Vinod Khosla argues that expert forecasts on energy are no better than random guesses, so entrepreneurs should ignore consensus and bet on discontinuous innovation. He treats failure as expensive education: his fund invested in many risky clean-tech bets, learning from losses to achieve outsized returns, including three IPOs in nine months.
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I fail all the time. I fail more often than most people have ever failed. I've just finished writing a paper called the Black Swan Thesis of Energy Transformation. Wow. I've been developing it for the last 3 years, and it's about discontinuous innovation and why that 1) is possible, 2) it's likely to happen, and 3) most of the conventional wisdom about how cleantech or energy will happened would be proven wrong.
In terms of your research for your paper, what was the most surprising aspect of it that you said, wow?
So the most surprising aspect is Professor Tetlock at UC Berkeley followed 250 experts, the kinds of guys you see on CNBC and CNN and Bloomberg, and expert opinion from them across 20 years of research was about as accurate as dart-throwing monkeys. It is complete baloney. In fact, I believe that the first thing you have to do to make— do any change in transformation is to learn to ignore the experts. They get in the way of real change. I like to say you can use those experts to extrapolate the past or invent the future. And that's what entrepreneurs do. They invent the future they want. And that's what's so exciting. And it's unbelievable how much is possible, how much invention is possible.
How do you ignore all of this noise around you and truly tap into— the reason people look for the noise is because they don't know how to tap into that inner entrepreneur.
It's more than that. You have to think for yourself. You read a lot of stuff. That's a new concept. That's a new concept. You know, your publication will talk about green and hybrids and Prius. 2 years ago, I wrote a blog called Prius: More Greenwash Than Green. If you really think about the Prius, it's all greenwash. It's nothing green about it.
No.
Its carbon emissions are higher than normal cars.
And the batteries are going to make islands in 30 years.
Right. And the cost is uneconomic, so it doesn't work. It defies the laws of economic gravity, as I like to say. And you know, we live in a capitalist society. Anything that defies the laws of economic gravity is temporary. It doesn't scale. It doesn't matter. And now the interesting thing in life is if you believe this, you stop investing in these incremental things that don't matter and you take much bigger, riskier bets that may fail. But what's important to me is— and I don't mind failing. I fail all the time. I fail more often than most people have ever failed. What matters is is that if you happen to succeed, not how often you fail, but if you succeed, it's worth succeeding at. I claim that most green tech investments are not worth succeeding at. Take biofuels as an example. We probably had 8 investments in the second-generation biofuels. The interesting thing is we looked at 5 years ago all the possible ways to make biofuels and decided to invest in all of them. Now when you do that, you know some will fail.
But that's okay.
The failures didn't matter. The successes more than returned the whole fund. And that's the key to black swan thesis that I talk about. And in fact, 3 of our 8 companies have done IPOs— Cure, Jeevo, and Amaris— in the last 9 months. That's pretty damn good. Which other area has done 3 IPOs in one fund?
But don't you think that a lot of people, because of how successful you are, more people are looking at what you're looking at? Does that concern you at all?
No, we've learned a lot. In fact, you know, in some ways my thesis is to screw up often, but screw up ahead of everybody else, and then learn as much and use it to make subsequent investments. So I feel at this point we've screwed up more often in biofuels or biochemicals or solar or batteries than almost anybody else. And because of that, we are further down the learning curve, and hopefully we can take advantage of it. Now, sometimes the best investments are after you screw up in an area, learn your lessons, and then use that to make your subsequent investment. That's okay. It's just an expensive education. But, you know, losing 10 or 20 million bucks on an education is not bad if you can use it to make 200 million bucks.
