Vinod Khosla is a legend in Silicon Valley. He's the powerhouse behind Khosla Ventures. Way before that, he was one of the founders of Sun Microsystems, and then became a general partner at Kleiner Perkins. He's also done many other amazing things. Vinod gave the keynote at Stanford's recent Graduate Business School event. Afterwards, I gave a breakout session talk with Heidi Roizen, where she called me a cockroach.
Vinod's keynote contained all the stuff you'd expect to hear from a super successful entrepreneur and VC. For most people, I'd imagine it was underwhelming in its obviousness, but only because hearing someone talk about what it takes to be successful is so different from actually doing it. Vinod offered no magic bullets. Just a solid list of advice that any current or want-to-be entrepreneur has heard and internalized. Things like, "Be a risk taker." "Be a good listener."
That's the entire point of why I'm writing a blog about his talk. There are no silver bullets. The key is to execute flawlessly on the basics. And that's so incredibly hard that most people don't do it.
Vinod highlighted the importance of perseverance in his talk. But the actual example of how he got into Stanford business school is what makes it shine, and what separates him from so many others.
When Vinod applied to business school, he was rejected. Instead of accepting that, as most people would do, he actually arrived at Stanford on the first day of classes, and got a note passed via a friend to the dean of admissions. Vinod told the dean that he was sure someone wouldn't show up for the first day of classes, and that Stanford should allow him to take that person's place, because he was already there. And that's exactly what happened.
Reading this, and with the benefit of hindsight, it's easy to say "that was awesome. Well done, Vinod." But that's biased thinking, because we already know it turned out well. The real question to ask is, "Vinod, how many risks did you take that didn't pan out? And how did you motivate yourself to keep trying after those failures?"
And I would ask you that same question. How many risks have you taken that make you uncomfortable because it's likely that you'll fail? And what do you do after you don't succeed? Risks are obvious and awesome with hindsight, but terrifying in the present.
I'll leave you with one last quote from Vinod. He said that being a VC means investing in things with a high chance of failure, and he's willing to do that so long as the consequences of success are large. His quote:
"A 90% chance of failure sounds pretty bad. But a 10% chance of changing the world seems like a pretty good deal."
Well said, sir.
Executing flawlessly on the basics is hard, but it's what can separate you from your peer group. You just have to believe in yourself and be willing to take the risk.
I did a breakout session with Heidi Roizen after Vinod's talk which delves into these themes in more detail. Thanks to Stanford GSB student Nicholas Hinrichsen for setting that up.
Here's the video of Vinod's talk at Stanford's GSB event:
Here is a transcript of Vinod's talk:
FemaleSp: Right, sit back and I will call the next group. Got it?
Alright, so who here is a student at the Stanford engineering school? Please stand up.
(Participants standing up)
Great, okay sit down. What about the medical school?
(Some people stood not captured by the camera, but people in front of the camera were able to see them!)
Okay good, yey! Alright good. How about students at the geo spheres? Students at the geo spheres.
(Participants stood up)
Surprise. What about any of the great, students from the great colleges that we have, the great schools that we have around this campus? Anyone from another college?
(Couple of participants stood up)
Wonderful. Okay, what about Stanford Alumni? Please stand up.
(Participants stood up)
Awesome. Fabulous. And what about the greater Entrepreneurial community?
(Participants stood up)
Great, well again welcome. As you can see we have such a rich diverse community that’s coming here tonight and we will hope that we really gain with your interaction with this phenomenal group.
So, with that speaking of what we are going to be doing tonight, we hope to bring you a unique experience. We call it an immersion in venture design. And we have brought together over a dozen of entrepreneurs and investors beginning with Vinod Khosla the founder of Khosla ventures and ETSB one. And we will hear about his philosophy about founder’s vision. Then we will have great sessions following this session with the entrepreneurs and investors, you will get a chance to immerse yourself with an issue that an entrepreneur and their investor face as they were designing and growing the company.
And as you see from this experience the solutions are not that obvious, it really takes an action oriented thoughtful leaders as well as leadership team in order to make it through some of these challenges and create opportunities about them. So with that I’d like to introduce somebody who is going to be in conversation with Vinod tonight and that is Professor Chuck Holloway. Chuck is the [could not understand] for professorship and management and premiaterist. He is also an expert at the study and the education of people in entrepreneurship, supply chain and as well as technology. He is the co-founder and the co-director of the center for entrepreneurial studies. And I’m so incredibly lucky to have him as my mentor because he’s passionate about entrepreneurship, most of all he’s an absolutely wonderful person. So please welcome Professor Chuck Holloway.
Chuck: Well thank you Sarah for those kind words. Let me add my welcome to all of you, it’s a pleasure to see many of you whom I haven’t seen for a number of years. And so welcome back to GSP. It’s my great pleasure to introduce to our speaker of the night, the kudos speaker of the night, Vinod Khosla. Vinod has a great agreed from the Indian, from the Indian Institute of technology in New Delhi. He has a Master’s degree in bio medical engineering from Carnegie Melon and he has a MBA from the Stanford business school.
