Vinod Khosla, MBA ’80: Failure does not matter. Success matters.

Vinod Khosla, MBA ’80: Failure does not matter. Success matters.


[MUSIC] [APPLAUSE]
>>Hello, everybody.>>Leonard, thank you for
being here today. Welcome back to the GSV.>>It’s always fun to be here. It’s a lot nicer than when I was here. [LAUGH]
>>Yes, I’ve been hearing that quite a bit today,
given the previous here. I, I’m thrilled to be
having this conversation. I was told that you scheduled
your time in 15 minute slots. So we are taking up four
of those slots right now. So, I’ll get right to it. I have a few questions here,
focusing on three things. Your leadership and management journey,
your thoughts of investing and entrepreneurship and then a few questions
on your personal life and legacy. After that, we’ll take a few questions
from audience and from Twitter. As Dean Saloner mentioned,
you were the founder and the first CEO at Sun Microsystems. About a year after you had started, you found out that Sun Microsystems was
gonna be shut out from a key thing. When you heard this, you got on a flight. Got to the customer’s lobby and made phone calls refusing to leave
until you met with the team. Where does this perseverance and
conviction come from?>>Well so, I have a philosophy in life. Whatever I believe, I should make happen. It’s that simple. And if a customer’s making a mistake,
[LAUGH] the customer isn’t always right. Trust me. [LAUGH] And if you want to do great
products, don’t listen to your customers, by the way. Lots of bad lessons in business
school I used to give a talk in the 80s on why not to listen
to your customers and maybe somebody will ask me a question
that story is in fact true. There was a signed contract
with a competitor, I stayed in the lobby all day
at 6 o’clock in the evening and I’d taken a red eye out and
I parked in the lobby. I met with the CEO of the company,
mostly, because he wanted me to go away. By 9 o’clock, he had I’d convinced him to
meet me in Chicago with his team the next day, because he didn’t wanna
be seen negotiating with us. The following morning,
the day after at 5 a.m. We signed a handwritten contract,
because I wouldn’t let him leave.>>Oh.
>>This was the CEO for big East Coast company, Computer Vision. We signed a handwritten contract and
life was good. The point is if you
actually believe something, you try your best to make it happen. It doesn’t always happen, but
it happens most of the time. Most of the business school
entry story is also true. I actually learned that
somebody had dropped out. That’s why I showed up and one of the nice
ladies in the business school office, put me in her living room to her husband’s
chagrin and she was real nice to me. But things do workout if you persist. Not always, but I like to say,
failure does not matter, it’s success that matters. And nobody remembers what you failed at. So, everybody remembers Sun. Does anybody know a company I
started before Sun that McNealy and I started together? Any hands?>>I do, but
I’ve been researching you for awhile now. [LAUGH]
>>What do you think the company is?>>Was it Data Dump? Or was it?
>>Yes. There was a company called Data Dump,
we started and go funded three months before Sun. Didn’t workout. We started both roughly together, but my point is people don’t
remember your failures. And I like to say my willingness to fail
is what gives me the ability to succeed. I find most people are so
afraid of failing, they don’t try and do the things that would
be important enough to do. Anything worth doing is hard an so.>>You’ve spoken in the past about the
importance of failure or the lack of it. You started your first
company at age 20 in Delhi, which did not work out as expected.>>Well, I didn’t actually get started.>>Huh.>>They told me,
it’d be seven years to get a phone line.>>How did you react to that? [LAUGH]
>>Honest to goodness. You know, I was 19 or 20 and they told me, it would be a 7 year waiting
list to get a land line. I, I, I sort of picked up and
went to Carnegie Mellon. [LAUGH]
>>How was that like, the move to the US?>>You know, look, it, it was easy. I wanted to be in Silicon Valley,
I knew I’d get here. I had no way to pay for it, so I had to figure out how to
get somebody to pay for it. In the end, the Biomedical Engineering
Department at CMU agreed to pay for it, so I went there. And I was very impressed
in biomedical engineering. So, I did that and
then applied immediately to Stanford and you heard the rest of the story. They turned me down a couple of times,
but, you know, the funny thing is with
enough persistence, most things that seem
impossible become possible. I’m always amazed at how often
you can turn things around and people take no for an answer too easily. You know, it’s whether you’re trying
to achieve a goal like get into business school or my,
my green card was the same way. I left the job that had sponsored me,
but I still got my green card, even though no lawyer would take me. I became my own lawyer. Got my green card without working for,
while I was in business school. [LAUGH] And I did it, perfectly, legally. I, my strategy there was if I
couldn’t convince immigration, I’d confuse them and I did. [LAUGH] And they gave me my green card. [LAUGH]
>>Well, you know, I, I just wanna ask you,
what are some, some of the perhaps, the early
influences that made you this way? This high perseverance,
high conviction person.>>Well I, I was sort of always this way. I didn’t grow up in this environment, nobody around my dad was in
the Indian arm since he was 16. So he joined the ranks of
the Indian Army in, when he was 16, got shipped off to Egypt to fight for
the British. And so,
