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									Punditry

           Invention


                      Vinod Khosla
                   Khosla Ventures
                             1
                   September 2009
“All progress depends on
 the unreasonable man.”
                 - George Bernard Shaw




                                         2
“A crisis is a terrible thing
         to waste.”
                        - Paul Romer




                                       3
reality check?

                 4
  “The telephone has too
 many shortcomings to be
seriously considered as a
means of communication.”
           - Western Union Internal Memo, 1876
                                                 5
 “There is no reason for
any individuals to have a
computer in their home.”
  - Ken Olsen, President, Chairman and Founder of DEC, 1977
                                                              6
  “Heavier-than-air
flying machines are
        impossible.”
  - Lord Kelvin, President, Royal Society, 1895
                                                  7
    Extrapolating the past…
             “A rocket will never be able to leave the Earth’s atmosphere.”
                        NY Times, 1936




                                        The reality…
                                                   The V-2, in 1942, Sputnik in 1957, and many more…



                                                                                                       8
Source: http://listverse.com/2007/10/28/top-30-failed-technology-predictions/
Extrapolating the past…
 1949: “Where a calculator like the ENIAC today is equipped with
 18,000 vacuum tubes and weighs 30 tons, computers in the
 future may have only 1,000 vacuum tubes and perhaps weigh
 only 1½ tons.”




      The reality…


                                                                                           9
                                                    Source: Popular Mechanics, Wikipedia
forecasting

              10
    “It is the mark of an educated
 person to look for precision only
as far as the nature of the subject
                           allows.”
                             - Aristotle
                                       11
     oil price forecasts (1985-2005)

                                                  $51




                                                                                                                                5 year
                                                                                                                               forecast
                                                                                                                                 error
                                                                  Forecast
                                                                                                                               10 year
                                                                                                                               forecast
                                                                                                                                 error



                                                                    Actual




                                                  $15
                                                                  1985                                    1990   1995   2000




                                                                                                                                          12
Data/Source: World Oil Prices Barrel) (current $ / - EIA Office of Integration Analysis and Forecasting
    gas price forecasts (1985-2005)

                                              $8.00




                                                                                                                                   5 year
                                                                                                                                  forecast
                                                                                                                                    error


                                                                                                                                  10 year
                                                               Forecast
                                                                                                                                  forecast
                                                                                                                                    error




                                                                 Actual



                                              $1.00
                                                                   1985                                      1990   1995   2000




                                                                                                                                             13
Data/Source: Natural Gas Wellhead Prices (current $ /1000cf) - EIA Office of Integration Analysis and Forecasting
                           EIA Oil Price Forecasts: 2005 through 2009



                                       140                                                                                                                              2009 forecast
                                       130


                                       120


                                       110


                                       100
                                                           The same regression
                                        90


                                        80
                                                         repeated year after year!
                                                                                                                                                                     2008 forecast
                                        70

                                                                                                                                                                         2007 forecast
                                        60


                                        50
                                                                                                                                                                      2006 forecast
                                        40


                                        30


                                        20


                                        10            Colored arrows represent price range for previous year
                                                                                                                                                                     2005 forecast
                                         0
                                         2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
                                             2005                                                                                                                2030




                                                                                                                                                                                         15
Source: EIA, data for Imported Low-Sulfur Light Crude Oil (2006-2009), 2005 forecast is “world oil price”
                                         World Oil Supply Projections: 2006-2030?




                                                                                    16
Source: Foreign Policy, citing McKinsey Global Institute
                                        telecommunications: actual vs. forecast demand



                                                                  1,000 GB/s




                                                                                                        1995 projection



                                                                                             1987 projection

                                                                                      1983 projection


                                                                                  1980 projection




                                                                               1978 projection




                                                                   1 GB/s




                                                                                                                          17
Source: internal forecasts for major telecommunications company
                                                         Mckinsey : US mobile subscribers
                                                                                     1980 forecast for 2000




                                                               forecast                                           actual




                                                                                                                           18
Source: American Heritage Magazine - http://www.americanheritage.com/articles/magazine/it/2007/3/2007_3_8.shtml
yesterday’s technology, tomorrow’s forecast




   1980’s phone:              year 2000 phone:




                                                 19
quantitative modeling flaws


  models with given inputs are precise but inaccurate


    • low “standard deviation”, but with high “standard error”

    • input the measurable, ignore the immeasurable

    • obscured embedded assumptions




                                                                 20
                the folly of predictions:
                tetlock study


            hundred’s 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
    more?

