DON'T Listen To Your Customers (do this instead) | Vinod Khosla

And people take no for an answer too easily.

You want to do something meaningful, add some value.

I frankly don't even care to talk to you.

If there was no risk, everybody would do it.

Most people do the traditional thing and get to traditional places.

Disrespecting authority.

Some entrepreneurs do a really good job of growing.

I won't go into the details of the story, but they offered $7 billion. So 40 engineers wasted 3 or 4 years of their life.

He's an Indian-American businessman listed by Forbes Forbes magazine as a billionaire. He made his early fortune as one of the co-founders of Sun Microsystems. He has an estimated net worth of $1.5 billion. He's Vinod Khosla, and here are his top 10 rules for success.

The funny thing is, with enough persistence, most things that seem impossible become possible. I'm always amazed at how often you can turn things around, and people take no for an answer too easily. You know, it's whether you're trying to achieve a goal like get into business school, or my green card was the same way. I left the job that had sponsored me, but I still got my green card even though no lawyer would take me. I became my own lawyer, got my green card without working for— while I was at business school. And I did it perfectly legally. My strategy there was if I couldn't convince immigration, I'd confuse them, and I did. And they gave me my green card.

Most of the time when you start something, you want to do something meaningful and get started. And maybe smaller, but you want to keep innovating, building on it one step at a time, and hopefully it becomes much larger. Amazon started with just books, now it's everything. If you look at Twitter or Facebook, when they started they were relatively small things. Mark Zuckerberg was trying to connect everybody on the Harvard campus, not 7 billion people on the planet. But he kept expanding his vision. So very often when you start with an innovative idea, you don't know how big it is. In fact, most of the really innovative ideas have been very hard to predict what's a large opportunity or a small opportunity. Most people thought Airbnb would just be this very small, nichey little opportunity that a few people would rent out their rooms. It'd be a nice little business. Now it's huge. People thought Uber would be this limo service business, and it's now bigger than all limos, all taxis, and maybe replacing personal transportation. So it's not possible to always predict everything and where things may go. But just because you can't predict where things may go doesn't mean you shouldn't try or you shouldn't start. Once you start and you stay creative and innovative and keep trying new things, things expand.

Add some value. There's a true societal and business value proposition. There's a contribution. I find, and I don't do this for reasons other than the fact that you can't long-term build a viable business without making a real contribution. Most people look at— they can start a business, do an IPO, make some money. Almost always that leads to businesses that are round trips, what I call— they go up and go down. To build a durable business, you really have to focus on the value proposition.

I am amazed at how few people have a belief system. What do they actually believe in? I— and yeah, it's okay to offend you guys. 90% of you will do what's expected of you as opposed to what you want to do. And, you know, I even, when I come to an event like this, say, why am I here? Why would I even bother to take an hour of my valuable time? No, it's true. I have to have a purpose. My goal is very simple. If I can convert one of you— there's probably 400, 500 people here— if I can convert one of you to follow your belief and have the guts to follow your belief, I'll have— I'll think of the hour as well spent. So I always say, what am I trying to do and why? I don't speak because somebody, you know, will write nice things about it. I always sort of have a purpose, but I have a belief system. And most people, even successful companies— and I have a big beef with Fortune 500 CEOs I can talk about— there's very little leadership there. Don't have an internal compass of what they believe in. It's what do others expect. You know, when I graduated, I went into entrepreneurship. Nobody went into entrepreneurship out of the business school, and people said, why wouldn't you work for Goldman or McKinsey? I said, why would you? Like, I couldn't fathom why you would want to do that job, right? I still can't, by the way. For those of you going to those places, and I'm sure there's plenty, I'm probably not the right person to talk to you. I frankly don't even care to talk to you. All of you others, I think there's something wrong with anybody who fundamentally wants to go work for one of the consultants or the investment banks today in this part. They don't understand how the world is going to work in the future. But my point again is, have a belief system, follow that compass. And I'm overstating it a bit, so there may be some hope for those of you going there. But it's only a little bit of an exaggeration. Let me go back to this issue of Fortune 500 CEOs. I've talked to many over the years. If a New York Times writer writes an article, they want to change their strategy, they want to respond. How silly is that, that some English major who's never had a business job can determine the strategy of a Fortune 500 company? Why? Because they care about what's written, not what their belief system is. You know what Elon Musk would say to that writer? Go get a real job. What Jeff Bezos would say, that's leadership. Having a belief system, knowing what's driving you to do what you do, not you fitting in to do career enhancement or making it look good to somebody else, whether it's to your friends or to your boss or to shareholders. And frankly, you look at all the companies that are languishing, in the Valley, the older companies, they generally don't have a belief system. They're generally trying to meet some quarterly target without saying, here's how we will be different and here's how we'll do it. Apple languished for 10, 15 years, and then Steve Jobs came in with a point of view and created the most valuable company in the world. He did irrational things. If you go back to January of 2007, And 7, January 1, everybody was saying nobody wants a phone without a keyboard. Nobody wants a phone that costs $699. I can go on with the litany. Those were all English majors writing articles. I have this beef against English majors. Not all English majors are bad, but the majority of them at Stanford are undirected and don't have a goal or a purpose. Sorry. And that's not to say among them there isn't 20% that are really good. They just didn't get the right guidance and ended up in the wrong place. I like purposeful education.

