All-In Summit: In conversation with Vinod Khosla

please uh join me um welcoming venod kosla to Stage venod oh how are you how are you doing legend legend let your winners [Music] ride and in we open sources to the fans and they've just gone [Music] crazy wow thanks Legend how are you Legend venod good to see you just by way of background I think we all know venod um venod is a legend and a friend uh his Indian army officer dad wanted his kid to join the Army and venod decided instead to go into business after reading about Intel and getting inspired by co-founder Andy Grove an immigrant who got um funding for his startup in Silicon

Valley venod later got a masters in biomedical engineering from Carnegie melon on a full scholarship Stanford GSB rejected him twice he finally got accepted and received his NBA 1980 and he worked at several startups some of which failed and then one of them worked out pretty good Sun Micro Systems started in 1982 with his Stanford classmates Scott McNeely Andy beckim and um Bill Joy uh venod um raised $300,000 in seed capital from Venture firm Kleiner Perkins Cofield and buyers and within 5 years son made a billion dollars in annual revenue he became a GP ecliner uh where he helped create an NextGen which

he sold to AMD for 28% of its market cap the first successful Intel microprocessor clone company and his largest return to date maybe we'll talk about this today was Juniper Networks where the firm's $3 million investment in the 90s earned $7 billion not bad in 2004 he launched coasta Ventures 2006 I pitched him and he rejected me me as an investor in my company I came back in 2011 and he led my series B and I had three competing offers and I picked V so um ven's been a great partner by the way I will also give you guys I had offers from um I guess I'll say it Founders fund and andron Horowitz for my series B venod gave me the lowest valuation and I still

took his offer entry price matter did he add more value vod's whole point was VCS typically add negative value we're going to put a senator on your board that we know that knows this and that that firm and the other board members they brought and the partners they brought to the table for me were incredible and he's been a great um mentor and adviser I'll also say I always gave people advice on Veno because I get a lot of reference calls like should I take money from venod I heard he's pain in the ass sometimes and I'm like let me tell you something about venod I've never told you this in public but I said the thing about venod is you go into a meeting

with venod and he's like the Oracle in Neo The Matrix you go in the kitchen and he's like you know she says no thyself she pulls out the chocolate chip cookies she said he says am I the one she says you're not the one kicks him out he has to ultimately decide what the right decision is and venod will cast for you a vision of all the things that you can become and and push you and try and make you extend your vision for your business and what is possible and through that thought through that conversation through the visioneering that he can help you do as an entrepreneur sometimes you need to listen and sometimes you need to ignore the [ __ ] advice he

gives you but I will say that um the role he plays is is really important and I've seen it work across some of the most important companies in Silicon Valley in the world today so venot thanks so much for being can I just interrupt with one comment yes you know advice to all the entrepreneurs most we's want to be your friend and so they are hypocritically polite instead of brutally honest in a way that can actually help you make a better decision in in that's sort of religion for me I prefer brutal honesty to hypocritical politeness and when people don't do that they are actually harming the entrepreneur and having the entrepreneur like them more that's not

my game and is that what you mean when you say V most VCS add negative value well they take a very shortterm approach uh just going through a situation companies being recapped they asked us to participate I said you are hanging on to revenue that is bad Revenue if you get rid of it and restart the company with positive Revenue in the right technology approach will partipate and even lead but they hung on to revenue since the beginning of this year by the way three years ago I asked them to take a technology approach as opposed to a people approach to the business they did not because Revenue came fast the technology took time to develop

and they didn't invest in it now they're going back and I just got an email today saying they are happy to take our approach of really investing in the technology lower burn rate not try and show higher Revenue so they can be acquired instead build a company yeah that's fundamentally the kind of thing I run into constantly so I I want to start our conversation with AI um I'm going to kick this off you invested in open AI you've been in inting in AI technology as people are framing it today for some time can you share with us a little bit about how you became an investor in open

