Vinod Khosla and Keith Rabois on Building and Investing in Enduring Companies | Ep. 40
We dive into working together, how they see the world, what's changed in tech, and of course a little bit about their politics.
Vinod Khosla and Keith Rabois are Managing Directors at Khosla Ventures.
Vinod is an entrepreneur, investor and technologist. In 2004, Vinod formed Khosla Ventures to focus on both for-profit and social impact investments that have included OpenAI, Stripe, DoorDash, Commonwealth Fusion Systems and many more. Vinod previously co-founded Daisy Systems, the first significant computer-aided design system for electrical engineers, which led to an IPO. He later went on to co-found Sun Microsystems in 1982, serving as its first chairman and CEO. After joining Kleiner Perkins Caulfield and Byers (KPCB), Vinod incubated the idea for Juniper Networks to take on Cisco System’s dominance of the router market.
Keith is also currently the CEO of OpenStore and led the first institutional investments in DoorDash, Affirm, and Faire, invested early in Stripe, and co-founded Opendoor. While a General Partner at Founders Fund, he led investments in Ramp, Trade Republic, and Aven, and before that made early personal investments in YouTube, Airbnb, Palantir, Lyft, Udemy, and Eventbrite. Keith started his career in leadership roles at PayPal and LinkedIn before becoming COO of Square.
Timestamps:
(0:00) Intro
(0:58) The working relationship
(4:26) Pie chart on what’s discussed
(7:11) Ethos of investors today vs yesterday
(10:42) Comparing FF and KV
(12:46) What makes a great founder
(22:56) Alpha in today’s market
(30:05) Themes within AI
(38:23) AI companies built differently
(46:23) Excitement outside of AI
(53:12) Politically active on X
(58:24) Evolution of political leanings
Links:
https://x.com/vkhosla
https://x.com/rabois
https://x.com/jaltma
Watch on YouTube; listen on Apple Podcasts or Spotify
Clips
AI companies are built differently
I asked Keith and Vinod if they think AI companies need to be built in different ways to previous generations of startups.
“I think it’s fundamentally different.”
Harsh on X, but really nice in person
I asked Keith why he is kind of harsh online but nice in person and he just said WRONG and stared me down.
First institutional investor in OAI
Khosla doesn't get nearly enough credit for their OAI investment.
They were the only institutional investor in the first round and they made the investment that was truly hard to make when others thought it was dumb.
They aren't the type to take credit but they deserve it here.
Transcript
Disclaimer: Transcript generated with AI assistance and lightly edited for clarity and accuracy.
How Keith and Vinod Work Together
Jack Altman
Keith and Vinod, I’m incredibly excited. I got to do this with each of you individually last year. The first thing I wanted to do coming into the new year was ask the two of you to come on together. So thanks for doing it.
Keith Rabois
Pleasure to be with you.
Jack Altman
I follow both of you a lot online and watch a lot of podcasts you’ve done, and I’ve never seen you together in this kind of format. So I was really excited to set this up. One of the first things I want to get into is how the two of you work together. Because it’s rare that you have two people who are both super individually accomplished at a venture firm, working side by side. You’ve done it for many years now.
You’re obviously very different people, but there’s a lot in common. I see you as this Venn diagram with a lot in the middle, but you also have your own styles. To start, what’s the texture of your day-to-day working relationship? How do you guys operate together? How do you communicate with each other? What does it look like all the time?
Vinod Khosla
Do you want to start?
Keith Rabois
Sure. We first started working together when Vinod joined the board at Square. I learned a lot of things from him.
Vinod Khosla
Actually, Slide.
Keith Rabois
Well we worked together at Slide, but that was more intermediated through Max. I would hear about these meetings with Vinod and all these ideas and grand theories about how we should reorient the business, but it wasn’t hands-on.
I actually worked with another one of our partners, David, at Slide very directly. He told me my first revenue model was terrible. David’s a little bit of an acquired taste.
Jack Altman
Sounds like David.
Keith Rabois
His exact quote was, “This revenue plan is very mediocre.” Which turned out to be right. But while Vinod was on the board at Square, he taught me a lot of things, including the most important precept: the team you build is the company you build.
So when I was considering being a VC, it was a very natural fit because a lot of the contributions that Vinod had at Square resonated with me. I could see the style of KV and how that translated through my brain. I felt like it would be a really good pairing.
Jack Altman
What was it like for you, Vinod? When you started working with Keith, could you tell immediately that stylistically it was what you liked? How did you know?
Vinod Khosla
For me, it’s really one thing: first-principles thinking. If you can do first-principles thinking, it’s easy to know where you agree and where you disagree. It isn’t this hand-wavy thing. A, B, and C. Then we can debate those three factors, and it’s worked out very smoothly. It’s seldom that we grossly disagree. We’ll even come down to, “If these facts were true, then this is a good decision or a bad decision.”
Keith Rabois
Which is incredibly helpful. There’s one specific investment I remember last summer where I couldn’t actually decide what to do. It was close to the line, I wasn’t quite sure. And then Vinod said that the key attributes of the founder that really matter for this are, one, two, three. And then our junior colleague John Chu and I were like, “Well on those three dimensions, this founder’s A, A, A.” So it made the decision really easy because he was able to isolate the key variables for that particular company.
Jack Altman
Do you guys get into strong debates over ideas? Or have you mind-melded so hard at this point that you don’t even need to as often? Because it’s hard for me to imagine either of you shying away from debate. You’re obviously both going to say whatever you think all the time.
Keith Rabois
I think that helps, the direct style which you’ve talked about for years.
Vinod Khosla
I’ve always said I prefer brutal honesty to hypocritical politeness.
Jack Altman
I can’t imagine you dancing around a topic with each other.
Vinod Khosla
No and it doesn’t matter whether it’s internally in a debate or on Twitter. It doesn’t matter. Being very direct saves a lot of hassle. Once you have that culture, nobody’s guessing at what you think. That’s worked really well within the partnership. Nobody’s ever guessing what you think or why you think that.
Keith Rabois
Externally, I think one of the reasons why we pair well with really ambitious founders is they appreciate clear communication, succinct and direct communication. They process it extraordinarily well.
Jack Altman
If you had to guess the pie chart of the time that you guys are spending talking to each other, how much of it is about existing investments, new companies, operating the firm, anything personal?
Vinod Khosla
Nobody ever discusses operating the firm very much inside Khosla Ventures.
Jack Altman
You don’t discuss that? Interesting.
Vinod Khosla
I would guess it’s far less than 5%.
Jack Altman
Is that because it’s so clear how it works?
Keith Rabois
If you include hiring, then there’s an allocation to assessing potential people.
Jack Altman
We’ll call that separate. Out of curiosity, is that because it’s already so clear that there’s nothing left to discuss? Or is it just so much relatively less important than the work of investing itself?
Vinod Khosla
First, we have a lot more fun investing than managing. The firm doesn’t take much management, honestly, other than comp once a year and hiring, that we talk about. I can’t remember when we had a strong policy disagreement.
