00:04[APPLAUSE]
>> Hello, everybody.
00:09>> Leonard, thank you for
being here today.
00:12Welcome back to the GSV.
00:14>> It's always fun to be here.
00:16It's a lot nicer than when I was here.
00:19I've been hearing that quite a bit today,
given the previous here.
00:23I, I'm thrilled to be
having this conversation.
00:25I was told that you scheduled
your time in 15 minute slots.
00:30So we are taking up four
of those slots right now.
00:33So, I'll get right to it.
00:35I have a few questions here,
focusing on three things.
00:38Your leadership and management journey,
your thoughts of investing and
00:41entrepreneurship and then a few questions
on your personal life and legacy.
00:45After that, we'll take a few questions
from audience and from Twitter.
00:49As Dean Saloner mentioned,
you were the founder and
00:52the first CEO at Sun Microsystems.
00:54About a year after you had started,
00:57you found out that Sun Microsystems was
gonna be shut out from a key thing.
01:01When you heard this, you got on a flight.
01:04Got to the customer's lobby and
01:06made phone calls refusing to leave
until you met with the team.
01:11Where does this perseverance and
conviction come from?
01:15>> Well so, I have a philosophy in life.
01:19Whatever I believe, I should make happen.
01:25And if a customer's making a mistake,
[LAUGH] the customer isn't always right.
01:33[LAUGH] And if you want to do great
products, don't listen to your customers,
01:38Lots of bad lessons in business
school I used to give a talk in
01:43the 80s on why not to listen
to your customers and
01:47maybe somebody will ask me a question
that story is in fact true.
01:53There was a signed contract
with a competitor,
01:56I stayed in the lobby all day
at 6 o'clock in the evening and
02:01I'd taken a red eye out and
I parked in the lobby.
02:05I met with the CEO of the company,
mostly, because he wanted me to go away.
02:10By 9 o'clock, he had I'd convinced him to
meet me in Chicago with his team the next
02:15day, because he didn't wanna
be seen negotiating with us.
02:19The following morning,
the day after at 5 a.m.
02:22We signed a handwritten contract,
because I wouldn't let him leave.
02:26>> Oh.
>> This was the CEO for
02:27big East Coast company, Computer Vision.
02:31We signed a handwritten contract and
life was good.
02:35The point is if you
actually believe something,
02:39you try your best to make it happen.
02:42It doesn't always happen, but
it happens most of the time.
02:46Most of the business school
entry story is also true.
02:49I actually learned that
somebody had dropped out.
02:53That's why I showed up and one of the nice
ladies in the business school office,
02:59put me in her living room to her husband's
chagrin and she was real nice to me.
03:06But things do workout if you persist.
03:09Not always, but I like to say,
failure does not matter,
03:14it's success that matters.
03:17And nobody remembers what you failed at.
03:21So, everybody remembers Sun.
03:24Does anybody know a company I
started before Sun that McNealy and
03:33>> I do, but
I've been researching you for awhile now.
03:35[LAUGH]
>> What do you think the company is?
03:38>> Was it Data Dump?
03:39There was a company called Data Dump,
we started and
03:43go funded three months before Sun.
03:47We started both roughly together, but
03:50my point is people don't
remember your failures.
03:54And I like to say my willingness to fail
is what gives me the ability to succeed.
04:00I find most people are so
afraid of failing, they don't try and
04:05do the things that would
be important enough to do.
04:09Anything worth doing is hard an so.
04:14>> You've spoken in the past about the
importance of failure or the lack of it.
04:18You started your first
company at age 20 in Delhi,
04:21which did not work out as expected.
04:23>> Well, I didn't actually get started.
04:26>> They told me,
it'd be seven years to get a phone line.
04:29>> How did you react to that?
04:30[LAUGH]
>> Honest to goodness.
04:34You know, I was 19 or 20 and they told me,
04:37it would be a 7 year waiting
list to get a land line.
04:42I, I, I sort of picked up and
went to Carnegie Mellon.
04:45[LAUGH]
>> How was that like, the move to the US?
04:51>> You know, look, it, it was easy.
04:54I wanted to be in Silicon Valley,
I knew I'd get here.
04:57I had no way to pay for it, so
04:59I had to figure out how to
get somebody to pay for it.
05:04In the end, the Biomedical Engineering
Department at CMU agreed to pay for
05:08it, so I went there.
05:09And I was very impressed
in biomedical engineering.
05:13So, I did that and
then applied immediately to Stanford and
05:16you heard the rest of the story.
05:18They turned me down a couple of times,
but, you know,
05:22the funny thing is with
enough persistence,
05:26most things that seem
impossible become possible.
05:31I'm always amazed at how often
you can turn things around and
05:36people take no for an answer too easily.
05:41You know, it's whether you're trying
to achieve a goal like get into
05:46business school or my,
my green card was the same way.
05:50I left the job that had sponsored me,
but I still got my green card,
05:54even though no lawyer would take me.
05:57I became my own lawyer.
05:59Got my green card without working for,
while I was in business school.
06:02[LAUGH] And I did it, perfectly, legally.
06:05I, my strategy there was if I
couldn't convince immigration,
06:09I'd confuse them and I did.
06:11[LAUGH] And they gave me my green card.
06:16you know, I, I just wanna ask you,
what are some,
06:19some of the perhaps, the early
influences that made you this way?