By the time he was 27 years old he had been a co-founder of the desk systems which was one of the first CAD companies in the world. And he had founded Sun micro systems. So I know someone who doesn’t let any grow under speed. He’s an entrepreneur, he’s a venture capitalist as you know he was a venture capitalist trying to Perkins starting 1986 and left and founded Khosla ventures. He is a trustee and has been a trustee of Carnegie Melon. He was a founder of the Indus entrepreneurs. Network of entrepreneurs throughout the world who create entrepreneurially ecosystems that are in 9 countries I believe.
He’s involved in microfinance to eliminate poverty. He is involved in alternative energy and environment. He’s passionate about and one of the things that, if you know it well you find he’s a great passionate about his children and I’m going to say that they have probably more info. On you than most anyone else that I have ever worked. He’s a listener but he listens to his children a lot and they have a lot to do with his interest in elevating poverty and his interest in the environment and alternative energy. There’s one thing up here that I should have added that is perseverance. Vinod although he’s a graduate at Stanford business school was turned down. He’s actually got on the waitlist and when got on the waitlist he made a breakthrough at that point in time and he made a point to come out he created a best friend who was the, those days they call them secretaries for the ignitions. And she was such a good friend at his that when he came back he stayed with her. And so he kept in his message to admissions and finally the day the classes started Vinod showed up and he stayed the night with his friend.
So contrary of being admissions. And he sent a note to make admissions I know somebody’s not going to show up. He was a check and I’m going to be attending classes today and sure enough fortunately for us nobody showed up and Vinod was here. So perseverance is a really important characteristic of Vinod Khosla.
I want to say just another word about Vinod. And she’s a great board member; she’s a tough board member. But he gets different ideas to be a board member. Let me quote couple of things. “The right advisor asks questions you never knew that are important. Mistakes, they might not see because their heads are down try to develop a business even more critically almost three decades. Being on board on some advising companies I’ve never voted against what a team wanted to do even though, even though I might strongly disagree with the choice.” I will debate every issue he’s famous for this. Hard push point of view but in the end it will be of advantage it will clear the ones which will be voted for the company.
Vinod is a great friend of the school, and we are very fortunate to have him here this evening. Please welcome Vinod Khosla.
Vinod: Thank you and good evening. Let me start by apologizing, I’ve a terrible cough and cold, I’ll try and cough my way through of few minutes of talking to you. And hopefully have a more interesting conversation with chat. My personal view is most people project the future by extrapolating the past. It was Alan Kay who said the best way to predict the future is to invent it. And my urge to all of you I presume all of you are interested in entrepreneurship is to invent the future you want.
More so than anything else I do believe it is completely possible, in fact more possible than most people believe. So a few of my favorite slides, human beings are more limited by what they think they can do than what they believe in what they do.
It is amazing how often this is true, one of the phenomena we recognize in the venture business is you take the nearly impossible task. If one person does it have that breakthrough soon after 3 people will have them. Why because it was suddenly proven possible.
The second thing I want to say to you is none of this happens without you being afraid. One of my favorite quotes is all progress depends on the unreasonable within just as George Brenardshah should have said we fought him with fidelity. Anything reasonable has already been done. If you’re going to do something unusual you’re stretching the limits of what’s reasonable and hence you have to be scared a little bit.
And so don’t be afraid of being scared feeling in your stomach as every entrepreneur knows. There’s no courage of the meaning if you’re scared.
This one’s obvious. The number of people who fail because they fail to start far far exceeds than the people who fail they failed to start itself.
And the bigger the vision the bigger you have to be prepared to fail. I’m in a fortune acquisition every time I fail at something press loves to write about it. In fact whether it’s just homemade failure as I often say a temporary failure they like to make a big deal. But it shouldn’t let that scare you. This goes with courage and goes with the fact that all unreasonable stuff, all risk taking involves a chance of failure. And the bigger the risk is you’re taking the bigger the chance of failure.
Once said that I don’t mind to get 90% chance of failure. And I don’t mind investing in something that has a 90% chance of failure if the consequences of success are large. Now in 90% chance of failure sounds pretty bad. But a 10% chance of changing the world seems like a pretty good deal. Two coins of the same probability sure.
(Coughs, excuse me!)
The other thing and Chuck talked about persistence and I got one other slide on persistence. Once I believe something I never let it get me down. If I fail at something I always willing to get up and try again hopefully more intelligently and I will come back to this issue of trying again and failing well.
This is a quote I extracted from film on sky diving that I saw when I was actually at the business school. It’s a movie on the sky diving I believe that, I’m sorry it was this movie on plane gliding; mixing my activities I enjoyed both. But the movie was dedicated to dream the dreams, to those who dream the dreams and then are foolish enough to make them come true.
Now this may apply to hand gliding but it also applies to entrepreneurs. If you think about what I said earlier people, only unreasonable people do unreasonable types. And normal people do usual kinds. Then you have to be somewhat foolish to attempt the things that nobody else would attempt. You have to take that step beyond reasonable into the domain of the full approach. And almost certainly everybody around you will tell you that, boy that’s a silly idea, or why it will fail, or snicker behind your back.
Fortunately in Silicon Valley that culture is gone away. It used to be that, what, how many of you are from Silicon Valley, any?
(Few hands are raised!)
