Vinod Khosla is more popular than ever right now. The Sun Microsystems co-founder became a prominent investor — first at Kleiner Perkins and, for the past 20 years, at his venture firm Khosla Ventures — has always been sought after by founders thanks to his no-nonsense advice and company track record, including bets on Stripe, Square, Affirm and DoorDash. But a $50 million bet OpenAI in 2019 – when it wasn’t clear the outfit would succeed at the scale it has – it put Khosla Ventures, and Khosla himself, in the spotlight.
He is thoroughly enjoying himself. I sat down with Khosla last week in Toronto at Conflict conference, and before our stage performance, he told me that he’s been appearing in public—either on stage or in podcasts or TV interviews—several times a week lately. Asked if he was exhausted from the schedule – for example, he flew to Toronto a few hours before our sit-down – he shrugged.
Sure, there are things he’d rather talk about, and the art of deal-making is not among those things. “Honestly, the investor side is a lot less interesting to me,” he said when I asked him about something I heard recently, which is that he hasn’t taken a single dollar in management fees since starting Khosla Ventures, despite the fact that now has $18 billion in assets under management. (He confirmed this, but said this only applies to himself and not a company policy.)
He’s much more passionate about the startup opportunities he’s spying on a daily-changing landscape than advances in artificial intelligence, so we talked about some of that white space. We also talked about what worries him most about the ripple effects of AI. FTC Chair Lina Khan; and why, in his view, “Europeans have regulated themselves out of leadership in any field of technology.”
We first talked about Apple’s exciting new deal with OpenAI, which allows Apple to integrate ChatGPT into Siri and AI production tools. Apple may be making similar deals with other AI models, including Meta, but of course, as an OpenAI investor, Khosla is bullish on the tie-in, which is the only one Apple has publicly announced so far.
Khosla called it “validation” for OpenAI. announcing its deal with OpenAI during its high-profile developer conference, Apple “also expressed confidence, I believe, [OpenAI CEO] Sam [Altman] to drive [developments in AI] in the next five or 10 years,” Khosla said. “When a company like Apple bets on a technology, they usually don’t change it the next year.”
But was it good news and also bad news for Khosla, we wondered? As we’ve noted at TechCrunch , many startups will likely be disrupted soon after their existence by some of Apple’s newest features, and it seemed likely that Khosla’s portfolio companies aren’t entirely immune. I was particularly curious about Rabbit, whose AI-powered hardware device promises to be a kind of artificial intelligence assistant to users and is backed by Khosla Ventures.
Asked if the device could be made obsolete by Apple, Khosla suggested that the device is more versatile than people realize and could be used by businesses such as hospitals, including emergency room environments. He put it in the growing line of things that “will pay attention to what you’re doing, see what you’re doing and automatically respond.”
In fact, Khosla suggested that his team has actively avoided anything that could become “roadkill” as large language models like OpenAI’s move forward. And he highlighted at least one company that is not in his portfolio: Grammarlya writing assistant startup that was valued by its backers not long ago at $13 billion.
“If you do Grammarly, say, it’s really a light wrapper on the current model, and Grammarly won’t keep up. it should never have been an app. It shows the need for this feature, but it will be part of Word or Google Docs. It’s pretty obvious. When we talk to YC companies or others,” Khosla continued, “I can usually say, ‘half of these companies are going to be obsolete before the YC lot is finished.’
Where Khosla sees a lot of opportunity is in industries where know-how will become almost free, though it’s not clear to me how these companies will make money sustainably (even after I ask him). Consider tutoring, or even oncology.
Khosla said: “Open AI or Google is not going to create a chip designer [to have on your smartphone]. OpenAI and Google are not going to make a structural engineer. They’re not going to make a primary care doctor or a mental health therapist,” he said. “So there are so many areas for [founders to mine]. But they have to look at where the models are going next year and five years from now, and say, “We want to leverage that capability.”
We also talked about regulation. I noticed that Khosla has said in the past that closed models of large languages like OpenAI’s should be protected, even if there should be a regulatory framework around them. I wondered if this meant Khosla would give up on other, “open source” AI forever.
Not at all, he said, noting that he’s a “huge fan” of open source. Sun was one of the first companies to “jump into open source,” opening up its file system, he said. He also noted that Khosla Ventures was an early investor in GitLab, whose software invites people to work on code together.
But he suggested that open source in the context of large language models is an entirely different animal. The “biggest risk we face with artificial intelligence is China” and “powerful Chinese artificial intelligence” that competes with US “liberal values”, he said, adding that “we have to make sure that China gets behind us”. Otherwise, he warned, China will provide “free doctors and free oncologists” to the rest of the world, and while they’re at it, they’ll “export both the economic power that comes with artificial intelligence and their political philosophy. “
On stage, I told Khosla about my recent meeting with FTC chairwoman Lina Khan, who doesn’t believe in the national champion model as a reason to bash outfits like Google or OpenAI as they advance their AI development.
Khan constantly hears from executives and investors who say government intervention will put the US on a dangerous path. But during my meeting with her, she argued that time and time again, the US has chosen “the path of competition” and “ended up fueling and catalyzing so many of these breakthrough innovations and so much of the remarkable growth that the country has enjoyed and this has allowed us to stay ahead globally.”
If you look at some other countries that have chosen this model of national champions,” Khan added at the time, “they are the ones that have been left behind.”
I had barely mentioned Khan, however, when Khosla became dismissive, calling her “not a rational human being” and accusing her of not understanding business.
“He shouldn’t be in that role,” Khosla said. “The anti-monopoly attitude is good to have in any country, any economic system. But antitrust [that’s] Over-enforcement or over-enforcement is bad economic policy. One thing the US has over its European rivals is much more streamlined business environments. This is why the Europeans have regulated themselves from the leadership position in any field of technology. they’ve basically been self-regulated by artificial intelligence, by all social media, by all Internet startups.”
Of course, if some antitrust enforcement is good, but too much is not, the question is where to draw the line. At this point, before we parted ways, I mentioned the “abundance” that Altman predicts will be created by artificial intelligence. During one of TechCrunch’s StrictlyVC events last year, Altman said that the “good case” for AI is “just so incredibly good that you sound really crazy to start talking about it.”
Khosla has said he thinks so, but I’ve long wondered how exactly society will enjoy all this upside if regulators don’t get more involved in the orbit of these companies. Besides, I told Khosla on stage, we’ve already seen an enormous accumulation of wealth and power attached to an ever-smaller group of companies and individuals. When will it be enough?
Here, Khosla said that the issue bothers him a lot. “I think 25 years from now, when I’m hopefully still working . . . the need for work will mostly disappear.” But while AI should create “great abundance, great GDP growth, great productivity – everything that economists measure,” he said, he worries “more than anything else” about “increasing income inequality. How we [ensure the] fair distribution of the benefits of artificial intelligence?’
He has an idea that could be the turning point. “If [U.S] GDP growth goes from 2% today – it’s less than 1% in Europe right now – to 4%, 5%, 6%, we’ll have enough abundance to share the wealth and share the benefits.”
Whether and how this happens, of course, are even bigger questions, and for all his brilliance, Khosla, a self-proclaimed techno optimist, didn’t have the answers.
Instead, after one last final remark, he thanked the crowd for their time, stood up, and walked off the stage, where a dozen young founders were gathered in the wings, all hoping to bend his ear as much as they could.
