Uncapped #40 | Vinod Khosla and Keith Rabois from Khosla Ventures

Summary

Podcast Summary: Uncapped #40 with Vinod Khosla & Keith Rabois (Khosla Ventures)

Episode Title: Uncapped #40 | Vinod Khosla and Keith Rabois from Khosla Ventures
Podcast: Uncapped with Jack Altman
Host: Alt Capital
Release Date: January 21, 2026

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Overview

This episode brings together two leading minds from Khosla Ventures—Vinod Khosla and Keith Rabois—for a wide-ranging conversation on venture capital, working relationships, identifying great founders, company building in the AI era, sectoral trends from fintech to defense, and their views on the interplay between technology and politics. The dialogue offers deep dives into their philosophies, memorable anecdotes, and a candid look at their sharply pragmatic but founder-centered approach to investing.

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Key Discussion Points & Insights

1. Working Together at Khosla Ventures

• Origins of Partnership: The working relationship began when Vinod joined the board at Square where Keith was operating ([01:29]).
• Styles and Overlap: Despite different personalities, the core of their collaboration is “first principles thinking” and direct, honest debate.
  • “If you can do first principles thinking, it’s easy to know where you agree and where you disagree… A, B, and C. Then we can debate those three factors and it’s worked out very smoothly.” — Vinod Khosla ([02:30])
• Directness as Core Culture: Both value candor and no-nonsense discussion; hypocritical politeness is seen as harmful.
  • “I always said I prefer brutal honesty to hypocritical politeness.” — Vinod Khosla ([03:43])
• Division of Labor: Very little time is spent managing firm operations; focus is on working with entrepreneurs and company building ([05:10], [06:44]).

2. Khosla Ventures’ Approach to Founders & Company Building

• “Venture Assistant” Mindset: Vinod considers himself a “venture assistant to entrepreneurs,” not just an investor ([06:44]).
• Way Beyond Founder-Friendly: The goal is to do what’s best for the company, even if that means tough feedback, not just being founder-friendly ([08:53]).
  • “Our business is much more about helping the entrepreneur build a successful company than about investing.” — Vinod Khosla ([08:23])
• Proactive vs. Reactive Support:
  • “Our craft is to be the partner in building the company. Like I look at my role as being the consigliere to the founder… not confused about who’s the CEO and who’s the consigliere.” — Keith Rabois ([10:55])

3. Spotting and Supporting Exceptional Founders

• Formula for Assessment:
  • Look for founders who are “best I’ve ever met in my life” on any critical dimension, or who possess rare combinations of strengths (e.g., technologist + business mind, as with Max Levchin) ([13:32]-[14:59]).
• Learning Rate is Key:
  • “In 40 years, what’s key is the learning rate of the founder—how open-minded they are to new ideas, how good they are at rejecting bad ideas. If a person listens to me all the time, I’ll almost never invest with them.” — Vinod Khosla ([17:13])
• Assessing Grit & Recruiting Ability:
  • Grit often emerges through anecdotes; recruiting and storytelling are critical founder skills ([15:29], [24:40]).
• “A+ Incomplete” Concept:
  • Recognize that high-potential founders often have exceptional strengths but important gaps; that’s where investor support matters ([22:06]).

4. Evaluating and Building Teams

• Hiring & Spec Setting: Boards often get fixated on track records and “look good on LinkedIn” candidates, which is counterproductive. Instead, Khosla Ventures looks for original thinkers who fit the actual needs of a startup, particularly in fast-evolving contexts like AI ([20:15]-[21:31]).
• Learning Rate Evaluation:
  • “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?” — Vinod Khosla ([22:30])

5. The AI Opportunity & Company Building in the AI Era

• Explosion of AI Investing: Keith shifted from zero AI investments pre-Khosla Ventures to ~70% since joining ([00:22], [37:06]).
  • “Had I not rejoined KV, I think I would either miss the whole wave and been completely irrelevant or been reckless.” — Keith Rabois ([00:21])
• Focus on “AI Workers”: Investing in startups applying AI to directly perform professional work (oncology, mental health, chip design, etc.), not just copilots ([30:44]-[31:11]).
• Ethics and Loyalty: Fiercely loyal to portfolio companies; will take public stances defending their entrepreneurs when necessary ([32:14]).
• Research Grade Talent & Company Structure: The rise of unprecedented growth rates and R&D intensity is upending traditional startup roles, comp, and organizational design.
  • “The idea of PMs does not make sense in a rapidly emerging technology field… you can’t have a 12-month roadmap.” — Keith Rabois ([38:35])
  • Compensation and talent competition with Big Tech require startups to rethink entire P&Ls.

6. Sectoral Trends & Investment Themes

• Beyond AI:
  • Deep and continued interest in fintech, sustainability, energy, manufacturing, and defense ([46:35], [49:00]-[51:45]).
  • Examples: Ramp, Aven, Hermeus, Varda, Upstart, companies using AI for significant edge ([46:49]).
  • AI’s penetration into finance is real but not as advanced as in other sectors due to hallucination concerns and market conservatism ([47:15]).
• Manufacturing & Onshoring: Applying AI to radically reduce labor and rethink manufacturing processes ([49:36]-[50:25]).
• Defense Tech: Early investors in defense and national security startups due to geopolitical concerns and the role of technology in national power ([51:45]-[53:11]).

7. Tech, Politics, & Principle

• Political Engagement:
  • Rabois: Uses his platform to influence discourse and correct misinformation, seeks no regrets about voicing convictions ([53:34]).
    • “I don’t want to regret having not tried to change people’s opinion.” — Keith Rabois ([53:34])
    • His Twitter demeanor is intentionally more combative/curt to flag bad ideas ([54:59]).
  • Khosla: Engages rarely but forcefully when needed, driven by principle, spends little time on social media ([55:59]-[56:24]).
    • “If something’s an important idea… usually it’s some principle somebody’s violating… so I replied to him pretty bluntly.” — Vinod Khosla ([56:24])
• Shifts in Political Identity: Both criticize convenience-based political shifts. Khosla stresses independence anchored in principle, especially on climate ([58:40]).
• The Stakes of Tech Policy: Advocacy for sensible AI regulation, wary of state-level regulation, and insistent on U.S. leadership in AI against China ([62:48]).
  • “We must do everything to win and everything we can to disadvantage them. It’s just the truth.” — Vinod Khosla ([62:30])

8. Memorable Anecdotes & Moments

• Airbnb & OpenAI Early Calls: Keith identified Airbnb’s potential “three minutes into Brian’s monologue” but delayed the meeting due to the company’s early name (a costly error) ([26:31]).
• OpenAI Investment: The firm sent an apology letter to LPs for the out-of-norm OpenAI investment—now a fundraising badge of honor ([27:05]-[28:14]).
• “A+ Incomplete” Founder and Fast Learning: The idea that great founders are incomplete, value feedback, and rapidly evolve ([22:06], [17:13]).
• Barry’s Bootcamp: Keith’s dedication to Barry’s Bootcamp and a funny customer connection story ([64:17]).
  • “I started getting myself in shape by going to Barry’s because I read about you doing it. And so you change someone’s life indirectly…” — Keith Rabois ([64:23])