Keith Rabois
At the end of the day, Vinod is energized by investing in the future through technology and founders. And I’m energized by pairing with people who want to change the world, which is roughly similar. So the management part is a distraction, to some extent, from those two core activities, which are exciting.
Vinod Khosla
Then we spend almost no time with LPs.
Jack Altman
That’s nice.
Keith Rabois
You may have to edit that. Just kidding.
Vinod Khosla
Look, I don’t mind. I spend less time with LPs than almost any other senior partner. I think that’s generally true of all the senior partners at Khosla.
Jack Altman
Well you’re at a place where you probably don’t need to spend that much.
Vinod Khosla
Frankly, entrepreneurs are a lot of fun to work with.
The Khosla Ventures Philosophy
Jack Altman
So are you spending most of your time talking about new companies, existing companies? Is that basically all of it?
Keith Rabois
Actually both. We take the current portfolio very seriously. Every single Monday meeting starts with the current portfolio before we ever talk about a new opportunity, because we’re in the build-a-company business. That’s what we focus on. We’re an investor, we’re going to be a partner for 10-20 years. How do we help the company achieve its highest ambition and potential? So we literally start intentionally that way with the portfolio before looking elsewhere.
Vinod Khosla
The funny thing is, in the 40 years that I’ve done venture capital, I’ve not once called myself a venture capitalist or an investor. I always say I’m a venture assistant to entrepreneurs trying to build companies. That’s what our website is focused on. That’s what we talk about mostly internally, how do we help a company change its trajectory, if the potential exists to change it?
Jack Altman
How differently do you see today the ethos of new young investors, versus when you were getting started? Because right now it is such a thing.
Vinod Khosla
Young and old doesn’t matter as much. What matters is, have you built companies and earned the right to advise an entrepreneur? I think most people who advise entrepreneurs haven’t earned the right to advise an entrepreneur.
Almost all the senior partners in our firm have earned the right by helping build a company, being inside a company, and having empathy for the founder. So I think that’s a pretty distinctive feature of how we think of our role. A lot of firms just want to be nice to founders and it hurts the founder.
It’s like saying yes to your kids all the time, no matter what they want. You want them to know you love them, but you’re trying to get them to be the best they can be. That includes pushing them to be the best they can be. I think we both agree our business is much more about helping the entrepreneur build a successful company than about investing.
Jack Altman
I’m newer to this obviously, but it seems like there was some moment in time where the dominant marketing strategy for VC firms flipped towards just being extremely founder friendly, whatever that means. I don’t know if that was 10 years ago or 15. But it was something like that. You guys probably experienced this going through being on one side of it and then the other. I kind of almost lived in that world. But was there a moment or a period of a few years where it just became the strategy for some reason for VCs to go full founder friendly?
Vinod Khosla
Our goal has always been what’s good for the company, not what sounds good or what will get us more referrals for the founder next time. I think this hypocritical politeness, which is pervasive in our business, is really bad for founders. When a founder selects for that, they’re generally a weak founder.
Strong founders almost always select for the best feedback they can get. They also know how to say, “No thank you. I disagree with you.” I think that’s a really important characteristic. One of my favorite thing is… There are two founders who did something called founderschoicevc.com. It was some survey of founders.
What I love is that they wanted to avoid the hypocritical politeness. So they said that only the VCs that you’ve worked with you can vote on, the VC firms. And you can’t say, “We have these three investors. They’re all great.” They forced them to rate them head to head, like a chess Elo rating. I’m very proud that we are at the top of that list among 400 VC firms and hundreds and hundreds of voters.
I think it’s the most important survey for me, to know that in retrospect our founders prefer us. And we prefer backing the same founders again and again. Our LP decks always have a huge component of how many repeat founders have come back to us to work with us.
Jack Altman
Keith, I’m actually really curious because obviously Founders Fund is an amazing firm as well as Khosla Ventures, and the ethos is the same in the sense of wanting to do what’s right for the company. But I think the pathway to get there is the opposite in some sense.
Keith Rabois
The goal of finding bold, ambitious founders and companies is very similar. I think the way we actually practice what we do is very different. Our craft is to be the partner in building the company. I look at my role as being the consigliere to the founder. Sometimes the consigliere tells you that’s a bad idea, and sometimes they tell you that’s a great idea. Then they help the principal, and they’re not confused about who’s the CEO and who’s the consigliere. That’s how I think of my role.
Founders Fund thinks their role is to provide the capital and get out of the way. And if you have an idea where they might be helpful, please call, and we’ll do everything we can to try to help. Proactive versus reactive.
Vinod Khosla
That’s exactly right. Very similar goals, betting on really bold ideas whether they’re popular or not, whether they’re on trend or not. They’ve done an incredible job of that and we like to think we do that also.
Jack Altman
You can imagine how the conversation would play out. On one side it’s, “we should back entrepreneurs that don’t need help.” Then the other side of the conversation it’d be “yeah, but even amazing people can still be helped. Even the best baseball player has a coach.”
Keith Rabois
Yes, even the best best ball players have coaches.
Jack Altman
I knew it, I was going to use sports for you.
Keith Rabois
Or they have shooting coaches even, or fitness coaches. There’s almost no profession where the best at what they do don’t have an advisor, coach, mentor.
Vinod Khosla
Take a really strong founder, like Max Levchin. I’ve never been on the board. The company’s gone public. We’ve distributed, a great outcome. We were the first investors. To this day, Max and I do quarterly phone calls because he wants my help and advice and second opinion on something he’s thinking about. I’m always looking for areas I’ll prod him in to think harder, like “you’re ignoring this or that.”
Identifying Great Founders
Jack Altman
I want to talk about clicking into the source of great founders and great companies. Obviously that’s the center of the work. I posted that I was going to have you guys on the podcast. Somebody said they wanted to hear about this, but Keith, that you can’t say the thing about comparative advantages and you’re like, “but it’s true.” And I think it is true.
But I want to try to click in, as closely as possible, to what makes a great founder. One of the things that stuck with me was you both have said that you guys are basically always aligned on the read of the founder. You might disagree on a market or if this is a business you want to be in, but more or less, you think the same thing about if a person is a great founder.
Keith Rabois
Very rarely is there significant divergence on the assessment of the founder. I can probably name two, three examples in eight years.
Jack Altman
What specifics can you describe?
Keith Rabois
I’ll give you my formula and feel free to edit. Mine is one of two traits. One, I meet a founder and in some dimension they’re the best I’ve ever met in my life. They can be different. They can be the smartest person, they can be the most tenacious person. They can be the best assessor of people. They can be the most strategic. It’s just, “oh my God, top one basis point on some dimension.”
We do mostly first institutional capital, we want to be as bold and as early as possible. What I’m trying to find out is, is there a non-zero chance this person can change a vertical or the world? That’s really it. One of those two things.
