing people want when they get lifted out of poverty is they want their car and they want their plasma screen, they want their iPhone. IPhone doesn't use that much energy. But they want all the electronics that we have and all the electricity production that we have. And if you take the number of people on the planet times somewhat closer, not quite our standard of living, but even a little bit of you get to 50 terrawatts. So there's a 35 terawatt gap between the 15 terawatts we're burning right now and where we need to get. There's only a limited number of places that can come from. Of course we can burn things to get there, but we're going to run out of things we can burn. So there's only a limited number of places. And there's nuclear, geothermal, wind, tides, biomass and solar. And each of these only can contribute about 2 or 3 terawatts. And the reason why it can only contribute that much is because you build a nuclear power plant, a gigawatt nuclear power plant. And if you built one nuclear power plant every other day for the next 35 years, you only get to a number, you know, sort of in this order. And it takes about seven years to permanent a nuclear power plant right now. So you're not going to build one every other day. So you just can't get 35 terawatt gap from nuclear, from any of these. For geothermal, you could put a geothermal power plant at every single site on Earth where there's heat underground and you get about 2 terawatts. So I'm not saying we shouldn't do it. You have to do it, but you don't get 35 from there. The same thing with wind. You go to every single high wind location on the planet, put a wind turbine, every single one, and you get relatively low 3 terawatts tidal power. Biomass. If you go make a biomass plant almost everywhere where we grow food, you can get to this 3 terawatts, still only a tenth of what we need. The sun, however, strikes the Earth with 15,000 terawatts. So 1,000 times we're using right now, 500 times the 35 terawatts we need. It's the only one that can really make up that kind of gap with a very tiny fraction. And yet why don't we do it? It's because it's too expensive. If you go back and look, solar is the most uniform natural resource, maybe except for air and dirt. Solar is evenly distributed across the whole planet. The very, very top of the planet, very, very bottom of the planet. There's not much sun, but almost everywhere else there's enough sun to do this with. And everybody gets it. It's not like scarcity, like other of our natural resources. The sun goes to everybody. So it's a really fair resource as well. But it's very, very hard to convert it cost effectively. It also takes a relatively small amount of land. People talk about how much land it takes, but you can power the whole United States with a square, 83 miles by 83 miles. So you wouldn't put it all in one spot, you spread it around. But it's a relatively doable amount of space. And of course, you can power all of Europe with a square about the same size, actually a little smaller in the northern Sahara desert. So you can really practically make it happen if we could get the cost right. And the problem has been that it's been too much. Earlier this decade, solar was costing about four times other ways of making electricity, for example. Now it's down to about two times. We've made a lot of progress in the last eight years since this chart came out, last nine years, but it's still two times too expensive. So the way solar has been going so far, it's all been with subsidies. I really believe that solar energy is just a novelty until it can beat the price of fossil fuels without subsidies. So there's a lot of interest around the world, but the governments don't have the money and the amount of money is too great to be able to subsidize the gap between the cost of fossil fuels and solar. But once you cross the price of fossil fuels with solar, then it will take off wildly because then it will be an enormous profit opportunity. Even if you beat the price of fossil fuel generated electricity by 100th of a cent, that would be unbelievable. You don't have to beat it by a lot because it's a commodity. You beat a commodity by a little bit and then just people flock to that because they can make a profit there. So there's unbelievable opportunity if you can just get that last factor of two out and people are working on it. It's a lot of different ways. We're going to get there. I'll talk to you about some of them and then talk to you about one that I'm working on. So the breakthrough to get that last factor of two, it could be some kind of chemical breakthrough. There could be some kind of solar paint or some kind of solar plant. It could be biological breakthrough, some kind of organism. It could be a physics engineering breakthrough. It could be all of these. I think it's going to be all of these. I think the opportunity is so big that we have to invest heavily in all these areas. And I know a lot of that investment is going on here. I'm going to talk to you about one particular new weapon that I think we have in the solar arsenal to try and get there. This new weapon in the solar arsenal I feel is Moore's Law. And let me talk to you about some other resources and their trend lines. If you look at coal, it's going up. Oil is going up, natural gas is going up, steel, gold, metals, everything, food, corn, rice, everything is going