06:23This high perseverance,
high conviction person.
06:26>> Well I, I was sort of always this way.
06:31I didn't grow up in this environment,
06:33nobody around my dad was in
the Indian arm since he was 16.
06:36So he joined the ranks of
the Indian Army in, when he was 16,
06:40got shipped off to Egypt to fight for
the British.
06:43And so,
I grew up in a very different environment.
06:47But I always had this view that if
I determined something was right,
06:52I was gonna make it happen.
06:55And this comes to, since one of
the focuses of this lecture is leadership.
07:00I am amazed at how few
people have a belief system.
07:04What do they actually believe in?
07:07I and, and, yeah,
it's okay to offend you guys.
07:13[LAUGH] 90% of you will do what's expected
of you as opposed to what you wanna do.
07:21And, you know, I even, when I come to
an event like this say, why am I here?
07:25Why would I even bother to take
an hour of my valuable time?
07:30[LAUGH] no, it's true.
07:32I, I, I have to have a purpose.
07:35My goal is very simple.
07:36If I can convert one of you,
there's probably 400, 500 people here.
07:41If I can convert one of you to follow
your belief and have the guts to follow
07:46your belief, I'll have,
I'll think of the hour as well spent.
07:52So, I would say,
what am I trying to do and why?
07:54I don't speak, because somebody you know,
will write nice things about it.
08:00I, I always sort of have a purpose,
but I have a belief system.
08:05And most people,
even successful companies,
08:10and I have big beef with Fortune 500
CEOs I can talk about, there's very little
08:15leadership there don't have an internal
compass of what they believe in.
08:21Its what do others expect?
08:24You know when I graduated,
I went into entrepreneurship.
08:26Nobody went into entrepreneurship
out of the business school.
08:31And people said why wouldn't you work for
Goldman or McKenzie.
08:35And I said why would you.
08:38I, I couldn't fathom why you
would wanna do that job.
08:45I still can't, by the way.
08:48For those of you going to those places,
and
08:52I'm sure there's plenty, I'm probably
not the right person to talk to you.
08:57I frankly don't even care to talk to you.
09:01[LAUGH]
>> All right.
09:05>> I think there's something wrong
with anybody who fundamentally
09:07wants to go work for
one of the consultants or
09:09the investment banks today and
there's probably.
09:12>> [LAUGH]
>> That, this,
09:13they don't understand how the world
is going to work in the future.
09:17But my point again is,
have a belief system.
09:20Follow that compass.
09:22And I'm overstating it a bit, so there may
be some hope for those of you going there.
09:28But it's a li,
only a little bit of an exaggeration.
09:34Let me go back to this
issue of Fortune 500 CEOs.
09:37I've talked to many over the years.
09:41If a New York Times
writer writes an article,
09:44they want to change their strategy,
they wanna respond.
09:48How silly is that, that some English
major who's never had a business job
09:53can determine the strategy
of a Fortune 500 company?
09:57Why?
Because they care about what's written,
09:59not what their belief system is.
10:02Do you know what Elon Musk
would say to that writer?
10:09What Jeff Bezos would say?
10:12Having a belief system.
10:14Knowing what's driving
you to do what you do.
10:17Not you're fitting in to
do career enhancement.
10:21Or, making it look good to somebody else.
10:25Whether it's to your friends, or
to your boss, or to shareholders.
10:31And frankly, you look at all the companies
that are languishing in the Valley,
10:36the older companies,
they generally don't have a belief system.
10:40They're generally trying to meet some
quarterly target, without saying,
10:45here's how we will be different and
here's how we'll do it.
10:49Apple did languish for 10,
15 years, and then Steve Jobs came
10:54in with a point of view, and created
the most valuable company in the world.
10:58He did irrational things,
if you go back to January of 2007,
11:04January 1, everybody was saying nobody
wants a phone without a keyboard.
11:09Nobody wants a phone that costs 699.
11:11I can go on with the litany.
11:14First of all,
English majors writing articles,
11:17I have this beef against English majors.
11:19[LAUGH]
>> Not all English majors are bad,
11:22but the majority of them at Stanford
are undirected and don't have a goal or
11:29>> [LAUGH]
>> Sorry.
11:32And,and that's not to say among them
there isn't 20% that are really good.
11:38They just didn't get the right guidance
and ended up in the wrong place.
11:41>> [LAUGH]
>> I like proper school education.
11:47>> [LAUGH]
>> This is,
11:48this actually is an interesting
>> I make up better questions than usually
11:52>> [LAUGH] That's a challenge
11:57But I want to ask you about this,
you are known for being for
12:00the lack of a better word somewhat blunt.
12:04your website says we prefer brutal
honesty to hypocritical politeness.
12:09What are the tradeoffs in doing this?
12:12>> Well there's lots of tradeoffs but.
12:16I'm, I'm again very clear.
12:17You know it started off
earlier in my life.
12:20I was very successful, even before
I started Sun, I started a company
12:25like Daisy that made me more money, which
was only a million dollars back then,
12:30or little more than that
than my dad had made in the,
12:34in his career cumulatively, so
I was in a whole different place.
12:39And I said, the one thing I'll do is
not do what others want me do, or
12:44be polite,
which generally means dishonest.
12:50There's a great book by Sam Harris,
12:52who's a professor over on the other side,
about lying.