99% of humanity is not going to change and reinvent an entire industry, let alone the world. So what’s the probability? Usually the people who succeed have some trait where, oh my god, your ears perk up.
The other exception is that they have a Venn diagram overlap of traits that you don’t see in common. For example, with Max Levchin, I’ve talked about this before. Literally, when I met him in December 2000, Reid Hoffman came up to me and said, “you’re getting ready for your first one-on-one with Max. Max is a first-rate technologist and a first-rate business mind. There’s fewer than five people in all of Silicon Valley that are that.” Reid was dead on. 25 years later, it’s still true. There’s fewer than five people and Max is one of them, and that’s led to his trajectory.
Jack Dorsey, whom we’ve both worked with, is actually a pretty damn good design mind, pretty good technologist, and a very good business strategist. He has three, which is also why he’s been very successful.
Jack Altman
So somebody that you trust refers someone, you’re going to meet them. You’re in the meeting with them for an hour. Are you trying to pull that out in that meeting? Is this work happening outside the meeting?
Keith Rabois
It usually is so strong that it shows up in three minutes. Literally you meet someone who’s the smartest person ever and you just feel this energy.
Jack Altman
Aren’t there some less obvious traits than super smart though, like grit or something like that?
Keith Rabois
Yes, there are. For example, one of my favorite gritty founders told me the story of when he was working at Uber. His team in this foreign country that he just joined—because he was a launcher—was going to run a triathlon on Saturday. And this is Thursday. He’s like, “I want to be part of this team, I want to fit in, I’m going to do it.”
He hadn’t trained at all and didn’t own a bike. So what did he do? He rented a Citi Bike and did the triathlon on a Citi Bike. That shows so much grit. That’s all you need to hear.
Then his co-founder finished second in the spelling bee when he was in high school and passed out due to stress. So he didn’t quit his senior year. He went back and tried to win it. I was like, “there’s a dimension there that you don’t hear very often.”
Jack Altman
So to get some of these ones that don’t show up in a live meeting, do you have certain things that you’re prodding towards? Are you asking more about life than business? Or are you just free flowing and seeing what comes up?
Keith Rabois
No, I actually don’t do the Doug Leone/Daniel Gross-style thing where it’s “tell me about your history and your siblings.” It does work. For those people, it definitely does.
Jack Altman
Have you tried it?
Keith Rabois
It’s usually, “tell them about your company and why you’re doing this company.” And it just shows up somewhere. There’s just a spark, they can’t help themselves.
Jack Altman
Have you tried the Doug Leone thing and it just didn’t work for you?
Keith Rabois
I never really tried it. It’s like when you assess people. Vinod’s been interviewing executive candidates for literally 40 years for companies. There’s a mechanical way of doing an interview where you go experience by experience. Why’d you leave VP of sales? What did you accomplish? What was the biggest challenge? What are people going to say about you?
Then there’s a different way where you interview people that’s a bit more freeform. I’m definitely in the freeform version of the interview.
Jack Altman
Do you do a founder meeting similar to that? Or is it a whole different thing for a founder?
Vinod Khosla
Every situation’s different. I want to add a couple of other things to what Keith said. I think the most important thing is exceptionality in some dimension, whether they’re going to be a good CEO or not. But related to that are two things. In the areas where they’re not good, it’s perfectly good to back a founder if they don’t know an area. Often it’s a professor or something. That’s where the venture assistance comes in that I was talking about, where we can help them be a complete founder.
But also the thing I want to emphasize is, to me what’s key is the learning rate of the founder: how open-minded they are to new ideas and how good they are at rejecting bad ideas. Too many founders just take every idea and try and execute. If a person listens to me all the time, I’ll almost never invest with them because I know they’re not critically examining.
I often take positions I don’t believe in just to test how the founder’s thinking about something. I have a document I put out, it’s a public document on how to do an interview. It is very much freeform. Everybody knows what answers to give in an interview. So how do you get past that? I have an internal document I give only to our founders on how to interpret the answers they get. If I put it out publicly, then every candidate would understand how I’m interpreting so I can’t put that out publicly.
But the first half, I made it public. Here’s how I assess somebody. I have a pretty clear style. It’s usually about putting people in a situation they haven’t been in. It’s not a soft, “tell me about your life history,” because people know how to storytell, and the best storytellers may not be the best candidates.
So you have to get past the obvious answers. “I did this in that company” or “I opposed that, in retrospect”. I think it’s very nuanced. So that’s a great example and ties back to “the team you build is the company you build, not the plan you make.” Because the right team will evolve the plan to the right thing and your initial plan is seldom the right plan.
But if you can help pick the right team in a new context—which is that you’re trying to do something bold and different—that’s a pretty critical part of it. So it’s both part of what we can do to help a founder and why most people are not qualified to even interview candidates. I’ve seen such bad specs for what the company needs. Most of the time they’re wrong on what a company needs to hire.
Keith Rabois
You have a great example in marketing specifically where you talk a lot about the zero-to-n marketing versus.
Vinod Khosla
Most startups are trying to create a brand. If you’ve been marketing at Cisco, you know nothing about creating a brand. You know how to incrementally sustain a brand. That’s a very different skillset.
Jack Altman
I was going to say something even worse than that. How to make this quarter’s number look a certain way so that your manager—
Vinod Khosla
I got in trouble for saying that if you’re at Cisco for more than 10 years, you’re not qualified for a real job in the entrepreneurial world.
Keith Rabois
It’s not Cisco specifically.
Jack Altman
They’re just so different. They have nothing to do with each other.
Keith Rabois
You have to find the dimensions that lead to success for what the startup needs. Then how do you find that trait or that proven ability and make sure there’s a Venn diagram overlap there? First it’s diagnosis and then assessment.
Vinod Khosla
This is the kind of place where venture firms are pretty different. We’ll agree if somebody can advise somebody on marketing, but if you look at a spec a board will put out, it’ll be cookie-cutter, “Get somebody from ‘X’ related business.” It’s just a terrible idea.
Jack Altman
It’s actually a source of a lot of management mistakes, which is that it has to look good on LinkedIn for the board and that’s a disaster.
Keith Rabois
Worst thing ever.
Jack Altman
And it’s really hard if you’re a young founder to stand up to that and the board’s confident.
Keith Rabois
This is the role of a really good advisor or board member. Sometimes just giving the founder confidence—
Jack Altman
Permission to trust their own gut.
Keith Rabois
Just saying, “You’re not wrong.” Just saying that when they’re getting a lot of pressure from somewhere else, especially for a first-time founder. Just saying, “No, you’re probably more likely right, actually.” Then all their instincts kick in and they have enough confidence to just say no.
Jack Altman
Outside of this idea of exceptionalism and finding this dimension of special, basically what you’re saying is if somebody’s B+ at everything, that’s not a good investment for you.