I grew up in a very different environment. But I always had this view that if
I determined something was right, I was gonna make it happen. And this comes to, since one of
the focuses of this lecture is leadership. I am amazed at how few
people have a belief system. What do they actually believe in? I and, and, yeah,
it’s okay to offend you guys. [LAUGH] 90% of you will do what’s expected
of you as opposed to what you wanna do. And, you know, I even, when I come to
an event like this say, why am I here? Why would I even bother to take
an hour of my valuable time? [LAUGH] no, it’s true. I, I, I have to have a purpose. My goal is very simple. If I can convert one of you,
there’s probably 400, 500 people here. If I can convert one of you to follow
your belief and have the guts to follow your belief, I’ll have,
I’ll think of the hour as well spent. Right? So, I would say,
what am I trying to do and why? I don’t speak, because somebody you know,
will write nice things about it. I, I always sort of have a purpose,
but I have a belief system. And most people,
even successful companies, and I have big beef with Fortune 500
CEOs I can talk about, there’s very little leadership there don’t have an internal
compass of what they believe in. Its what do others expect? You know when I graduated,
I went into entrepreneurship. Nobody went into entrepreneurship
out of the business school. And people said why wouldn’t you work for
Goldman or McKenzie. And I said why would you. I, I couldn’t fathom why you
would wanna do that job. Alright? I still can’t, by the way. For those of you going to those places,
and I’m sure there’s plenty, I’m probably
not the right person to talk to you. I frankly don’t even care to talk to you. All of you others. [LAUGH]
>>All right.>>I think there’s something wrong
with anybody who fundamentally wants to go work for
one of the consultants or the investment banks today and
there’s probably.>>[LAUGH]
>>That, this, they don’t understand how the world
is going to work in the future. But my point again is,
have a belief system. Follow that compass. And I’m overstating it a bit, so there may
be some hope for those of you going there. But it’s a li,
only a little bit of an exaggeration. Let me go back to this
issue of Fortune 500 CEOs. I’ve talked to many over the years. If a New York Times
writer writes an article, they want to change their strategy,
they wanna respond. How silly is that, that some English
major who’s never had a business job can determine the strategy
of a Fortune 500 company? Why?
Because they care about what’s written, not what their belief system is. Do you know what Elon Musk
would say to that writer? Go get a real job. All right. What Jeff Bezos would say? That’s leadership. Having a belief system. Knowing what’s driving
you to do what you do. Not you’re fitting in to
do career enhancement. Or, making it look good to somebody else. Whether it’s to your friends, or
to your boss, or to shareholders. And frankly, you look at all the companies
that are languishing in the Valley, the older companies,
they generally don’t have a belief system. They’re generally trying to meet some
quarterly target, without saying, here’s how we will be different and
here’s how we’ll do it. Apple did languish for 10,
15 years, and then Steve Jobs came in with a point of view, and created
the most valuable company in the world. He did irrational things,
if you go back to January of 2007, January 1, everybody was saying nobody
wants a phone without a keyboard. Nobody wants a phone that costs 699. I can go on with the litany. First of all,
English majors writing articles, I have this beef against English majors. [LAUGH]
>>Not all English majors are bad, but the majority of them at Stanford
are undirected and don’t have a goal or a purpose.>>[LAUGH]
>>Sorry. And,and that’s not to say among them
there isn’t 20% that are really good. They just didn’t get the right guidance
and ended up in the wrong place.>>[LAUGH]
>>I like proper school education. Anyway, sorry. Back to you.>>No, absolutely.>>[LAUGH]
>>This is, this actually is an interesting
>>I make up better questions than usually>>[LAUGH]>>[LAUGH] That’s a challenge for you guys. #GSVBFTT. But I want to ask you about this,
you are known for being for the lack of a better word somewhat blunt. [LAUGH]
But your website says we prefer brutal
honesty to hypocritical politeness. What are the tradeoffs in doing this?>>Well there’s lots of tradeoffs but. I’m, I’m again very clear. You know it started off
earlier in my life. I was very successful, even before
I started Sun, I started a company like Daisy that made me more money, which
was only a million dollars back then, or little more than that
than my dad had made in the, in his career cumulatively, so
I was in a whole different place. And I said, the one thing I’ll do is
not do what others want me do, or be polite,
which generally means dishonest. There’s a great book by Sam Harris, who’s a professor over on the other side,
about lying. I recommend everybody read
Sam Harris’ book on lying, and why we all lie too much and too often. We put this sort of slogan,
I prefer brutal honesty to hypocritical politeness, on our website,
because it’s a real disservice to people. You don’t have to be
offensive to be honest.>>Hm.>>When I don’t like somebody,
I can get offensive, too. But generally you can be constructive and
very honest. And I prefer that brutal honesty,
because it serves a purpose. The receiver can do something about it,
if it’s a constructive criticism. If you get po, hypocritical politeness,
you might lose a lot. So, again,
it’s about having enough confidence to say the other person will eventually
