Spence Green

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A New Take on Renewables

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“Everything that you’ve heard about renewable energy is wrong.” So began Vinod Khosla’s 22 October talk at Stanford on clean enterprise. He was quick to raise a disclaimer about his position, revealing one of his key principles to be that “anything out of the ordinary that you want to do will make others skeptical.” Quoting Stephen Kaggwa, he encouraged the audience of aspirant entrepreneurs to “Try and fail, but don’t fail to try.” The approach worked once for Khosla: in the early 80s he bet, and won, on the idea that the desktop could be a viable power computing workstation. Thirty years later, the founder of Sun Microsystems believes that he has found the next honeypot, and unlike some of the environmental activists that garner only incidental respect from him, he has staked a vast portion of his personal fortune on the notion that renewable energy will become a reality in 10 years time.

Khosla’s first several slides described the preconditions for successful renewable products. Three factors must remain in balance: relevant cost, relevant scale, and relevant adoption. In other words, a product must be cheap enough so that it may be adopted widely. Khosla labels this idea the “Chindia Test,” which means that a product must be viable in China and India absent government subsidies. “Trajectory is also important,” he remarked, “Liquid Natural Gas (LNG) can reduce CO2 emissions by 20%, but what about the other 80%?” Here he paused to take an impromptu poll of the number of Prius owners in the audience. A cluster of enthusiastic hands darted up, must of them from the first few rows. “You wasted your money,” said Khosla innocently, before listing several cheaper alternatives, among them painting a 100 sq.ft portion of a roof white. A recent McKinsey study, which showed that hybridization will solve the energy crisis at precisely the same moment that Whole Foods cracks world hunger, backs his claim convincingly.

The most promising path therefore seems to be the least structured: add the best minds, harvest the best ideas, fuel the effort with entrepreneurial enthusiasm, and season with greed. This is perhaps the most common yet least appreciated equation in all of entrepreneurship, and it is Khosla’s formula for uncovering the Black Swan. Among the companies in his piebald venture capital portfolio are: a company coaxing microbes to excrete crude, a method for turning power plant exhaust into cement, a new take on the internal combustion engine, clean televisions and chemicals, and earth-friendly nylon. He is also trying to reinvent the lightbulb.

None of these ventures have reached a highly profitable stage, but Khosla was not discouraged. Wall St was on the minds of not a few people in the audience, and Khosla seized an easy opportunity to decry the market’s vicissitudes, charactizing the venerable American financial machinery as “artificial prices that do not matter.” A chart that juxtaposed NASDAQ closing levels since 1995 and world internet usage buttressed his argument: prices rose and fell, but the overall trend was up, and by an exponential factor. “What matters is this: the things that people do on a daily basis.” Day traders and worried retirees aside, he had a point.

Khosla closed the talk with a touch of idealism. Entrepreneurship requires money, and the desire of it, but success follows religious fervor. “We are missionaries, not mercenaries,” he said, evidently referring to those who can reflect on a spirited conversion. For his part, Khosla believes that his VC firm, Khosla Ventures, has a good bat in its hands and a its name lined-up in the 3-hole. Now it is a matter of swinging, and hoping for homeruns.

Written by Spence

November 5th, 2008 at 12:42 am

Posted in Tech Trends

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