Keith Rabois
Usually an A+ and incomplete. Vinod likes the term incomplete. A+ and incomplete is a really good formulation. The rate of growth is hard to tell in your first meeting. That is one of the hardest things, because you have one dot. Geometry, you can draw a number of lines through one dot.
Jack Altman
What do you do about that? Do you try to go historically?
Keith Rabois
The best thing is you know someone over time. The reality is—
Vinod Khosla
Let me interrupt with my favorite example. For YC founders, the most important question I can ask the partner who’s working with the company is, how much have they learned in the last three months? Three months is enough to tell if they have a high learning rate or not.
Jack Altman
I guess in a fast-moving process, all you can do is basically try to get a data point from the past.
Keith Rabois
Yeah. Once in a while you can try to get data points from external people, but most people have the wrong prism. Unless you ask the question perfectly, unless you can really retrain their eyes, it doesn’t help.
Vinod Khosla
But there’s other ways. Imagine you were in this business that you’re not familiar with. How would you go about learning X or Y? Putting them out of context and having them think through, it’s very easy to tell.
One of my favorite questions… It doesn’t matter whether they’re doing a startup or not. Let’s say they’re a candidate for a marketing job. If I gave you a seed amount of funding to investigate three ideas, which three would you pick? How would you go about evaluating them over the next six months? It’s a pretty simple test. You can tell a lot about a person just based on how they answer that question.
Jack Altman
That’s good. Are there any things that a founder can’t be completely deficient in?
Vinod Khosla
Ethics. No question.
Jack Altman
How do you figure that one out?
Vinod Khosla
Mostly through references.
Jack Altman
Even on that point, a lot of people that seem not so friendly are actually very ethical. I’ve noticed that a lot of the highly disagreeable, intense founders actually have a very strong moral compass.
Vinod Khosla
Yes. That is absolutely true. Because they believe in their principles.
Jack Altman
And it’s the source of both. That’s interesting.
Vinod Khosla
You’ve seen this in the Valley. We were talking about this earlier. People have changed their political affiliation at a whim, not stayed with what they really believe in.
Jack Altman
Yep. We’re definitely coming back to politics in a little bit. I have a lot there. Is there anything around ability to recruit?
Keith Rabois
Ability to recruit is a very important dimension. Can you envision this person hiring the first hundred people? The first hundred are really critical, because those people are going to replicate themselves. Patrick Collison talks about this at length. The first 10 are going to multiply by 10.
Jack Altman
You can imagine somebody who’s really exceptional in some dimension, but you just don’t think they could recruit well.
Keith Rabois
Right, but then the question is, can they parlay whatever unique assets they have into convincing people to work with them? Sometimes they can actually, even if they’re very uneven. Or you can help them. You can help them communicate. Why is this ambition worth chasing? What kind of people do you want? But their energy or their special secret sauce comes through. Let’s say I set you up to interview one of these great founders. I think you would pick up on the fact that this person’s kind of unique, even if you couldn’t articulate the exact reason.
Jack Altman
You just come out feeling that way.
Keith Rabois
You come out feeling like, “wow, that was interesting.” At a minimum, that was interesting.
Jack Altman
One of the things I often think about is that somebody who is good at selling anybody is on some level good at selling everybody around. It’s the same person who can convince candidates and investors and customers and all of it. It all does bundle together.
Keith Rabois
You definitely have to be able to tell a story. At the end of the day, you have to convince people. You haven’t proven almost anything usually in the beginning. You’ve got to convince people to come along on the journey with you. Those are investors, early beta/alpha customers, employees. You have to retain your employees in a hot market. You’re doing some version of that constantly.
Jack Altman
Look back at a bunch of the greatest investments over the last 15 years or so, Airbnb or whatever. There’s a bunch of companies that were not hot early and everybody passed. Is that still the case, do you think? Has the consensus become more accurate? Or is it still the case that it’s random signal?
Keith Rabois
I don’t think it’s random at all, by the way. For example, let’s talk about Airbnb. To me it was obvious three minutes into Brian’s monologue. I was like, “this is the coolest thing since YouTube.” I literally told him this, told him exactly why. It was so obvious to me I needed to meet him. I didn’t like the “air bed and breakfast” name that they were using at the time so I kept rescheduling the meeting, which was a very costly decision for me.
But at the end of the day, if you met Brian for three minutes, there was no way of missing that this team was very special and he was able to convey three key things he said in the three minutes that made me like, “oh my God, this is really amazing.”
Jack Altman
You saw it but most people didn’t.
Keith Rabois
Yeah but I’m saying it’s not random. You saw OpenAI, a company we all know. The key investment decision… Literally, if you read our memo—which we sent to the LPs because it was so much of an outlier at the time—outside Google and DeepMind specifically, this was the only critical density of research-grade people that could possibly pull off AI. That was the investment hypothesis in a rough sentence.
Vinod Khosla
And given all the other stuff—it was a nonprofit, there was no product plan, no revenue plan, just this AI capability—it’s the only time in the 20-year history of Khosla Ventures we sent an apology letter to our LPs when we made the investment. Because it was twice the largest initial investment we’d ever made. We sent an apology letter: “I know it makes no sense, but we are doing it anyway.” Not asking for permission. That letter’s now part of our fundraising deck. We sent it in 2018.
Keith Rabois
Here’s a good example too of rate of growth. It did help a lot that David, me, and Vinod all knew Sam for a long time, over a sustained period of time. So you could see certain lines there. The critical density of talent that he assembled, plus certain traits about Sam specifically, led to that investment.
Jack Altman
As time has gone on and more people are in tech and there’s more founders and more investors, not from people who can really see it but from the average reception to investors, do you think that the consensus hot deal is becoming any more or less likely over time…
Keith Rabois
At seed? I don’t think so.
Jack Altman
You think it’s still the case that these hot seeds are no better than the non-consensus seeds?
Keith Rabois
In my personal opinion?
Vinod Khosla
I agree totally.
Keith Rabois
Rocket Lab was one of the best investments anywhere. I don’t think they would’ve raised money from anybody.
Vinod Khosla
It’s worth $40 billion now. We bought a third of the company for $5 million because nobody wanted to invest in space. Or Commonwealth Fusion, or even OpenAI. We were the only venture investor in 2018 that committed, because it didn’t make sense. I think at the seed level, consensus hot bets are generally around people, not around the idea.
Jack Altman
If you have two people who left, pick your super hot current company… Let’s say an engineer and a designer leave Cursor tomorrow. What’s that going to go at?
Keith Rabois
A lot. But a seed investment around undiscovered people, I think the consensus ones aren’t going to outperform the outliers at all.
AI Investment Landscape
Jack Altman
Maybe just talk about themes that you guys are interested in. I know that you’re mostly focused on people, but you also care a lot about markets and technologies. Maybe start with AI and then we can go outside of AI. Obviously AI is in the midst of playing out. I don’t know what inning it’s in, but it’s probably one of the early ones.