appreciate it, and that loc, local goods-slogan came after I
was working on a company with another major rental firm, and
I didn’t believe their plan would work. They had $45,
$50 million in their bank account, so everybody was comfortable,
too comfortable, in my view. I talk to the founders
why it wouldn’t work. What my concerns were. The other VCs agreed with me in the board
meeting, said all these polite things. You know, so 40 engineers wasted three or
four years of their life because nobody was willing to tell them the honest
truth about what they really thought. Right and I swore I would never
let anybody waste their life. At least give them the best advice I had
to give and tell them I may be wrong, but I’m not gonna say something I
don’t believe in, I just won’t. In, and that’s extremely
valuable to the other thing. But to be honest, look, there
are situations you, it offends people, and I offend people often, but it helps
them if they’re really introspective.>>Hm.>>Right? I just had a candidate from Howard
Business School come in and interview for a job and I,
half an hour into the meeting I said, you know, you’re not a match for us. Here’s what I would do, and
I spent the next half hour. I said, I literally said to her, if I’m
gonna waste the next half hour of my life talking to you, I’m gonna give you my
best advice on what to do about your career,
>>Hm.>>which I did. She didn’t love it. She sent me a nice note a week later. But its very valuable. But the real fact,
the honest truth about why I like that is, once I was in a position
I didn’t need a job. Nobody could fire me. I’ve actually never worked for anybody,
so it’s actually sort of nice. I felt it was a indulgence or
a luxury I could enjoy. Some people, if they make, get that
financial freedom might buy a yacht. I bought myself the freedom of brutal
honesty, and it’s an indulgence. I get to do things others may
not be in a position to do. There is a downside for others, but
I think generally constructive honesty and constructive criticism than hypocritical
politeness will serve other people well. That founder, by the way, in that company
called me four years later after, after this company, this company got
sold for $3 million four, three and a half, four years later. Sad story. And he called me a year after that. He said, I only wanna work for you on my next venture because
I wish somebody had told me.>>You mentioned, you talked briefly about
venture capital as it stands now earlier. I just wanna come back to that. Specifically, how does it compare to 1982,
when you were starting Sun Microsystems, and what are the major
differences you see?>>It’s a lot more popular now. It’s a lot more accepted. It’s a lot more accepted to do startups. So for those of you who are so inclined,
it’s much easier to take that route. It wasn’t back then, so the risk of going
the entrepreneurial route was much higher. If you went entrepreneurial and it didn’t work out you couldn’t
get a job at GE, right? Much harder. Today, if you’ve done a startup, GE would
love to have you, even if it failed. In fact, would prefer you over
somebody who spent two years at GE. Not 100% true. But generally,
it’s the learning experience of a startup, whether it’s successful or unsuccessful,
is recognized as extremely valuable. And the cultural training of that is
something everybody’s striving for. I’m amazed at the people who
come through Silicon Valley. It feels like a tourist stop,
like Fisherman’s Wharf used to be. Every Fortune 500 CEO coming here, holding board meetings here because
they wanna learn the culture. And, and I think that becomes
a real career enhancement for those of you who do that. Now, I’m not a big fan
of planning careers. I’m much more about driving for
the things you wanna do and go do them.>>And, and that’s about entrepreneurship. What about venture capital? I mean, for instance, you very famously
said in a TechCrunch interview, 95% venture capitalists add no value,
and 70% add negative value.>>[LAUGH]
>>All of my venture capital friends love that statement.>>Yes, they do. [LAUGH]
>>But I, I, I tell them that, you know, there was a major firm. I called somebody there and said,
this guy’s destroying this company, right?>>Wow.>>It happens all the time. One, it, look venture capital’s
become a big business. It didn’t use to be back then. It was a specialty art form. There was a few firms, and most of them. Sequoia was started with Don Valentine. If you know Don, he was an operator. Kleiner was started by Tom Perkins and
Eugene Kleiner. Tom ran a division of HP, and
before that, he was a technologist. These guys, and, and
I’m not one for looking back and being romantic about things,
but this issue is important. These guys earned the right to advise an entrepreneur. That means they’d gone through
the battles, they, they had the experience when a unique situation came up and
an entrepreneur wanted advice. They actually had been through
the firing line to viscerally understand how to give them advice. Most VCs have not earned the right
to advise an entrepreneur, yet they feel free to in their ignorance. And I believe you should have
gone through a startup or at least some significant experiences, and
there are good exceptions to this rule, to really advise entrepreneurs
on how to build a company. And most VCs haven’t done that,
so they give stupid advice. You know,
if you got out of business school and joined a VC firm and grew up and eventually became a partner, you haven’t
learned what it’s like to be in a startup. So in our firm, we have a rule. You can join, you join for
three to four years. Then you’ll have to leave, actually work