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Notable Quotes & Timestamps

• First Principles Thinking:
  “If you can do first principles thinking, it’s easy to know where you agree and where you disagree…”
  — Vinod Khosla ([02:30])

• On Brutal Honesty:
  “I always said I prefer brutal honesty to hypocritical politeness.”
  — Vinod Khosla ([03:43])

• The Venture Assistant:
  “I’ve not once called myself a venture capitalist or an investor. Always say, I’m a venture assistant to entrepreneurs…”
  — Vinod Khosla ([06:44])

• On Assessing Founders:
  “Mine is one of two traits. Either I meet a founder in on some dimension, they’re the best I’ve ever met... Or, they have a Venn diagram overlap of traits that you don’t see in common.”
  — Keith Rabois ([13:32])

• Learning Rate:
  “What’s key is the learning rate of the founder—how open minded they are to new ideas, how good they are at rejecting bad ideas.”
  — Vinod Khosla ([17:13])

• On AI’s Impact:
  “First of all, they are growing at rates that are unprecedented in the history of technology… you can’t have a 12 month roadmap.”
  — Keith Rabois ([38:35])

• Political Conviction:
  “I don’t want to regret having not tried to change people’s opinion.”
  — Keith Rabois ([53:34])

• US vs. China in AI:
  “We are in a techno economic battle with China. We must do everything to win and everything we can to disadvantage them.”
  — Vinod Khosla ([62:30])

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Timestamps for Important Segments

• [01:29] – Origins of working relationship
• [03:43] – Philosophy of brutal honesty
• [06:44] – The “venture assistant” mindset
• [13:22]-[17:13] – How to read founders; the importance of exceptionality and learning rate
• [20:15]-[21:31] – The pitfalls of traditional management hiring in startups
• [22:30] – “How much have they learned in the last three months?” – measuring founder learning curve
• [32:14] – Stance on loyalty and ethics with entrepreneurs
• [38:35]-[40:18] – Company building in AI vs. traditional tech companies
• [46:35]-[51:45] – Trends in fintech, manufacturing, defense
• [53:34]-[54:49] – Motivation for politics and engagement on social media
• [62:30]-[63:26] – Importance of US dominance and realism in AI regulation and competition

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Tone and Style

• The conversation is candor-rich, energetic, and practical. Both guests are comfortable with sharp takes but always return to principles and substance.
• There’s a spirit of admiration but also gentle teasing (e.g., jokes about Barry’s Bootcamp or being too candid online).
• The hosts and guests share an “in the trenches” attitude, valuing founder toughness, rapid adaptation, and substance over style.

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For Listeners: Key Takeaways

• Khosla Ventures is driven by first-principles, founder-focused investing, not old-school venture formulas.
• Exceptional founders: Look for “A+ incomplete” people who rapidly learn, possess unique strengths, but benefit from honest counsel—not flattery.
• AI’s current wave: Both see AI not as a sector but as a revolution reshaping company building, hiring, and product architecture across industries.
• Honesty and loyalty: Clear, sometimes tough communication—internally and with founders—distinguishes their style.
• Tech & politics: Both see tech as pivotal in global affairs and are unafraid to use their voice to influence the direction.
• Personal quirks and humor: The episode is laced with lighthearted banter about social media habits, gym routines, and more, revealing the personalities behind the capital.

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The Bottom Line

This is an inside look at the “operating manual” of one of Silicon Valley's most influential venture firms—where building world-changing companies means being both tough and supportive, having the courage to act differently, and always centering founder potential above all else.

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End of summary

Transcript

[Keith Rabois]

I've invested a lot in AI.

[Vinod Khosla]

So yeah, I love your quote about AI and how you'd have done it differently if you hadn't joined the coast.

[Keith Rabois]

Of interest before I joined kb, I joined KB literally two years ago, basically this week. Yeah, I had invested in zero. Zero. Rejoin. Yeah. Rejoin, Rejoined.

[Podcast Host]

Yeah, that's not good.

[Keith Rabois]

And literally had invested in zero AI companies before.

[Podcast Host]

Interesting.

[Keith Rabois]

Since then, in the last two years, I'd say it's about 70% of my investments are AI. And had I not rejoined KV, I think I would either miss the whole wave and been completely irrelevant or been reckless.

[Podcast Host]

Keith and Vinoda, I'm incredibly excited I got to do this with each of you individually. Last year, first thing I wanted to do coming into the new year was ask two of you to come on together. So thanks for doing it.

[Keith Rabois]

Pleasure to be with you.

[Podcast Host]

Yeah, obviously I follow both of you a lot, you know, sort of online and watching a lot of podcasts you've done and just knowing you over time and I've never seen you together in this kind of format and so I was really excited to set this up. One of the first things I want to get into is like how the two of you work together because I think like 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 and you're obviously very different people, but there's like a lot in common. Like I see you as this like Venn diagram with a lot, you know, in the middle, but you also have your own styles. So I guess just to start, like what's the like texture of your day to day working relationship? Like, like how do you guys operate together? How do you communicate with each other? Like what does it look like? Just like all the time you want to start?

[Keith Rabois]

Sure. Well, we first started working together when Vinod joined the board of Square, so. And you know, I learned a lot of things from actually Slide. Well, we worked together Sly, but that was more intermediated through Max. And I would, I would hear about these meetings with a node and all these ideas and these grand theories about how we should reorient the business. But it wasn't like 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. And so David's a little bit of acquired taste.

[Podcast Host]

Sounds like David.

[Keith Rabois]

Yeah, he's like this revenue plan is very mediocre. Was the exact quote.

[Podcast Host]

That's great.

[Keith Rabois]

Which turned out to be right. But in any event, while he was on the board of Square, he taught me a lot of things, including the most important precept of the team. He builds the company build. So when I was considering being a VC is a very natural fit because a lot of the contributions that Vinod had at Square resonated with me and I could see the style of KV and how that translated through my brain and that I felt like it would be a really good pairing.

[Podcast Host]

What was it like for you? So, like, you know when you're starting to work with Keith, like, could you tell immediately that stylistically it was like what you like? Like, how did you know?

[Vinod Khosla]

For me, it's really one thing. It's first principles thinking. If you can do first principles thinking, it's easy to know where you agree and where you disagree that it isn't this hand wavy thing.

[Podcast Host]

Yeah.

[Vinod Khosla]

A, B and C. Then we can debate those three factors and it's worked out very smoothly. It's seldom we grossly disag will even come down to if hex were true, then this is a good decision or.

[Keith Rabois]

A bad decision, which is incredibly helpful. Like, there's one specific investment I remember last summer where I couldn't actually decide what to do. It was close to the line, wasn't quite sure. And then Vinod said, the key attributes of the founder that really matter for this are 1, 2, 3. And then our junior colleague John Chu and I were like, well, on those three dimensions, this founder is aaa. So it made the decision really easy because he was able to isolate the key variables for that particular company.