12:55I recommend everybody read
Sam Harris' book on lying, and
13:00why we all lie too much and too often.
13:05We put this sort of slogan,
I prefer brutal honesty to hypocritical
13:10politeness, on our website,
because it's a real disservice to people.
13:17You don't have to be
offensive to be honest.
13:23>> When I don't like somebody,
I can get offensive, too.
13:26But generally you can be constructive and
very honest.
13:31And I prefer that brutal honesty,
because it serves a purpose.
13:35The receiver can do something about it,
if it's a constructive criticism.
13:42If you get po, hypocritical politeness,
you might lose a lot.
13:48So, again,
it's about having enough confidence to say
13:52the other person will eventually
appreciate it, and that loc,
13:56local goods-slogan came after I
was working on a company with
14:00another major rental firm, and
I didn't believe their plan would work.
14:04They had $45,
$50 million in their bank account,
14:09so everybody was comfortable,
too comfortable, in my view.
14:12I talk to the founders
why it wouldn't work.
14:15What my concerns were.
14:17The other VCs agreed with me in the board
meeting, said all these polite things.
14:24You know, so 40 engineers wasted three or
four years of their life because
14:29nobody was willing to tell them the honest
truth about what they really thought.
14:34Right and I swore I would never
let anybody waste their life.
14:38At least give them the best advice I had
to give and tell them I may be wrong,
14:45but I'm not gonna say something I
don't believe in, I just won't.
14:50In, and that's extremely
valuable to the other thing.
14:55But to be honest, look, there
are situations you, it offends people, and
15:00I offend people often, but it helps
them if they're really introspective.
15:08I just had a candidate from Howard
Business School come in and interview for
15:12a job and I,
half an hour into the meeting I said,
15:16you know, you're not a match for us.
15:18Here's what I would do, and
I spent the next half hour.
15:22I said, I literally said to her, if I'm
gonna waste the next half hour of my life
15:26talking to you, I'm gonna give you my
best advice on what to do about your
15:34She sent me a nice note a week later.
15:38But its very valuable.
15:41But the real fact,
the honest truth about why I like that is,
15:47once I was in a position
I didn't need a job.
15:51Nobody could fire me.
15:53I've actually never worked for anybody,
so it's actually sort of nice.
15:57I felt it was a indulgence or
a luxury I could enjoy.
16:04Some people, if they make, get that
financial freedom might buy a yacht.
16:08I bought myself the freedom of brutal
honesty, and it's an indulgence.
16:14I get to do things others may
not be in a position to do.
16:18There is a downside for others, but
I think generally constructive honesty and
16:23constructive criticism than hypocritical
politeness will serve other people well.
16:29That founder, by the way, in that company
called me four years later after,
16:35after this company, this company got
sold for $3 million four, three and
16:39a half, four years later.
16:44And he called me a year after that.
16:46He said, I only wanna work for
16:48you on my next venture because
I wish somebody had told me.
16:54>> You mentioned, you talked briefly about
venture capital as it stands now earlier.
16:59I just wanna come back to that.
17:01Specifically, how does it compare to 1982,
when you were starting Sun Microsystems,
17:06and what are the major
differences you see?
17:10>> It's a lot more popular now.
17:11It's a lot more accepted.
17:14It's a lot more accepted to do startups.
17:16So for those of you who are so inclined,
it's much easier to take that route.
17:23It wasn't back then, so the risk of going
the entrepreneurial route was much higher.
17:29If you went entrepreneurial and
17:31it didn't work out you couldn't
get a job at GE, right?
17:38Today, if you've done a startup, GE would
love to have you, even if it failed.
17:43In fact, would prefer you over
somebody who spent two years at GE.
17:50But generally,
it's the learning experience of a startup,
17:54whether it's successful or unsuccessful,
is recognized as extremely valuable.
18:00And the cultural training of that is
something everybody's striving for.
18:07I'm amazed at the people who
come through Silicon Valley.
18:11It feels like a tourist stop,
like Fisherman's Wharf used to be.
18:17Every Fortune 500 CEO coming here,
18:20holding board meetings here because
they wanna learn the culture.
18:24And, and I think that becomes
a real career enhancement for
18:27those of you who do that.
18:29Now, I'm not a big fan
of planning careers.
18:32I'm much more about driving for
the things you wanna do and go do them.
18:36>> And, and that's about entrepreneurship.
18:39What about venture capital?
18:40I mean, for instance, you very famously
said in a TechCrunch interview,
18:4595% venture capitalists add no value,
and 70% add negative value.
18:49>> [LAUGH]
>> All of my venture capital friends love
18:54[LAUGH]
>> But I, I, I tell them that, you know,
18:56there was a major firm.
18:57I called somebody there and said,
this guy's destroying this company, right?
19:04>> It happens all the time.
19:04One, it, look venture capital's
become a big business.
19:12It didn't use to be back then.
19:15It was a specialty art form.
19:18There was a few firms, and most of them.
19:21Sequoia was started with Don Valentine.
19:24If you know Don, he was an operator.
19:27Kleiner was started by Tom Perkins and
Eugene Kleiner.
19:32Tom ran a division of HP, and
before that, he was a technologist.
19:37These guys, and, and
I'm not one for looking back and
19:39being romantic about things,
but this issue is important.
19:41These guys earned the right
19:47to advise an entrepreneur.