in a startup, before you come back, and actually can get, I’ll give you the
responsibility to advise entrepreneurs. People get frustrated because their peers
in other venture firms are sitting on boards and advising entrepreneurs. But, you know,
that’s exercising authority as opposed to exercising influence because you
have credibility with entrepreneurs. Most of the time I don’t go on boards. I just advise entrepreneurs. And frankly,
being on a board is irrelevant.>>On that topic you have a really
unique strategy among VCs. You’ve said,
I’m only interested in technologies that have a 90% chance of failure, but if they
do succeed would change the infrastructure of society in a radical way. How did you come to adopt
this particular strategy?>>Well, so, that’s not exactly accurate because
we don’t mind low-risk technologies,. We invest in that, too. But what I wanna say is, venture capital, if you think about it, isn’t,
is not an IRR business. You, you,
you take any of the big successes. Google, Facebook, Twitter. You can’t predict them. You know, a camera like GoPro,
can you predict the, the market cap? You can’t. And you can do spreadsheets, so we don’t
allow any IRR calculations in our firm. Nobody does them, nobody looks at them. In making investments,
we never calculate an IRR. Because calculating an IRR, in my view, is creating the illusion of knowing,
which big companies are very good at. You tweak some assumption. I did enough business plans to know I can
make the business plan do whatever I want on the spreadsheet. You know, reality is different. I don’t even think you can plan startups,
so business plans are largely irrelevant other than in surfacing the key issues
the entrepreneur is thinking about. How thorough is their thinking? What’s the quality of their thinking? That’s the only thing I
use a business plan for. Then what are you doing? You’re really doing option value
investing, if you want a financial term. If you lose,
you lose one time with your money. If you win, you win ten times your money. Your downside is limited
to your investment. So whenever we make an investment,
I assume we lost it, and then there’s only upside.>>[LAUGH]
>>Right? As soon as you write it off in your mind,
there’s only upside. So that’s how I view the world. And then you try and take the higher risk. And there’s VCs who won’t invest
with us because they feel like we, we take too much risk, which is fine. There’s room for every style of VC firm. Ours is different. It’s about taking higher risks and
higher upside. 90% chance of failure is not a problem. If there’s a ten percent chance
of 100 times your money. If it’s the only thing that worked,
then you’re in pretty good shape. And, and
that’s not the only good strategy. Private equity does very well
running spreadsheets and that, I just have no
interest in spreadsheets. So, and we’re not good at it.>>Hm.
>>So we know what we do. What’s bad is when people who
come from that word want to do this kind of investing.>>Yeah.
>>It can’t be a mismatch of your personality with
the investing type. But all those are good scenarios and
some of them are even better scenarios, for our art than what we do.>>We, sorry. You, you mentioned in your, you mentioned right now about getting
other VC students to invest with you. And throughout your investing period you
had a strong streak of going against conventional wisdom. NexGen, Juniper I’m curious. How do you get others to
buy into your convictions?>>Sometimes they do after the fact,
sometimes they don’t. Sometimes they actually
don’t know any better. So they’re confused, which is good. [NOISE] A, all those happen. Look, there’s lots of really good. Receives a lot, right? But there’s order of magnitude
more bad we sees around. It’s, so there’s probably half a dozen
people I respect in the VC business and probably the vast majority I don’t
know personally so I won’t judge them. But of all the people I know in the VC
busni, 90% really add no value, and I truly belive 70% of them reduce
the potential of a company.>>I could, I could keep asking
you questions on investing, but I really wanna-
>>But, but, here’s the thing, right? 90% chance of failure. You have to have the courage to fail them, because most likely you’re going to,
to get that option at a very large play. Well, and, and
that’s a pretty clear segment of the venture capital business or
the investing business. It’s not every segment. Capital preservation is important in other
segments it’s just boring to me, it’s much more exiting to be on a roller coaster
where the highs a high and a lows a low. So risk taking is
absolutely essential now. As career advice to all of you, most, you can make money and good status,
and all that in regular big companies. There’s very little really interesting
stuff you can do in big companies. It comes shockingly,
it’s shocking to people, but who invented, reinvented retail? It wasn’t Wal-Mart. It was Amazon. Who reinvented media it wasn’t NBC. It was YouTube. Who reinvented space it wasn’t Lockheed. It was Space X. I was hard pressed to think of
one thing that had come out of a large company in the last 20,
30 years. That was materially
changing the landscape. And the reason’s very simple, and
this is all interesting things have, eh, happened at the edges of the system. They don’t happen in the solid core. And, all that you have to do where things are fuzzy,
unclear, uncertain. If there’s a market forecast,
it’s not at the edge of the system. If some analyst has a report. It’s not what’s ex,
going into that area, right? I’ve a whole thing about
analysts we can get there.>>[LAUGHTER]
>>Let’s actually talk about it.>>Okay.
