A review of some remarks by Vinod Khosla on “Silicon Valley Vision” in 2012 and the value of youth from the Nasscom conference in November 2011. I contrast that with an earlier article by Jim Collins on “Built to Flip.”
Getting Acquired Should Not Be The Goal
Vinod Khosla wrote “Maintain the Silicon Valley Vision” in July 2012. He outlined a number of suggestions for how to preserve innovation and new startup formation.
“Some people seem to think that getting acquired should be the highest aspiration for an entrepreneur in Silicon Valley. I disagree vehemently.”
Vinod Khosla in “Maintain The Silicon Valley Vision“
I think too many entrepreneurs view getting VC funded as a significant milestone in the life of the company. It’s been my experience in observing many go through the process of meeting with VC’s and answering the same questions “What is your exit strategy?” and “How much will this startup sell for in three to five years?” that they absorb the VC’s desire to see them acquired at a large valuation as their highest aspiration.
“Seeking an acquisition from the start is more than just bad advice for an entrepreneur. For the entrepreneur it leads to short term tactical decisions rather than company-building decisions and in my view often reduces the probability of success. It can lead to sub-par “guns for hire” rather than a team excited about a larger vision. It leads to a job not a lifestyle.”
Vinod Khosla in “The Silicon Valley Vision“
Here he is echoing an analysis that Jim Collins had offered more than a decade earlier in 2000 article “Built to Flip” he relates a story a former student of his told him:
“I developed our business model on the idea of creating an enduring, great company—just as you taught us to do at Stanford—and the VCs looked at me as if I were crazy. Then one of them pointed his finger at me and said, ‘We’re not interested in enduring, great companies. Come back with an idea that you can do quickly and that you can take public or get acquired within 12 to 18 months.’ ”
A former student was reporting to me on her recent experiences with the Silicon Valley investment community. As an MBA student at Stanford, she had taken my course on building enduring, great companies. She had come up with a superb concept that involved doing just that. But when she took the idea to Silicon Valley, she quickly got the message: Built to Last is out. Built to Flip is in.”
Jim Collins in “Built to Flip” (2000)
This was written at the height of the dotcom boom but this attitude persists at most VC firms as the primary investment strategy.
Missionaries Not Mercenaries
“You want missionaries, not mercenaries –passionate, maniacally-focused founders who believe in a vision. Founders like this draw the most gifted and passionate employees, who maximize the chance of success, even if they ultimately fall short of their initial goals and get acquired.”
Vinod Khosla in “The Silicon Valley Vision“
I think you want to work on a problem you bring useful expertise to and attack a market that has customers you will find energizing and rewarding to support. I am not sure you need a big vision as much as a commitment to continuing to tinker and experiment and refine. You can have a clear vision of the outcome you want to achieve, but it’s always good to bear in mind Paul Saffo’s advice: “never mistake a clear view with a short distance.”
Jim Collins and Jerry Porras wrote “Built to Last” in 1994 and it was widely influential. Collins and Porras had challenged themselves to derive a set of principles for how to build great and enduring firms.
We drew examples from such 20th-century icons as Disney, General Electric, HP, IBM, and Wal-Mart. These were not hot companies—nor was this a sexy topic. In retrospect, I think that Built to Last gave people three perspectives that they desperately craved.
- It said, “Yes, there are some timeless fundamentals. They apply today, and we need them now more than ever.”
- It affirmed that the essence of greatness does not lie in cost cutting, restructuring, or the pure profit motive. It lies in people’s dedication to building companies around a sense of purpose—around core values that infuse work with the kind of meaning that goes beyond just making money.
- It tapped into powerful, albeit latent, human emotions: Readers were inspired by the notion of building something bigger and more lasting than themselves.
Jim Collins in “Built to Flip” (2000)
Persistence, an Open Mind, and a Continual Ability to Learn
“There are of course mercenaries and people setting up for “acqui-hires” in the valley as well, but that is not what Silicon Valley’s special sauce is about. In my view, it’s irreverence, foolish confidence and naivety combined with persistence, open mindedness and a continual ability to learn.”
Vinod Khosla in “The Silicon Valley Vision“
His suggestion splits into two parts:
- irreverence, foolish confidence and naivety
- persistence, open mindedness and a continual ability to learn
Khosla: “People Over 45 Basically Die in Terms of New Ideas”
In November 2011 at the “NASSCOM Product Conclave and Expo 2011” Khosla famously remarked: “People under 35 are the people who make change happen. People over 45 basically die in terms of new ideas.” Here is a recording of the event and a partial transcript of relevant portions of his remarks, which are more nuanced than the simple sound bite suggests.
At 1:46 Vinod Khosla says:
It’s time to start talking about inventing the future you want.
That’s why it’s so encouraging so many hands come up today when the audience was asked how many people under 35
People under 35 are the people who make change happen.
I recently said people over 45 basically die in terms of new ideas.
Now there are exceptions and some of us who are over 45 try and keep having new ideas and stop falling back into old habits. It’s very very exciting it keeps you alive and new.
at 8:39: Vinod Khosla says
“The thing to remember is that large things are unreasonable. You cannot do unreasonable things by being reasonable.
[Background slide: “all progress depends upon the unreasonable man” George Bernard Shaw]
There are experts who will tell you, “it can’t be done.”
And my main message to you as entrepreneurs, especially all of you under 35, but everybody can be under 35. I am 56 but I consider myself under 35, and I ignored the experts when they tell me what cannot be done.
[Background slide: “Heavier than air flying machines are impossible.” Lord Kelvin]
Khosla seems to suggest that if you work at it you can keep yourself mentally flexible. I am guided in part by David Galenson‘s research in “Young Geniuses and Old Masters” (also a book “Old Masters and Young Geniuses” that there are two distinct styles of innovation: conceptual and experimental. Conceptual innovators work deductively and make breakthroughs when they are young and first enter a field, formulating new approaches that obsolete existing paradigms. Experimental innovators work inductively and make their major contributions later in life, after a long period of tinkering, exploration and trial and error. Galenson essentially agrees with Khosla that “breakthrough ideas” come from younger conceptual innovators but suggests that “Old Masters” continue to refine and deepen their understanding of old ideas with additional experimentation yielding further–often significant–improvements.
Built To Work
“Built to Last or Built to Flip?” is the wrong question. Some companies will be built to last; some won’t. Some should be; others shouldn’t. Ultimately, that’s an artificial distinction. The real question, the essential question is this: Is your company built to work? The answer rests on three criteria: excellence, contribution, and meaning.
- Excellence: are we committed to doing our work with unadulterated excellence, no matter how arduous the task or how long the road?
- Contribution: is our work likely to make a contribution that we can be proud of?
- Meaning: does our work provide us with a sense of purpose and meaning that goes beyond just making money?
If we cannot answer yes to those questions, then we’re failing, no matter how much money we make. But if we can answer yes, then we’re likely not only to attain financial success but also to gain that rarest of all achievements: a life that works.”
Jim Collins in “Built to Flip” (2000)
I let Collins have the last word because I think he is right, it’s horses for courses.
Related Blog Posts
- Khosla posted “Maintain the Silicon Valley Vision” on his website.
- Michael Arrington’s “Twice Shy” One Year Later
- Quotes on Foresight
- Paul Saffo on Forecasting Innovation In Silicon Valley
- Three Advantages of Older Entrepreneurs in B2B Startups
- Three Advantages of Younger Entrepreneurs in B2B Startups