[Podcast Host]

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 us. Very. You're obviously both going to say whatever you think all of the time.

[Keith Rabois]

I think that helps the direct style, which you've talked about for years.

[Vinod Khosla]

I always said I prefer hypocritical brutal honesty to hypocritical politeness.

[Podcast Host]

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. And once you have that culture, nobody's guessing at what you think. And that's worked really well within the partnership. Nobody's ever guessing what you think or why you think that.

[Keith Rabois]

And then 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 extraordinarily well on you two working together.

[Podcast Host]

Like if you had to sort of like, guess, like, I don't know, like 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]

So nobody ever discusses operating the firm very much. You don't discuss the ventures.

[Podcast Host]

Interesting.

[Vinod Khosla]

You know, this almost note, I would guess it's far less than 5%.

[Podcast Host]

Is that because it's so clear how it works or because it's like, maybe around.

[Keith Rabois]

If you include hiring, like, then there's an allocation to assess people.

[Vinod Khosla]

Yeah.

[Podcast Host]

Out of curiosity, is that because you think that it's like, it's already so clear there's nothing left to discuss, or is it just so much relatively less important than the work of investing itself?

[Vinod Khosla]

Well, first, we have a lot more fun investing than managing. And the firm doesn't take much management, honestly, other than comp. Once a year. There really isn't a lot of in hiring that we talked about. There isn't much in terms of, I can't remember when we had a strong policy disagreement.

[Keith Rabois]

It's also, 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. And so the management part is a distraction to some extent from those two core activities, which are exciting.

[Vinod Khosla]

So what else do we spend almost no time with LPs? Yeah, I mean, I may have to edit that.

[Keith Rabois]

I'm just kidding.

[Vinod Khosla]

I, I, look, I don't, I don't mind. I mean, less time with LP than almost any other senior partner. And I think that's generally true of all the senior partners at Costa.

[Podcast Host]

Well, you're at a place where you, you probably don't need to spend that much.

[Vinod Khosla]

And frankly, entrepreneurs are a lot of fun to work with.

[Podcast Host]

Yeah. So are you spending most of your time talking about new companies, existing companies? Is that basically all of it?

[Keith Rabois]

Actually both. I mean, 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 the company business, you know, sort of, that's what we focus on, is 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? Highest potential. And so we start literally, intentionally that way with the portfolio before looking elsewhere.

[Vinod Khosla]

So the funny thing is, in 40 years that I've done venture capital, I've not once called myself a venture capitalist or an investor. Always say, I'm a venture assistant to entrepreneurs trying to build companies. And that's what our website is focused on. And that's what we talk about mostly internally. How do we help a company change its trajectory if the potential exists to change it?

[Podcast Host]

How different do you see today? Like the sort of ethos of like, new young investors versus, like, when you were getting started? Because, like, right now it is such.

[Vinod Khosla]

Like a thing to, you know, there's 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, 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 because I say it's like saying yes to your kids all the time. No matter what they want you want, they 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. And I think we both agree our business is much more about helping the entrepreneur build a successful company than about investing.

[Podcast Host]

I'm newer to this, obviously, but it seems like there was some moment in time where like, the dominant marketing strategy for VC firms flipped towards just like extreme founder friendly, whatever that means. I don't know if that was 10 years ago or 15, something like that, though. You guys probably experienced this going through being on one side of it and then the other. I kind of always lived in that world. But, like, was there like a moment or like a period of a few years where it just like became the strategy for some reason for VCs to just go full.

[Vinod Khosla]

You know, 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 they need to refer. So I think this hypocritical politeness which is pervasive in our business is really bad for founders. And when a founder selects for that, they're selecting, they're generally a weak founder. Strong founders almost always select for the best feedback they can get. And also know how to say, no, thank you. I disagree with you. I think that's a really, really important characterist. One of my favorites is this. Some founders, I don't know the names. The two founders did something called founderschoicevc.org or.com some survey of founders. Some survey of founders. And what I love is they wanted to avoid the hypocritical politeness. So they said only the VCs that you've worked with can vote on you on the VC firm. 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 chassis ELO rating. And I'm very proud. We're sort of at the top of that list among 400 we seize firms and hundreds and hundreds of orders. 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. Like our lp Dax always have a huge component of how many repeat founders have come back to us to work with us.

[Podcast Host]

Keith, I'm actually really curious because like obviously Founders Fund is an amazing firm as well as Khosla and the ethos is the same in the sense of like we want to do what's right for the company, but I think like the pathway to get there is like the opposite.

[Keith Rabois]

Yeah, I think 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. Like I look at my role as being the consigliere to the founder and like 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 what how I think of my role 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.

[Podcast Host]

Totally.

[Vinod Khosla]

That's exactly right. Very, very similar goals in 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.

[Podcast Host]

Yeah, it's almost like you can imagine the conversation would play out, you know, on one side it's, well, we should back Entrepreneurs that like, don't need help. And then the other side of the conversation would be like, well, yeah, but even amazing people can still be helped.

[Keith Rabois]

Of course. Like, I mean, like, even the best baseball has a coach. Have you going to sports, you know, they have shooting coaches even, like, they're very dedicated or fitness coaches. Like, there's almost no profession where the best at what they do doesn't have an advisor, coach, mentor.

[Podcast Host]

Yes.

[Vinod Khosla]

Yeah, look, take somebody, a really strong founder like Max Lovechin. I've never been on the board. The company's gone public. We've distributed great outcome. We are the first investor to this day. Max and I do quarterly phone calls because he wants my help and advice and second opinion or something he's thinking about or always looking for areas I'll prod him in to think harder. Like, you're ignoring this or that.

[Podcast Host]

I want to talk about like, so what this clicking into the source of like, great founders, great companies. Because obviously that's like the center of like, the work. I posted this, you know that I was going to have you guys on the podcast. Somebody said, you know, we want to hear about this, but Keith, you can't say the thing about comparative advantages. And you know, you're like, but it's true. And I think it is true. But like, I want to try to click in as closely as possible to like, what makes a great founder. And I think one of the things that stuck with me was you both have said that you guys are basically always aligned on like, the read of the founder. You might disagree on a market or if this is some. A business you want to be in. But like, 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 like eight years. Yeah.

[Podcast Host]

What specifics can you sort of like, describe?

[Keith Rabois]

Well, I'll give you my formula and feel free to, you know, edit. So mine is one of two traits. Either I meet a founder in on some dimension. They're the best I've ever met in my life. It 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 like, oh my God, top one basis point on some dimension. Because what I'm trying to do is when you're. 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 that this person can change a vertical or the world? Like that's really. It is one of those two things.

[Podcast Host]

Either like at least illegal.