Quite a few, great. Hopefully you spread this culture to other parts of the world. This is why entrepreneurship doesn’t work as well outside Silicon Valley, because there’s too much conventional wisdom trying to suppress the budding entrepreneurs and their foolishness. Too many people telling them what can’t be done instead of what is worth attempting.
How many have actually been entrepreneurs?
(Few hands rose)
Those of you who’ve been entrepreneurs know how lonely it can be. Yes? When you’re doing something though that other people haven’t done most people either don’t believe it’s going to work or don’t think it’s important, one of the two. And you strive away in your corner will hopefully you see its impact.
And some impact is greater, longer than others but almost always very few people recognize what you’re trying to do. And I encourage each one of you when you’re going through this phase you remember of us have gone through this nobody believes that nobody knows that why what you’re trying to do is important, and they nod politely shall with you.
And you’re with the kind of persistence that needs to get the business scope. In that too almost everything I’ve done since. And no matter what stage you’re at this will keep coming back to you again and again.
Let me give you an example. This never goes away no matter whether you’re starting your entrepreneurial career or at a later stage in your entrepreneurial career. One of the guys I want to highlight is Élan Musk, I presume everybody here knows. Being a successful entrepreneur and having made a lot of money at PayPal, he decided to try 2 or 3 unreasonable things. First to build a car company, an electric car company when they weren’t practical. And then to build this space launcher. Now how unreasonable can you get beyond that.
Not only to it that he stuck with that to it with persistence in a way had he almost lost everything had he made. But did it scare him off what he’d believe in? No. It’s one of the boldest acts I’ve seen and I love that courage of your convictions that he had in sticking with what he believed in, what he want to do. And through all the ups and downs he stuck with it. That’s a very important characteristic. Now hopefully in QnA we can talk about what we ask in it and what not to ask in it about.
But this is very important, I could ask pretty much every week ‘How come you guys are still investing in clean energy?’ I said, because we believe. He keep looking, he keep looking for bigger breakthroughs with nobody would touch solar he made two new solar plasmas last year. We invested in ground beef last year. It doesn’t matter what others think because if you are investing where everybody else thinks is a hard area you’re investing in an overinvested area. You’re investing in fashion; you know many people who invested in clean as fashion. The few invested in it because if they had a belief system that has stuck with. It’s become much harder but that doesn’t mean it’s become less lucrative and they got pretty convinced this will be more lucrative because there’s far less competition.
The other thing you have to do if you are in an area like clean tack today, you’re overselling your heart out. As not a nerd you’re selling investors, you’re selling employees convincing them to join the area everybody thinks is dead. But the life as we know it is about selling everybody, their employees, their vision, their investors, their products, absolutely a critical part of entrepreneurship.
With a lot of guts, confidence you normally shouldn’t have and I often say with premature confidence because one of the great thing about being an entrepreneur is often you’re naïve about many of the serious problems that deter the more knowledgeable. Now think about it – if you had as much experience, you’d know all the reasons why you shouldn’t do what you’re doing. You wouldn’t stop; you fail to try from my earlier slide. If you don’t know all the problems but have a larger vision, you jump in. And then as you’re running through these problems the experts told you would get in your way the reason they wouldn’t do it, you have no choice, you suddenly in domain of that cold adage ‘necessity is the mother of invention’. Either you die or you solve the problem that has come up. And because of that you solve the problem. You bang your head against the wall and you keep going again and again till you solve the problem. And more often than not if it’s dire enough most problems are solvable. And that’s why premature confidence, a little bit of naivety is so important.
Chuck mentioned to me earlier that he wanted to talk to me about my views of healthcare. I’ve never invested in healthcare. I know nothing about healthcare and readily admit that my naivety about it frees me up to try something’s that people who are live in the domain of reimbursement and codes and things like that won’t cut out. And that’s okay, premature confidence is extremely important. But then knowing how to be on the flip side of it and be paranoid is equally important.
Andy Grove wrote a very important book in the ’80, it’s called ‘Only the paranoid survive!’ I think you have to be both overconfident and paranoid at the same time almost razofrenek in your personality. Overconfident about your ability to solve a problem. Paranoid that everything will get you so you constantly looking for the problems.
And willingness to fail. I fundamentally state that my willingness to fail gives me the ability to succeed. If I wasn’t willing to fail there are a lot of things I wouldn’t attempt or try. And so this is absolutely critical and the more you start and start to take the risk out of it the less likely you are to do something significant or meaningful. And I’ve seen the venture business gradually reduce the risk of a venture to the point where the consequences of success are inconsequential.
If you increase the probability of success that you decrease the consequences of success. I’d much rather to having a higher probability of failure but to make sure if I succeed it’s consequential. It’s a pretty explicit tradeoff most entrepreneurs make.
Here’s my fun part. This is what I mean by healthcare saying I know nothing about healthcare that’s why I think I complain. Irreverence, disrespect for experts absolutely key to, now I know it sounds frivolous but let me give you the real statistical data that experts need to be ignored. They limit your thinking on what’s possible. Professor Debt Lock and UC Berkley did a study. He took 28,000 expert forecasts on 250 experts. So statistically valid number of experts, statistically valid number of forecasts on the wide range of topics. What he did, and this was a 2 year study, he gave priority at the time of the forecast, classified what would be success, failure or something in the middle. Three different outcomes.