19:53That means they'd gone through
the battles, they, they had the experience
19:58when a unique situation came up and
an entrepreneur wanted advice.
20:03They actually had been through
the firing line to viscerally understand
20:08how to give them advice.
20:11Most VCs have not earned the right
to advise an entrepreneur, yet
20:17they feel free to in their ignorance.
20:22And I believe you should have
gone through a startup or
20:26at least some significant experiences, and
there are good exceptions to this rule,
20:31to really advise entrepreneurs
on how to build a company.
20:36And most VCs haven't done that,
so they give stupid advice.
20:40You know,
if you got out of business school and
20:42joined a VC firm and grew up and
20:44eventually became a partner, you haven't
learned what it's like to be in a startup.
20:49So in our firm, we have a rule.
20:51You can join, you join for
three to four years.
20:55Then you'll have to leave, actually work
in a startup, before you come back, and
21:00actually can get, I'll give you the
responsibility to advise entrepreneurs.
21:06People get frustrated because their peers
in other venture firms are sitting on
21:10boards and advising entrepreneurs.
21:13But, you know,
that's exercising authority as opposed to
21:17exercising influence because you
have credibility with entrepreneurs.
21:21Most of the time I don't go on boards.
21:24I just advise entrepreneurs.
21:27And frankly,
being on a board is irrelevant.
21:31>> On that topic you have a really
unique strategy among VCs.
21:35You've said,
I'm only interested in technologies that
21:38have a 90% chance of failure, but if they
do succeed would change the infrastructure
21:42of society in a radical way.
21:44How did you come to adopt
this particular strategy?
21:47that's not exactly accurate because
we don't mind low-risk technologies,.
21:51We invest in that, too.
21:54But what I wanna say is, venture capital,
21:58if you think about it, isn't,
is not an IRR business.
22:05You, you,
you take any of the big successes.
22:08Google, Facebook, Twitter.
22:10You can't predict them.
22:12You know, a camera like GoPro,
can you predict the, the market cap?
22:18And you can do spreadsheets, so we don't
allow any IRR calculations in our firm.
22:24Nobody does them, nobody looks at them.
22:27In making investments,
we never calculate an IRR.
22:31Because calculating an IRR, in my view,
22:34is creating the illusion of knowing,
which big companies are very good at.
22:39You tweak some assumption.
22:41I did enough business plans to know I can
make the business plan do whatever I want
22:47You know, reality is different.
22:49I don't even think you can plan startups,
so business plans are largely irrelevant
22:55other than in surfacing the key issues
the entrepreneur is thinking about.
23:00How thorough is their thinking?
23:01What's the quality of their thinking?
23:03That's the only thing I
use a business plan for.
23:08Then what are you doing?
23:10You're really doing option value
investing, if you want a financial term.
23:16If you lose,
you lose one time with your money.
23:18If you win, you win ten times your money.
23:20Your downside is limited
to your investment.
23:22So whenever we make an investment,
I assume we lost it, and
23:26then there's only upside.
23:27>> [LAUGH]
>> Right?
23:29As soon as you write it off in your mind,
there's only upside.
23:34So that's how I view the world.
23:36And then you try and take the higher risk.
23:39And there's VCs who won't invest
with us because they feel like we,
23:43we take too much risk, which is fine.
23:45There's room for every style of VC firm.
23:51It's about taking higher risks and
higher upside.
23:5490% chance of failure is not a problem.
23:59If there's a ten percent chance
of 100 times your money.
24:03If it's the only thing that worked,
then you're in pretty good shape.
24:10And, and
that's not the only good strategy.
24:14Private equity does very well
running spreadsheets and
24:18that, I just have no
interest in spreadsheets.
24:21So, and we're not good at it.
24:23>> Hm.
>> So we know what we do.
24:26What's bad is when people who
come from that word want to do
24:30this kind of investing.
24:31>> Yeah.
>> It can't be a mismatch
24:33of your personality with
the investing type.
24:36But all those are good scenarios and
some of them are even better scenarios,
24:42for our art than what we do.
24:47You, you mentioned in your,
24:48you mentioned right now about getting
other VC students to invest with you.
24:52And throughout your investing period you
had a strong streak of going against
24:55conventional wisdom.
24:57NexGen, Juniper I'm curious.
25:00How do you get others to
buy into your convictions?
25:05>> Sometimes they do after the fact,
sometimes they don't.
25:08Sometimes they actually
don't know any better.
25:10So they're confused, which is good.
25:12[NOISE] A, all those happen.
25:15Look, there's lots of really good.
25:17Receives a lot, right?
25:20But there's order of magnitude
more bad we sees around.
25:27It's, so there's probably half a dozen
people I respect in the VC business and
25:33probably the vast majority I don't
know personally so I won't judge them.
25:38But of all the people I know in the VC
busni, 90% really add no value, and
25:44I truly belive 70% of them reduce
the potential of a company.
25:52>> I could, I could keep asking
you questions on investing, but
25:54I really wanna-
>> But, but, here's the thing, right?
25:5690% chance of failure.
25:59You have to have the courage to fail them,
26:02because most likely you're going to,
to get that option at a very large play.
26:07Well, and, and
that's a pretty clear segment
26:12of the venture capital business or
the investing business.
26:15It's not every segment.
26:17Capital preservation is important in other
segments it's just boring to me, it's much
26:22more exiting to be on a roller coaster
where the highs a high and a lows a low.