[Keith Rabois]

99% of humanity is not going to change when we invent an entire, you know, industry, let alone the world. And so it's like, what's, is there some probability? Usually the people who succeed at that have some trait that just like, oh my God, your ears like perk. The other exception is they have a Venn diagram overlap of traits that you don't see in common. So for example, Max Levchin, I've talked about this before, but 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 in a first rate business mind. There's less than five people in all of Silicon Valley that are that Reed was dead on. 25 years later, it's still true. There's less than five people and max is one of them. And that's led to his trajectory. So if I see these traits, Jack Dorsey, who we've both worked with is actually pretty damn good design mind.

[Podcast Host]

Yeah.

[Keith Rabois]

Pretty good technologist and a very good business strategist. He has three, which is also why he's been very successful.

[Podcast Host]

Okay, so you meet, you meet somebody that you trust. Refers somebody you, great, I'm gonna 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]

I'm using it usually, if it's so strong, it usually shows up in three minutes. Like literally you meet someone who's the smartest person ever. You did like, like you just feel this energy.

[Podcast Host]

Aren't there some less obvious traits than like super smart though? Yes, there are like grit or something like that.

[Keith Rabois]

Exactly. But like, so 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 like Thursday. And he's like, I want to be part of this team, I want to fit in. I'm going to do it. I haven't trained at all, didn't own a bike. So what did he do? He rented a city bike and ran the trial and did the whatever, triathlon on a city bike.

[Podcast Host]

That's crazy.

[Keith Rabois]

That shows so much Grant Mike is like, that's all you need to hear. And then his co founder finished second in a spelling bee when he was in high school and passed out, like due to like stress. So he didn't quit his senior year. He went back and tried to win it. Like, I was like, there's a dimension there that you're like, you don't hear very, you know, often.

[Podcast Host]

So to get some of these like ones that don't show up in a, like a live meeting, are you. Do you have certain like things that you're prodding towards? Like, are you asking more about life than business? Like, no, I actually don't do the.

[Keith Rabois]

Sort of the Dugglioni Daniel Gross style thing where tell me about your history and your sibling and you know that it does work, you know, for the people. It definitely does. Tell me about your company and like, why are you doing this company? It just, it just shows up somewhere. There's just a spark. They can't help themselves.

[Podcast Host]

Have you tried the Douglione thing and it just like didn't work for you.

[Keith Rabois]

Or you just like the mechanical. It's like when you assess people, if the nodes interviewed executive candidates for, you know, literally 40 years for companies, there's a mechanical way of assessing doing an interview where you go, you know, experience by experience. Like, why'd you leave? What was the biggest challenge? What are people going to say about you? And then there's different ways when you interview people, that's a little bit more free form. I'm definitely in the freeform version of interviewing.

[Podcast Host]

Did you do a founder meeting similar to that or is it a whole different thing for a founder?

[Vinod Khosla]

You know, every situation is 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 is two things. In the areas where they're not good, perfectly good to back a founder. If they don't know an area, often it's a professor or something. That's where 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, how good they are at rejecting bad ideas. As I said, 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. 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 this public document on how to do an interview. It is very much like, hey, it's free form. But everybody knows what answers to give in an interview. So how do you get past that? I have an internal document I give to only our founders on how to interpret the answers they get. If I put them out publicly, then every candidate would understand how I'm interpreting. So I can't put that publicly. But the first half I made it public. Like here's how I assess somebody. So I have a pretty clear style. And it's usually about putting people in a situation they haven't been in. It's not 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 like I did this in that company or I oppose that. In retrospect, I think it's very nuanced. So that's a great example. And ties back to the team you build as a 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 you're trying to do something bold and different, that's a pretty critical part of it. So 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]

Well, you have a great example in marketing specifically where you talk a lot about like the zero to end marketing versus I don't know if you want to amplify that.

[Podcast Host]

Yeah, I'm curious.

[Vinod Khosla]

For example, 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 skill set.

[Podcast Host]

I was going to say something even worse than that, but yeah, you know, like make this quarter's number look a certain way.

[Vinod Khosla]

I got your manager was saying if you're at Cisco more than 10 years, you're not qualified for a real job in the entrepreneurial world.

[Podcast Host]

Yeah, we don't.

[Vinod Khosla]

No, it's not true.

[Podcast Host]

Yeah, it's hard. They're just so different.

[Keith Rabois]

They have like trying to figure out.

[Podcast Host]

Like they have nothing to do with.

[Keith Rabois]

What'S going to mention that leads to success for what the startup needs. Yeah. And then how do you find that trait or that proven ability and make sure there's a Venn diagram overlap there which purchase diagnosis and then it's like.

[Vinod Khosla]

Assessment and you know 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 then X business to get somebody from X related businesses. It's just a terrible idea.

[Podcast Host]

It's actually a source of a lot of management mistakes which is like it has to look good on LinkedIn for the board and that's a disaster.

[Vinod Khosla]

Yeah.

[Podcast Host]

And it's really hard if you're like a young founder to stand up to.

[Keith Rabois]

That and the board's confident advisor board member sometimes just giving the founder confidence.

[Podcast Host]

Yeah.

[Keith Rabois]

Permission. You're not wrong just saying that when you're getting a lot of pressure from somewhere else like especially the first time founder just saying like no, you're probably more likely right actually. And then, then all their instincts kick in and they have enough confidence to just say no.

[Podcast Host]

Outside of this idea of like exceptionalism and like finding this dimension of special like you know, basically what you're saying is like if somebody's like B at everything, that's not a good investment for you.

[Keith Rabois]

Usually an A plus incomplete like Vinod.

[Vinod Khosla]

Likes to term incomplete incomplete.

[Podcast Host]

I like that part.

[Keith Rabois]

Really a really good formulation. The rate of growth is hard to tell in your first meeting. That is one of the hardest things because when you have one dot geometry is like infinite number of lines through one dot.

[Podcast Host]

What do you do about that?

[Keith Rabois]

So you need, do you try to go historically someone over time. The reality is the easiest.

[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.

[Podcast Host]

Totally. So 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. And then once in a while you can try to get data points from external people. But most people, you don't have the wrong prism. They don't. Unless you ask the question perfectly. Unless you can really retrain their eyes, it doesn't help.

[Vinod Khosla]

But you know, there's other ways like to say imagine you were in this business that you're not familiar with how would you go about learning X or Y?

[Podcast Host]

Let's even see how they would start.

[Vinod Khosla]

Putting them out of context and having them think through. Very easy to tell. One of my favorite questions is it doesn't matter whether they're doing a startup or not. Let's say they're 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?

[Podcast Host]

Yeah, that's good.

[Vinod Khosla]

It's a pretty simple test. You can tell a lot about a person just based on how they answered that question.

[Podcast Host]

Yeah, that's good. Are there any things that a founder can't be completely deficient in?

[Vinod Khosla]

Ethics. Ethics, no question.

[Podcast Host]

How do you figure that one out?

[Vinod Khosla]

Mostly through references.

[Podcast Host]

Even on that point, a lot of people that seem not so friendly are actually very ethical. And like, I've noticed that a lot of the, like, highly disagreeable, you know, intense founders actually have a very strong moral compass.

[Vinod Khosla]

Yes, that is absolutely true. Because they believe in their principles and.