The average statistical accuracy of experts in predicting the future was about the same as Dotroy monkeys. Now I tell you this, it’s sort of funny most US policy gets made by these experts but it is why entrepreneurs ignore these experts. Those of you are statistically inclined there’s a book called ‘expert political judgment’ rigorous statistical treatment of expert opinion for those of you less inclined very fun book it’s called ‘future battle’ by Dane Gardner.
It’s hilarious, pardon me but I could go on expert opinion, great talk on that and I love giving but this is why irreverence and rule breaking important. When you put pain and you mark it, you can’t play by the rules of the markets, you make up your own. Unless you make your own rules in the game you’re going to lose to the incumbents.
In the interest of time I’m going to move a little faster. And uncertainty shouldn’t faze you; this leads me to the other VC problem of make a plan. I’ve gotten to hate plans. I don’t really care about plans. Plans are very good for one thing, they are good for seeing how an entrepreneur looks at a problem, how the enterprise cells. But so much is unknown that you can’t really plan. I only use plans to judge the quality of thinking of an entrepreneur not what they’ll actually do. And very few entrepreneurs end up doing what they plan. You have to be comfortable with that and of course comfortable with big hairy audacious goals.
Now, let me talk on this a bit, because there are different styles of entrepreneurship. You can definitely own and start a new restraint and that’s good entrepreneurial activity and less risk. But that’s not the kind of thing I’m talking about because I know nothing about the kind of entrepreneurship that involves risks but relatively smaller risks. Large personal risks because most people invest their own life savings into starting their restaurants so not to be taken lightly. But I’m talking about setting large goals. If the uncertainty is launched, you want the consequences of success to be launched. The venture startups don’t work unless if you succeed. You succeed in a big and consequential what, and that doesn’t happen without the big hairy audacious goal.
Incremental improvements don’t work in the metro model in my view. The other thing that is important is to point view; we all must have a point of view. Elad must have a point of view. Larry Beige had a point of view. Most good entrepreneurs, Steve Jobs had a point of view. Andy Grove had a point of view. And they’re never afraid of their point of view. You know, being a few years ago Andy is not well now but when Andy was feeling well I invited him to a CEO conference. He called me up and said hey I love to come and speak but you mind if I tell your people why you are all wrong. Then I said great.
He clearly had a point of view on everything. And points of view are important because if you’re doing the same thing everybody else is doing you’re not doing anything unique. You’re probably not doing anything unreasonable. So you have to dare to be great. You do something great, something consequential.
But in that, in all of entrepreneurship one thing you can’t ignore is the people. It’s the single biggest area of mistakes I see. People either ignore the value of people, or run over people. But they don’t realize that people are the key to achieving all unreasonable goals. Think about it, if you are taking on a large hairy problem and you are naïve about it your probability of success is little low. Because there’s lots of things that you don’t know.
And for everything you don’t know you need people that arguably help you avoid those errors, those mistakes. I have a paper on our website at Khosla Ventures there’s lot of resources for people for to note I for 1 – I particularly love all the engineering of a pool of a startup. You not only plan, make a business plan to go with that. Assets whether it’s your technology or your idea, you’re engineering for your weaknesses. Because not only your assets can help you but your weaknesses can kill you. And usually the weakest link does. So engineering the gene pool of a company to the risks the company might face is key, and people are key to that engineering of the gene pool.
So let me talk about perspective a little bit because I get asked this question. You can’t start day 1, and some of you are young and some of you are probably multi line entrepreneurs, I see a range. You don’t have to have a change the world perspective day 1. It can change over time. Let me give you an example. When I was young I had to get milk every day and wasted a lot of time. The milkman milked the cow and I had to be there to get milk because it wouldn’t keep. And so I decided I want to do soy milk products so that wouldn’t have to be refrigerated every day. That was pretty new world view for me. I was solving one of the problems I had. Because I was an electrical engineer I started thinking about how you could do CAD design. Later, and most people don’t know this, and this is a great lesson, how many people know I started a company called datadump? Anybody here?
Hah, one hand is gone up. Here’s the key thing – failure does not matter. People don’t remember your failures. We started; Tok McNealy and I started the datadump 3 months before we started sun. And yet how many people remember sun?
(Vinod nods acknowledging that lot of folks have raised their hands – couldn’t be seen in the video though)
How many people remember the datadump? My point – people never really remember your failures. But the point I want to make is overtime on my perspective on what I could impact proved. And in some sense I keep expanding my perspectives because I want to change energy, and I now I want to change food, we’re doing a lot in food. Now I’m going to change healthcare.
But it’s okay to start with soy milk or something smaller. These are stepping stones and as you are successful, you can grow your perspective. But here’s the hope I can give you. Shortly as in 1985 nobody could imagine a PC in every home. In 1990 nobody could imagine email for grandma. And I had dinner in late ’89 in New York with couple of my MBA friends, and I put my email in my business card and I got laughed at by them by having an email address on my business card by my MBA buddies. Because it was so nerdy and unusual. In 1995 you couldn’t imagine the internet. 18k and every major areas in this country told me in 1995 the year me and Pradeep Sindhu was thinking according to them that they would never adapt TCP/IP as a protocol. TCP/IP is the core of the internet, never. CISCO said they would never do it. They all saw it to be unreasonable.