When one is starting, it's hard to say whether it will be successful or not. If it's an assured success, then there would be no risk. If there was no risk, everybody would do it, and if everybody was doing it, it wouldn't be unique or innovative. So innovation fundamentally involves risk-taking, and risk-taking means failure. I like to say my willingness to fail is what gives me the ability to succeed, and too many people just are not willing to fail, so they don't try anything new. I like to say you should try and fail, but not fail to try. Because the people who fail to try, fail to take risks, fail to do something, attempt something new, are failing before they start. They just don't know it.

But what transpired for me when I was probably 15 was reading in the late '60s about the founding of a company called Intel. Craig Barrett, the CEO of Intel, is here. And it developed as a role model for me of what I wanted to do.

Of course, at that stage of my life, it seemed very, very far away.

But many years later, and I'll tell you later that I'm a big fan of risk, I learned hang gliding. And while watching a movie about hang gliding, I saw this quote, this dedication of the movie, and it went something like this: Dedicated to those who dare to dream the dreams and then are foolish enough to try and make those dreams come true. And the operative word here is foolish, because unless you transcend what's traditional, and I think we've talked about this earlier, Unless you go past what's reasonable, you're not going to get someplace different. Most people do the traditional thing and get to traditional places. There is another way.

I think shaking things up is an essential part of entrepreneurship in sort of almost challenging disrespecting authority, not, not being too confirming are essential parts of entrepreneurship.

Building a team is the hardest thing for an entrepreneur to do because very often they don't know what they don't know, right? They, they know their area of specialty really well, but other areas they think they understand but they don't. And every area is more complex and more nuanced than it appears to somebody. You know, I see so many entrepreneurs who think marketing is about a press release or an advertising campaign.

It's not.

It's much more nuanced and sophisticated than that. So team building is very important. Some entrepreneurs do a really good job of growing. Larry Page is an example. Mark Zuckerberg is an example of being better at new functions as they come up. And also, they've done a really good job of adding people who they can learn these new areas from. What I find is some entrepreneurs assume they know the answer, and that's very dangerous, and others know they don't know, and they hire the people who they can learn from. But they can still apply their entrepreneurial style in these new areas. Sometimes it makes sense for the entrepreneur to keep being CEO and driving the whole vision. Usually that's the best course. But some entrepreneurs can't think broadly enough to do that, and they can't grow fast enough.

You also have to dare to be great. I'll tell you one little story. One of the most successful investments we made was a small company called Ceran. We had just started to sell product. We were doing fairly well. We had half a million of revenue in 1997. Cisco came and said, we'd like to buy this company for $300 million. Having invested $3 or $4 million for half the company, that'd be a pretty good investment. And yeah, we had one other investor. And I said no deal because I believed in what we were trying to do. April came along and somebody called me from Cisco and said, we'd like to offer $700 million. And we at that point with subsequent investments owned about 35-40% of the company. And I said, "No deal." August came along. I won't go into the details of the story, but they offered $7 billion.

We did take the deal.