up. The one thing that's going down consistently over the years, the price of computing power is going down so much while everything else in the world is going up, because everything else is a scarce resource. And computing power. The way we've been able to use our brain power to fit more in less space means that cost is going down so dramatically. How can we use this? How can we use Moore's Law to try and drive down the price of solar energy? So I started thinking about that a lot. I started thinking about how can I take the one thing that's going down in price and apply that to solar? You can't apply Moore's Law to PV panels, to photovoltaic cells, because PV panels don't have microprocessors on them or in them. They're not taking advantage of the density that Moore's Law brings. They're taking advantage of maybe a slight reduction in cost of silicon, but that's again, a natural resource that's not going down. PV cells are based on area of usage. You just need a lot of area. Well, that means you have to use all the heavy intensive energy process and chemical process to make the cells on a large area basis. Well, we need to come up with some way to apply Moore's Law that doesn't need the area. Some way we can use a small microprocessor to leverage against something that's big. So that's what I started working on. I took a look at a taxonomy of all the different types of solar Things over here on the left you have photovoltaic techniques, silicon panels, thin film panels, concentrated PV panels. And over on the right, solar thermal. And you have dishes and troughs, parabolic troughs, and linear fresnel concentrators and power tower. And I looked at all these things and way over here, this is the highest efficiency the solar power tower. The solar thermal power tower is the highest efficiency solar conversion in the high 30 percents you can get. So I figured if there's any place to try and apply Moore's Law, it'd be way over here on the right. And that's what I wanted to try and do. How do you apply Moore's Law to this high efficiency solar conversion system? So this is what the company we created to do. That is called esolar. This is a picture of an esolar plant in Southern California. And I'll talk to you how we applied Moore's Law to this. So the typical solar power plant that does solar thermal concentration takes a large mirror, a big parabolic mirror that is about the size of a tennis court, and tries to track it in two axes to concentrate sunlight to a single tower. But that requires huge construction in the field. We thought, what if you take that mirror and break it up into lots of little tiny mirrors. Now all of those would have to be controlled separately because they all have to move differently over the day to redirect their light to a single point. They're not all moving together, they're moving differently. But that's exactly what a microprocessor would be good at. What if we put a microprocessor in every single mirror? So compared to doing this big assembly and cranes and assembly in the field, because this is larger than can be shipped, this is larger than a shipping container. Each of these things could be smaller than a shipping container. We could deliver it. And this is what we came up with, a system that comes out. These things get pulled out of a shipping container. They get unfolded like an accordion onto the field and get bolted down to a bunch of ballasts that are sitting on the ground and just uses a regular wrench to tighten it down. So just regular hand tools. So we get rid of all the heavy equipment. Then you walk down the aisles and put the mirrors on and they're all crooked and different angles and everything like that. But we're going to use software to try and straighten that all out. And this is what it looks like at the ground level. You can see these racks that have all the wiring in it in advance. Double axis actuators and some plain old about 1 square meter flat mirrors. So we don't have to curve the mirrors anymore. We don't have to make a parabola in metal and in glass. We're now going to make a parabola in software. So we're going to concentrate the sunlight dynamically with software. And the way we do that is this. We again taking advantage of Moore's law too. Today you can buy high resolution sensors. You can put on some towers in the corner, and those sensors can look at all the mirrors and really detect every single mirror. With image recognition, pick out each mirror with a GPS time clock, Figure out the time of day and where the sun is, and look at the reflected beam coming out of each mirror. And in real time, compute the angle of every mirror. And we can do it at way, way higher precision than you ever could by surveying where the mirror is, the way it's been done in the past. Now it requires a $2 microprocessor in every mirror. But a $2 microprocessor is now negligible and off the shelf product that even 10 years ago would have cost $5,000 per mirror and you couldn't have done it. But today it costs $2. So it's just unbelievable what has happened that Moore's law allows this to take place. We can point the mirrors much more precisely, which means higher temperatures and higher efficiency, Less spillage of light at the receiver, and we can just get much, much more cost effectiveness because we can have lighter structures, less steel and less labor, all made up for by microprocessors. So