So ask me after I finish this.>>Sure.>>Talk. In the edges where things are uncertain
is they’re old evolutionists and there interesting changes in business or
society happen. And unless you’re there and
learning fast from being there and not being too out of it to believe you
know what’s going to happen you’re not gonna be in that learning edge of
the wave, where new things are happening. And as career advice, I say. And that’s where failure happens often. You want failure to be small,
and success to be very large, which is the characteristic
of option value. You lose your option price, but
you get option value if it’s successful. That all happens at the edge. In automotive, I, as, th,th,
there was a CEO, in fact, I’ve had three CEOs from the ten
largest auto companies come by in the last six months and I said I wouldn’t
worry about building a better car. Almost certainly,
ten years from now, a Volkswagen or a Toyota will be a financing entity,
not a car-making entity. There will not be the notion
of marketing to consumers. The auto industry as we know
it I think will disappear. Disappearing in the sense of IBM
mainframes are still around, they’re still a business, they’re relatively static,
they’re filling an old need. But almost certainly, the number of
cards produced ten years from now will be less than half of what is produced
today for sale to consumers.>>Hm.>>I, now, long, we don’t have enough
time to go into why I believe that. Almost certainly, and
I’m serious about this. I gave a talk at the Stanford med school,
and I said, if I wanted to be a good doctor in 15,
20 years, I wouldn’t go to the med school. If I wanted to be a good doctor,
I would go to the math department. Almost certainly, every single thing they’re learning about
medicine will be obsolete in 15 years. So, you can join Medtronic, or
DE Medical, and do incremental things, or you can try to learn that the edges, where
your probability of failure is much high. But the consequences of success
are really consequential, and most people in their life,
in their business, reduce risk to the point where the probability
of success goes higher, but the consequences of success
are inconsequential, as opposed to reducing the probability
of success and increasing the consequences of success.which
is sort of my life to start with. Trust me, it’s a lot more fun
then spending 30 years and Goldman and I like Goldman.>>[LAUGH] That’s a fascinating world
view, but I really want to get a question.>>So let me go back to.>>Okay.
>>[LAUGH] [APPLAUSE]>>I, I, I just have seen the tide. But you did ask me to talk about
>>The analysts and the experts.>>Yeah.