I think there’ve been a lot of changes to what the labs say that they’re focused on. Maybe the types of companies that are getting funded are adjusting a little bit, if you track it every six months or so. I’m curious what you guys see as the lay of the land outside the labs, where you think most of the opportunity lives, what you’re most interested in, what you think is going to be a big deal in the next year or two.
Vinod Khosla
That’s such a broad surface. I think I was counting this. There’s 30-some startups in our portfolio that are building an AI worker of some sort: AI oncologists, AI mental health therapists, AI chip designer, AI structural engineer. As many professions as there are, there’s that many opportunities.
Jack Altman
Basically to fully do the work.
Vinod Khosla
Do the work. One thing we decided a couple of years ago, probably three years ago, we wouldn’t do a lot of copilots. Copilot had just come out and we said, “Copilots, humans get in the way. Let’s just do the work.” So we love people doing the work as opposed to helping a human do the work. Now there’s exceptions to that, but mostly that’s true. That’s a big category. We haven’t invested in any competitor to OpenAI, obviously.
We should come back and talk about it. We are fiercely loyal to our companies. We can talk about loyalty. With OpenAI, I think I was the very first one when Sam got fired to come out and say, “We’ll fund Sam for whatever he wants to do next.”
Jack Altman
The loyalty, does that stem from a business decision or idea, or does it stem from, “this is how it ought to be”? Is it more of an ethics kind of thing?
Vinod Khosla
This is how it should be. It’s about ethics. If I disagree with an entrepreneur, then my job is to sit down, tell them why, and agree that we agree or disagree before taking the right position publicly.
Keith Rabois
If we believe, on the principles, that you’re on the right side, then we’re willing to use our brand capital and audience to help.
Vinod Khosla
Along the AI question you were asking, we’ve invested a bunch in other approaches than transformer models that make sense. We probably have four or five different efforts. They don’t have to replace transformer models. But they’re different because I think the big labs are doing transformer models really well and then doing some other things.
Jack Altman
So what else do you think is promising?
Vinod Khosla
It’s too early to tell. I think any of us who pretend we know this technique or that… We have a bet on neurosymbolic techniques, we have a bet on category theory in math, we have a bet on interpretability that leads to different models, we have diffusion models. There’s plenty of others. I’m very excited about real-world models.
Jack Altman
I was just going to ask you that.
Vinod Khosla
I think that game hasn’t played out yet. It is not clear at all who will win. It’s very clear what the major labs will do in that area, and at least the major labs all have efforts. But I think it’s completely up for grabs.
Jack Altman
And you have no doubt it’s going to work. It’s just a matter of how.
Vinod Khosla
I have zero doubt it’ll work and work increasingly well.
Jack Altman
And it’ll be embodied robots.
Vinod Khosla
It’ll be embodied and more than that. Understanding the physical world… Let me give you an example. This is a public clip we showed. Intuition is a very big deal, and I don’t think current models embody intuition.
So we have a company called General Intuition, based on gaming data. I saw a clip of this. It was a live feed of Ukrainian soldiers trying to escape Russian attackers. We gave the AI half the clip and said, “Replicate the other half.” It replicated the intuition of the Ukrainian soldiers trying to escape almost identically. That’s intuition. There’s many dimensions like that.
But there’s many obvious ones. We all talk about the fact that frontier models hallucinate and there’s probably not a good way to avoid them. There’s ways to minimize them, and the labs will do a pretty good job. But you see the hot agents startups like Sierra and Decagon, they’re completely, I think, missing the point.
We’ve focused on customer support agents that do not hallucinate. If you’re a bank, if you’re a Visa or MasterCard or insurance company, you can’t afford to hallucinate an answer, even if it’s a low percentage. We’ve heard a lot about mental health therapy where bots take people down untoward paths. Those are all examples. So I think the winning customer support thing will be something that does not hallucinate for a class of applications. With some applications some hallucination is fine.
Jack Altman
Are you saying that you think a company can’t just increment its way from hallucinating sometimes to hallucinating never? Those companies can’t just improve their way to no hallucination?
Vinod Khosla
It’s possible, but I think if you architect for low hallucination, know when to use “no hallucination” when you can afford to. Giving somebody’s bank balance, you better not ever hallucinate. I think it’s pretty important to look beyond normal. Lots of people will do the normal extensions of LLMs to lots of applications. It’s a massive market. Lots of people will do it. Every area will have 10 startups.
Jack Altman
Keith, are you interested in hard tech as much, or do you invest more in B2B typically?
Keith Rabois
I’ve invested a lot in AI.
Vinod Khosla
I love your quote about AI and how you’d have done it differently if you hadn’t joined Khosla Ventures.
Keith Rabois
Before I joined KV—I literally rejoined two years ago, basically this week—I had literally invested in zero AI companies before. Since then, in the last two years, I’d say about 70% of my investments have been AI. Had I not rejoined KV, I think I either would have missed the whole wave and been completely irrelevant, or been reckless. Neither one’s good.
What I was able to do when I joined is learn by osmosis. I’d sit in partner meetings and 80% of the companies that we would discuss, in the portfolio or new opportunities, would be AI-based. I would listen and learn. As I started meeting founders, who were interested in AI that fit my normal standards, I could send the deck to three people here—Vinod, Sven, and John Chu, and sometimes Kanu too—get feedback and then actually often have some combination, maybe all four, meet the team.
So when I first started making AI investments, I felt like I had this air cover. They could understand A) how good is the team B) how smart is their approach, how differentiated is their approach? And C) is there anything else in the landscape that’s even better? That allowed me to start making new investments. You then develop some taste and some ideas about what works. You join the board of the companies and you learn how these companies are built and what works, what doesn’t, what are problems, what are not. So now I basically do all AI.
Jack Altman
On the topic of how companies are built, obviously you’re super involved with company building, you’ve built companies yourself a bunch, and it’s something that you talk about a lot. Do you think AI companies are built in any substantially different way?
Keith Rabois
I think it is fundamentally different. First of all, they are growing at rates that are unprecedented in the history of technology. To me, it’s a little bit like running the four-minute mile. Once you see someone run the four-minute mile, then no company should have an excuse for not growing rapidly.
You see all these enterprise companies going from zero to $50 million. You start asking questions. Why can’t you, at least what are the limiting factors? There sometimes are real reasons, but you start with the question of why not? Why not? Versus, oh, that’s impossible.
If you had said we’re going to start a company and have $10 million of revenue in year one from launch, 10 years ago all of us would’ve said that’s impossible. Definitely not the right answer. Now it doesn’t mean every company should do that, but it’s an open question.
Then the question is, what do you do about that? Borrowing from Peter Fenton here, the idea of PMs does not make sense in a rapidly emerging technology field. What do PMs do? They go talk to customers and they create a sequential roadmap over the next four months. If the field’s evolving and the capabilities are evolving—literally every month there’s papers published, you probably read papers every week, let alone things that are launched live—you can’t have a 12-month roadmap. That makes no sense. So you have to rethink that.
