Vinod Khosla Talks Robots, Clean Tech Investing & More on Studio 1.0

in Delhi, India, son of an officer in the Indian Army. His parents agreed he could explore his boyhood curiosities with no limits as long as his grades didn't suffer. He went on to start Sun Microsystems, then become a venture capitalist, he says, to help entrepreneurs take the same risks he has no fear of taking. Joining me today on Bloomberg Studio 1.0, Khosla Ventures founder Vinod Khosla. Vinod, thank you so much for being here. It's really great to have you.

It's great to be here.

So you are known for being an investor who not only challenges conventional wisdom, you explode it. How early did that start?

You know, one of the privileges and the indulgences you get if you're successful early— and luck counts a lot in success— is the ability to do things others may not have the freedom to do. So I used it to my advantage very early. I was always interested in radical change, big ideas, and I got the opportunity to do that.

So you were raised in Delhi, in India. What might we find a young Vinod doing?

You know, I didn't have anybody around me interested in either business or technology. I grew up in an Indian Army household. And then I read this story about Andy Grove, a Hungarian immigrant coming to this country to start a company. I was 15, and the technologies, which was Intel, sounded very cool. And I fell in love with the idea, and I've stayed with the idea since. I wanted to start a soy milk company and realized how hard it is to start a company in most parts of the world.

You now say technology is your religion. Were you raised religious?

My parents were sort of normal religious people. But I very early realized at least priests in India were a scam. I was probably 12. And I decided that if the purpose of religion was to do the most societal good, technology was the most powerful tool to do it. So I adapted science and technology almost as a religion very, very early in life.

You're best known for co-founding Sun Microsystems. You were chairman and CEO. But you founded a number of companies before that.

We started another company called the Data Dump about 3 months before we started Sun. Scott McNealy and me were founders of both companies. And I love this story for the following reason. Nobody remembers your failures. Even though the probability of success was low on either, this is great about entrepreneurship. Failure doesn't matter. But one's willingness to fail gives one the ability to succeed. If you're not willing to take risks, if you're not willing to fail, you're not going to do anything interesting because most interesting things are new, and new things involve risk, and risk involves failure.

Why did you leave when you did, and what was your biggest takeaway?

Before Sun and before DataDump, I'd started a company called Daisy Systems. And Daisy was quite successful. In '86, it went public. And frankly, Daisy made more money for me than I need— thought I needed ever in my life. And so I then wanted the freedom. And I looked at careers like, what else should I do? So I joined Kleiner Perkins, which was one of my lead investors, to essentially mentor and help entrepreneurs.

How does the venture industry back then compare to today?

There's many more venture capitalists now. Many bad ones, a few good ones, and entrepreneurs should understand that. I get in trouble for saying that, but I think it is much more dynamic. Entrepreneurs have many more options, and that's really great for entrepreneurs, and I love that.

You got multiple degrees, an engineering degree at the India Institute of Technology, biomedical engineering at Carnegie Mellon, an MBA at Stanford. And you wrote this Medium post called "Is Majoring in Liberal Arts a Mistake for Students?" where you indicated it doesn't necessarily set you up for success. This caused some controversy, which I know you're not shy about. One commenter wrote, "The real assertion here is that the purpose of human existence is fundamentally tied to the accumulation of wealth." What is your response?

That's a nonsensical response. What liberal arts has become is an excuse to do less work That's not everybody. And I speak to the 80% of students who actually do it for the wrong reason. But bottom line, if liberal arts goals are the goal, then liberal arts as taught today and taken today is the wrong curriculum.

So what should they be studying?

Logic and philosophy should be an absolute part of any liberal arts curriculum, because otherwise you don't learn how to think. Linguistics, economics, learning how computers work because we live in a computer age. Why require a second language that's French or some aesthetic language when the most important second language is computing? Not that most people ever need to code, but because it's a style of thinking. The critique is all from people who I feel failed to understand what I was saying, which is exactly the point I was making. So their comments, like the one you mentioned, reinforce the notion they didn't get a good education.

Do you think college is important at all? Should kids go to college? I mean, Peter Thiel is paying them not to.