                                  … specialists are not
                               significantly more reliable
                                 than non-specialists in
                               guessing what is going to
                               happen in the region they
                                         study…

                                                                        22
Source: http://www.newyorker.com/archive/2005/12/05/051205crbo_books1
        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




                                                                                    23
Source: http://www.newyorker.com/archive/2005/12/05/051205crbo_books1
The losing mentality…

“If I had thought about it, I wouldn't have done the
experiment. The literature was full of examples
that said you can't do this."

   - Spencer Silver on work that led to the unique adhesives for 3-M "Post-It"
Notepads.




                                                                 Source: Wikipedia
“extrapolation of the past”

            vs.

  “inventing the future”

                              25
redefining swans




                   26
             “black swan”
                                                            …rarity, extreme
                                                                 impact, and
                                                               retrospective
                                                                 (though not
                                                                prospective)
                                                               predictability


                                                                                27
Source: Nassim Nicholas Taleb, author of “The Black Swan”
calera



... turning problem carbon dioxide into a feedstock.




                                                       28
kior



       “a million year crude production cycle
                reduced to hours?”




                                                29
transonic/ecomotors



“50-100% more efficient engines cutting world
           oil consumption in half”




                                                30
soraa



   “10X less electricity use for lighting”




                                             31
battery black swan rumblings?




                                32
moore’s law: not a new paradigm!

   $1,000 of computing buys
   exponential scale




                  electromechanical   relay   vacuum   transistor   integrated circuit
                                               tube                   (moore’s law!)




   Each time one paradigm runs out of steam, another picks up the pace!
                                                                                         33
“relevant scale” solutions for




                                      ... oil
                                    ... coal
                               ... materials
          ... (efficiency of oil & coal use)
                                                34
  “...relevant cost”

 “...relevant scale”

“...relevant adoption”

                         35
reality: electric cars




                         36
reality: $2,500 nano




                       37
reality: electric cars




                         38
                         38
    reality: electric cars

                   over next 40 years, car fleet = 3 billion cars

                   … China (2050) = total worldwide fleet today
                   … India (2050) = 50X current Indian fleet




                                                            … and yet I am optimistic!




                                                                                         39
Source: The Economist
as surely as...
1985: NOT a PC in every home

    1990: NO email for grandma

        1995: NOT the internet

             2000: NO pervasive mobile

                 2005: NO financial implosion


                    2010+: reason for optimism

                                                 40
     reason for optimism:

                            users



                                           radio
                                           TV



                                           cable

                                           internet
                    50 million




                                    1922   2002




                                                      41
Source: Morgan Stanley
   “…every strategic inflection
   point [is] characterized by a
                ‘10X’ change …”


“There’s wind and then there is
a typhoon, there are waves and
        then there’s a tsunami”
                         - Andy Grove
                                    42
exponential innovation…
assuming ~2% rate of change…
  190
190

  170
170

  150
150
                                                         = X units
  130
130

  110
110
  Index
Index




      90   to predict 2040 in 2010, we would need to predict 2010 in 1926!
 90
      70
 70
      50                                                         = X units
 50
      30
 30
      10
 10
   1926                                                  2010                2040
                                                                                    43
land is not (remotely) a constraint


                                               3000 km




                                                           world electricity demand
                                                                (18,000 TWh/y)
                                                            can be produced from
                                                                300 x 300 km²
                                                              =0.23% of all deserts
                                                         distributed over “10 000” sites




                                                                                           45
   Source: Gerhard Knies, CSP 2008 Barcelona
three billion
  acres...

                46
negawatt energy savings!




                           47
negabarrel energy efficiencies!




                                  48
brian arthur’s evolution...




                              49
path to black swans...

more shots on goal!