In the year 2000 I did a 3 day seminar in Telecommunications from McKinsey in India, they asked me to chair it. And not 1 person was willing to accept that mobile and TCP/IP would be the dominant. They will still trying to see how to get more landlines into India. My point is reason for optimism. Because all the things people assume won’t happen do happen and they happen regularly. They happen every few years, and I just picked a few examples.
So let me talk a little more personally. There are many many reasons to be an entrepreneur. I urge people not to be externally driven. To know why you want to be an entrepreneur, many of us know that, never having to bounce your checkbook, it’s a nice thing, never having to carry the American express card is nice. Never having to say you’re sorry to have your own playpen. Having passion to your particular vision, just to work with friends.
These are all valid reasons. The problem happens when people confuse these reasons. So I urge you to be clear, because you build your venture differently. I know people who are really happy because all they want to do is work with people they really like and don’t want the company. They just want to have fun. Especially second and third time entrepreneurs often go back to; hey I want a great environment to spend the rest of my life.
Whatever your reason, and all of these are valid just be clear. Let me go through this quickly and start. This is a slide that John Drewer came up with first, let me give him credit. There’s a difference in people who are trying to do entrepreneurship for mercenary reasons versus missionary reasons. And I won’t go through all of them. But I thought it was such an important slide that I shared and I carried it with me for years, whoops sorry let me. The last is very important; I find the lust for making money mostly leads to unhappiness. The lust for making meaning and passion and changing the world is so motivating, whether you succeed or failed, entrepreneurship is really really rewarding.
So let me finish by saying the rate of change will accelerate and that’s always good for entrepreneurship.
Thank you let me stop there.
You know that we can sit down over here.
If they have a few questions.
I apologize for my bad throat.
Well, we are very pleased that you were able to overcome it and coming just in time with its.
So I want to ask you a change with it’s going to change to questions from the audience, but. I want to follow up on your statement that it’s important to know when to be absent and when not to be obsolete and so, do you have any advice on that?
Yeah, so to be honest this is not my first game to the 100k entrepreneurship competition that we had in MIT a year ago.
We wanted to be prep just in case in accordance…
Yeah, but as a version of this talk that is much more tactical for entrepreneurs like, what you do day to day which is a little high-level. And that’s on our website and I gave back all too all our CEOs about a 100 of them last year. So, it’s under the Khosla ventures CEO summit 2012. And it’s called lessons from years of screwing up. I love that topic because I was screwed up more often than anybody else I know when it comes to entrepreneurial ventures.
But, you know, many entrepreneurs struggle with this idea of when to change, when to premature, you’ll hear that term a lot, when you stick with your vision and be persistent. In the stock I talk about… It’s okay to be persistent about your vision, and be flexible about your tactics. So how you’re getting through a goal, you should be extremely flexible about it. When you hear pinging slightly sort of in experimentation and pivots what they’re really talking about is to find lots of things to figure out what actually works.
But I believe unless you have a passion for a vision that you’re trying to convey to your users, it’s hard to be successful. You sort of have to be option ate about your vision but the vision must be really purled than experimental, and tactical about tactics.
That’s a very important distinction, and well I didn’t want to talk to you about your solution about the medical role that the expectation that doctors going to be gone in 10 to 20 years. I think I leave that and we’ll get a question from the audience.
Audience: So Vinod, thanks for coming. First of all we’ve collected a couple of questions on Twitter including one from Wikilabs. What industry does your advice which we are linked to work in?
Vinod: What industry?
Audience: What industry do you advise us to work in?
Vinod: Well, I’m glad that’s the first question. You know what I have found surprising is that only thing needed to work in the industry, and in a way is imagination. I go back to what I said earlier. Most people are limited by what they think is possible, not by what is possible. So patt conn who was a professor here in Stanford in the genetics department gave up his tenure and a Harvard Hughes fellowship, because he wanted to change all animal husbandry on this planet. Now that’s a big very audacious scope.
So what’s he doing with us? His first task is to make hamburgers. Honest to goodness we are innovating how hamburgers are made. If any of you have walked into a CVS recently we just introduced a line of Candy corn I am real, which is not healthy but it is way healthier than Mars Candy. We just introduced a salt that’s half the sodium. We’ve done 2 or 3 startups in agriculture.
Three PhD’s from Stanford, now I will give you more and more Stanford examples, decide they can measure Nitrogen, Potassium and other nutrients in soil in near real-time. So farmers can those appropriately saving money on fertilizer in reducing the environmental effects of run off of excess fertilizer. Climate change has parameterized climate insurance, so we can offer a crop insurance scheme in competition with a free service like a federal crop insurance program. We just invested in a company that’s redoing stainless steel.
So we invested in glass making it electrical mix, so we can go from dark to light so you don’t need light air conditioning blowing. So I don’t know how many weird areas I can point to, but wherever I look there’s room for dramatic innovation. So, to your question you name an area and probably find a way to innovate there. And so it’s not everybody has to be in software, I think that’s a fallacy I think we are dedicating probably too much of our resource in software though we invest a lot in software. Having said that beyond software now, machine learning and intelligence an area that I think has more potential for change than all of software in the next decade.
