“Innovation distinguishes between a leader and a follower.” – Steve Jobs
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About two weeks ago, 60 Minutes ran a story evaluating Vinod Khosla’s investments in the Cleantech industry and interviewed several industry “experts” about the financial performance of these early-stage companies. If we completely ignore the fact that 60 Minutes’ Leslie Stahl has numerous factual inaccuracies as pointed out by Vinod himself on the Khosla Ventures site, it is more striking to me that the debate over the actual motivation behind this story has not been more prevalent in subsequent dialogue. We are in a fragile time as a country: for each day that passes, China becomes more of an economic threat with a cheaper, more educated, and harder-working workforce. Our competitive advantage as a country is our comfort with taking risks on crazy ideas. The US has been the epicenter of technological innovation for the past century and that has only been the case because we invest in growth even when we don’t know if there will be a return in the future.
However, there has been a fundamental shift in our mindset over the past decade — the country as a whole has become more risk averse. Job growth is paramount as always, but speculative investments such as Cleantech are frowned upon to the point that the most “critically acclaimed” journalists are declaring war on speculators like Vinod. While there are divergent opinions about whether investing billions of dollars in unproven industries is a good idea or a bad idea, there is one truth that always holds true: from many failures comes few successes. Innovation is messy and only through learning can we be successful. I believe the majority of the scrutiny from Stahl is generally with regards to the US Government’s policy to pour $150+ Billion into cleantech. This is a valid concern, however, the amount of Government investment in Cleantech and growth industries is in no way comparative to the Government’s expenditures on zero growth industries such as agriculture subsidies.
Stahl’s scrutiny of venture capital and Khosla is significantly more risky than it seems. If the notion that venture capital is a scummy industry becomes common belief, we as a country will be at a drastic disadvantage to China and other competitive nations. In fact, it is possible that the reason a few of Khosla’s cleantech companies have struggled is because new investors are afraid and becoming more risk averse. I cannot stress that this behavior — which is characteristically un-American — is becoming more pervasive in the investment community. Venture investors are more focused on chasing trends and investing in markets that are developed rather than markets where there is little precedent.
Stahl prefaces her report with “the smart people who funded the Internet…have now turned their [sights] toward [cleantech]” and her tone echos shades of mockery rather than respect. She has preconceived disdain for investment in underdeveloped or “ experimental” markets. However, she fails to qualify that these cleantech investments are just as speculative and just as risky as investments in Apple or Sun Microsystems (the company Vinod founded along with Scott McNealy in the 80s). In fact, 60 Minutes has a track record of unnecessarily criticizing speculative and innovative companies — even going so far as to say Facebook would never figure out how to make money during an interview in 2007.
The media’s job is to explain complicated subjects to the mainstream and allow viewers to consider negative or positive implications of a situation. In this case, we see another example of sensationalism at the cost of innovation and growth in a new and undiscovered market. We ought to celebrate risk and celebrate our learnings through failure; we should never admonish people for attempting to improve the world, especially when those investments have the chance to reduce our reliance fossil fuels. If we’re ridiculed even for taking a risk, we’ll never improve.
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