The experts. So Professor Chetlark when he was at
Berkley did research on expert opinion. All the analysts you read all
the Mackenzie reports, and by the way, Bain and PCG no different. And he followed all of their forecasts for
20 years, 28,000 individual
forecasts from 250 experts. Where when the forecast was made, he classified what would be a success,
what would be a failure, And the book is called “Expert Political
Judgement.” So, all these great studies, the 10-year studies McKenzie did for
millions of dollars for AT&T on what would happen to the cell
phone business, that’s a fun story. Across 28,000 individual forecast
in 84,000 possible scenarios. The average accuracy of the best experts,
whether it was Henry Kissinger, Tom Friedman, McKenzie, your favorite,
eh, favorite economic forecaster. The average accuracy,
was about the same, to use his words, as dart throwing monkeys. So if you want to run your
life on these forecast and create an illusion of knowing. Great, go do it! You will follow a path that others
will reinforce because you can give them a data quest study or
a Bain forecast. Or you can discover the edges where
things are happening and changing. Know that you don’t know,
and really change the world. Now, again bringing back to leadership,
it’s about having a point of view. It’s about having an internal compass. This is a great point in your life. To actually decide which one of those. Do you have a belief system? Or you gonna do what
others tell you to do? Whether it’s written up
in the New York Times, which, which somebody wrote up who
doesn’t understand the context. Whether it’s the McKenzie report or
a G-Forecast, or a Goldman analyst, or
you gonna do what you believe in? And unfortunately,
very few of you will do that. I hope I can work some of you
to believing in yourself. And the good news is,
I actually believe five percent of the people is all that’s needed to be even
remotely innovative to change society. I once looked at all social changes,
not just business, and I looked at a decade and I said for
people born between 1940 and 1950 or 1950 of all the people
born on this planet. You can take the ten ma, 100 major areas. And define, could you find 100
people in each of those areas, from that decade, that generation,
who affected change? It didn’t matter whether
it was music,arts, research in social sciences,
technology invention, business. You can’t find a hundred areas and
you cannot find a hundred people that stand out in
each of these areas in any given decade. So, less than 10,000 people
born this decade will influence All of what society does think, happen. I’d like to say you should try and
be one of those people, and none of those people will
follow any analyst’s forecast. They will have an internal compass, they’ll have self-confidence in a belief
system, and they’ll make change happen. I’m very passionate about this,
cuz frankly, it only takes a few people to change the
direction of any industry or social trend.>>You know, I think this might be a good
time to open up the floor to questions from the audience. So we have Caroline and
Rai on either side with mics. Please keep your hands raised so
that one of them can spot you. You can also tweet your questions
using #gsbvftt, and Michelle here will ask your question, actually lets
start with a question from twitter.>>And I want to apologize I have
to leave soon after this, but my email address is [email protected]
if we don’t get to your question, please feel free to send it.>>Thank you Vino-
>>And I’ll spend as much time answering it as, as much time as you spent
thoughtfully asking the question. [LAUGH]
That, that’s my rule on email. I try and judge how much, how thoughtful
was somebody in sending the email. Yes, sorry.>>Alright, there’s a lot of very
thoughtful questions on Twitter regarding your belief system. Can you talk about what exactly
is your core belief system, and how do you foster that in your team and
your company?>>You know, so I decided very early I
wanted to work on interesting things. Is not well known but I started the first
program, programming class at NEIIT. In 1971, we formed a hobby club of
four people to learn programming, and that was the first instance I know
of a programming class at NEIIT. A few years later, I got interested
in biomedical engineering, and I was 16 when I started the programming
club at IIT Delhi, a few years later we started the biomedical
engineering program, which was, we just convinced one professor to work with us,
and there was three or four of us, and so I had this habit of saying, what do I
want to do and how to make it happen. But the core belief system I have is,
I wanna work on interesting things. I don’t wanna get bored. And it applies to what I’m doing today. What I’ve learned since is,
it’s nice to do that, but it’s even more rewarding to do interesting
things that have a great impact. And so I measure impact a lot. We are probably the only VC
firm that in the first, for the first slide deck
a fundraising slide deck we said we care about our ambition
which is R&R but care as much but more about our ambition, our mission
which is to make a positive change. And, I’ve told my LPs if you get a lower
rate of return but higher impact, we’ll probably pick that, because I’m much
more interested in that than feeding some pension fund a slightly higher rate
of return as long as I cross a bar. It’s very clear to me. So, it was cool stuff and
interesting stuff, early I didn’t have
perspective when I was in 20s. And over time I said, it’s much more fun
to work on things that make a difference. And so I only do that. We, we had an investment and somebody
will tweet this and I’ll get in trouble. We are looking at investment in a company
called T Spraying which is doing extremely well. And the partner who was doing that,
and I said you know, you want to invest in T Spraying or
t-shirts, great. Don’t expect me to spend any time. I’m not interested in t-shirts. I’d rather work on a healthcare solution,
and so, it’s not, again, I want to emphasize
this is a luxury I’ve earned. So, all of you don’t have that luxury,
if you’re not in the same place, and I recognize when other people
aren’t in the same place. I also never cared what people thought, so I had that luxury
very early on in my life. Mostly through my attitude, which was
much more belligerent when I was young. But now I can honestly say, we built
a new building a few years ago and I said, you know, as long as health
permits, I’ve enjoyed this so much and the area I’m working on keeps
changing every few years because the nature of venture capital and
technology. I’m gonna do this for
the rest of my life but only do things that actually
make a positive difference. But then also, anytime you make
a difference, you make money and I think when you make money as a consequence of
trying to do really interesting companies, you make much more of an impact
then if you do it as a transaction, buy/sell kind of thing. In fact, if I get a plan,
business plan that talks about exit in the first couple of pages,
I almost never read the rest of it.>>It’s a good tip, right?>>Can you hear me?
