Ian CasselKeymasterOfflineTopics: 43Replies: 12
Vinod Khosla is an Indian American engineer and businessman. Khosla is listed by Forbes magazine as a billionaire. Khosla made his early fortune as one of the co-founders of Sun Microsystems, where he was the founding CEO and chairman in the early 1980s. In 1984, he left Sun Microsystems to go into venture capital. In 1987, Khosla joined the venture capital firm Kleiner Perkins Caufield & Byers as a general partner, and then started his own firm Khosla Ventures in 2004.
In this interview, Khosla talks about his story and background. In particular, I enjoyed his thoughts on perseverance, conviction, and failure.
Question: You were the co-founder and the first CEO at Sun Microsystems. About a year after you had started you found out that Sun Micro was going to be shut out from a key sale. When you heard this you got on a flight, got to the customers lobby, and made phone calls refusing to leave until you met with the team. Where does this perseverance and conviction come from?
Khosla: I have a philosophy in life that whatever you believe you should make happen. It’s that simple. If a customer is making a mistake [laughter]. The customer isn’t always right, trust me [laughter]. 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 1980’s about why you shouldn’t listen to your customers [laughter]. That story you mention of Sun Micro is in fact true. There was a signed contract with a competitor; I took a red eye flight. I parked myself in the lobby and refused to leave. I met with the CEO of the company mostly because he wanted me to go away. By 9pm I convinced him to meet me in Chicago with his team, to meet me the next day because he didn’t want to be seen negotiating with us. The following day at 5am, we signed a hand written contract because I wouldn’t let him leave. This was a CEO of a big east coast company. We signed a handwritten contract.
The point is if you actually believe something, you should try your best to make it happen. It doesn’t always happen that you succeed, but it happens most of the time. Failure does not matter; it’s success that matters. No one remembers what you failed at. Everyone remembers Sun Micro, but does anyone know a company I started with McNealy before Sun Micro? Any hands? Anyone? There was a company called DataDump we started and got funded three months before Sun Micro. It didn’t work out. We started both companies roughly the same time. My point is no one remembers your failures. I like to say that my willingness to fail is what gives me my ability to succeed. I find most people are so afraid of failing they don’t try to do the things that would be important enough to do. Anything worth doing is hard.
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Exceptional talk. Got me to thinking:
– investing in companies is investing in the value to be created rather than the value that currently exists
– what would my portfolio/returns look like if I invested just in the most interesting, dynamic, unique, creative companies out there, irrespective of value.
– wouldn’t that be an interesting way to spend one’s working life — studying, investing in, writing about — the most interesting companies out there.
– value is one of the most difficult and abstract concepts in investing. When you probe investors, even highly-accomplished investors, on how they assess value they tend to quickly digress to terms and discussion that don’t mean anything, at least anything relevant to returns. Interest rates, inflation (remember when there was inflation?), competition, management change, unpredictable events, credit market conditions (availability or lack of credit, which is highly-dependent upon recent history and confidence) all have such a powerful impact on estimates of value, and those variables so unpredictable, as to make them very rough guesses at best. The valuation standards applied in March 2009 are dramatically different than those applied now, for instance. Liquidation value, value in an acquisition, value based on average earnings over an entire business cycle, all lead to dramatically different estimates of value.
– I’ve spent a lot of my investment career avoiding great companies because they seemed overvalued relative to average or mediocre companies.
All these thoughts came from the video, and your posting of it here is greatly appreciated.rodmaciverParticipantOfflineTopics: 0Replies: 3
Another thought, final thought on this subject. I have difficulty writing research reports and interviewing management largely because most companies and most managements are boring. My dad, who ran CSIS, Canada’s secret police, used to say he liked boring. I don’t and procrastinate in every possible way when I have to write an investment report on a boring company, regardless of its investment merits.
This interview of Vinod helped me see that, understand it better.
1 user thanked author for this post.Ian CasselKeymasterOfflineTopics: 43Replies: 12
Now the irony of this is given your dynamic background, conquests, etc, I would think you would be the first person to want to study unique, dynamic, and great businesses and the people that lead them 🙂
For anyone that would like to read Rod’s background:
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