what it looks like, as an example, when you first put down this row of mirrors, may be hard to see back there, but on the left, because the ground is a little bit unflat, because the metal has thermal expansion, is a little bit crooked because the mirrors have end stops that aren't exactly aligned. The best you can do with lining this up, the mirrors are accurate, plus or minus about 3 degrees. But then after you run the software and command the mirrors to go flat, you can see here, this row is accurate to a twentieth of a degree. About the most accurate anybody ever achieved with this method was a half a degree. And now we're at a twentieth of a degree. So we're ten times more accurate just with the $2 microprocessor and every single mirror. So it really, really has caused a big difference in cost, a big difference in performance. And this is what the whole plant looks like. So here's rows of mirrors. You can see the parabola is made. And all the mirrors are all slightly curved. All the light from the sun is reflected up to the tower. Up at the tower, it's immensely hot. And then we make steam and then run a steam turbine at high efficiency and take the electricity and go into the grid. So this is a 5 megawatt plant, this one in Palmdale, California. And we now have an order for 1,000 megawatts in India and 2,000 megawatts in China. The one in India is already under construction. China will begin next year. And you can imagine how proud I am of this when I started with my little tiny stuff back in high school. To be able to walk in a field like this, it's an eerie feeling, actually, because it's very quiet. You don't really hear much because there's little tiny motor actuators moving the mirrors, the steam, of course, you don't hear any of that in the tower. There's an immense amount of thermal energy up on the top of the tower and it's very, very bright. But it's a really, really amazing sight to see, to be able to take Moore's Law, apply it to an old idea, but really drive down the cost and hopefully get us there. We're within striking distance of the price of fossil fuels right now, and with some additional storage techniques and additional production, we should be able to get to the price of fossil fuels in just three to five years. Now, this is just one way of doing it. There's many, many ways. We encourage all of them. But I was just really excited to share with you this one particular angle of how you could take entrepreneurship, Moore's Law and technology, apply it to relatively static field in solar energy, and try and make a new way to try and arbitrage those technologies to try and make a breakthrough. In quick summary, I really do feel we have to get to majority renewable energy this century. The only question is whether it's going to be painful or respectful to get there, because we're going to get there by force, one way or another. It's just going to be how problematic. If we apply foresight and start working on it all out this decade, we can make it be with less pain. It's not just about climate change, it's about resource wars. Even if you're not worried at all about climate change, we need to get there anyway, because we're going to have big fights over the stuff we burn if we don't get there. Because everybody's going to want to live like us. And we have everybody on the Planet wanting to live like us, there's just not going to be enough to go around. It's very, very hard to compete with fossil fuels with no subsidies, but it's possible. And I really feel that should be the goal and should be the goal this decade. And I personally believe, as I've told you here, innovation, engineering and science, that's the way to solve this problem. And not only, I think, not laws, I don't think laws forcing people to do it are the way to get there. I think innovating is the way to get there. And I actually personally believe that entrepreneurship is the best way to mobilize great minds to do this problem. But actually I think to mobilize to solve almost any problem. So I really encourage that. Thank you very much. You've been a great audience. Well, it's really an honor to be here and I'd love to answer any questions that I can for you on any front on energy, on entrepreneurship, starting companies, challenges we had anything. Yes. What do we do about the problem of currently the concentration of wealth? And would this industry be able to work against that or is it going to be more of the same question on concentration of wealth? I think this industry actually can combat that. My belief is that it would because the resource is so distributed, the system has to be put where the people are. So unlike other wealth, which is concentrated in a country and then someone hoards it and then throttles it out to people by selling it around the world, rare earth metals or oil or anything, this has to be placed where the resource is, where the people are. So I hope that this would lead to a more even distribution. I'm not sure that it will, but I hope that it does over there. Yes. Okay.

First off, I just wanted to say that it was really cool to see the presentation. I actually used the Jumpstart stuff.

Oh, great. Oh, that's.

So when I saw it up there, when I read about it.

Oh, that makes me feel really great. I hope you enjoyed it.

I mean, I'm at Stanford now, so.

Yeah, we didn't put that in the box. Use Jumpstart, get into Stanford.