Yeah? So I’m Melina and I actually work for
a healthcare start up. I have a pointed question about you. I’m very impressed by
the confidence you exhibit and obviously you have reasons
to be that confident.>>Some people call it arrogance.>>[LAUGH]
>>My question is did you, when you were a kid, did you get
support from your family that made you as confident as you are right now?>>You know, e, e,
first it’s hard to remember. I always did my thing. I always did things most kids didn’t do. And my parents always sort of, I guess support is
probably the right word. Indian families are very different, you never did things your parents really
oppose, but, I tended to do some of that. [LAUGH] but I always had great dialog with
my parents, and they actually sort of, accepted me very early doing,
going out of the bounds. For those of you interested in my attitude
and those of you who may have kids, I was asked to give a talk at Harker
School here in, you know, in Saratoga. So give a talk to the high school kids,
and I did a presentation. My first slide was something like why
you should only color outside the lines.>>[LAUGH]
>>My second slide was about why you should disregard your teachers.>>[LAUGH]
>>My third one was why you should disobey parents.>>[LAUGH]
>>Eh, and, and yeah, it was sort of funny and the kids loved it, but
I’m dead serious about it. I am dead serious about it. I actually think,
inculcating an attitude of exploration, not confirmation to a bound set,
a bound set by others, is what creates this internal compass and
belief system and confidence in yourself. Again I say,
90% of you will do what’s expected. You know, after this you’ll be
motivated and then go back and say, oh, that Goldman job, it pays more.>>Okay.>>Hi, I’m Neil MBA1,
thanks for your speech. I just on the end of this thing that you
mentioned, there’s the VC field now, as compared to in the past, has become a lot more crowded and
there’s a talk of tech bubble here. In your opinion,
are we in the middle of a bubble? And if so,
when do you foresee it bursting? Thanks.>>I don’t,
I know that I don’t know the answer. I also know anybody who tells you they
know the answer is probably stupid. [LAUGH]. [LAUGH].>>So yeah, thanks, thanks for
your talk, Pablo Fuentes, MBA10. So I think your brand of swashbuckling is
particularly effective if you show some vulnerability. So I’m gonna be your buddy and allow you
to tell us a story about a time when you got crushed by somebody’s brutal
honesty and what you did with that.>>[APPLAUSE]
So, look it would take an hour to
talk about all my mistakes. I actually let me put it this way. In the last 15 years, there’s only once
in my life I’ve called somebody and say I’d like to speak at this conference. And that wasn’t a popular conference. It was a small thing in a hotel
room in San Francisco and was called FailureCon where
everybody who had co, failed came. And I wanted to speak to
this issue of failure. There are so many s, stupid things. You know, the iPad is so popular. We tried to do it, probably one of
my large mistakes, in the late 80s. And I could go into details,
and I, I’ll cut it short. What I would say is I’m never
embarrassed about my failures. And so if you search in the web for
my failures, you’ll find lots of them and you’ll find me talking about them. And it’s important because,
given my philosophy, where I screw up doesn’t matter,
because it’s a long list. In fact,
it’s a longer list than my successes. But like I started with, nobody remembers the data dump here,
everybody remembers Sun. Right? The number of venture companies
where I made stupid mistakes. I’ll, I’ll tell you one of my,
big failures. So if you go back to Sun. 1980s. Sun’s logo, or, on, on, le, motto under the logo
was the network is the computer. And these couple of people started
this software program that did routing of IP packets of network traffic. That happen to be the beginning of Cisco. Now, when you say the network
is the computer and make these arrogant marketing lines, and you
forget that routing is the key element. And Cisco was born as an application
on Sun, and we didn’t see it. And I said to myself, duh, how stupid was
I not to see it when it was happening? Even when I saw the application! A router was an application
on a sun machine, we missed the largest
opportunity Sun put out. I can find 100 such examples,
the point is, try and fail but don’t fail to try. My, a couple of other favorite
quotes along those lines, since we’re coming to the end of our time. Robert F.