Then also, how does sales work with your research team? OpenAI actually pairs, as far as I can tell, the people doing customer acquisition with the research team. That’s a completely different model than how most technology companies were built.
Compensation—this is in the public domain—it’s completely different. People haven’t even thought through the implications. There are so many companies like Meta that can afford, because of how they mint money, or Google because of how they mint money, to pay salaries that only professional athletes could aspire to when we were growing up.
However, if you’re starting, how you can afford that level of cash compensation when you’re not minting money—
Jack Altman
You can’t, right?
Keith Rabois
Well, you still have to compete with people who can.
Jack Altman
Doesn’t that go to your “diamonds in the rough” type of idea?
Keith Rabois
That’s one possible solution. Or you’ve got to hire people that don’t care about short-term cash comp and have a different missionary zeal or different orientation. Or you’ve got to take a lot of money from somewhere else that you’re not paying for. But very few people have thought through company building from scratch if you need research-grade talent and you have to compete with the market. How do you reorient the entire P&L of a company?
It depends on what you’re trying to do. It depends on what market you’re in and who you’re competing with and how much cutting-edge AI talent you need. Do you need one person? Do you need a team of 10? Those are all very different. There’s a lot of financial consequences to those.
Jack Altman
Let’s say somebody is building a new AI-centric system of record or something like that. How different do the first 30 hires look like? Could you guess what you think that might approximately look like?
Vinod Khosla
I think it’s very different. First, the whole idea of systems of record is going to change pretty dramatically. It may be that the old systems of record don’t go away, but the operating substrate is wholly different. In fact, most likely that’ll be the case.
Take ERP, a hot area. It’s really becoming unbundled. There’s procurement and then there’s finance. You can go through the various modules in an ERP system. If you don’t have the right substrate to have it operate under an agent architecture, you’re not going to have huge success.
It used to be that in the ERP system it’s, what features does it have? I’m a manufacturer, do I have manufacturing features? I think now it’s about how do I reduce the number of people I need in accounting or supply chain or others. One of my favorite examples, we invested in DualEntry. They have a client called Slash that does small business lending. It’s a complex business. It’s both regulatorily complex, and you have credit scoring and all those complex areas. $150 million ARR company with only one person in accounting. That was my reference when we invested. Why? Because the architecture’s right.
By the way, these aren’t founders who are credentialed. I think they’re from Venezuela. Really great people, love entrepreneurs. That was number one, we loved the entrepreneurs. Loved the architecture, loved the impact. The benefit is very different from a feature list.
Jack Altman
Here’s another difference. For example, if you traditionally built an ERP-ish system of record or whatever, you think your defensibility would be around the number of integrations you would do. Think Rippling. We have all these integrations, blah, blah, blah, and it creates a big moat. With things like Cognition Devin, doing a hundred integrations is something you could actually feasibly do in a month at very low marginal cost.
Jack Altman
Totally. A company like MuleSoft makes no sense now.
Keith Rabois
Exactly. So a lot of these incumbents are much more vulnerable, I suspect.
Jack Altman
Given that you’ve got all these different intentions for the company, the way success is measured, the way you build a company, the old playbooks, to whatever extent those ever were any good, are definitely no good now. Have you found that retraining, for lack of a better word, experienced execs who came up in pre-AI ports over well? Do you have to be more cautious with that as you’re bringing in higher execs into new companies?
Keith Rabois
I think it’s fun and challenging. I’ll give you a good example. One of the best companies ever is going to be Ramp, but Ramp started in the pre-AI era. We’re very AI-forward. We’ve talked about this publicly, there are stats about it. We’re leaning in, we’re hiring AI-native people constantly. We have the best intern pool on the planet for the last three or four years in a row.
But we actually have to rethink the company because we really started in 2019. So we have a lot of things that were based on doing the best possible version of a technology company in 2019. That’s changing. It’s an interesting board-level conversation that we have of, “wow, should we rip up everything we’ve learned, or which pieces should we rip up so that we can be the best company in the next 10 years?” If Ramp’s doing that, imagine what every other company should be thinking.
Vinod Khosla
Here’s my way of explaining this. Most experts are experts in a previous version of the world, not the one you’re trying to create. So fast learning, and I come back to that, is much more important than lots of experience in this AI world. How you do anything—computer architecture, system integrations, marketing, customer support—all that is so radically different. You want rapid learners, whether they’re experienced or fresh.
Keith Rabois
Let me give you a mundane example. Think Lattice back in the old days. Right now in enterprise, because of the hype of AI, top-down sales can work extremely well. The CEOs feel pressure from their board to be AI-forward. Their executives feel pressure to be leaning into AI.
Historically, it’s not the best way to build a company, to depend upon top-down CEO sales. But it actually does work in certain verticals right now extremely well. So the whole go-to-market playbook, you have to rethink too.
Jack Altman
It’s funny, like in legal or a couple other categories, they just want to buy AI even more than what the specific solution is. It’s like, “we have a big budget for AI.”
Keith Rabois
In the short term, they have the budget. They may not care about the impact. In the long term it’ll harmonize. You have to produce results ultimately. We care about that. We evaluate it. When we look at application-level companies, the actual impact you’re driving for your customers is a key input.
Jack Altman
But I assume if you have a founder you love and there’s this crazy market pull, even if they haven’t worked out all the pieces yet, that’s a good enough starting point to bet on.
Keith Rabois
If they really understand that they need to, versus just chase revenue.
Other Investment Areas
Jack Altman
You said 70% is AI, so there’s other stuff you guys are interested in. We talked about robotics last year.
Vinod Khosla
Robotics is AI. We’re pretty big on robotics.
Keith Rabois
One thing people know less about us—but we’ve been consistently excellent at it across the history of the fund—is in financial services. We have this point we make to LPs that in every single fund we’ve had, we’ve returned the fund solely on one financial services investment. So we love things like Square, Stripe, Affirm, just as examples in the modern stuff.
Vinod Khosla
First investors in all of those, except Stripe where we were second.
Keith Rabois
We have Aven, which is a very excellent company.
Vinod Khosla
It’ll be the next surprise Stripe.
Keith Rabois
Upstart was incredibly successful. We did some of the seed and led the A.
Jack Altman
Has finance gotten less AI-ified than other areas?
Keith Rabois
People are using it maybe not as strategically yet.
Jack Altman
You think it’s because people are a little scared, or rightfully scared? Because I do feel that the fintech companies of the last era seem more insulated from the AI wave and threats. I haven’t seen as many—
Keith Rabois
Some of it is hallucination concerns.
Vinod Khosla
Aven is a good example of a company that’s deeply using AI in every aspect of it. That’s why you can get a home equity line of credit and consolidate all your credit cards onto a new credit card that has a 10 points lower interest rate.
Jack Altman
Then they have your credit card.
Vinod Khosla
They issue a credit card based on your whole home equity line of credit. They can get it done in an hour. Normally that’s weeks and weeks.