But I just also wanted to say. So I was reading about Idealab. I'm the in the MSME 178 class. And we have a discussion before each of the speakers come in. And one of the questions that kept coming up was the fact that idealab is kind of like something between a venture capital firm and a startup incubator. And the one big difference is that you guys don't take outside ideas and kind of come up with your own ideas. And I guess I was wondering, obviously it's been successful so far, especially since a lot of the companies that have been shown in the slides have been acquired or have done well for themselves. But I was just wondering, do you ever think that or do you think that that's a competitive advantage that you don't take outside business proposals, that you don't spend the time that VCs do meeting entrepreneurs? Or do you ever feel that idea generation becomes stagnant with only the staff.

At IdeaLab question about the idea generation and taking ideas from the outside? I actually think it's a competitive disadvantage that we wouldn't take ideas from the outside and meet outside entrepreneurs. So we're actually starting to do that more. The reason we did it was not because it's smart or not. It's just we had more ideas we wanted to do than we could find people to do. It's been my problem all my life that just every week we're coming up with a new idea. We would do 52 companies a year if we could. And it's just finding talent to execute on those ideas that is the bottleneck. So we are taking having people come to us from the outside with ideas. Sometimes that idea merges with one of ours. Sometimes we'll fund that company separately. But I really think of what we do as we're really trying to be more of a lab where we can do it, where we have the chance, just because we like it. I'm not saying this is a good business model. We love doing it. We love being in the part of experiencing new idea generation, trying them out and seeing what works and doesn't work. That's just fun to us. And the other aspect that we're trying to do is we're trying to make a big impact. So we actually are looking probably in our criteria for going forward with an idea. Will this idea be something that someone else would never have done? Because then we can make more impact on the world. We'd rather do something. Sometimes we come up with ideas, a great idea test out as a business model, but it's sort of close to what other people are doing. So even if we can make an okay business, it's just not interesting enough for us. Again, that's just our choice. So we try and judge on impact, not roi, sort of impact roi. And we try and find ways to meet great people who can help us do the things that we think will have big impact. Could you talk a Little more on idea generation in the idea since. I mean, do these just come to you or do you have a methodology that you follow? Well, a lot of them are things that I personally want. I mean, I really have to say, like even pay per click was something that I personally wanted because we had other companies that were trying to find ways to market more effectively online and I needed that as a way. So many of the things that we do are things that we find a need for that we see there's a big need, at least for us, because we feel it's very hard to predict what someone else might want. But to talk a little bit more about the idea generation part, well, we have regular brainstorming sessions. We have 50 people in IdeaLab. There's about 15 people, the core, who really are involved in the brainstorming. We have these sessions. A lot of ideas we come up with we can't carry out. But we patent things still. Maybe they'll get useful later. We bring in outside people to brainstorm with us. I've had a brainstorming session with Nathan Myhrvold and Intellectual Ventures to try and brainstorm new ideas. But what I mostly do is I just read everything. So I'm just always reading everything and looking at what's going on and seeing what else people are doing and trying to find new ways to combine different things that I see happening with a new technology that I see to try and do with this technology and this problem and this. There's something new there and that's the way I try and come up with them back there. Can you talk a little bit more about the methodology you use to compare various ideas that you generate to err. How do you compare. Compare. How do you objectively compare ideas? Yeah, that's a good question about how do we objectively compare ideas? It's very hard and it's very emotional for sure now because I said one of our metrics is impact. Sometimes we look at two ideas, one that has a better business opportunity. But we look and we say, you know, I think this is going to change the world more. It will be better for people, better for humanity. Let's do that. We have a company we started called Duron Power and it's a company that is making very small scale solar solutions for villagers in India and Africa. It's a little $99 product with a solar panel and battery and lighting and cell phone charger and fan. And we're not going to make very much money on that. We're selling it for maybe A few dollars more than we make it for. But if we can have a million families have that, it will have a great impact. So we chose to go with that one, even though it wasn't maybe the best economic one. So measuring that is one way. The other way we try and compare is we do business models and projections and forecasts. We, of course, do that. We do focus groups. We test on people. The thing we really like to do, and probably the thing that I don't know if we're known for this, but it's the thing that I'm most proud of, what we do is we try and find ways to come up