Kennedy said, only those who fail greatly
can succeed greatly. The classic example of that is Elon Musk. He said forget this bullshit
about supplying batteries to GM. They’re just too slow
to make change happen. You know I was talking about retailing
Amazon not Walmart, YouTube not NBC. Think about GM or Tesla. GM spent way more money than Tesla did. Space, NASA and Lockheed spent
way more money than SpaceX did. I can go on and on, every major change. So failure, try and fail,
but don’t fail to try. Nassim Taleb and his book Antifragile
which I recommend everybody read if they are setting off on a career as a personal
philosophy, mine happens to coincide, and I’m not talking about Black Swan,
but his book called Antifragile. I always love ending with a good rec,
book recommendation. I think that’s important, so. I’m just not embarrassed
about my stupid mistakes. I mean, I think that’s the difference.>>[INAUDIBLE]
>>I’d know if I answered your question.>>[INAUDIBLE]
>>When did I get crushed?>>[INAUDIBLE]
>>By brutal honesty. I mean, I’ve offended plenty of people. And that, so I won’t go into
the details because the public company, two public companies involved but,
I was on a, on a panel with the CEO of this public company and I basically
told them how stupid they were and then there was payback in a indirect way and
that really hurt this other company and it you know, literally killed,
almost killed the company. Unfortunately because they’re public
companies I won’t go into details. So that’s an example where
brutal honesty really hurt me. I can think of lots of, look, there’s
plenty of people in the VC business that don’t like me because I tell them
they, they, they’re sort of worthless. Eh, eh, I do! But again it’s an indulgence on my part. The really good people
I don’t say that to. If I don’t know somebody enough
I won’t say to that to them. But if I do know for
sure I do make sure I tell them. More importantly, I tell [INAUDIBLE] knows
what I think and they often tell the VC. But it’s part of life.>>Now I want to make sure we
have time for one more question.>>Mm-hm.>>Actually,
a quick announcement before that. Friends of Ronid from the class of 2010
are welcome to join his family backstage after the event ends to share stories and
reminisce. So, this questions has sort of sort
of a view from the top tradition. And every applicant to Stanford GSB is
asked this question on their application. However, you were not asked
this question in 1978, because this question didn’t exist
in 1978, it started in 2000s. So here’s your chance to
answer this question, what matters most to you and why?>>You know I think it sort of and,
and I won’t phrase this in, in a do gooder kind of way and
I don’t mean it that way. I just find it’s cool to
disrupt things for the better. And so when I say impact I sort of feel like I’m being
a troll on various industries. It’s a luxury I’ve earned to, because
I don’t need to pay my mortgage and so, I like taking on new things. You know, I, it’s sort of like
now people are mad at me for saying we don’t need doctors. I actually don’t believe we do. So but we need, a different kind of
doctor to do a different kind of thing. And I wouldn’t go to Stanford Med
school to get the best doctors. I’d go to UCLA film school because the
human element of care is important, and acting becomes important. And that’s where most of our doctors
will come from in 15 years for the human element of care. And people hate it, doctors hate
it when I say to get the most, most of the human element of care
you need the most humane humans and those aren’t the high-IQ people who
got into Stanford Med School, reality. But what I would say is knowing I can make a difference in industries where
things are positive is very rewarding. And let me end on the note that
I actually like working on things that my four kids would be
proud of me working on, right. And there’s this question that
all of you will face of work, life balance so let me end on that note. Working on cool things excites me,
keeps me motivated, I like to say, you you grow old when you retire, not you
re, you don’t retire when you grow old. And as long as you are stimulated and
excited and whatever your passion is, and it can be what I do,
it could be I want to train a whale. I find that a really hard task. It’s a significant challenge by itself. Maybe it’s not hugely impactful for
society. But I actually love that example of,
if I got passionate about that and did that, and
it’s a really hard thing to do. It’d be exciting to go pursue it. So I like hard challenges, I like
difficult things, I like working against the odds and that brings out
my competitive spirit and now I happen to constrain it to areas where
I think I can have a positive impact. But not so much in the do-gooder thing,
it’s a luxury I can indulge in. It makes my kids feel better. So let me end there. Through all of the 90s when my
kids were young, I had one rule. This 15 minute thing,
managing my time came from the following. I realized it was easy for
all of us to say things and then, and mean them and
not stay true to them. The most important? Family. Everybody says the right words,
they don’t live by them. So, what I decided I would
do is get a monthly report of every category of time I spent time on. It could be working with entrepreneurs,
evaluating new companies, being polite talking to journalists,
being polite because somebody said, here my son wants to talk,
have a conversation. I classified my time into 20 categories,
one of the most critical lines from that was the number of times
I had dinner with my kids at home. And I set an impossible goal of 25 times,
a month. And, it took me a year or
so, but eventually I met it. But more importantly, every month I had
to report on whether I did or didn’t. I do believe work,
life balance is possible. You just have to be extremely
disciplined about it. I no longer went to the pub,
right, or the. I know no longer did
baseball games with friends, I only did it with my kids or son. I, I decided what my
priorities were explicitly and then measured it to meet the requirements. I highly recommend you come up with
your own priorities and measure them. Thank you all very much.>>Thank you Rao thank you
>>[APPLAUSE] [MUSIC]

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