So, I disagree with Peter. I think college, curriculum, even high school are very important. There are people who will do well without an education and people who will do well no matter what subject they take. Leaving aside those people, the top 10 or 20%. I think college gives you a grounding to be able to do things that adapt over time.

What do you think sets Khosla Ventures apart from the other top-tier venture capitalists? Andreessen Horowitz, Sequoia, Benchmark, Kleiner. So you went on to found your own fund. What do you think sets Khosla Ventures apart from the other top-tier venture capitalists? Andreessen Horowitz, Sequoia, Benchmark, Kleiner?

We tend to be much, much broader. Nutanix is an enterprise software company, but then we'll do burgers like Impossible Foods. We'll do rocketry like Rocket Lab, and we'll do very, very hard science stuff. We want to invent new medicine. So we'll do very unusual things— robotics, semiconductor stuff. We've even done the nuclear project.

So you believe that most VCs actually hurt companies, not help them. What do you mean by that?

You know, applying traditional business school and business metrics to innovative startups is the wrong thing. And when people focus on IRRs and rates of return on boards, they actually hurt a company. I don't believe just because you're an investor you earn the right to advise an entrepreneur by being a board member. If you're going to advise entrepreneurs, you should have started companies, known how hard and painful it is, how difficult the trade-offs are. It is painful being an entrepreneur. Life is not easy. And unless you have empathy for an entrepreneur by having done it yourself, you don't have the right to advise an entrepreneur, in my view. So one rule I have in 30 years, I've never, ever voted against an entrepreneur. They don't need hypocritical politeness from board members trying to be popular and be their friends and not help them think through all the risks they're going to face and challenge them. And then these same board members want to vote on things as if they know enough to vote. They don't.

You also don't go to board meetings if you can help it.

Mostly I don't go to board meetings because I can't stand to listen to other VCs talk about things that I actually think hurt an entrepreneur.

So what's your advice to CEOs and entrepreneurs about how to be a CEO and how to not be a CEO?

So first, don't take advice because it's from the board. Just ignore the board to the maximum extent you can, but consider the input of people who have real experience as input to your thinking.

So— and this is interesting because, you know, we've talked about the lack of women in the venture capital industry. I know you're looking hard for a woman partner, but what do you think it takes to be a successful VC? Do you need to have a STEM degree? I know some of your top partners don't. Do you need to have been a founder? Do you need to have been a CEO?

You don't need to have a STEM degree. It helps because you're dealing with technologists and speaking their language makes it easier. So it does help, but probably— and this is not even essential— but the most important requirement is having been an entrepreneur.

Is that why it's so hard to find women to fill these roles?

I think there's fewer women who've been entrepreneurs. So I think as women play more of an entrepreneurial role— and that's increasing, and we have many, many entrepreneurs who are women, even in very deeply technical areas, they, when they get enough experience, will be great partners. But you need the flow at the bottom to increase. And we need to encourage more women to be entrepreneurs.

You mentioned you have a broad range of investments— rockets, food, AI, health, finance, energy— companies with a usually high failure rate. And you say every 4 to 5 years you go deep into an area you know nothing about. What's worked? What hasn't worked?

First, all of them have worked in the sense, like, I've really enjoyed learning a new area. Now, it'll be 5 years before I know I'm right or wrong. But independent of whether the companies are successful or not, I think I will have learned a lot. I think the 2 most important things that can happen in technology that would really change humanity for the better is artificial intelligence and nuclear power, unlimited energy. I can't think of any two things that would impact humanity more than those two things.

You recently tweeted, "If AI scenario happens, we'll have abundant GDP to take care of everyone, but great disparity. Only people who want to work may need to work." Paint the picture for us.

If AI does what humans can do, or most of it. I think it's pretty likely in 40 years of all the jobs that exist today, the majority, more than 50%, will be done by machines. And it doesn't matter whether it's a farm worker, a hamburger flipper, a legal researcher, a radiologist, a pathologist, or an oncologist. So it's not just the low-skill works. If that happens, we'll have dramatic GDP growth, dramatic productivity growth, all the traditional economic metrics, and because more people are out of work, more income disparity. It's hard to say whether that'll happen in 30 years or 50 years, but it will, I'm pretty sure, happen.

But what happens to all those people who don't have a job?

