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tv   Bloombergs Studio 1.0  Bloomberg  November 27, 2016 12:00pm-12:31pm EST

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♪ emily: he is known for shunning convention, taking massive risks that could win or lose billions, and investing in black swans, companies with a near complete chance of failure. if they succeed, the world will be changed forever. vinod khosla grew up in india. the son of an officer in the indian army. his parents agreed he could explore his curiosity these with -- curiosities with no limits as his grades didn't suffer. he began by founding sun microsystems. he then became a venture capitalist. he helps entrepreneurs take the same risks he has no fear of taking.
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joining me today on "bloomberg studio 1.0," vinod khosla. thank you so much for being here. it is great to have you. vinod: great to be here. emily: you are known for being an investor who not only challenges conventional wisdom, you explode it. how early do that start? -- did that start? vinod: one of the privileges you get if you succeed early, and luck counts a lot, is the ability to do things others may not have the freedom to do. i used it to my advantage early. i was always interested in radical change, big ideas. i got the opportunity to do that. emily: you were raised in delhi, india. what might we find a young vinod doing? >> i did not have anyone around
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me interested in business or technology. i grew up in an army household. i read about a hungarian immigrant coming to this country to start a company. i was 15. the technology, which was intel, sounded very cool. i fell in love with that idea and have stayed with that idea since. i wanted to start a company and realized how hard it is to start a company in most parts of the world. emily: you now say technology is your religion. were you raised religious? vinod: my parents were normal religious people. but i, very early, realized that at least priests in india were a scam. i was probably 12. 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 early in life. emily: you are best known for
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cofounding sun microsystems. you were the chairman and ceo but you founded a number of companies before that. vinod: we started another company called the "data dump" about three months before we started sun. scott make me -- mcneilly and me were founders of both companies. i love this story for the following reason. no one remembers your failure. even though the probability of success was low. that is what is great about entrepreneurship. failure does not matter. one's willingness to fail gives one the ability to succeed. if you are not willing to take risks, if you are not willing to fail, you will not do anything interesting. most interesting things are new, and new things involve risk. risk involves failure. emily: why did you leave what -- when you did and what was your biggest take away? vinod: before sun and before data dump, i started a company called daisy systems. that was quite successful in 1986. it went public. daisy made more money than i
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thought it needed ever in my -- i needed ever in my life. and so i then wanted the freedom. i looked at careers like, what else should i do? so i joined one of my lead investors to essentially mentor and help hunt. emily: how does the venture industry back then compare to today? vinod: there are many venture capitalists now. many bad ones. a few good ones. entrepreneurs should understand that. i get in trouble for saying that. i think it is much more dynamic. there are many more options. that is great for entrepreneurs. and i love that. emily: you have multiple degrees. an engineering degree, as the indian institute of technology, biomedical engineering at carnegie mellon, an mba at stanford. you wrote this medium post called "is majoring in liberal arts a mistake" for students. it doesn'taid
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necessarily set you up for success. it caused some controversy, which i know you're not shy about. one critique wrote "the real purpose of human existence is fundamentally tied to the regulation of wealth." what is your response? vinod: that is a nonsensical response. what liberal arts has become is an excuse to do less work. that isn't everybody. 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. emily: what should they study? vinod: logic and philosophy should be an absolute part of any liberal arts curriculum. otherwise you do not learn how to think. linguistics, economics. learning about how computers work. we live in the computer age. why require a second language when the most important language is computing?
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not that most people ever need to code. but because it is a style of painting, the critique is all from people who fail to understand what i was saying, which was exactly the point i was making. the comments like the one you mentioned reinforce the notion that they did not get a good education. emily: do you think college is important at all? should kids go to college? peter thiel is paying them not to. vinod: i disagree with him. i think college and high school is very important. there will be people who will do well without an education and people who do well no matter what subject they take. leaving aside those people, the top 10%-20%, i think college gives you the grounding to be able to do things that adapt over time. emily: what do you think sets coastal ventures apart from other top-tier ventures? ♪
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emily: you went on to found your own fund. what do you think sets khosla ventures apart from other top-tier ventures? sequoia, benchmark? vinod: we tend to be much broader. we will do burgers like impossible foods. we will do rocketry like rocket lab. we will do hard science. we will invent new medicine. we will do very unusual things. robotics, semiconductors, even nuclear projects. emily: you believe that most vcs actually hurt companies, not help them.