We’ll start to see intelligence emerge at the level we haven’t seen, which leads me back to the question you asked me. Like why do you think you can replace a lot of doctors? What I’ve said to be very very crystalize, software and machine learning can replace 80% of what doctors do way better than the medium physician can. Now, most people argue with me in that 50% physians aren’t below average, but I’ll leave that argument alone, I’ve actually got arguments bad.
So, I’ll just have a follow-up on that in this. You talked about areas where you could see innovation. If this happens with medical, what are some of the opportunities that you would see for people who want to invest in that career?
So one basic kind in medicine I can say that is shocking to some people but I’ve never had a knowledgeable observer to challenge me on that in the next 10 years data and data size will improve medicine more than biology. I know there’s a bunch of med school students here, and I presume that some biology students here. But that’s a shocking statement that data and data sites will so improve medicine more than biology will. It’s not the next receptor that motivates to cure cancer, its machine learning methods to do better analysis, find a better prescription, better dose and maybe even exact modeling of the human body.
I was just reading an article early this morning in new scientist that said, by modeling the arteries from your brain people will be able to predict which autisms will likely to burst to cause a major crisis.
Now, there are half a dozen examples to break mathematical modeling, who’s likely to have a heart attack, who’s likely to have a brain anuria, like to go on, look up new scientist. So almost every area I looked you see this. So let me give you one stunning example. Now there’s a standard for stroke victims, stroke is a pretty common case, Keiser see lots of stroke victims because they have a lot of patients. Somebody in their data science group decides to look at how they were treating stoke victims and what happened. With the existing drugs simple stats that most of you probably familiar with. By changing how they list their stats they reduce death rates for incoming stroke victims by 40%. Now there’s no drug for stroke victims that had that dramatic improvement, but simple data analysis did that. That’s pretty stunning.
It gives me so much open opportunity that there’s probably a 100 such things buried in the data that we haven’t looked for. So med students go there, big data analysis.
One more question from the audience.
Audience: Thank you. Mr. Khosla I have high respect about you, not because you were successful entrepreneur, investor, but I respect you because you are a sage in life journey. So my question is about entrepreneur’s personality. I think there’s may be a dilemma of the personality as an entrepreneur she must be visionary to look afar, but in the meantime she also must be pragmatic to start from little. So to be a great entrepreneur there must be a bridge between the dilemmas of two sides. What that bridge would be? Thank you.
Vinod: So I’m not sure I fully got your question, but let me try and answer it, I know we are running short of time. Entrepreneurs are mostly schizophrenic. It has multiple personalities. I talked about premature confidence, and I talked about paranoia. Paranoid you are going to fail, and tactically doing all the things to avoid all the risks, while being overconfident in your objectives beyond reasonableness in being unreasonable. This optimism is hope in vision, but pragmatism is also important. There’s another article I’ll refer you to that’s also on our website that I didn’t find but I loved it, it was written at NCAT by a professor there called effective reasoning and by entrepreneurs effective reasoning.
Entrepreneurs set their long term goals, good entrepreneurs. They know what they shooting for. But the dumb entrepreneurs go from here to their goal. The effectual reasoning entrepreneurs as this paper describes, now I put it on our website even though it’s probably illegal that’s ok I like irreverence and breaking the rules, they look at what they got what the resources are currently and this is a really important concept for entrepreneurs. That even if you can’t bridge to your vision you have a current set of resources, they look at how do you take your next step whether it’s little bit to the left and not directly at your vision or little bit to the right, wherever it is however you make progress even if it’s not manically towards that one objective.
Let’s see use the resources you have to gather the next steps so you can gather more resources and get closer and closer to your vision. This paper describes it usefully and it’s explains the problem of how do you have a vision that’s too impractical yet to take lots of pragmatic steps towards your vision. I think it’s a really important paper, I urge all of you to think about this. It’s also same as being able to arsenate about your vision and the stretchable about your tactics. Thank you all very much.
I had a pleasure of knowing Vinod for 30 years and you can now know we’re in a lot of things and Vinod thank you very much for coming. And we are very grateful that you fought the cold and made it here. So once more thank you Vinod.
So I want to just take a minute to introduce a concept that we’re going to use as we go through the rest of this program. It’s something that we feel is important. A set of concepts, a framework if you like a philosophy of venture design. It’s not a philosophy of starting a company; we hope that this will be certainly useful to all of you.
To start with we all know a venture needs a product or a service. And it’s very important to have product design. But I would like you to think about is to have an impact, to have a successful sustainable company you need more than that.
All parts of a company, all parts of a venture have to be designed, not just the product. And that’s where standard for total venture design comes in. When Thomas Freidman was on the stage last year one of the points he made was the world doesn’t need more products, but the worlds needs more companies. Companies hire people, companies have impact on the economy. And for the world to grow and for us to come out of poverty we need more companies.