26:27So risk taking is
absolutely essential now.
26:31As career advice to all of you, most,
26:36you can make money and good status,
and all that in regular big companies.
26:41There's very little really interesting
stuff you can do in big companies.
26:47It comes shockingly,
it's shocking to people, but
26:52who invented, reinvented retail?
26:59Who reinvented media it wasn't NBC.
27:04Who reinvented space it wasn't Lockheed.
27:09I was hard pressed to think of
one thing that had come out
27:14of a large company in the last 20,
30 years.
27:18That was materially
changing the landscape.
27:22And the reason's very simple, and
this is all interesting things have,
27:28eh, happened at the edges of the system.
27:32They don't happen in the solid core.
27:39you have to do where things are fuzzy,
unclear, uncertain.
27:45If there's a market forecast,
it's not at the edge of the system.
27:50If some analyst has a report.
27:53It's not what's ex,
going into that area, right?
28:00I've a whole thing about
analysts we can get there.
28:02>> [LAUGHTER]
>> Let's actually talk about it.
28:05>> Okay.
So ask me after I finish this.
28:10In the edges where things are uncertain
is they're old evolutionists and
28:18there interesting changes in business or
society happen.
28:24And unless you're there and
learning fast from being there and
28:32not being too out of it to believe you
know what's going to happen you're not
28:37gonna be in that learning edge of
the wave, where new things are happening.
28:42And as career advice, I say.
28:44And that's where failure happens often.
28:46You want failure to be small,
and success to be very large,
28:51which is the characteristic
of option value.
28:54You lose your option price, but
you get option value if it's successful.
28:59That all happens at the edge.
29:02In automotive, I, as, th,th,
there was a CEO, in fact,
29:07I've had three CEOs from the ten
largest auto companies come by in
29:11the last six months and I said I wouldn't
worry about building a better car.
29:18Almost certainly,
ten years from now, a Volkswagen or
29:22a Toyota will be a financing entity,
not a car-making entity.
29:26There will not be the notion
of marketing to consumers.
29:31The auto industry as we know
it I think will disappear.
29:35Disappearing in the sense of IBM
mainframes are still around, they're still
29:39a business, they're relatively static,
they're filling an old need.
29:44But almost certainly, the number of
cards produced ten years from now will
29:48be less than half of what is produced
today for sale to consumers.
29:53>> I, now, long, we don't have enough
time to go into why I believe that.
29:59Almost certainly, and
I'm serious about this.
30:02I gave a talk at the Stanford med school,
and I said,
30:05if I wanted to be a good doctor in 15,
20 years, I wouldn't go to the med school.
30:11If I wanted to be a good doctor,
I would go to the math department.
30:18every single thing they're learning about
medicine will be obsolete in 15 years.
30:24So, you can join Medtronic, or
DE Medical, and do incremental things, or
30:30you can try to learn that the edges, where
your probability of failure is much high.
30:35But the consequences of success
are really consequential, and
30:39most people in their life,
in their business, reduce risk
30:44to the point where the probability
of success goes higher, but
30:49the consequences of success
are inconsequential,
30:52as opposed to reducing the probability
of success and increasing
30:58the consequences of success.which
is sort of my life to start with.
31:03Trust me, it's a lot more fun
then spending 30 years and
31:08Goldman and I like Goldman.
31:11>> [LAUGH] That's a fascinating world
view, but I really want to get a question.
31:14>> So let me go back to.
31:15>> Okay.
>> [LAUGH] [APPLAUSE]
31:18>> I, I, I just have seen the tide.
31:20But you did ask me to talk about
>> The analysts and the experts.
31:23>> Yeah.
The experts.
31:26So Professor Chetlark when he was at
Berkley did research on expert opinion.
31:34All the analysts you read all
the Mackenzie reports, and
31:39by the way, Bain and PCG no different.
31:42And he followed all of their forecasts for
20 years,
31:4728,000 individual
forecasts from 250 experts.
31:52Where when the forecast was made,
31:55he classified what would be a success,
what would be a failure, And
32:00the book is called "Expert Political
Judgement." So, all these great studies,
32:06the 10-year studies McKenzie did for
millions of dollars for
32:10AT&T on what would happen to the cell
phone business, that's a fun story.
32:16Across 28,000 individual forecast
in 84,000 possible scenarios.
32:25The average accuracy of the best experts,
whether it was Henry Kissinger,
32:31Tom Friedman, McKenzie, your favorite,
eh, favorite economic forecaster.
32:37The average accuracy,
was about the same, to use his words,
32:42as dart throwing monkeys.
32:46So if you want to run your
life on these forecast and
32:49create an illusion of knowing.
32:53You will follow a path that others
will reinforce because you can
32:58give them a data quest study or
a Bain forecast.
33:02Or you can discover the edges where
things are happening and changing.
33:07Know that you don't know,
and really change the world.
33:12Now, again bringing back to leadership,
it's about having a point of view.
33:18It's about having an internal compass.
33:21This is a great point in your life.
33:24To actually decide which one of those.
33:26Do you have a belief system?
33:28Or you gonna do what
others tell you to do?
33:30Whether it's written up
in the New York Times,
33:33which, which somebody wrote up who
doesn't understand the context.
33:38Whether it's the McKenzie report or
a G-Forecast, or
33:41a Goldman analyst, or
you gonna do what you believe in?