with the absolute minimum viable product and test it. And I think you guys have heard that variation of that theme before, but I'll give you one specific story. So one thing that I wanted, going back to things I want, it was like 1997 or 1998, I think, and people were starting to use credit cards online. Amazon was taking off, but still a lot of people were scared about putting credit cards online. And I wanted to get a new car, and I didn't want to go to a dealer, and I just hated the hassle of going to a car dealer. I'd been so messed up by all the lies and everything that I got from going to a car dealer. So I wanted to go to a website, and I wanted to do the whole transaction to website, and I wanted the car to show up at my house in a flatbed truck. And I thought that's the way the whole transaction should occur. But I told people that idea, and they said, that's crazy. I don't think people will do it. People aren't going to buy a car online. No one's going to use a credit card. No one's going to put a deposit of $1,000 down without seeing the car. And I said, yeah, I think they will, because I'll do the research and I'll figure out what car I want. And I know what I want, and I'll configure it, and I just want to buy it. That was the concept. It was called Cars Direct. We had a lot of disbelievers, but we had a budget of $100,000 in 90 days. I gave a particular CEO that we found a budget of $100,000 in ninety days to see if someone wants to buy a car online. And the idea was to make a website where you could configure some cars, and we'd see if people would put in a $1,000 deposit. To do it. And then if they did, we would sell them a car. And he kept on coming back into me 30 days in. Okay, we were talking to car dealers about this and getting supplied. I go, what are you talking to car dealers for? I just want you to make a website. And he's talking to find out how to become a dealer for Ford and dealer for Honda and all that. We're not going to do that. We're just seeing if someone wants to do it. And then he'd come back in 60 days and well, I'm working on this. And I kept, on the 80th day, I said, just put the site up and if someone buys a car, put it up at the end of the day. If someone buys a car by the morning, we'll turn the site off and we'll go buy them at the Honda Auto Mall down in Monrovia and we'll deliver the car to them. We are not trying to actually sell a car. We're trying to. So he finally put the site up on one Thursday evening. I remember coming in on Friday and he came up to me excitedly. We sold four cars. I said, hurry up and turn the site off. But we saw that people wanted to buy a car. They didn't know that we were driving down to pick up the car and that didn't matter. But then we turned the site off and then we built out the system because the test worked. We found out that someone actually would do that. So I really, really try and do that all the time with our companies. How could you find out in some fake kludge way? Do people really like what you have and then go build the whole thing if they do, but don't build the whole thing first and then find that out afterwards? Yes. Clearly you have all sorts of brilliant thinkers working with you. How do you put the ideas out that you can't pursue yourselves for other people to pursue? That's a really good question. We don't do enough of that. And I'd like to invent a company to do that. I would like to invent a company that could allow people to come together around ideas and sort of self organize around ideas that we come up with or that other people come up with. And I'm thinking about that right now. It's in the early stages, but stay tuned. I'm might be some way to be able to do that. Yes, right here. So talk about knowledge ventures. Yes. I was curious. You mentioned you decided to eventually sell it. So was that. Can you describe what was like you Know when your first company you start, you feel very passionate about it. It's almost like it's your baby. So you do. Was it hard to make that decision? It's always hard to make that decision. And it's hard now that we have IdeaLab, where sometimes a company grows up and moves out of our building. And it's sad. I mean, it's our baby. But I've experienced that with my kids now, so I've experienced that with our companies. It's a lot like that with Knowledge Adventure. My brother took over for me, so I felt like it was in good hands. And I really, really wanted to try this IdeaLab experiment. I really wanted to try this thing where you could do multiple companies under one roof at one time. I'd always been starting companies in my life in series, and I wanted to try doing it in parallel. And because my brother was there to take over for me, it was a great way to make it happen. Yes. You were talking about failure and having ideas that are just a little bit too early for the market. I'm just curious about one of those failure stories. And speaking to entrepreneurs who maybe don't have an amazing company around them like idealab to keep me going for a couple extra years, what is your advice for how do you know when to stop? Oh, yeah, boy. Well, let me do the last one first. It is really, really hard to know when to stop. I mean, the hallmark of success is perseverance and sticking through the tough times. But it would also be a hallmark of stupidity to stay with something too long when all the indicators and all the signals are saying there's no market for this. And I've experienced that many times. We had a bunch of companies. We had a company, Omnilux, which was doing optical mesh communications. We had a bunch of different companies. We tried that. We just tried and tried and tried. And we were always close and it always seemed