[Podcast Host]

It, like, is the source of both. That's interesting.

[Vinod Khosla]

Well, 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.

[Podcast Host]

Yep, we're definitely coming back to politics in a little bit. I have a lot there. Is there anything around, like, ability to, like, recruit? Anything around, like, ability to recruit is.

[Keith Rabois]

A very important dimension. Can you envision this person Sounds like.

[Podcast Host]

They got to hire a thousand people at some point.

[Keith Rabois]

Yeah, but can they hire the first 10 is like really critical because those people are going to replicate themselves. Patrick Halson talks about this at length. Like, your first 10 are going to multiply by 10.

[Podcast Host]

Because you could 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? And sometimes they can't actually, even if they're very uneven, it's like, oh my God, like they can still. Or you can help them. You can help them communicate. Like, why is this ambition worth chasing? What kind of people do you want but their energy or their special secret sauce, like, comes through, like, let's say I set you up to interview with one of these great founders. I think you would pick up on this person's kind of unique, even if you couldn't articulate the exact reason.

[Podcast Host]

Yeah, you just come out feeling that way.

[Keith Rabois]

You come out Feeling like, wow, that was interesting. At a minimum. That was interesting.

[Vinod Khosla]

Yeah.

[Podcast Host]

I mean, one of the things I often think about is, like, somebody who is good at selling anybody is kind of on some level good at selling everybody. Like, it's the same person who can convince candidates and investors and customers and kind of all of it. Like, it all kind of does bundle together.

[Keith Rabois]

Yeah. You definitely have to be able to tell a story. Right. Like, at the end of the day, you have to convince people that you haven't proven almost anything, usually in the beginning. Right. And 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. Like, you're. You're doing some version of that constantly.

[Podcast Host]

When you look back at like a bunch of like, the greatest investments over the last, let's say 15 years to go back like a. But like an Airbnb or, you know, whatever, there's like a bunch of companies that were like, not hot early and like everybody passed. Is that still the case, do you think? Or do you think that it has become more like. Has the consensus become more accurate? Or is it still the case that, like, it's random signal?

[Keith Rabois]

I don't think it's random at all, by the way.

[Vinod Khosla]

Go ahead.

[Keith Rabois]

I mean, I think, for example, like, let's talk about, like, Airbnb. To me, it was obvious. Three minutes into Brian's monologue, I was like, this is the coolest thing since YouTube literally told him this. Told him exactly why it was so obvious I needed to meet him.

[Podcast Host]

Yeah.

[Keith Rabois]

And I didn't like the bed and breakfast name that they were using at the time. So I kept deferring the meeting, which it was a very costly decision for me. At the end of the day, if you met Brian for three minutes, there was no way of missing this team was very special. And he was able to convey a couple. Three key things he said in the three minutes that I was like, oh, my God, this is really, really amazing.

[Podcast Host]

But you saw it, but most people didn't.

[Keith Rabois]

Yeah, but I'm saying it's not random or you saw OpenAI some company. We all know the key investment decision. Literally, if you read our memoir, which he sent to the LPs because it was so much of an outlier at the time. Was this 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.

[Vinod Khosla]

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 history, 20 year history of coastal ventures we sent an apology letter to our LPs when we made the investment because it was twice the largest investment we'd ever 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. It's really. That letter is now part of our fundraising deck.

[Keith Rabois]

Wow.

[Vinod Khosla]

But we sent it in 2018.

[Keith Rabois]

And then here's a good example too of Radio Grove. Like it did help a lot that David, me and Vinod all knew Sam for a long time for sustained period of time. So you could see certain lines there and the critical density of talent that he had assembled plus certain traits about Sam specifically led to that investment.

[Podcast Host]

Do you think that as time has gone on and like more people are in tech and there's more founders and more investors, do you think that there's any increasing, not from you know, people who can really see it, but from the average, you know, reception to investors. Do you think that the consensus hot deal is. Is becoming any more or less likely over time?

[Keith Rabois]

You know what I'm at seed. I don't think so.

[Podcast Host]

You think it's still the case that like these hot seeds are no better than the non consensus seeds?

[Vinod Khosla]

Personal opinion I agree totally with.

[Podcast Host]

There was this like big talking about.

[Keith Rabois]

Like Rocket Lab was one of the best investments anywhere. No, I mean I don't think they would have raised money from anybody.

[Vinod Khosla]

Like well, it's worth 40 billion now, but we bought third of the company for $5 million. Nobody wanted to invest in space. Commonwealth Fusion probably Commonwealth Fusion for Fusion or even OpenAI. Right. It wasn't. You're the only venture investor in 2018 that committed because it didn't make sense. I think at the seed level, consensus hotbeds are generally around people, not around the idea.

[Podcast Host]

Yeah. It's like if you have two people who left pick your super hot current two people leave cursor. It's like an engineer and a designer leave cursor tomorrow. What's that going to go at?

[Keith Rabois]

A lot, but it's but a seed investment around let's say undiscovered people. I think the consensus ones aren't going to outperform the outliers at all.

[Podcast Host]

Maybe just talking about like themes that you guys are interested in. I know that you're mostly focused on people but you know, you also care a lot about markets and technologies maybe to like start with AI and then we can go outside of AI. So obviously AI is like in the midst of playing out. I don't know what inning it's in, but it's one of the early ones probably. You know, like, I think there have been like, a lot of changes to, like, what, you know, the labs say that they're focused on and maybe like the types of companies that are getting funded is adjusting a little bit. If you sort of like just like kind of track every six months or so. I'm curious what you guys see as the lay of the land for, like outside the labs where you think most of the opportunity lives, what you're most interested in, what you think is going to be like a big deal in.

[Keith Rabois]

The next year or two.

[Vinod Khosla]

That's such a broad surface, of course.

[Podcast Host]

Sorry.

[Vinod Khosla]

I think I was counting this 30 some startups in our portfolio that are building an AI worker of some sort, an AI oncologists, an AI mental health therapist, an AI chip designer, AI structural engineer. As many professions as there are, there's that many opportunities basically to fully do the work. Do the work.

[Podcast Host]

Yeah.

[Vinod Khosla]

So one thing we decided a couple of years ago, probably three years ago, we wouldn't do a lot of copilot. Copilot had just come out and we said, copilots, humans get in the way. Let's just do the work. So we love really 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. So we haven't invested in any competitor to OpenAI, obviously, and we should come back and talk about it. We are fiercely loyal to our companies. We can talk about loyalty. Well, 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.

[Keith Rabois]

Yeah.

[Podcast Host]

Is the loyalty, does that stem from sort of like a business decision or idea, or does it stem from just like, this is how it ought to be, Like a more ethics kind of thing.

[Vinod Khosla]

This is how it should be. It's about ethics. And if I disagree with the 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]

Yeah. If we believe on the principles, like to the point, if you have principles and you believe you're on the right side, then we're willing to use our brand capital audience to help. Yeah.