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what do you mean by that? vinod: applying traditional business school and metrics to innovative start ups is the wrong thing. when people focus on irr's and rates of return, they actually hurt the company. i don't believe just because you are an investor, you have earned the right to advise an entrepreneur by being a board member. if you're going to advise entrepreneurs, you should have started a company, knowing how hard 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 having done it yourself, you don't have the right to advise and onto burner. -- an entrepreneur. so one rule i have had -- in 30 years, i have never voted against an entrepreneur. they do not need hypocritical politeness from board members. trying to be their friends and
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not helping them think through the risks they are going to face and challenge them. and then the same board members want to vote on things as if they know enough to vote that they don't. emily: you don't go to board meetings if you can help it. vinod: i cannot stand to listen to other vc's talk about things that i actually think they hurt entrepreneurs. emily: what is your advice? to ceos and entrepreneurs. vinod: don't take advice because it is from the board. ignore the board to the maximum extent you can. consider the input of people who have real experience as input to your thinking. emily: this is interesting because we have talked about the lack of women in the venture capital industry. i know you are hard for a woman partner. what do you think it takes to be a successful vc? do you need a stem degree? i know some of your talk -- top
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partners don't. do you need to have been a founder, a ceo? vinod: you don't need to have a stem degree, but it helps. because you are dealing with technology and speaking their language is. it makes it easier. but probably, and this is not even essential, but is having been an entrepreneur. emily: is that why it is so hard to find women to fill these roles? vinod: there are fewer women, so fewer women who have been entrepreneurs, i think as women play more of an entrepreneurial role, and that is increasing. we have many entrepreneurs who are women, even a deeply -- even in deeply technical areas, when they get enough experience, they will be great partners. you need the floor at the bottom to increase. we need to encourage more women to be entrepreneurs. emily: you mention a broad range of investments. rockets, food, ai, health, energy. companies with a usually high failure rate.
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every four years you say you go deep into an area you know nothing about. what has worked? what has not? vinod: all of them have worked in the sense that i really enjoy learning a new area. it will be five years before i know whether i am right or wrong. independent of if they are successful or not, i will have learned a lot. the two 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 cannot think of any two things that would impact humanity more than those. emily: you tweeted recently that if "ai scenario happens, we will have abundant gdp to take care of everyone, but great disparity. only people who want to work will work." paint the picture for us. vinod: if ai does what people can do, i think it is likely in
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40 years that of all the jobs that exist today, the majority, more than 50%, will be done by more than 50%, will be done by machines. it does not matter whether it is a farmworker, a hamburger flipper, a legal researcher, a radiologist, or an oncologist. it is not just low skill work. if that happens, we will have dramatic gdp growth, dramatic productivity growth. all the traditional economic metrics. and because more people are out of work, more income disparity. it is hard to say whether it happens in 30 years or 50 years, but i am pretty sure it will happen. emily: what happens to those people who do not have jobs? vinod: the critical question is how do we fairly address the people who are left out of this? it will be most of the people. the good news is we will have enough gdp to provide basic
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income to everybody. i know this sounds horrific. we will have the resources. if per capita income is $150,000 or $300,000, some basic income as per capita income climbs above $100,000 will become very important. that will be a social and political issue we have to address. emily: hampton creek is a company that so many people have been excited about. now they are facing serious allegations. when do you say it is time for new leadership? ♪
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emily: hampton creek is a company that so many people have been excited about. now they are facing serious allegations. the sec is involved. the doj is involved. they are accused of buying their own products off the shelves. when do you say, it is time for new leadership? vinod: let me flip this around. there was a bloomberg article recently where the reporter employee whoask bought some stock and then accused the company of giving false information. i would've bought his stock. the company offered to buy stock. if he thought he was defrauded, didn't he sell the stock
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back? he could have sold it back. marc benioff did not feel defrauded. his wife is on the board. she looked at the details. maybe there's other stuff we will discover. i cannot say what else we will discover. i personally went and talked to him and he didn't have one credible allegation. he suggested talking to three other people. i talked to those people. emily: do the allegations bother you? do they concern you? vinod: any company that has employees leave has allegations. sometimes, probably 20%-30% of the time, they are right. 70%-80%, they are just bitterness. we will look into them when they are serious, i won't comment on the specifics but we are always looking. is the buyback relevant?