like the order was around the corner. It is so hard to tell. It is so hard. We had another company, Ray Tracker, that we started that was making solar energy trackers that was just always about to get a customer, always about to get a customer. And we kept on. It just wasn't happening. It was during the crash, just now, the economic crash of the last few years. And the product was good and it seemed like sales were coming and we had a pipeline, but just no one could get their financing. And we just stuck with it and stuck with it. And we had so many tough decisions, tough board meetings where we really thought we should kill it. And we kept on putting money in and then the corner turned a little bit in 2009 and then it got a little better. And then the company sold to First Solar a few months ago in a great exit for us. And that was a success story where we stayed and there was an equal other story where we stayed and we felt the same emotion and it failed. So there is no simple thing I can look at and say, if you see this sign, it's going to make it. And if you see this sign, it isn't. It takes a lot of luck and timing to make everything work out. And it just takes really digging down and looking at all the circumstances. I would say probably the best thing is getting outside advisors that you trust to look at the situation with you so that at least your own bias because of course you're in love with the idea. Your own bias isn't the only thing looking at the idea. And you can listen to other people doesn't mean you should listen to them blindly, but it means you should hear the other voices. And we brought in some outside advisors in this particular case who thought, you know, this really does seem right. The team seems good, the product seems good, it's worth sticking with it a little more. I remember putting like an extra million dollars in and we made it and then it turned the corner and then it was a great success. On the first part of your question, on some lessons from a failure, it's almost always a team or running out of money. Team issues where the team doesn't get along or doesn't have all the skills or team is spending too fast and doesn't conserve cash. The first one is probably the harder one because finding the right people that have all the skills is always hard. The second one should be easy. But sometimes people are so emotional about people are often so worried. And this was one of the excesses of the dot com crash. So worried about if I don't spend the money now, I'm going to lose the market share. I'm never going to be able to. It's about to go away and it's going to get way more expensive. And that's always the excuse for spending faster. And I haven't seen too many cases where that works. It does work sometimes. I mean, there are cases where there truly is a race to a winner take all like market. But usually the better executor with the greater persistence wins. So I would say those would be the two biggest lessons from a failure. Yes. With tens of companies under your roof at one time, how do you scale.

Your own talent to be able to touch each one in a real way?

Yeah, well, that's really hard. Hard, but it's what I love to do. So I try and give 25% each to 10 companies. I work a lot. I'm always in contact with all the CEOs. I meet with them periodically. What I found for me, the way it works is I try and only be involved in the very important strategic and product things and not involved with more of the minutiae of the company. I'm really not involved in the finances or HR or other things. I have other people in idealab who take care of that. So I really try and focus on where I have the most value at and the stuff I love the most. And then I really try to be available more impromptu, like sort of just in time. So I try and stay aware of what's happening in a company and give a piece of wisdom or experience right when they're having that problem as opposed to trying to. What I'm doing here is I'm trying to give you examples. These might not apply to you at that particular moment, but if I give you a really laser like, focused, targeted thing when you're having that problem, it can be very helpful. So I try and do that for the companies as well. Having them in the building is pretty great though, because then I can just walk around. A lot of VCs say they like to have companies within 30 minutes of them. I like to have them in 30 seconds. So just as I'm walking around at lunch, we have a bar at the company where people hang out and just all around I just hear things and see things going on so I can be connected to them very, very casually. And that's one of the things I really like to do. One more question, Bill. Yes, right here. So you observe companies going from berk to finished product and you do that with a. A bunch of different companies all the time. Is there a particular stage of the development process for each company that's really enjoyable for you, or a particular stage that's unenjoyable? Well, for me, being that e off the charts there, the very early stage, I love it. I love seeing an idea go from nothing to something and then all the hard work after that. That is not as appealing to me because I. Because I get so much leverage in that first stage. So I love that part. But there are people who love each part. You have to get the people together who love each part and that's where the complementary skills comes in. But I love whenever there's a tough challenge, that's when I get excited. When I could be juggling in my head all the different ways you could solve a particular problem, that really gets my juices flowing. That's why I love to be called into the room. Thank you very much. You've been a great audience.