[Vinod Khosla]

But along those. The AI question you were asking, we've invested a bunch in all their other approaches than transformer models that make sense. And we probably have four or five different efforts that they don't have to replace transform models, but they're different because I think the big labs are doing transformed models really well and then doing some other things.

[Podcast Host]

So what else do you think is promising?

[Vinod Khosla]

Look, it's too early to tell. So I think any of us who pretends we know this technique or that neurosymbolic technique, we have 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. Do you think very excited in real world models?

[Podcast Host]

Yeah, I was just going to ask you that.

[Vinod Khosla]

So I think that game hasn't played out yet. It's 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.

[Podcast Host]

And you have no doubt it's going to work? It's just a matter of how.

[Vinod Khosla]

Oh, I have zero doubt it will work. And working increasingly well.

[Podcast Host]

And it'll be embodied. Robots that are.

[Vinod Khosla]

It'll be embodied. And more than that, understanding the physical world.

[Podcast Host]

Yeah.

[Vinod Khosla]

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 something called general intuition based on gaming data. And I saw a clip of this live feed of Ukrainian soldiers trying to escape Russian attackers. And then 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 agent 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, you can't afford to hallucinate an answer, even if it's low percentage. We've heard a lot about mental health therapy where bots take people down towards bats. Those are all examples. So I think the winning customer support thing will be something that does not hallucinate for a class of applications. Some applications, some hallucination is fine.

[Podcast Host]

And are you saying that you think that like a company can't just increment its way from hallucinating sometimes to hallucinating never and you just need to. You can't just. Those companies can't just improve their way to no hallucination?

[Vinod Khosla]

No, 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, massive market. Lots of people will do it. Every area will have 10 startups.

[Podcast Host]

Keith, are you interested in hard tech as much or do you invest more in B2B typically?

[Keith Rabois]

Well, I've invested a lot in AI, so. Yeah. Yeah.

[Vinod Khosla]

I love your quote about AI and how you'd have done it differently if you hadn't joined Coastal Ventures.

[Keith Rabois]

Before I joined kb, I joined KV literally two years ago, basically this week. Yeah, I had invested in zero. Zero. Rejoin. Yeah, rejoin. Rejoined.

[Podcast Host]

Yeah, that's not good.

[Keith Rabois]

And literally had invested in zero AI companies before.

[Podcast Host]

Interesting.

[Keith Rabois]

Since then, in the last two years, I'd say it's about 70% of my investments are AI. And had I not rejoined KV, I think I either missed the whole wave and been completely irrelevant or been reckless. Neither one's good because what I was able to do when I joined is learn by osmosis. So I'd sit in partner meetings and 80% of the companies that we would discuss in the portfolio, new opportunities would be AI based and I would listen and learn. And then B, as I started meeting founders who were interested in AI that fit my normal standards, I could send the deck to actually three people here, Vinod, Sven and John Chu and sometimes actually Kanu too, get feedback and then actually often have some combination, maybe all four meet the team. And so when I first started making AI investments, I felt like I had this air cover of a lot they could understand. How good is the team? B, how smart is their approach, how differentiated is their approach? And then B, is there anything else in the landscape that's even better? And then that allowed me to start making new investments. And then you developed some taste and some ideas about what works. And then 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 almost virtually all AI.

[Podcast Host]

Yeah, I'm actually curious on the Topic of how the companies are built. And obviously you're super involved with company building. You've built companies yourself a bunch and it's just like something that you talk about a lot. Do you think AI companies are built in any substantially different way?

[Keith Rabois]

I think fundamentally different. First of all, they are growing at rates that are unprecedented in the history of technology. And it's a little bit like to me, it's like running the four minute mile. Once you see someone runs the four minute mile, then no company should have an excuse for not growing rapidly. You see all these enterprise companies going from 0 to 50 million, you start asking questions, well, why can't you at least what are the limiting factors? And there sometimes are real reasons. But you start with the question of why not versus oh, that's impossible. Like if you had said we're going to start a company and have $10 million of revenue in year one from launch, you would have said, all of us would have said 10 years ago, that's impossible. That is not, definitely not the right answer. Now doesn't mean every company should do that. But it is an open question. Then the question is, well, what do you do about that? I think the idea of them 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 12 months. Well, if the field's evolving and the capabilities are evolving, like 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. And so you have to rethink that then also, how does sales work with your research team? Like OpenAI actually pairs, as far as I can tell, the people doing customer acquisition with the research team. And that's a completely different model than how most technology companies were built. Compensation, this is in the public domain.

[Podcast Host]

Completely different.

[Keith Rabois]

Completely different. And people haven't even thought through the implications. Yes, there are some companies like Meta that can afford because of how they mint money, or Google because of how they meant money to pay things that only professional athletes could aspire to when we were growing up. However, if you're a startup, how you can afford that level of cash comp while you're not minting money?

[Podcast Host]

Well, you can't, right?

[Keith Rabois]

Well this is. But then you still have to compete with people who can. So you have to think, doesn't that.

[Podcast Host]

Go to like your diamonds in the.

[Keith Rabois]

Rough type of idea either, well 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 costs somewhere else, a lot of money from somewhere else that you're not paying for. Like, but no one's really. Very few people have thought through company building from scratch. If you need research grade talent and you have to compete with a market, how do you reorient the entire P and L of a company?

[Podcast Host]

Yeah. Do you have like.

[Keith Rabois]

Well, I think it depends what you're trying to do. Like depending on what market you're in and who you're competing with and how much cutting edge AI talent you have. Do you need one person? Do you need a team? 10?

[Podcast Host]

Yeah.

[Keith Rabois]

Those are all very different. You know, financial. There's a lot of financial consequences to those.

[Podcast Host]

Yeah. How different do you think it is for like, let's say like I don't know, somebody who's building like a new like AI centric system of record or something like that. Like how different is like the first 30 hires look like what are like. Yeah, could you sort of like guess what you think that might approximately look like?

[Vinod Khosla]

I think it's very different.

[Podcast Host]

Yeah.

[Vinod Khosla]

First, the whole idea of systems of record is going to change pretty dramatically and it may be the old system 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. So there's procurement and then there's finance and then you can go through the various modules in this ERP system. If you don't have the right substrate to have it operate under an agentic architecture, you're not going to have huge success. Used to be in an 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. So one of my favorite examples we invest in dual entry. They have a client called Slash. Small business lending complex business. It's both regulatorily complex in credit scoring and all our complex areas. $150 million ARR company with only one person in accounting. That was my reference when we invested. Why? Because the architecture is right. And by the way, these aren't founders who are credentialed. I think they're from Venezuela. Really great people. Love the entrepreneurs. That was number one agreement. We love the entrepreneurs. Two, love the architecture. Three, love the impact. The benefit is very different than a feature list.

[Keith Rabois]

Another difference is so for example, we traditionally built an ERP ish system of record or whatever you think about like your defensibility would be around the number of integrations you would do like think rippling. Like we have all these integrations, blah blah, blah. And creates a big moat with things like cognition. Devon, doing a hundred integrations is something you could actually feasibly do in a month. Yeah. At very low marginal cost.