AI in the context of the AI trajectory that you've been seeing for some time and also maybe give us a little color because we haven't had this question answered on our show about how open AI went from nonprofit to for-profit and what the future is for open AI well let me tell you a more General story first starting with the internet in 1982 when we started Sun we bet on on the Internet only company to bet on the internet 1996 since you brought up Juniper the internet was growing but not yet clear the the Senior Management of every major TCO in the United States told me they would never adapt tcpip on for the internet and I said fine will

build Juniper to build tcpip Cisco told me they would never do tcpip above what is probably your home home service today oc2 never um and so we built tpip why because we've seen the internet on an exponential and the flat part of the exponential looked very uninteresting and nobody believed in it we invest in Juniper it was a 2500x return for us at Kleiner one of the largest returns in Venture at least when uh Wall Street journ J did a piece on the snap IPO of largest Venture returns ever but we believed in something and did that how it relates to open AI probably year 2000 I gave a interview with the New York Times it's my son just sent it to me so I remember

it I said AI will be powerful enough we don't know when but it'll we'll have to redefine what it means to be human and I understand Steven Wolfram had some interesting comments in that area so happy to talk about 10 years ago I wrote two blogs the first one was called do we need doctors with a premise that AI would replace the expertise of doctors and let them do the things humans do really well so 20% doctor 80% AI is the thing I defined um and I wrote another blog called do we need teachers because the only way to scale education at an equal level for every kid was with

AI that was 20 January of 2012 so about 12 years ago so four or five five years ago late 2018 is when I started talking to Sam the opportunity came up to do something with open a eye I said this is a clear B I couldn't predict when things will Emer how much capability will happen how fast but you didn't know need to know that whether it was in 3 years 5 years or 10 years I was pretty convinced it would be pretty phenomenal and there'd be practical applications along the way where it would have a large impact long before we got to AGI so we placed the back and we placed a long-term back you know this audience is going to hear from

Bob mguard you know 5 years ago I played was a bet on Fusion for the same reason if we get it to work these are humongous returns big bats but reasonably high probability of success initially but very high payback and I was so convinced in open AI I placed twice uh our initial investment was twice the largest previous investment I'd made in 40 years in Venture Capital 2x the largest bet I'd ever placed initially in a company how did that go from nonprofit to for-profit and raise Venture money well you know those are details we don't understand but I would say the foll figure those out there are

plenty of nonprofits in Europe that have for-profit arms right right it's a very good model to sustain and generate profit for a nonprofit to scale like I think the European model some of these examples are really really great Ikea Bosch they have very large nonprofit ownership and I think that's a very good model to scale I mean I just mentioned do we need doctors my son's building a primary care doctor AI my wife's doing a primary care or tutor AI as a nonprofit it really doesn't matter how you do it the question is how can you gather the resour resources to scale the social good you're tring to do whether with a doctor or with a tutor for every kid on the planet there's a

lot of discussion about um how jobs might be displaced because of AI you've seen I guess three or four of these amazing um efficiency uh Cycles what's your take on that because this one does feel qualitatively different uh and it does seem to be moving at a faster pace so the speed at which AI is moving Ming uh and just the the Leaps and Bounds of how it's making people augmented you're saying 80% AI 20% doctor um what do you think this does to jobs and do you have those concerns of displacement that a lot of people seem to be concerned about I I think it's a genuine concern okay um the path to getting to that point so let me start with that 2025 years from now I

think the need to work will disappear people will work because they want to work not because they need to work and nobody wants a job doing the same thing for 30 years on an assembly line at GM that there's a set of jobs nobody wants to do that we shouldn't really call jobs they're absolute treasury yeah so hopefully those disappear I love my job so 25 years from now Health permitting I'll still be doing the same thing like I'm 68 so uh you know and Warren Buffett's gone a lot longer than I have I'm very passionate about what I do I enjoy it so much I do it for free and I'll keep doing it and other people will there will be new jobs um what you

call jobs or what people get paid for so is X Games popent a job I I don't know I don't call it a job but it is a passion that can pay um so I do think the nature of jobs would will disappear now societies will have the the transition from today to that vision of not needing to work if you don't want to will be very messy very political very uh I would say controversial and I think some countries will move much faster than others I I suspect let's take something I'm very hawkish on China they will take a tanaman square tactic to enforcing what they think is right for their

society over a 25e period we will have a political process which I prefer to the Chinese style you like the debate over the tanks well debate always improves things but it also does slow down and certain societies may choose not to adapt these uh and I think the societies that do that will fall behind and I think that's a massive uh disadvantage for our political system we may choose not to do it we've done it before but we've also seen massive transition before agriculture was 50% of us employment in 1900 by 1970 it was 4% so most jobs in that area the biggest area of employment got displaced we did manage the