33:44And unfortunately,
very few of you will do that.
33:51I hope I can work some of you
to believing in yourself.
33:56And the good news is,
I actually believe five percent of
34:04the people is all that's needed to be even
remotely innovative to change society.
34:10I once looked at all social changes,
not just business,
34:15and I looked at a decade and I said for
people born between 1940 and
34:211950 or 1950 of all the people
born on this planet.
34:25You can take the ten ma, 100 major areas.
34:30And define, could you find 100
people in each of those areas,
34:34from that decade, that generation,
who affected change?
34:38It didn't matter whether
it was music,arts,
34:43research in social sciences,
technology invention, business.
34:49You can't find a hundred areas and
you cannot
34:51find a hundred people that stand out in
each of these areas in any given decade.
34:56So, less than 10,000 people
born this decade will influence
35:02All of what society does think, happen.
35:09I'd like to say you should try and
be one of those people, and
35:14none of those people will
follow any analyst's forecast.
35:18They will have an internal compass,
35:21they'll have self-confidence in a belief
system, and they'll make change happen.
35:26I'm very passionate about this,
cuz frankly,
35:29it only takes a few people to change the
direction of any industry or social trend.
35:36>> You know, I think this might be a good
time to open up the floor to questions
35:41So we have Caroline and
Rai on either side with mics.
35:44Please keep your hands raised so
that one of them can spot you.
35:48You can also tweet your questions
using #gsbvftt, and Michelle here
35:52will ask your question, actually lets
start with a question from twitter.
35:56>> And I want to apologize I have
to leave soon after this, but
36:00my email address is vk@coastalventures.com
if we don't get to your question,
36:05please feel free to send it.
36:08>> Thank you Vino-
>> And I'll spend as much time answering
36:12it as, as much time as you spent
thoughtfully asking the question.
36:16[LAUGH]
That, that's my rule on email.
36:22I try and judge how much, how thoughtful
was somebody in sending the email.
36:27>> Alright, there's a lot of very
thoughtful questions on Twitter regarding
36:31Can you talk about what exactly
is your core belief system, and
36:36how do you foster that in your team and
your company?
36:39>> You know, so I decided very early I
wanted to work on interesting things.
36:47Is not well known but I started the first
program, programming class at NEIIT.
36:54In 1971, we formed a hobby club of
four people to learn programming, and
36:59that was the first instance I know
of a programming class at NEIIT.
37:03A few years later, I got interested
in biomedical engineering, and
37:09I was 16 when I started the programming
club at IIT Delhi, a few
37:14years later we started the biomedical
engineering program, which was, we just
37:18convinced one professor to work with us,
and there was three or four of us, and so
37:22I had this habit of saying, what do I
want to do and how to make it happen.
37:29But the core belief system I have is,
I wanna work on interesting things.
37:33I don't wanna get bored.
37:37And it applies to what I'm doing today.
37:40What I've learned since is,
it's nice to do that, but
37:45it's even more rewarding to do interesting
things that have a great impact.
37:51And so I measure impact a lot.
37:55We are probably the only VC
firm that in the first, for
37:58the first slide deck
a fundraising slide deck
38:01we said we care about our ambition
which is R&R but care as much but
38:06more about our ambition, our mission
which is to make a positive change.
38:10And, I've told my LPs if you get a lower
rate of return but higher impact,
38:17we'll probably pick that, because I'm much
more interested in that than feeding some
38:21pension fund a slightly higher rate
of return as long as I cross a bar.
38:26It's very clear to me.
38:28So, it was cool stuff and
interesting stuff,
38:31early I didn't have
perspective when I was in 20s.
38:35And over time I said, it's much more fun
to work on things that make a difference.
38:39And so I only do that.
38:41We, we had an investment and somebody
will tweet this and I'll get in trouble.
38:47We are looking at investment in a company
called T Spraying which is doing
38:51And the partner who was doing that,
and I said you know,
38:55you want to invest in T Spraying or
t-shirts, great.
38:59Don't expect me to spend any time.
39:02I'm not interested in t-shirts.
39:04I'd rather work on a healthcare solution,
and so,
39:09it's not, again, I want to emphasize
this is a luxury I've earned.
39:15So, all of you don't have that luxury,
if you're not in the same place, and
39:20I recognize when other people
aren't in the same place.
39:24I also never cared what people thought,
39:25so I had that luxury
very early on in my life.
39:30Mostly through my attitude, which was
much more belligerent when I was young.
39:37But now I can honestly say, we built
a new building a few years ago and
39:42I said, you know, as long as health
permits, I've enjoyed this so
39:47much and the area I'm working on keeps
changing every few years because
39:52the nature of venture capital and
technology.
39:55I'm gonna do this for
the rest of my life but
39:57only do things that actually
make a positive difference.
40:00But then also, anytime you make
a difference, you make money and I think
40:05when you make money as a consequence of
trying to do really interesting companies,
40:10you make much more of an impact
then if you do it as a transaction,
40:14buy/sell kind of thing.
40:17In fact, if I get a plan,
business plan that talks about
40:20exit in the first couple of pages,
I almost never read the rest of it.
40:25>> It's a good tip, right?
40:27>> Can you hear me?
Yeah?
40:30So I'm Melina and I actually work for
a healthcare start up.