Jack Altman
AI is what makes it possible to go so fast, which makes it fit in the right way into the process.
Keith Rabois
And Ramp’s using AI very aggressively, but I think it hasn’t been quite as transformative across the broader sector.
Vinod Khosla
The thing is, there aren’t too many great fintech companies. I would venture to guess Ramp and Aven will end up being two of the best of the new breed started in the last five years.
Keith Rabois
I agree with that. So that may be true. Once every so often there’s an amazing fintech opportunity, at least in the United States. There’s been Nubank and a company in Germany, Trade Republic. They’re awesome. Revolut. But in the United States it’s once every two or three years at most that you have a true iconic company—
Vinod Khosla
That can get to tens of billions or $50 billion or a $100 billion market cap. There’s not that often. So I do think the next generation will use AI in a very significant way.
So fintech’s a really interesting area. We still do a lot of sustainability stuff. I’m really bullish on energy. We are very bullish that that area will keep sustaining. By the way, manufacturing is another area we haven’t talked about. It’s a huge interest for us. Defense is another huge interest.
Jack Altman
What in manufacturing?
Vinod Khosla
Applying AI to completely change the paradigm of how manufacturing is done. As part of that you can onshore stuff that was offshore. So it’s these two trends colliding.
Jack Altman
Is robotics part of that too?
Vinod Khosla
It is part of that. It’s not the most essential part.
Jack Altman
What’s essential?
Vinod Khosla
Essentially reducing labor costs in other ways. Not by a robot doing the job, but running a system in a way… An iPhone assembly line would have a few thousand manufacturing engineers. If you can do that function with AI, then you have a pretty large advantage manufacturing onshore.
Jack Altman
How much of the opportunity is that the points of creation of goods versus the operations and logistics around a manufacturing company?
Vinod Khosla
Both. We are seeing both. Supply chain was a minor part of all ERP, we talked about that. There’s going to be lots of opportunities to replace supply chain software with new AI software.
Jack Altman
Then in defense, obviously with Anduril, SpaceX, there’s huge inroads here. Is your guys’ sense that there’s a lot more opportunity for those flavors of companies to be built? Will those companies dominate in their markets? How do you think about how those markets will play out?
Vinod Khosla
I think there’s room for lots of new startups. We are big investors in Hermeus. That was not started in the current fashion. It was started five years ago to do hypersonic aircraft. I think that’ll be an important part of national defense. It’ll become even more prominent because Russia has used hypersonic missiles in Ukraine and we don’t have any. So that’s an important area we did a while ago. There are many other areas. Keith, you can talk about Mach and some of the others.
Keith Rabois
We’ve been concerned geopolitically about the threat posed by our adversaries, the CCP, etc. Vinod got involved in The Hill & Valley Forum before it was cool. He was one of the first 20 people when it was sitting up to alert—
Vinod Khosla
By the way, under a Democratic administration because it was a common concern.
Keith Rabois
The country needs to take advantage of the best and brightest in technology and cutting-edge technology, or we are going to sacrifice our way of living to people who do. We started investing in things like that ahead of the curve. There’s now more interest among VCs because some companies are perceived to be doing quite well.
VCs are always like a herd. But we invested in Varda, which has a significant defense component. Mach Industries is a very high potential company.
Vinod Khosla
Rocket Lab many years ago.
Keith Rabois
All of these were before it was “cool”. Now the country needs to take advantage of technology. The country has more threats and more potential adversaries to worry about. It has to do it with less money. It has to survive or thrive with less money.
Technology is a great magic wand. It has been for consumers for 40 years. You get more for less. The government needs to embrace that. This administration is putting people like Emil in place, hopefully to catalyze a new world order where we take advantage of technology and make America better.
Politics
Jack Altman
On politics, both of you are pretty willing to get into politics stuff on Twitter/X. You have very different politics obviously.
You both are willing to just get into, I don’t want to say “fights”, but fights on X about politics and stuff. It clearly comes from strongly believing in what you think. Why spend the cycles on it?
Keith Rabois
I’ll give you my answer. I don’t actually know yours. Through technology, I developed a following. I woke up one day and said, “I don’t want to die one day and regret that I didn’t use my audience to proselytize about ideas and things that I find important.”
So if I can surface new ideas or rebut bad ideas, I want to finish my life thinking I did the best I could to have influence and have a platform. So I started using it that way, particularly on topics related to politics. I was just like, “I don’t want to regret having not tried to change people’s opinion”.
Jack Altman
Are you stressed at all? When you’re getting into it on X with somebody, are you feeling anything about it or are you just, “oh, I’m just saying what I think”?
Keith Rabois
There’s times when I wish I had more time to research, if I didn’t have a day job. I know how to construct an argument, I know where all the evidence is. There’s a time when I don’t have time to go do that. My friend David Sacks back in the day hired a research assistant secretly to help him. I don’t have time to do that.
So there’s times when I happen to know the answer. I used to be very involved in politics, I know a lot of details. But I do wish sometimes that, if I wasn’t doing a real job, I would be spending more care and marshaling more evidence, and probably be more effective.
Jack Altman
One other bit that I’m now curious to ask about because I think it’s funny, is that you’re kind of harsh on Twitter, but you’re really friendly in person. Is that just how you write, or do you mean to? Are you doing it for the bit?
Keith Rabois
I also have this crazy idea. This is a dumb idea. A decade ago, I was like, I’m going to combat every bad idea on the internet with the worst idea. If someone puts a bad idea or something wrong, false out there, and nobody responds, people think it’s true. LLMs are going to pick it up and think it’s true. I’m just going to respond so at least there’s a written record. But there’s so many bad ideas and dumb ideas in the world that this is like the worst idea I’ve ever had in my life. You get addicted to trying to fix every mistake on the internet.
Jack Altman
I like the ones where you don’t even explain what the problem is. You’re just like “Wrong.”
Keith Rabois
That was a funny Square joke. It was an old Square joke. We had this critic at Square named Rakesh and he used to just constantly complain about Square. It was never going to be successful and he knew payments for 20 years. He’s a canonical expert in payments. So sometimes I’d engage and write back substantively, but sometimes he’d be so far off, I’d just write “Wrong.” So it became this internal Square joke and it became a meme. That’s where it started.
Jack Altman
That’s good. Why are you motivated to get into it online?
Vinod Khosla
I don’t spend very much time. On all of social media I probably spend less than an hour a week. So if I incidentally run into something that is blatantly wrong, then I’ll express an opinion. But I won’t even have the time to read the replies.
Jack Altman
So if you’re fighting with somebody on X about whatever and you’re getting all these replies, you’re not bothered?
Vinod Khosla
I’m not bothered. But if something’s an important idea or something… Usually it’s some principle somebody’s violating. Like this weekend I happened to run into a tweet by Bill Ackman that was sucking up to Trump on capping interest rates at 10%. He’s sort of recommending that idea and then saying, “Maybe there’s a market approach”, hedging the truth. He’s clearly a market person.