transition well cost went down and productivity went up yeah so I do think we will have to rethink so the one thing I would say is capitalism is by permission of democracy and it can be revoked that permission and I worry that the this messy transition to the vision I'm very excited about may cause us to to change systems I do think the nature of capitalism will be will have to change I'm a huge fan of capital capitalism I'm a capitalist but I do think the set of things you optimize for when economic efficiency isn't the only criteria will have to be increased so disparity is one that will be increased I first wrote a piece of 2014 in fores

it was a long piece that say AI will cause great abundance great GDP growth great productivity growth all the things economists measure and increasing income disparity that was 2014 and I think I ended that to close this answer off with we will have to consider Ubi in some form and I do think that will be a solution but meaning for human beings will be the largest problem we face which was my followup which is if you give people Ubi do you have concerns of you know the idle mind and what happens we've seen in other states when 25% of young men maybe don't have jobs their minds wander and bad things happen and so what do you think the societal issues will be if we do offer

Ubi um I think we will have issues but we will eliminate other issues you know there's pros and cons to everything it's weird very hard to predict how complex systems behave and it's very hard for me to sit here and say I have a clear vision of how that happens but I for one am addicted to learning I know other people addicted to producing music uh all of those are reasonable things for people to find meaning in or personal meaning yeah there's others like I said just want to perfect their participation in in a certain sport or I love X Games because wasn't even remotely considered a sport not that long ago uh so things

passions will emerge and I think if people have very early in their life the ability to pursue passions I hope that adds the meaning human beings will need and in some sense that's what I was talking about in 2000 when I said we'll have to redefine what it means to be human your assembly line job won't Define you for your whole life that'd be a terrible thing yeah in the VK in the AI landscape just going back to that for a second um you have a lot of these big companies who seem to have been caught flat-footed so they're acting pretty aggressively I think even yesterday there was a a leak of something where meta trying to really superpower llama 2 and then create some

high performance Cloud that they effectively want to give away um we talked about this a little bit on the Pod but the idea seem seems like the big companies want to Scorch the Earth on on the foundational model set then you have some other big companies that are working on Silicon so can you just walk us through in your mind how you've organized where the where the value is getting created where there'll be product value but no economic value etc etc yeah look uh going back to openai part of my interest in funding openai was when we looked at it when I looked at it there was two major centers of excellence in AI there was Google gole

they had Deep Mind and Google brain but Google and then there was an effort at Biden and it was very worried the Chinese might win that uh I'm hawkish on China I have no trust there um and I loved Graham Allison's book uh destined for war I'm a complete believer in that thesis um but I thought it'd be valuable to create a third Center and that was part of the motivation in funding open eye I'm really glad meta is doing it and others are trying to do it and you know there's efforts in every country every country wants their National AI I think more competition especially in the set of countries subscribing to Western values is good and I think that will

sort of but I would say the following almost all the efforts I have seen are very limited they're all trying to scale llms and you know I spend my time looking at what besides llm will play an important role I haven't seen one effort among the majors that isn't following the same model yeah more Nvidia gpus scale the parameters more data um instead of saying are there other methods so so I'll mention you know we made an investment in a symbolic logic idea would that be dramatically additive in in you know just like open a ey didn't look that interesting for 5 years ago 2018 late 18 is when we really uh made our decision to invest it got

took a while to get organized but I'm saying what else would look like that in 2028 yeah you know would it be symbolic logic All In in anybody doing that probalistic programming is it completely otherwis like multi-agent systems is there are going to be other axes in which we will see progress said differently do you need to make sure there are other axes so that we we're not looking back a few years from now and there's just massive Cuda lock in and nothing can happen without one gatee keeper is that well the great thing about Venture and Venture capist is they like to play long bats yeah so I'll place all those long bats on alternative ways to learn yeah

and not replace but add to llms I think is the more likely scenario though who knows yeah um but even among just if imagine llms do it all it's good that there's multiple plers and so more big companies pop up great uh I also do think governments will have their own efforts China of course has one but plenty of other Rumblings of governments trying to put together an effort in my country tell us the and that's all good tell us upleveling away from just AI but broadly speaking Venture give us the State of the Union of venture capital in September 23 so let me give you a perspective I've been doing Venture for some 40

years in that time I have not seen and people get surprised at this one example of a large Innovation that came from a large company or institution so the only thing you can do not one the the the only two examples I could find was in the early 70s which was if you go back 50 years when I was Bank of America put debit and credit on a plastic card like that wasn't even a major Innovation but I'll give them that but I couldn't think of examples like that apple with the iPhone maybe um that was Steve Jobs I think it was a Founder Le I should have said founder Le Innovation okay got it is a more accurate description I like that you