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the $77,000, that is completely irrelevant to our investment decision. why is somebody investigating? to ask the question. under a freedom of information request, the american egg board was plotting to destroy hampton creek because the egg industry hated them. unilever sued and then withdrew the lawsuit when they realized how bad it was. there are many enemies the company has, including using federal funds in the department of agriculture to target the company whose e-mails were discovered by a reporter in washington that said how can we prevent them from getting distribution at whole foods? why would a federal agency be trying? why? because there are interests. people who are being disruptive and will get hurt.
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so i will tell you it is a complex story but i cannot go into specifics. emily: how would you describe your faith in the ceo and the company? do you think this will be a winner in your portfolio? do you think this company can transform the food chain? vinod: hampton creek has already done a lot to change the food chain. all-male chicks when they are born are crushed. live. it is horrific. he is changing that practice. he's bringing visibility to it. caged hens, he is bringing visibility to it. are they making a difference? absolutely. even if they are not successful, they will have made success by bringing visibility to these real industry issues that the egg industry is trying to distract from. as far as the ceo is concerned, we normally talk to his team.
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we see if the team supports 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 is a constant evaluation. emily: you are passionate about clean technology. you have made a lot of investments. some people would say that investors like you and john doerr made a mistake by going too far into this field. what have you learned and what is your response to that? vinod: clean technology is an important area. climate change is a risk. i view climate change no different than i view homeland security, nuclear proliferation, terrorism. they are all risks society faces. we should ensure against that. how much of our gdp do we spent -- spend ensuring against foreign attacks, national defense, homeland security? we should treat climate change the same way. it is a business decision.
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we should encourage new competitive technologies and then stop supporting them when they get to a certain size. it is time to stop supporting wind. maybe even solar subsidies should decline. we have done ok in clean technology. we probably have six companies that could be worth $1 billion. i would rather try and fail then fail to try. something that is really important. emily: it is clear that you are -- care deeply about the environment. you are incredibly philanthropic. you have pledged to give away half of your wealth. one of the stories that gets written about you most is a lawsuit you are involved in around public access to your beach. some people would say that is at odds. vinod: normally i don't like to talk about things under litigation. giving up half your wealth will not impact my lifestyle. it is not a huge sacrifice. what i find is that i can spend
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more of my time working on technology. i will 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 is amazing to me how many fortune 500 ceo's read the press, read "wall street journal," and respond to it by that, instead of saying, here is what we believe is a company. passionate entrepreneurs, they have a passion that far exceeds their desire for short-term profit. because of that they make more , wealth and profit over the long haul. wealth is just a tool to give you freedom to do what you want to do. many people like donald trump get trapped in this cycle of making more. that is not that interesting. doing all of the deals.
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he thinks it is smart to avoid taxes. and that just blows my mind. i'm religious about my belief system. so when i have a battle on the beach, back to your question, it is about property rights. and about a set of people who want to use coercion. they told me they would like to embarrass me into giving up my rights. if you have a belief system, even if it is unpopular, you want to live by your principles. whether it is that or protecting privacy property rights are fighting for what the law is -- and when it is not clear -- there are clearly things that are not clear in the law, it is important to get them legally resolved. the courts are a way to resolve things. not somebody's opinion or the press or hyperbole. emily: what are the dangers of technology?
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vinod: many people have a rich lifestyle. technology lifestyle. energy lifestyle. i can use nuclear technology to -- technology can be used for good or bad. i can use nuclear technology to make a nuclear bomb or i could use it for nuclear power to provide great services and saves hundreds of millions of lives because of the extra energy. and energy use correlates into less mortality. emily: do you worry about the dangers of technology? vinod: every time you have a powerful technology i think we , as a society should worry about it. it has negative uses often, ai, for one, we should worry about it. the greater role that technology plays in society, the more he -- we will have to use it to service people at the bottom of the pyramid. emily: you have talked about the value of failure -- do you ever worry you are too willing to fail?
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vinod: it depends on who you are. america, as a society, can't afford to fail. the world depends too much on us. if i am a mature company with 100 people or 1000 people or 100 thousand people, i shouldn't fail. it doesn't mean that i shouldn't encourage failure. i always say encourage , experiments that might fail and if they fail, you lose 5% or 10% of your assets, resources, cash. but if you succeed 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 are not innovating.
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you are not allowing yourself to succeed in the long run. emily: thank you so much joining us today. it has been great to have you. vinod: it has been fun to be here. ♪ wow, x1 has netflix?
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