And that’s what we are about. And so I want to spend just a minute here talking briefly about the venture ecosystem that we see in terms of what we call is Stanford total venture design. And it starts with people. And it starts with people with a vision, and it goes out from there. If you see the orange there, we have the opportunity and a vision. But around it is a venture. Now you can decide you can define ventures in a variety of ways, but we think it’s important to recognize that is it a product or a service, but also to recognize is it a business model.
And important to understand that there’s an organization and a culture and a business processes, manager of competencies and management systems that also need redesign. These don’t appear just magically as you start to create a venture. And a third part, this is equally important and that’s what’s in the white which is what we call the outside forces.
As a company you need to be prepared to interact with the outside forces, not only prepare to interact with them but be prepared to interact with them and take advantage of them. So what are some of them? Well there’s obviously technology, there’s web related markets, obviously consumer markets. There is the economy; there are suppliers who can extremely important to start a company.
There’s a side in a way to which you can interact you can either make it better or worse as a company, better or worse. The financial market of course and regulations are source of advantage for many startups. The regulations when come in often create opportunities for startups. And then there is a national environment which more and more we see is not only important for us to deal with in terms of protecting it but without suggested it gives you an opportunity actually in terms of the way in which you might start your business.
So this is what we think you’re aiming at. And we think that each one of these components is important. So the question is though how do you go about designing them?
And so we have some processes and activities we think are useful in thinking about, there’s the identify phase where you identify an opportunity, and you identify founders with a vision. There’s design as I said, you design the product or service, and you design the business model. You design the organization culture. And then there is the implementation phase where you look at management competency, business processes, management systems and the way you interact with outside forces. So all these are important.
And they come together in a diagram like this where we added people. Now when you add people you also have a requirement of leadership. And the question is what kind of leadership is important and when do you have to have this leadership? Well, there is variety of leaders that you need in an entrepreneurial study. There are the believers, the visionaries - they are the doers, people get the work done. They are the observers, the people that are paying attention to what’s going on. They are the collaborators, the people who actually work with you and your outside forces. And importantly they are the experimenters, because one of the things that happen in every venture that I’ve ever been involved with, and every mission that I’ve ever known is that you iterate, you don’t get it right the first time. And so leaders that can push you through this iteration process, this experimental process are very important.
So these are three aspects then of total venture design and one are the components of the venture itself, including the outside forces. It’s important to understand all these. Secondly there are the process and activities that allow going through and designing them. And thirdly there’s the leadership part of it. And what we hope to do in total in venture design is give you some idea of how these various aspects of venture can be created.
So what I’ve done here is I’ve expanded on one of the sets here just briefly. And that’s on the business model, and I went to sun microsystems as an example of where innovation in a business model can be important. As a matter of fact if you look at all the companies that exists that actually turn out to be valuable, it’s often the case that the innovation this comes. It’s not a product, the innovation is comes in a business model.
So what we have up here are a number of aspects in business model that had to be designed. The addressable market, competitive positioning, pricing and revenue model, I hope that those of you in business school surely making a little translation here. Addressable marketing, competitive positioning strategy, pricing and revenue model – finance, go to market strategy. My point is here that there are disciplines that are associated with these and we think that as we develop this we’ll be able to get the disciplines to be more focused on these aspects of the business model design.
So I want to just do two things with this design to give you an example of how they are going to wary. So let’s take competitive position. When sun was started there was one key factor that every technology company believed in. And Hari you can correct me on this if I’m wrong. But, you had to have proprietary technology that was a way you protected your product, not only the product itself but all the peripherals. So you design them all and they were proprietary. So if you bought computer or a workstation which was Sun did from a company, you also bought the monitor, you also bought the disk drives, you also bought the network equipment etc., etc.,
When sun microsystems turned this and it’s a hit. They said we’re going to have an open system. And they did for a couple of reasons. 1) They went to take the advantage of the supply network for building all the components. They didn’t had to manufacture, and design and manufacture by themselves. 2) The second and perhaps more important here is while that which differentiated them from their competitors because the barriers to entry were much lower. And the barriers to exit were much lower. Here’s what you can do, you can try our program and by the way if you don’t like it you can buy all your own peripherals and you have those peripherals. So importantly they had advantage in the marketplace when they did that.
So one other example and then I’m going to close. It is relationships, strategies and with suppliers. When Sun was starting Hewlett Packard on the road was also designing a workstation. They had 300 engineers working on this. Vinod decided he could probably afford to hire 40 engineers. He also thought, if you notice he has a lot of cousins, he also thought if he could get it done with 8, but he could only afford 40, so working the other 40 engineers. Well, he went to the suppliers and he said I want you to buy compliments from; I want you to design new compliments because the technology I’m going to add is going to require you to have better compliments.
And I’m going to give you the technology required, because we know what it is. We are going to give that to you because you are going to be a hit above your competitors. And moreover once you design this for us you can select whoever you want, we don’t care, we don’t ask you proprietary. Vinod, Scott once said to me all we need is 6 months, we get 6 months we’re a hit. And technology is going to change anyway and we’ll win on that. After he did that he also said and by the way you’re going to give it to us cheaper. Why you’re going to do that? Because we’re going to be the big customer. If you heard Vinod talk about salesmanship’s important. One of the best sales people I’ve ever seen is Vinod Khosla. And this gives you two examples of the way in which he and Sun used the design of the business model to be innovating and to provide a competitive advantage.