Right. Critical question is, how do we fairly address the people who are left out of this. And it'll be most of the people. The good news is we will have enough GDP to provide basic income to everybody. I know it sounds horrific, but we will have the resources. If per capita income is $150,000, $200,000, $300,000, I think some sort of basic income as per capita income climbs above $100,000 will become very, very important. And that'll be a social and political issue we have to address.

Hampton Creek is a company that so many people have been excited about, and now they're facing some serious allegations. When do you say it's time for new leadership? Hampton Creek is a company that so many people have been excited about, and now they're facing some serious allegations. The SEC is involved. The DOJ is involved. They're accused of buying their own product off the shelves. When do you say It's time for new leadership.

Let me flip this question around. There was a Bloomberg article recently. The reporter believed Ollie Pertove, an ex-employee who accused— who bought some stock, then accused the company of giving false information. I would have bought Ollie's stock. The company offered to buy his stock if he thought he was defrauded. Why didn't he sell the stock back and not lose a penny? He could have gotten his money back and gone away. Marc Benioff is an investor. He didn't feel defrauded. His wife's on the board. Lynn's on the board. She looked at the details. Now, maybe there's other stuff we'll discover, and I can't say what else I'll discover. I personally went and talked to Ali. He didn't have one credible allegation. He suggested talk to these 3 other people. I went and talked to those 3 other people.

So do the allegations bother you? Do they concern you?

No.

First, every company, any time they have employees who leave, have allegations. Sometimes, probably 20%, 30% of the time, they're right. 70%, 80% of the time, they're just bitterness. We look into them whenever it's serious. I won't comment on the specifics.— but suffice to say, we are always looking. Entrepreneurs push the edges. Is the buyback relevant? The $77,000 reported? Completely irrelevant to our investment decision. Why is somebody investigating? Ask the question. Do you know under a Freedom of Information request, the American Egg Board was plotting to destroy Hampton Creek because the egg industry hated them. Unilever sued Hampton Creek for calling their mayor mayor and then withdraw the lawsuit when they realize how bad it was. So there are many, many enemies the company has, including using federal funds in the, in the Department of Agriculture to target a company There's emails that were discovered by a reporter in Washington that said, how can we prevent them from getting distribution at Whole Foods? Now, why would a federal agency be trying? Why? Because there's interests involved here. People, again, who are being disrupted and will get hurt. So I'll tell you it's a complex story, but I can't go into specifics.

How would you describe your faith in the CEO, Josh Tetrick, and your faith in Hampton Creek as a company Do you still think this will be a winner in your portfolio? Do you still think this company can transform the food chain as we know it?

Hampton Creek has already done a lot to change the food chain. They brought sensitivity to the fact that all male chicks, when they're born, are crushed live in hoppers. It's just horrific. He's changing that practice, bringing visibility to it. Caged hens. He's bringing visibility to it. Are they making a difference? Absolutely. Even if they're not successful, they will have made a difference by bringing visibility to these real issues that the egg industry is trying to distract from. As far as CEO's concerned, we normally talk to his team and see, do the team support the CEO? When they don't, We have to have a conversation with the CEO. Do CEOs make mistakes? Absolutely. Do we make mistakes? Absolutely. It's a constant evaluation process.

You're very passionate about clean tech. You've made a lot of investments here. Some people would say that, you know, investors like you and John Doerr made a mistake by going too far into this field. What have you learned from it and what is your response to that?

Clean tech is an important area. Climate change is an important risk. Now, I view climate change no different than I view homeland security, nuclear proliferation, terrorism. They're all risks society faces, and we should insure against them. Now, how much of our GDP do we spend insuring against foreign attack, national defense, Homeland Security. We should treat climate change the same way. It's a business decision on how much insurance to buy. We should encourage new competitive technologies to come up and then stop supporting them when they get to a certain size. It's time to stop supporting wind. Maybe even solar should be— the subsidies should start to decline.

Really?

We've done okay in clean tech. We probably have 6 companies that could be worth $1 billion still. But I'd rather try and fail than fail to try something that's really important.

It's clear you care deeply about the environment. You are incredibly philanthropic. You've pledged to give away half of your wealth. Yet one of the stories that gets written about you most is about a lawsuit that you're involved in around public access to your beach. Some people would say that's at odds.