40:33I have a pointed question about you.
40:36I'm very impressed by
the confidence you exhibit and
40:40obviously you have reasons
to be that confident.
40:42>> Some people call it arrogance.
40:43>> [LAUGH]
>> My question is did you,
40:47when you were a kid, did you get
support from your family that made
40:52you as confident as you are right now?
40:55>> You know, e, e,
first it's hard to remember.
41:00I always did my thing.
41:02I always did things most kids didn't do.
41:06And my parents always sort
41:11of, I guess support is
probably the right word.
41:15Indian families are very different, you
41:19never did things your parents really
oppose, but, I tended to do some of that.
41:25[LAUGH] but I always had great dialog with
my parents, and they actually sort of,
41:30accepted me very early doing,
going out of the bounds.
41:36For those of you interested in my attitude
and those of you who may have kids,
41:42I was asked to give a talk at Harker
School here in, you know, in Saratoga.
41:49So give a talk to the high school kids,
and I did a presentation.
41:53My first slide was something like why
you should only color outside the lines.
41:59>> [LAUGH]
>> My second slide was about
42:02why you should disregard your teachers.
42:05>> [LAUGH]
>> My third one was why you should disobey
42:09>> [LAUGH]
>> Eh, and, and yeah, it was sort of funny
42:13and the kids loved it, but
I'm dead serious about it.
42:18I am dead serious about it.
42:21I actually think,
inculcating an attitude of exploration,
42:27not confirmation to a bound set,
a bound set by others,
42:31is what creates this internal compass and
belief system and confidence in yourself.
42:38Again I say,
90% of you will do what's expected.
42:42You know, after this you'll be
motivated and then go back and say, oh,
42:46that Goldman job, it pays more.
42:57>> Hi, I'm Neil MBA1,
thanks for your speech.
43:01I just on the end of this thing that you
mentioned, there's the VC field now,
43:06as compared to in the past,
43:07has become a lot more crowded and
there's a talk of tech bubble here.
43:12In your opinion,
are we in the middle of a bubble?
43:14And if so,
when do you foresee it bursting?
43:19>> I don't,
I know that I don't know the answer.
43:23I also know anybody who tells you they
know the answer is probably stupid.
43:36>> So yeah, thanks, thanks for
your talk, Pablo Fuentes, MBA10.
43:40So I think your brand of swashbuckling is
particularly effective if you show some
43:45So I'm gonna be your buddy and allow you
to tell us a story about a time when you
43:48got crushed by somebody's brutal
honesty and what you did with that.
43:59look it would take an hour to
talk about all my mistakes.
44:03I actually let me put it this way.
44:09In the last 15 years, there's only once
in my life I've called somebody and
44:15say I'd like to speak at this conference.
44:18And that wasn't a popular conference.
44:20It was a small thing in a hotel
room in San Francisco and
44:23was called FailureCon where
everybody who had co, failed came.
44:28And I wanted to speak to
this issue of failure.
44:33There are so many s, stupid things.
44:38You know, the iPad is so popular.
44:41We tried to do it, probably one of
my large mistakes, in the late 80s.
44:49And I could go into details,
and I, I'll cut it short.
44:53What I would say is I'm never
embarrassed about my failures.
44:58And so if you search in the web for
my failures, you'll find lots of them and
45:03you'll find me talking about them.
45:05And it's important because,
given my philosophy,
45:08where I screw up doesn't matter,
because it's a long list.
45:12In fact,
it's a longer list than my successes.
45:16But like I started with,
45:18nobody remembers the data dump here,
everybody remembers Sun.
45:26The number of venture companies
where I made stupid mistakes.
45:31I'll, I'll tell you one of my,
big failures.
45:34So if you go back to Sun.
45:41on, on, le, motto under the logo
was the network is the computer.
45:47And these couple of people started
this software program that did
45:51routing of IP packets of network traffic.
45:56That happen to be the beginning of Cisco.
45:59Now, when you say the network
is the computer and make these
46:05arrogant marketing lines, and you
forget that routing is the key element.
46:11And Cisco was born as an application
on Sun, and we didn't see it.
46:16And I said to myself, duh, how stupid was
I not to see it when it was happening?
46:21Even when I saw the application!
46:24A router was an application
on a sun machine,
46:26we missed the largest
opportunity Sun put out.
46:29I can find 100 such examples,
the point is,
46:34try and fail but don't fail to try.
46:41My, a couple of other favorite
quotes along those lines,
46:45since we're coming to the end of our time.
46:49Robert F.
Kennedy said,
46:50only those who fail greatly
can succeed greatly.
46:55The classic example of that is Elon Musk.
47:01He said forget this bullshit
about supplying batteries to GM.
47:07They're just too slow
to make change happen.
47:09You know I was talking about retailing
Amazon not Walmart, YouTube not NBC.
47:15Think about GM or Tesla.
47:19GM spent way more money than Tesla did.
47:22Space, NASA and Lockheed spent
way more money than SpaceX did.
47:27I can go on and on, every major change.
47:33So failure, try and fail,
but don't fail to try.
47:39Nassim Taleb and his book Antifragile
which I recommend everybody read if they
47:44are setting off on a career as a personal
philosophy, mine happens to coincide,
47:49and I'm not talking about Black Swan,
but his book called Antifragile.
47:54I always love ending with a good rec,
book recommendation.