So with that I want to turn it over to Mark Khupta, Mark where are you? Mark is one of the organizers of this event. He’s going to tell you what the next phases is going to be. Thanks.
Mark: I hope you enjoyed the first part of the conference. The Vinod’s speech, conversation and the introduction to venture design and how the CES used that. Let’s give a round of applause for…
Now everybody’s going to head to individual breakout sessions, you can look at your card and see which one you should be going to. But I just want to talk about what we actually have here. The team that we put together with MBAs, we’ve got investors from energy, from IT, from healthcare, from fashion, from social media, so we’ve got a very big diverse people as well as well as the investors and entrepreneurs go along with that.
And so what we’re do is, everybody’s going to disperse right out of this room, everybody is probably really hungry as well, so grab food and we’re going to eat in the breakout room that’ll be good. And then about 9 PM everybody’s going to come back and we’re going to reconvene, give a chance to network with each other so you know people in your specific breakout room, you can see people individually.
Today I gave a keynote at the sold-out MobileX conference in Cincinnati. I can't tell you how impressed I am by this group. Brian, Therese, Evan and the entire crew did an amazing job scheduling and executing on this event, and it's no wonder it sold out. Top notch facility and speakers. They had camera crews throughout, so although I brought my own camera equipment as I always do to capture content, I'll likely just swap it out with theirs once it's live.
Here's video from the main keynote I did (slides are below): The title was "Capitalizing on the Mobile Tsunami: Trends and how to Leverage them for Success." I talk about mobile trends our company is seeing and provide a perspective of being a mobile entrepreneur for the past four years, first with the consulting company PointAbout, then the DIY app creation product AppMakr, and now with the social API Socialize. I'd also like to credit my cofounders Sean Shadmand and Isaac Mosquera for their contributions to the content in this presentation, as we all bounce ideas off each other all day, and the final product is stellar.
Socialize & AppMakr breakout: After the keynote, I got to do a much more intimate break-out session to discuss Socialize and AppMakr in more detail. We also touched on how to leverage social media in general, outside of mobile. I referenced my Henry Ford blog but neglected to reference my post on why service providers should blog, which would've been perfect to discuss.
Today I gave a keynote at the sold-out MobileX conference in Cincinnati. I can't tell you how impressed I am by this group. Brian, Therese, Evan and the entire crew did an amazing job scheduling and executing on this event, and it's no wonder it sold out. Top notch facility and speakers. They had camera crews throughout, so although I brought my own camera equipment as I always do to capture content, I'll likely just swap it out with theirs once it's live. Here's video from the main keynote I did (slides are below): The title was "Capitalizing on the Mobile Tsunami: Trends and how to Leverage them for Success." I talk about mobile trends our company is seeing and provide a perspective of being a mobile entrepreneur for the past four years, first with the consulting company PointAbout, then the DIY app creation product AppMakr, and now with the social API Socialize. I'd also like to credit my cofounders Sean Shadmand and Isaac Mosquera for their contributions to the content in this presentation, as we all bounce ideas off each other all day, and the final product is stellar. Socialize & AppMakr breakout: After the keynote, I got to do a much more intimate break-out session to discuss Socialize and AppMakr in more detail. We also touched on how to leverage social media in general, outside of mobile. I referenced my Henry Ford blog but neglected to reference my post on why service providers should blog, which would've been perfect to discuss. Slides from Keynote: Being a mobile entrepreneur Here's a great pano from the event, a relevant twitter feed below that. . //
Fresh out of Stanford Business School, I started a software company, T/Maker, with my brother Peter. He was the software architect and I was, well, everything else. Our little company was among the first to ship software for the Macintosh, and we developed a positive reputation among the members of the nascent developer community, which led us to expanding our business by publishing software for other independent developers. Two of our developers, Randy Adams and William Parkhurst, went to work for Steve Jobs at his new company, NeXT, and that’s how I ended up head to head with Steve Jobs.
Turns out, Steve had a problem and Randy and William thought I could be the solution. Steve had done an “acquihire” of the developers who had written the Mac word processor MacAuthor. In order to make the deal economics work, Steve had promised to publish MacAuthor and pay royalties to the developers. But now, with the world’s attention on his new startup, how would it look to have NeXT’s first product be a word processor for the Mac? Randy and William suggested to Steve that if I were to be the publisher, the problem would be solved. Steve liked the idea, and invited me in to talk about it.
My first meeting with Steve lasted well over an hour. He grilled me about packaging, channels, distribution, product positioning and the like. I must have passed the test, as he invited me back to negotiate a publishing deal. I spent the next three weeks preparing detailed timelines, package mockups and drafting a very specific contract based on our experience with the other developers we had already published.
On the appointed day, after waiting in the lobby for 45 minutes (this, I would come to learn, was par for the course for meetings with Steve), I was called up to Steve’s cubicle. I remember to this day how completely nervous I felt. But I had my contract in hand and I knew my numbers cold.
Shortly into my pitch, Steve took the contract from me and scanned down to the key term, the royalty rate. I had pitched 15%, our standard. Steve pointed at it and said,