So I replied to him pretty bluntly. I like Bill, he’s a good guy. I know him. But I just couldn’t let that pass, sucking up to Trump on a truly bad idea of capping interest rates. It’s almost like Trump and Kamala Harris would have the same idea: price controls. Come on, speak up! Don’t be dishonest about your opinion and he was being dishonest. So when it bothers me, I reply. But I don’t spend a lot of time and I don’t have a lot of time otherwise.
Keith Rabois
I do it mostly when I’m in an Uber. You know you have these moments where it’s really hard to be effective. I just use it as a snack while I’m in an Uber ride, I’m not going to be able to schedule a call while I’m in an Uber ride. So I—
Jack Altman
Get on there and dunk on someone?
Keith Rabois
The worst is when I do it when I’m eating, which is a bad habit truthfully. I’m having breakfast and I’m on Twitter or something.
But when I started, it was actually a business reason. I was kind of famous back in the day at Square. I read every single tweet, every single day, about Square for years. Because occasionally you’d see a gem. It’s either a great story that you could re-share, a positive experience like “you helped my life” and you get this great anecdote. Or you’d see a customer complaint and you could route it directly to someone. Or you’d see a product feature. So I literally started every single day reading everything. But then that gets you in this trained habit of having to read everything. Maybe not the best.
Jack Altman
10 years ago maybe, you were one of the first vocal conservatives.
Keith Rabois
Maybe the only one.
Jack Altman
Maybe the only. I think now you’re maybe one of the only vocal, at least liberal-leaning—
Vinod Khosla
I’m an independent for the record. I’ve never been a Democrat.
Jack Altman
So what was the political journey?
Vinod Khosla
I used to be a lifelong Republican over fiscal issues and switched to independent over climate issues. I’ve stuck with that pretty consistently. Principles matter a lot. My fight against Trump is his values. He has none. We can disagree, or he tries to go to extremes to get his constituency rallied around him. Either way, I don’t like the idea that people don’t mind lying about things.
Jack Altman
When you watch that and it’s violating your principles… You’re seeing everybody around you. What is your assessment or read on the situation? Obviously 10 years ago this wouldn’t have been the dynamic and it all flipped.
Vinod Khosla
Clearly people have changed their affiliation for convenience. Doing things for convenience is a bad idea. Now I realize some CEOs have responsibilities to others other than themselves. Some will just change political affiliations, and if the next president is Bernie Sanders, they’ll become liberal again. That I hate.
Keith Rabois
I agree. By the way, I don’t like the convenience. I believe in principles. A reasonable fraction of people, I think that’s true. Then I think there are some who just watched the evidence of a lot of things the last administration did badly and jeopardized the country in some ways. Then some things that Trump has done have clearly worked or seem to be working at least. And for some people, it is fine to change your mind based upon evidence.
I would say there’s an element of convenience too. There’s probably a mix. It’s hard to sometimes know who’s who and what camp and all that stuff. Then there are some who have customers and employees that they have to represent, absolutely. That’s an important consideration. So for example, if you have significant government contracting revenue, you do have to think that. You’re fueling your families, your employees’ families. There are real responsibilities.
Vinod Khosla
There are responsibilities. You see them from a number of companies where they clearly, fundamentally haven’t changed their principles, but they have to take the responsibility of the role or get out of the role.
Jack Altman
It’s also interesting because it’s new for tech to even care, or for it to even be reasonable for tech to care, about politics. It just didn’t matter in the past. Also it was not possible. Tech was much more monoculture on the left before. There also just weren’t government-related tech startups.
Keith Rabois
Some of it is that the government has found tech much more interesting for a variety of good and bad reasons probably. You could argue that the best thing ever was that tech was built mostly on the West Coast, far away from Washington. It allowed tech to thrive and invent itself without a lot of scrutiny. Because generally speaking, government scrutiny early in emerging technologies is not a good thing.
Jack Altman
This is why I’m afraid of AI regulation. What are the odds of getting it right? It just seems hard to do.
Keith Rabois
I think that’s a real risk with emerging technologies. The government is less likely to be right than wrong on something that’s rapidly emerging. Maybe when something stabilizes, the government might have a better predictive accuracy record or something.
Jack Altman
You obviously need regulation at some point in these journeys.
Keith Rabois
But then you also have to think about the rest of the world. Vinod, even though he’s probably a little bit more pro-regulation generally speaking than I am, has been very concerned about losing AI to China and what that would mean for this country. If you have a threat, you have to think very carefully about regulating a new technology if you know a very serious adversary is putting the pedal down and isn’t constraining itself.
Jack Altman
They’re really good at robotics, they’re really good at manufacturing.
Keith Rabois
They’re really, really good at robotics.
Vinod Khosla
Look, it’s very clear. Four years ago at The Hill & Valley Forum I talked about how we are in a techno-economic battle with China. We must do everything to win and everything we can to disadvantage them. It’s just the truth.
Jack Altman
What does that look like? What needs to happen there?
Vinod Khosla
I think too much regulation in AI would be a really bad thing. State-level regulation is a horrendous idea.
Jack Altman
Just generally?
Vinod Khosla
They just don’t understand the global implications. Not everybody abides by American rules. The Chinese for sure don’t. So I think we have to be realistic and pragmatic about what battle we are in. Over the next 10-15 years, economic superiority is up for grabs and we’ve got to win or we’ll live under President Xi’s rules.
Jack Altman
Obviously you’ve talked about this a lot too, the China stuff.
Keith Rabois
It was a bipartisan effort four or five years ago, and fortunately it was very effective. It started changing people’s minds. There were a lot of people that were very naive about the threat five years ago. There’s still debate about whether we should export this chip or that chip, what the restrictions should be on different technologies. There’s a lot of nuance to this, but at least the central idea that we just cannot lose this race for AI is pretty mainstream now.
Jack Altman
It’s part of why a lot of the America-centric companies and investment firms are really resonant for people. People want to work at those. There is a growing patriotism out of necessity.
I have a final question for you, Vinod. Did you see the report that Keith went to Barry’s 2,000 times last year?
Vinod Khosla
Too many times.
Keith Rabois
It’s only 430 a year. The interesting thing about it is, literally this morning I went to Barry’s at 7:10 AM and a founder comes up to me after class and says, “Nice to meet you.” I was like, “what do you do?” He said, “I run an AI company detecting cancer, funded by a16z.” I was like, “that’s cool, that’s interesting. Who knows if one day we’ll invest or whatever.”
But he said, “thank you so much” and I said, “what are you talking about?” He said, “I started getting myself in shape by going to Barry’s because I read about you doing it.” So you changed someone’s life indirectly through that, that’s actually really rewarding.
Jack Altman
It’s a bit much, but it’s good.
Keith Rabois
That was just this morning.
Jack Altman
That’s great. Alright you guys, thank you very much for doing this. I had a great time. Really appreciate it.