We put this sort of slogan, "I prefer brutal honesty to hypocritical politeness," on our website because it's a real disservice to people You don't have to be offensive to be honest. When I don't like somebody, I can get offensive too. But generally, you can be constructive and very honest. And I prefer that brutal honesty because it serves a purpose. The receiver can do something about it if it's a constructive criticism. If you get hypocritical politeness, you might lose a lot. So again, it's about having enough confidence to say the other person will eventually appreciate it. And that slogan came after I was working on a company with another major venture firm, and I didn't believe their plan would work. They had $45, $50 million in the bank account, so everybody was comfortable, too comfortable in my view. I talked to the founders why it wouldn't work, what my concerns were. The other VCs agreed with me. In the board meeting, said all these polite things. You know, so 40 engineers wasted 3 or 4 years of their life because nobody was willing to tell them the honest truth about what they really thought. And I swore I would never let anybody waste their life. At least give them the best advice I had to give and tell them I may be wrong, but I'm not going to say something I don't believe in. I just won't. And that's extremely valuable to the other thing. But to be honest, look, there are situations you can— it offends people, and I offend people often. But it helps them if they're really introspective. That founder, by the way, in that company called me 4 years later after this company— this company got sold for $3 million, 3.5, 4 years later. Sad story. And he called me a year after that and said, I only want to work with you on my next venture because I wish somebody had told me.

Thank you so much for watching. I made this video because Levi's Matola asked me to. So if there's a famous entrepreneur that you want me to profile next, leave it in the comments below and I'll see what I can do. I'd also love to know which of the top 10 rules hit you the hardest, meant the most to you. Leave it in the comments and I'll join the discussion. Thank you so much for watching. Continue to believe, and I'll see you soon.

Entrepreneurial life isn't all rosy. It's really hard. Failure feels pretty bad. You're hanging on by your knuckles. It's tough. It's a life in which I like to say it's really a roller coaster where the highs are really high and the lows are really low. It can be lonely. It can be difficult. Been through all of them. Been through, don't know how I'll meet next month's payroll, to, whoa, I'm the smartest person in the world because everything's going right. I've seen both emotions all the time in the same startup. So despite it being a hard life, an entrepreneurial life isn't easy. It is a lot of fun. You're always stretching yourself. You're always learning something new. You're always pushing the boundaries of what other people think is reasonable. But— and I think most entrepreneurs are pretty unreasonable because if they were only doing reasonable things, somebody else would have done them. And I'll cite two of my favorite quotes on this. George Bernard Shaw said, "Human progress depends on the unreasonable man." He should have said man or woman, but I'm being—

reproducing it with fidelity.

Martin Luther King said something similar. He said, "Human progress depends on the socially maladjusted." That's what entrepreneurs are. That's why they do unreasonable things. And unreasonable things— sorry, I'm way past your question, but just a stream of consciousness. I talk a lot.

Your voice sounds nice, so that's good.

You know, if you're doing unreasonable things, you're stretching the bounds. If you're doing reasonable things, you're not stretching the bounds. You're not really taking risks. You're not going to do something different. I like to say not all hard things are valuable, but most hard— most valuable things are hard.

But the thing about entrepreneurship is it's not about business. It's not about investing. It's about having a desire to make a difference. Most good companies, and I suggest you look at every one of them, are built from passion for a vision. You have a vision. When I started my first company, Daisy Systems, I looked at how engineers used to design chips. We said that was silly, and that was— there was 3 of us, we just said will change that way. And it was the first CAD company, really.

There were a few others, but none doing quite what Daisy was doing.

As soon as we started working on Daisy, we realized that engineers work the wrong way. All engineers, not just silicon engineers. And we started Sun because we wanted to change that. I sincerely believe to this day, to achieve anything, you really have to have passion for a vision.

I have a philosophy in life: whatever I believe, I should make happen. It's that simple. And if a customer is making a mistake— the customer isn't always right, trust me. And if you want to do great products, don't listen to your customers, by the way. Lots of bad lessons in business school. I used to give a talk in the '80s on why not to listen to your customers. And maybe somebody will ask me a question. That story is, in fact, true. There was a signed contract with a competitor. I stayed in the lobby all day. At 6 o'clock in the evening, And I'd taken a red-eye out, and I parked in lobby. I met with the CEO of the company mostly because he wanted me to go away. By 9 o'clock, he had— I'd convinced him to meet me in Chicago with his team the next day because he didn't want to be seen negotiating with us. The following morning, the day after, at 5:00 AM, we signed our handwritten contract because I wouldn't let him leave. This was the CEO of a big East Coast company, Computervision. So we signed a handwritten contract, and life was good. The point is, if you actually believe something, you try your best to make it happen. It doesn't always happen, but it happens most of the time. Most of the business school entry story is also true. I actually learned that somebody had dropped out. That's why I showed up. And one of the nice ladies in the business school office put me in her living room to her husband's chagrin. She was real nice to me. But things do work out if you persist. Not always, but I like to say failure does not matter. It's success that matters. And nobody remembers what you failed at.