I normally don't like to talk about things under litigation, but, you know, giving up half your wealth, it won't affect my lifestyle. So it's not a huge sacrifice to sign up for The Giving Pledge. What I find is I can spend more of my time working on technology. I'll probably have way more impact than from my giving. The other half of that is having principles, having a point of view, having a belief system. It's amazing to me how many Fortune 500 CEOs read the press, read Wall Street Journal, and respond to it instead of saying, here's what we believe in as a company. Passionate entrepreneurs like Elon Musk or Larry Page or Mark Zuckerberg, they have a passion that far exceeds their sort of desire for short-term profit. And because of that, they make more wealth and more profit over the long haul. In fact, wealth is just a tool to give you freedom to do what you want to do. And many people, especially people like Trump, get trapped into this cycle of making more. That's not that interesting. And doing all the deals— he thinks it's smart to avoid taxes. It just blows my mind. I'm religious about my belief systems. So when I have a battle on the beach, back to your question, it's about property rights and about a set of people who want to use coercion. In fact, they told me they'd like to embarrass me into giving up my rights. Well, if you have a belief system, even though it's unpopular, even though the press all knocks you for it, you want to live by your principles. Whether it's that or protecting private property rights and fighting for what the law is. And when it's not clear, and there's clearly some things that are not clear in the law, it's important to get them legally resolved. The courts are the way you resolve things, not somebody's opinion, not the press, not, not hyperbole.

What are the dangers of technology?

You know, the way I look at it, maybe 700 million people on the planet have a rich lifestyle. Energy-rich, resource-rich, healthcare services-rich, education-rich. 7 billion people want it. Technology can be used for good or bad. I can use nuclear technology to make a nuclear bomb, or I can use it for nuclear power that provides great services and saves hundreds of millions of lives because of the power, the extra energy we have. And energy use correlates to less mortality.

Do you worry about the dangers of technology?

You know, every time you have a powerful technology, I think we as a society should worry about it. It has negative uses often, AI being one. There are things to worry about. The greater the role technology plays in society, I think the more we will have to use it to service the people at the bottom of the pyramid.

You talk about the value of failure, the value of making mistakes. Do you ever worry about overusing failure as a tool or being too willing to fail?

Everything's a matter of gradation. When's failure good? Depends on who you are. America as a society can't afford to fail. The world depends too much on us. If I'm a mature company, if I'm 100 people or 1,000 people or 100,000 people, I shouldn't fail. That doesn't mean I shouldn't encourage failure. I always say encourage 10 experiments that might fail, but if they fail, you lose 5% or 10% of your assets, resources, your cash, your market cap. But if you succeed, if any of these 10 succeeds, you double your market cap. I do think failure is key to innovation. Because risk is key to innovation. If you discourage failure or don't reward intelligent failure, then you're not innovating and not allowing yourself to succeed in the long run.

Vinod Khosla, founder of Khosla Ventures, thank you so much for joining us today. It's been great to have you.

It's been fun to be here.

We asked some of the best minds in the world from business, government, the arts, academia, what are the most urgent problems facing humanity and how do we solve them? The result is Big Problems, Big Thinkers. What is the number one major problem facing mankind?

I think it's a lack of education. Politics has been getting dumber and dumber. You're dealing with a balance of greed and fear. If we don't find a more sustainable way—

Everybody has the capability of making a difference.

Remember your humanity and forget the rest.

Welcome to Big Problems, Big Thinkers. I'm Terry Blair. In this series, we confront the most dangerous challenges facing our survival as a human race. Climate change, economic dislocation, nuclear proliferation, social unrest. And we examine each issue by asking if there is an ethical framework that can help us face these problems and solve them. To do that, we'll hear from an extraordinary group of leaders as they search for answers and perhaps inspire us collectively to take action. In this first episode, all of these exceptional exceptional men and women agree that climate change is one of the top threats to our existence. Will we be up to the challenge? Will we take action?

When I was born 70 years ago, there were just slightly over 2 billion people in the world, and now there's almost 7 billion. The number of people on the planet has increased by 3.5 times in the life of one person. This has never happened before.

I often telling, uh, my Indian friends and also Chinese friends, I say, combine these two nations, over 2 billion, but 2 billion car oil pollution