[Podcast Host]

Totally. Like a company like Mulesoft makes no sense now.

[Keith Rabois]

Yeah, well exactly like so a lot of these incumbents are much more vulnerable, I suspect.

[Podcast Host]

So given that you've got like all these different intentions for the company, the way success is measured, it's like the way you build a company. Like the old playbook to whatever extent those ever were any good or 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 bringing execs into new companies?

[Keith Rabois]

I think it's fun and challenging. So I'll give you an example. One of the best companies ever is going to be ramp. But Ramp started in the pre AI era and we're very AI forward. Like we talked about this publicly. There's stats about it leaning in. We're hiring AI native people constantly. We have incredible. 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. And so we have a lot of things that were based on doing the best possible version of a technology company in 2019. And that's changing. And it's an interesting board level conversation that we have of like, 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?

[Podcast Host]

Yeah.

[Keith Rabois]

And if Ramp's doing that, imagine what every other company should be thinking.

[Vinod Khosla]

You know my, my way of explaining this. Most experts are experts in a previous version of the world, not the one you're trying to create.

[Podcast Host]

Yeah.

[Vinod Khosla]

And so fast learning. And I come back to that is much more important than lots of experience in this AI world. Even 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. So think lattice back in lattice days right now in enterprise, because of the height, 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 pressured to be leaning into AI. Historically not the best way to build a company is 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.

[Podcast Host]

It's funny like in legal or like a couple other categories. It's like they just want to buy AI like more than what the specific solution is. Like we want. We have a big budget for AI.

[Keith Rabois]

In the short term they have the budget, they may not care about the impact. Long term it'll harmonize. You have to produce results. Ultimately we care about that. We evaluate when we look at application level companies what is the actual impact you're driving for your customers is a key, key input.

[Podcast Host]

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 later, like that's a good enough starting point to bet.

[Keith Rabois]

If they really understand that they need to versus just chase revenue outside of.

[Podcast Host]

AI are you guys. You said 70% AI so like there's other stuff you guys are interested in. I know we've talked about like robotics last year. We've talked about.

[Vinod Khosla]

Well robotics is AI. Yeah, of course, but pretty big on robotics.

[Podcast Host]

Yeah.

[Keith Rabois]

Well one thing people know less about us, but we've been consistently excellent at across the history of the fund is in financial services. We have. This point we make to LP is that in every single fund we've had we've returned the fund solely on one. Just on one financial services investment.

[Podcast Host]

That's a crazy story.

[Keith Rabois]

So we love things like you know, square stripe affirm just examples in the modern stuff.

[Vinod Khosla]

First investors in all of those except stripe. We were second.

[Keith Rabois]

Like we have Aven, which is a very excellent company, you know.

[Vinod Khosla]

Yeah, it'll be the next surprise strike.

[Keith Rabois]

Upstart was incredibly successful. We did some of the seed LED the A.

[Podcast Host]

Has finance gotten like less AI ified than other areas people are using it?

[Keith Rabois]

I'd say maybe not as strategically yet.

[Podcast Host]

You think it's because people are like a little scared like or like rightfully scared? Because I do feel that the fintech companies of the last era seem more. They seem more insulated from the AI wave and threats and I haven't seen as Many like.

[Vinod Khosla]

Well, there may be some good example of.

[Keith Rabois]

Well, some of them is hallucination concerns.

[Vinod Khosla]

But even 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 in consolidate all your credit cards onto a new credit card that you get that has 10 points lower interest rate and then you have a credit.

[Podcast Host]

And then they have your credit card.

[Vinod Khosla]

Well, they issue a credit card based on your home equity line of credit. They can get it done in an hour. Normally that's weeks and weeks.

[Podcast Host]

And AI is what makes it possible to go so fast, which makes it fit in the right way into the process.

[Keith Rabois]

And ramps using AI very aggressively. But I think it hasn't been quite as transformative across the broad space versus like.

[Vinod Khosla]

Well, you know, the thing is there aren't too many great fintech companies. I would venture to guess Ramp and Avon will end up being two of the best of the new breed started in the last five years.

[Keith Rabois]

Yeah, I agree with that. And so that may be true like once every so often there's an amazing fintech opportunity. At least the United States there's been like Nubank Co. 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]

Tens of billions or 50 billion or 100 billion in market cap. There's not that often. And so I do think the next generation will use AI in a very significant. Yeah, so fintech's really interesting area. We still do a lot of sustainability stuff. I'm really bullish on energy. We are very, very bullish that that area will keep sustaining actually.

[Podcast Host]

So maybe this is a good moment to talk about this.

[Vinod Khosla]

By the way, manufacturing another area we haven't talked about. Oh yeah, Huge interest for us Defense is another huge interest.

[Podcast Host]

What in manufacturing?

[Vinod Khosla]

I think 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.

[Podcast Host]

Is robotics part of that too?

[Vinod Khosla]

It is part of that. It's not the most essential part.

[Podcast Host]

What's essential?

[Vinod Khosla]

Essentially reducing labor costs in other ways. Not by a robot do 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.

[Podcast Host]

How much of the opportunity is at the points of creation of goods versus the operations and Logistics around a manufacturing company.

[Vinod Khosla]

We are seeing both Supply chain was sort of a minor part of whole erp. We talked about that. There's going to be lots of opportunities to replace supply chain software with new AI software. Yeah.

[Podcast Host]

And then in defense I guess obviously with Anduril SpaceX obviously now there's huge inroads. Here is your guys sense that there's a lot more opportunity for those flavor of companies to be built. Will those companies dominate in their markets? Like how do you think about what those markets will play out?

[Vinod Khosla]

Like I think there's room for lots of new startups. I mean we have big investors in Hermeus now that was not started in the current fashion. It was started five years ago to do supersonic aircraft. I think that'll be an important part of national defense. Become even more prominent because Russia has used supersonic aircraft missiles in Ukraine and we don't have any.

[Podcast Host]

Yeah.

[Vinod Khosla]

So that's an important area we did a while ago. There's many other areas Keith, you can talk about Mark and some of the others.

[Keith Rabois]

Yeah. So we've been in that. Well, we've concerned like politically geopolitically about the threat posed by our adversaries. The CCP et cetera. Minod got involved in Hill Valley Forum before was cool. One of the first 20 people like when you know setting up to alert.

[Vinod Khosla]

By the way under Democratic.

[Keith Rabois]

Yeah, under a Democratic administration because it.

[Vinod Khosla]

Does come concern because the country needs.

[Keith Rabois]

To take advantage of the best and brightest in technology and the cutting edge technology or we are going to sacrifice our way of living to people who do. And we have started. 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 you know are always like heard. But we invested in Varda which has a significant, you know defense component. Mock technologies is a very high potential.

[Vinod Khosla]

Many many years ago. Yeah.