know did General Motors do driver L cars or weo did uh would somebody at Avis do Uber would somebody at Hilton do Airbnb right would would somebody and Elon speaking next but somebody at blacked Martin do SpaceX or rocket lab we investors in rocket lab so I like it a little more um they do have a superior strategy but SpaceX has done a great job uh but think think of every large social change is there a large company that play you know the only thing somebody came up with was debt structur debt structuring that the bankers did uh and I said they didn't take any risk right right no ination they took a risk with somebody else's money other people's

money easy to play with whether you're uh in finance or in government uh other people's money is easy uh but my idea is innovation comes from group like this and I'm completely convinced I lost the original question but this is where Innovation will come from on that yeah so any large area you'll be hearing from Bob mumar you know four five years ago invested in Fusion now we may fail I think we are much more likely to succeed sitting here today than fail but it's possible can you talk about that just while you're on Fusion that there we've got both Bob and David from here helon tomorrow morning yeah and there's broadly call it six or some number of General architectural

approaches to solving the yeah there's six approaches a dozen companies I think it's well now there's 70 but yeah it's I mean it's just ballooning but how do you think about the role that a commonwealth or even an open AI I guess how big of a role does Capital play in getting there because what made what makes Commonwealth different is how much Capital they've raised Billion Dollar Plus at this point open AI similar the um the decision as an investor how much of it is predicated on this team or this architecture let me tell you the Commonwealth story before Bob has a chance to tell you is he here by the way

to myad I'm sure he's here somewhere because I'm meeting him in half an hour okay backstage U but here's the thing they may have raised a lot of money it took double double digigit Millions to handle the single biggest risk in building the architecture right which was can you build a 20 Tesla magnet yeah the magnet right and Bob and I had this discussion I said if Fusion doesn't work but you can build a 20 Tesla magnet we got lots of interesting applications in nuclear medicine yeah you know a fusion reactor is a particle accelerator that technical breakthrough we can pivot somewhere else

yeah nuclear Med MRI machines lots of areas so let's go build with double digit Millions which is not a huge amount in the context of the upside of maybe a bigger upside than the 2500x Juniper had if you solve the fusion problem there's still a 10x upside if you just solve the MRI machine problem so you're thinking of probabilities well in today we not but but when we stored it that was clearly to look at off RPS right like where else could we go if we only had double digit Millions we didn't we built the magnet if we didn't build the magnet we failed that's rent of capital so how do you know that that bet that investment at this point is still a

good investment or you keep putting more capital in if there's now six competing architectures any one of which could have their own breakthrough that could yield better economics so we've continued to invest in it mostly because I think Bob's just a phenomenal CEO and if any body can make this happen and the world needs it to happen Bob can but I'm also optimistic and as you know we invested in Sam too he invested in helon I think there's more than one approach that could be successful in fact i' guess 15 years from now we'll be looking at one more than one company that's successful Sak you had a question I wanted to make sure you got to ask it

well let's let V finish that that point I thought it was finished yeah anything else so my view is large problems like that yeah you'd think G would solve not a chance not a chance right seens not a chance um you know you take any of these one of my favorite you take large problems one of my biggest beefs is the traffic in cities I actually think we're very much on track to replace most cars in most cities in 25 years how by building a different kind of public transit system anybody want to invest in it I'm really excited about it um you know we went the way of autonomous cars for consumers or taxis aut autonomous cars in public transit will increase through the only thing fixed in

cities is Lane wdth you have a road certain size you don't destroy buildings on both sides so if you can increase passenger per hour through it and by the way bicycles don't we love bicycles but they don't scooters don't public transit autonomously driven in small parts will make public transit on demand so unscheduled on demand any time of the day or night uh and point to point you don't stop for anybody else to get up it's a beautiful way to do change cities and I think it'll happen there's no question about it so like uber pool but with a larger Mini Bus type format no no no you don't want to go to mini

bus because then you have to stop for other people to get out so just if it's two or four person Vehicles it's faster than your private car it doesn't stop at traffic lights it's on demand you don't have to park it I could go on and on uh I don't want to spend too much time on one particular idea but all I'm saying is whether it's Fusion or public transit and we're doing 3D printed buildings uh another one of my favorites is a new and you were asking about this a music model to produce music that is not trained on any YouTube or public music yeah so completely IP free of any constraints like I'm really excited