                         50
    nine dots problem




                            51
Source: Amory Lovins, RMI
  standard nine dots solution




                                52
Source: Amory Lovins, RMI
 standard nine dots solution




                               53
Source: Amory Lovins, RMI
 better: use just three lines




                                54
Source: Amory Lovins, RMI
mechanical engineer’s solution




                                 55
                                 55
geographer’s solution




                        56
                        56
wide line solution




                     57
                     57
…technology expands the ‘art of the
            possible.’



   …today’s ‘unimaginable’ is
tomorrow’s ‘conventional wisdom.’


                                      58
we can’t predict what will happen

   “Nobody knew early in 1921 where radio
      was really headed. Everything about
   broadcasting was uncertain. For my own
   part I expected that since it was a form of
      telephony, and since we were in the
  business of furnishing wires for telephony,
  we were sure to be involved in broadcasting
                   somehow.”

                 - Walter Gifford, future President of AT&T, 1921



                                                                    59
200 years of technology speculation

                                                                                                                                               internet

    10,000 semilog scale


                                                                                                                                   computers

                                                                                                                    broadcasting




                                                                                                    telephone,
                                                                                                  electric lights
                                                             railroads
                                                                            railroads




                       1785                                                                                                                    1995




           “Triumph of the Optimists: 101 Years of Global Investment returns”
                                                                                                                                                          60
  Source: Elliot Wave International; "Triumph of the Optimists: 101 Years of Global Investment Returns"
         Dotcom bubble…

                1400




                1200




                1000




                                                                                                                                                                        Morgan Stanley High
                                                                                                                                                                         Technology Index
        Terabytes




                    800




                    600




                    400




                    200




                      0

                     1996                1997                 1998             1999             2000                2001             2002   2003   2004   2005   2006
                                                                                                                                                                                         61
Source: Andrew Odlyzko (University of Minnesota – Digital Technology Center)    Morgan Stanley Technology Index from Yahoo Finance
   new technology has a history...



                                         Connections in London   7,000,000
                                                                      7,00 0,000



                                                                      5,25 0,000



                                                                      3,50 0,000



                                                                      1,75 0,000



                                                                             00

                                                                                   90   93   95   99




      “In 1885, Yale students who were getting ‘more light than they relished’ chopped down an
                         electric pole erected at the corner of the campus…”

                                                                                                       62
Source: When Old Technologies Were New
   “no change bigotry”
           vs.
“environmental everything”
           vs.
      pragmentalists



                             63
to predict the
    future,
   invent it!

                 64
irrational ideas: “how to green” books




                                         65
... or get to work.




               vk@khoslaventures.com
     khoslaventures.com/resources.html

                                         66
Together, our products will improve the way all people live




                                                              67   65
                                  Calera Corporation




Built on carbon negative cement




                                  68        66
                                                                    Living Homes




And prefabricated, environmentally friendly, cheaper, LEEDS homes




                                                                    69       67
                                 Soladigm




Using electrochromatic windows




                                 70         68
                                Amyris

                                LS9

                                Gevo

                                Kior

                                Mascoma

                                Range Fuels

                                Coskata

                                LanzaTech




Fueled from renewable sources




                                71        69
                                                  Ramu

                                                  EcoMotors

                                                  Transonic

                                                  Firefly

                                                  Seeo

                                                  Sakti3

                                                  Nanostellar

                                                  Tula Technologies

                                                  Hybradrive




With reduced fuel consumption and CO2 emissions




                                                  72          70
                                                      Topanga




Lit by high intensity, low power discharge lighting




                                                      73        71
                              Ausra

                              Altarock

                              Infinia

                              Stion

                              PVT Solar




Using renewable electricity




                              74          72
                                                     Great Point Energy




Cooking with natural gas from clean coal & biomass




                                                     75        73
                            Lumenz

                            Group IV

                            Soraa




Reading with LED lighting




                            76         74
                       Kaai




Watching HD laser TV




                       77     75
                             NanoH2O




Drinking desalinated water




                             78        76
                                               Segetis




Safely using biobased plastics and chemicals




                                               79        77
                                   Draths




Biobased materials for your home




                                   80       78
                                                           Pax Streamline




Staying comfortable with more efficient air conditioning




                                                           81       79
Change every aspect of daily living




                                      82   80

								
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