47:58I think that's important, so.
48:00I'm just not embarrassed
about my stupid mistakes.
48:04I mean, I think that's the difference.
48:07>> [INAUDIBLE]
>> I'd know if I answered your question.
48:11>> [INAUDIBLE]
>> When did I get crushed?
48:15>> [INAUDIBLE]
>> By brutal honesty.
48:18I mean, I've offended plenty of people.
48:22And that, so I won't go into
the details because the public company,
48:28two public companies involved but,
I was on a, on a panel with the CEO
48:34of this public company and I basically
told them how stupid they were and then
48:39there was payback in a indirect way and
that really hurt this other company and
48:43it you know, literally killed,
almost killed the company.
48:49Unfortunately because they're public
companies I won't go into details.
48:53So that's an example where
brutal honesty really hurt me.
49:00I can think of lots of, look, there's
plenty of people in the VC business
49:04that don't like me because I tell them
they, they, they're sort of worthless.
49:12But again it's an indulgence on my part.
49:14The really good people
I don't say that to.
49:17If I don't know somebody enough
I won't say to that to them.
49:20But if I do know for
sure I do make sure I tell them.
49:23More importantly, I tell [INAUDIBLE] knows
what I think and they often tell the VC.
49:28But it's part of life.
49:29>> Now I want to make sure we
have time for one more question.
49:32>> Actually,
a quick announcement before that.
49:34Friends of Ronid from the class of 2010
are welcome to join his family backstage
49:39after the event ends to share stories and
reminisce.
49:42So, this questions has sort of sort
of a view from the top tradition.
49:45And every applicant to Stanford GSB is
asked this question on their application.
49:50However, you were not asked
this question in 1978,
49:53because this question didn't exist
in 1978, it started in 2000s.
49:56So here's your chance to
answer this question,
49:59what matters most to you and why?
50:02>> You know I think it sort of and,
and I won't phrase this in,
50:08in a do gooder kind of way and
I don't mean it that way.
50:11I just find it's cool to
disrupt things for the better.
50:16And so when I say impact
50:19I sort of feel like I'm being
a troll on various industries.
50:22It's a luxury I've earned to, because
I don't need to pay my mortgage and
50:26so, I like taking on new things.
50:30You know, I, it's sort of like
now people are mad at me for
50:33saying we don't need doctors.
50:34I actually don't believe we do.
50:36So but we need, a different kind of
doctor to do a different kind of thing.
50:41And I wouldn't go to Stanford Med
school to get the best doctors.
50:45I'd go to UCLA film school because the
human element of care is important, and
50:50acting becomes important.
50:52And that's where most of our doctors
will come from in 15 years for
50:55the human element of care.
50:57And people hate it, doctors hate
it when I say to get the most,
51:02most of the human element of care
you need the most humane humans and
51:05those aren't the high-IQ people who
got into Stanford Med School, reality.
51:13But what I would say is knowing I
51:18can make a difference in industries where
things are positive is very rewarding.
51:23And let me end on the note that
I actually like working on
51:28things that my four kids would be
proud of me working on, right.
51:32And there's this question that
all of you will face of work,
51:35life balance so let me end on that note.
51:42Working on cool things excites me,
keeps me motivated, I like to say,
51:48you you grow old when you retire, not you
re, you don't retire when you grow old.
51:54And as long as you are stimulated and
excited and whatever your passion is, and
51:59it can be what I do,
it could be I want to train a whale.
52:04I find that a really hard task.
52:07It's a significant challenge by itself.
52:09Maybe it's not hugely impactful for
society.
52:12But I actually love that example of,
if I got passionate about that and
52:17did that, and
it's a really hard thing to do.
52:20It'd be exciting to go pursue it.
52:23So I like hard challenges, I like
difficult things, I like working against
52:27the odds and that brings out
my competitive spirit and now
52:33I happen to constrain it to areas where
I think I can have a positive impact.
52:37But not so much in the do-gooder thing,
it's a luxury I can indulge in.
52:40It makes my kids feel better.
52:42So let me end there.
52:45Through all of the 90s when my
kids were young, I had one rule.
52:49This 15 minute thing,
managing my time came from the following.
52:54I realized it was easy for
all of us to say things and
53:00then, and mean them and
not stay true to them.
53:07Everybody says the right words,
they don't live by them.
53:12So, what I decided I would
do is get a monthly report
53:16of every category of time I spent time on.
53:21It could be working with entrepreneurs,
evaluating new companies,
53:25being polite talking to journalists,
being polite because somebody said,
53:29here my son wants to talk,
have a conversation.
53:33I classified my time into 20 categories,
one of the most critical
53:38lines from that was the number of times
I had dinner with my kids at home.
53:44And I set an impossible goal of 25 times,
a month.
53:49And, it took me a year or
so, but eventually I met it.
53:53But more importantly, every month I had
to report on whether I did or didn't.
53:59I do believe work,
life balance is possible.
54:02You just have to be extremely
disciplined about it.
54:07I no longer went to the pub,
right, or the.
54:12I know no longer did
baseball games with friends,
54:17I only did it with my kids or son.
54:20I, I decided what my
priorities were explicitly and
54:24then measured it to meet the requirements.
54:27I highly recommend you come up with
your own priorities and measure them.
54:32Thank you all very much.
54:33>> Thank you Rao thank you
>> [APPLAUSE]
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