about little outfit in Australia and they've just um produced a released a product that would be the mid Journey for music really exciting what's your favorite genre of music what do you like to I I'm not a huge music fan to be honest I Adit it but you know I I love a great challenge when this entrepreneur came to me and said hey in some period of time say 10 years and this was four or five years ago and long before AI was a big thing he said I want to produce a music a song a top 10 music song Untouched by a human I said I love a challenge like that let's go it literally took me half an hour to say I in no diligence didn't need all that David yeah I think where tth was going

to go a minute ago about the state of the union and VC is that we talk a lot on the pot about the fact that we just been through an asset bubble that popped uh last year yeah and it you know really inflated during coid with all the money printing that went on and it may have been inflating before that with these Zer policies going back I don't know 15 years um I guess my question to you is how much fakeness do you think that created in the ecosystem um you know or is there any way to even quantify it I mean I think we see now that the size of venture funds is Contracting that new funds are going to be smaller probably there's a lot of VCS who shouldn't even

be in business I think you'll be happy about that um you know we've estimated on the Pod there's 1400 unicorns right now we've tried to sort ort of get all are half of them fake um I guess my question to you is how much did this asset bubble sort of inflate everything in VC and where do you think it stands right now you know it inflated things a lot in certain areas and it deflated things a lot in certain areas but let me give you two analogies to understand this you know investors only and there's a fair number of investors I hear here only care about two emotions fear and greed and they bounce between the two and there's nothing in the middle and so the key to being a good investor is

staying focused on the long term in the middle so anytime you get a hype cycle you'll get inflation and then you will get deflation but let me ask you the following question 1998 there was a do com bubble or bust tell me and there was clearly a change in Wall Street prices and value valuations and all that there was absolutely no bust in the amount of internet traffic so if you look at internet traffic you can't tell when the dot bust happened so I'm saying the reality of using the internet didn't change just because people had inflated values and then deflated them that's just a fear reaction and a grade reaction same thing happened with the original bubble in the

1830s in England if you got the right to build the railroad between two cities you could offer scripts on the market big bubble then a big collapse but more railroad was built in the 10 years after the bubble collapsed in England in the 1830s than before my point is the reality of the underlying business if you're adding value does not change that much it can accelerate a little bit or slow down because less resources available but fundamentals is a good way way to invest sort of the Warren Buffet method not the shortterm hey he's valuing it twice so let me pay up and then you'll pay twice as much as that or

soft M will uh later uh um I think I think it's a question of you can't time the market you as long as you know that this is a an investable technology an investable Trend timing what price you're coming in at I mean this is an old ad in in Market you know it doesn't really matter what price you're coming at it you know in inflationary times you pay a little bit more but you get less dilution later because other people are investing and then when it gets uh goes into a deflationary cycle you just have to learn to respond quickly and good investors will help guide entrepreneurs correctly through all those phases we've

seen a lot of that in climate investing yeah for sure you know very low valuations look when we invested in impossible Foods it was a $3 million valuation pre money crazy idea crazy idea nobody thought plant proteins wasn't a word um another one of my favorite projects is replace soy as a protein Source on this planet and I think we are well on our way to do that right I'm very excited but at that level it doesn't matter whether valuation in the end goes up or down by a factor of two it doesn't really matter if you're adding fundamental value and long-term things but I just want I know that your long-term view is critical to making

Silicon Valley work I think that we all kind of appreciate your leadership your support your mentorship and um and the fact that you're willing to make those big bets in very low probability outcomes but if they work the return is so much more um than that that that multiple um that ratio that you're getting and it matters so much I I just want to add it's just inspiring how much you share with all of us who are behind you and how much we've all learned from you and you've I didn't mention it but you've take a lot of time for jamath you've taken time for me in my career and I I just think it's like a great gift we end I can end with a quick story

I when I when IED we really do have to jump I emailed I I mailed paper mailed been trying 40 or 50 people to try to get a job in VC in 2000 the only single person sent me an handwritten rejection letter VK hey give it up thank you everybody [ __ ] yeah another stand wow thank you thank you sir apprciate great [Music] great let your winners [Music] ride and instead we open sources to the fans and they've just gone crazy with [Music] it Bes my dog taking driveway man we should all just get a room and just have one big huge orgy cuz they're all this useless it's like this like sexual tension we just need to release

[Music] some we need to get [Music] mer