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Investing in the Future

Investing in the Future. Vinod Khosla Khosla Ventures April 2011. …5B people want to live like 500M do today. 2. Source: EIA. “ when the train of history hits a curve, the intellectuals fall off.” - Karl Marx. 3. “All progress depends on the unreasonable man”

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Investing in the Future

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  1. Investing in the Future Vinod Khosla Khosla Ventures April 2011

  2. …5B people want to live like 500M do today 2 Source: EIA

  3. “when the train of history hits a curve, the intellectuals fall off.” - Karl Marx 3

  4. “All progress depends on the unreasonable man” - George Bernard Shaw “Human salvation lies in the hands of the creatively maladjusted” - Martin Luther King 4

  5. experts reality check 5

  6. “Heavier-than-air flying machines are impossible” - Lord Kelvin, President, Royal Society, 1895 6

  7. “The telephone has too many shortcomings to be seriously considered as a means of communication.” - Western Union Internal Memo, 1876 7

  8. “There is no reason for any individuals to have a computer in their home” - Ken Olsen, President, Chairman and Founder of DEC, 1977 8

  9. 9

  10. TWEET? Did not exist 5 years ago! Today: More than 100 million users 65 million tweets are posted each day • 140 characters that millions of people follow • Can tell the mood of a nation 10

  11. Egyptian revolution… Map of #jan25 tweets and retweets the moment Mubarak resigned 11 http://gephi.org/2011/the-egyptian-revolution-on-twitter/

  12. The reliability of forecasting 12 Source: http://bucks.blogs.nytimes.com/2010/09/20/market-forecasts-are-just-guesses/

  13. oil price forecasts (1985-2005) $51 5 year forecast error Forecast 10 year forecast error Actual $15 1985 1990 1995 2000 13 Data/Source: World Oil Prices Barrel) (current $ / - EIA Office of Integration Analysis and Forecasting

  14. Changing with the wind: EIA wind forecasts 2009R/ 2010 Projected GW deployed 2008/2009 2006/ 2007 2005 year 14 Source: EIA, AEO forecasts

  15. Mckinsey : US mobile subscribers 1980 forecast for 2000 forecast actual 15 Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it/2007/3/2007_3_8.shtml

  16. yesterday’s technology, tomorrow’s forecast 1980’s phone: year 2000 phone: 16

  17. Could McKinsey or an analyst have predicted : …Twitter? …India’s cellphone to toilet ratio? …pharma, computer, telecom, media changes …China’s rise, Berlin wall, Egypt, USSR? 17

  18. quantitative modeling flaws • models with given inputs are precise but inaccurate • chasing “false precision”; chasing 3rd order effects • input the measurable, ignore the immeasurable • obscured embedded assumptions 18

  19. If China’s per capita oil use = South Korea, its share of global use goes from 10% to 70%! 19 Source: Council of Foreign Relations/Paul Swartz, citing OECD / BP / IMF / US Census / BLS

  20. China’s oil demand, EIA vs. ?? 20 Source: Douglass Westwood

  21. the folly of predictions: tetlock study hundreds of experts. 80,000+ “expert” forecasts & 20+ years results: experts are poorer forecasters than dart-throwing monkeys 21 Source: http://www.newyorker.com/archive/2005/12/05/051205crbo_books1

  22. why? “…. experts were much tougher in assessing the validity of information that undercut their theory than they were in crediting information that supported it.” - Tetlock 22 Source: http://www.newyorker.com/archive/2005/12/05/051205crbo_books1

  23. Soviet Union (in 1988) - by 1992, Communist Party control will strengthen weaken remain unchanged EU Monetary Union (in 1991) - by 1996, the plan for a common currency abandoned seriously delayed on schedule South Africa (In 1989) - by 1994 there will be more repressive white control continuation of the status quo less repressive minority rule but no serious power-sharing with blacks major movement toward black majority rule formal establishment of black majority rule … experts were asked to predict about 23

  24. … with unexpected results • No relation between experience and accuracy! • A robust finding – based on thousands of forecasts made by hundreds of experts. 24

  25. The illusion of knowing … vs. … knowing that we don’t know 25

  26. “extrapolation of the past” vs. “inventing the future” 26

  27. Disruptions are where most will not venture 27

  28. Improbable is not unimportant… One risky shot may not make sense… … enough (intelligent) shots can be very profitable 28

  29. “black swan” …rarity, extreme impact, and retrospective (though not prospective) predictability 29 Source: Nassim Nicholas Taleb, author of “The Black Swan”

  30. What if oil was a 100% renewable and cheaper than fossil crude oil and we used 50% less of it? 30

  31. kior “a million year crude production cycle reduced to minutes and market competitive?” 31

  32. ecomotors “Engine that delivers 50%+ vehicle efficiency for lower cost?” 32

  33. What if coal based electricity could be 75% cleaner and we used 75% less of it for lighting and cooling? 33

  34. ciris “ … clean coal without ever taking it out of the ground” 34

  35. calera “ ... turning problem carbon dioxide into a feedstock for building materials” 35

  36. soraa “no-compromise 80% more efficient pay-for-itself lighting” 36

  37. caitin “no new functional thermodynamic cycle for cooling has been implemented in decades… … but new lower cost HVAC at 80% less electricity” 37

  38. What if electricity storage was affordable for both stationary and mobile applications and we had a truly smart grid, well beyond today’s “smart meters”? 38

  39. lightsail “ 5x cheaper grid scale energy storage, using only air” 39

  40. Quantumscape/advanced storage Quantumnanothingamijigit 40

  41. What if we applied unconventional technology to large global problems like steel, sugars & agriculture? 41

  42. Advanced Agriculture “massively cutting fertilizer & pesticide use and increasing yields” 42

  43. New metals “reinvent materials science” “approach theoretical perfection at large scale” 43

  44. HCL “food-grade sugars from any biomass” 44

  45. winners take (almost) all =investment viability 5 years out, the group’s market cap has grown… Starting Industry Structure But leaders far exceed the also-rans 45

  46. Recommended reading list • “Expert Political Judgment” – Dr. Philip Tetlock • “Predictioneer’s Game” – Bruce Bueno de Mesquita • “How We Decide” – Jonah Lehrer 46

  47. comments? vk@khoslaventures.com 47

  48. 48

  49. The New Green: “Maintech not Cleantech” … oil … coal … materials … efficiency Reinvent the infrastructure of society 49

  50. …imagine the possible 50

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