[Keith Rabois]

All of these were before was kind of quote cool. Now also the country needs to take advantage of technology. The country has more threats and has more potential adversaries to worry about. It has to do with less money. It has to survive or thrive with less money. Technology is a great magic wand. It's been for consumers, you know for 40 years. It was like magic wand. You get more for less. The government needs to embrace that. And this administration is in putting people like Emil in place hopefully to catalyze a new world order where we take advantage of technology and make America better.

[Podcast Host]

Yeah. I guess on politics like both of you are, like, pretty willing to, like, get into politics, stuff on Twitter and stuff X. And you have very different politics, obviously. But I guess my first question is, like, you both are, like, willing to just sort of, like, get into. I don't want to say fights, but, like, fights on X about politics and stuff like that. Clearly, it comes from, like, strongly believing in what you think. Why spend the cycles on it? Like, why do you.

[Keith Rabois]

I'll give you my answer. I don't actually know yours. Mine was like, yeah. Through technology, I developed a following, and I woke up one day and said, like, look, I don't want to die one day in 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 new or rebut bad ideas, I want to, you know, finish my life thinking. I did the best I could to have influence, and I have a platform. So I started using it that way, particularly on, like, topics related to politics. And so I was just like, I don't want to regret having not tried to change people's opinion.

[Podcast Host]

Are you stressed at all when, like, when you're, like, getting into it on X with somebody? Are you, like, feeling anything about it or are you just, like. I'm just saying what I think, but I'm.

[Keith Rabois]

Well, there's times where you should have more time to, like, research. Like, if I was doing nothing else, if I didn't have a day job, there's times when I know how to construct an argument. I know where all the evidence is. 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. 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 in marshaling more evidence and probably be more effective.

[Podcast Host]

Actually, one other bit that I'm now curious to ask, because I think it's kind of funny, is you're, like, kind of harsh on Twitter, but you're, like, really friendly in person. Is that just, like, how you write? Or, like, do you mean to, like, are you doing it for the people?

[Keith Rabois]

Well, I also had this crazy idea. This is a dumb idea. Like, a decade ago, I was like, I'm going to combat every bad idea on the Internet with the worst idea. Like, I was like, well, if someone Puts a bad idea or something wrong or nobody responds. People think it's true. Like, LLMs are going to pick it up and think it's true. I was like, I'm just going to respond. So at least there's a written record. But, like, there's so many bad ideas, there's so many dumb ideas in the world that this is the worst idea I've ever had in my life. But you get addicted to trying to fix every mistake on the Internet.

[Podcast Host]

I like the ones where you don't even explain what's the problem there. You're just wrong.

[Keith Rabois]

Yeah, well, that was a funny square joke. That was an old square. We had this critic at Square named Marcash and he used to just constantly complain about square. Square was never going to be successful and he knew payments for 20 years. He's a canonical expert in payments. And so sometimes I'd engage and write back substantively, but sometimes it'd be like so far off, so wrong. So it became like this internal square joke to our caps and it became like a meme.

[Podcast Host]

That's good.

[Keith Rabois]

That's where it started.

[Podcast Host]

That's good. Why are you motivated to, like, get into it all?

[Vinod Khosla]

I don't spend very much time all of social media. I probably spend less than an hour a week. That's good. 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 I get.

[Podcast Host]

So, like, if you're. If you're like fighting with somebody, somebody on X about whatever, and you're getting all these replies, or you're just like, I can't. You're not, like, 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%. Said he's sort of recommending that idea and then saying, well, maybe there's a market approach. Hedging the truth is clearly a market person. So I replied to him pretty bluntly. I like Bill. He's a good guy, know him. But I just couldn't let that pass of sucking up to Trump, which on a truly bad idea of capping interest rates. Almost like Trump and Kamala Harris would have the same idea. Price control. It's like, 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]

Yeah, Yeah, I do mostly, like, I mean, in Uber, you know, you have these moments where it's really hard to be effective.

[Podcast Host]

Yeah.

[Keith Rabois]

Like, I just use it as, like, snack while I'm, like, in an Uber ride. I'm not going to be able to schedule a call while I'm in an Uber ride, you know, etc, So I.

[Vinod Khosla]

Kind of like get on there and.

[Keith Rabois]

Dunk do when I'm eating, which is a bad habit. Tr like I'm having breakfast. I'm like, on Twitter or something. But I started, you know, where 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 J, like either a great story that could reshare, like a positive experience, like, you helped my life and you get this great anecdote, or you'd see like, a customer complaint and you could route it, you know, directly to someone, or you'd see a product feature. I literally read every day. Started every single day. But then that gets you in this trained habit of, like, you have to read everything. And, you know, maybe not the best.

[Podcast Host]

You were like, 10 years ago, maybe, let's say you were, like, sort of like one of the first sort of like, vocal conservatives.

[Keith Rabois]

Maybe the only one.

[Podcast Host]

Maybe the only. And I think now you're maybe like, one of the only vocal, like, at least, like, liberal leaning. Maybe that's, like, too strong.

[Vinod Khosla]

I'm an independent.

[Podcast Host]

You're an independent.

[Vinod Khosla]

For the record. Yeah, I've never been a Democrat.

[Podcast Host]

Oh, yeah. 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. And I've stuck with that pretty consistently. And then principles matter a lot. So, you know, my fight against Trump is his values. He has none. Yeah, 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.

[Podcast Host]

Yeah. When you watch that and, like, so it's like violating your principles, you're seeing, like, everybody around you, like, what's your. What is your, like, assessment or read on the situation? Because, like, obviously 10 years ago, this wouldn't have been the dynamic.

[Vinod Khosla]

People have changed their affiliation to be for convenience. Doing things for convenience is a bad idea. Now I realize some CEOs have responsibilities to others than themselves. But some are just will change political affiliations and if the next president is Bernie Sanders, they'll become liberal again that I hate.

[Keith Rabois]

So I agree, by the way, I don't like the convenience. I believe in principles. I think a reasonable fraction of people I think that's true of. And then I think there are some who watch the evidence of just like there's a lot of things, let's say the last administration did badly and jeopardize the country in some ways. And then some things that Trump has done have clearly worked or seem to be working at least, you know, et cetera. And 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, you know, who's who and what camp and all that stuff. And then there are some who have customers and employees that they have to represent. Absolutely. And you know, that's an important consideration. Like sort of, for example, if you have a significant government contracting revenue, you know, you have, you do have to think about like you're fueling your families, your comp, your employees families. Like yeah, you know, there, there are.

[Vinod Khosla]

Real, there are responsibilities. You CM 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.

[Podcast Host]

It's also interesting because it's like it's new for tech to even, to even be reasonable for tech to care about politics. It just didn't matter in the past. And also it was not possible. Tech was much more monoculture on the left before. And then also there just weren't government related tech.

[Keith Rabois]

Tech starts some of this. The government has obviously, you know, found it much more interesting what tech variety good and bad reasons probably. And you know, you could argue that his best, best thing ever was the tech was built mostly on the west coast, far away from Washington. Allowed tech to thrive and you know, invent itself without a lot of scrutiny. Because generally speaking, government scrutiny early in emerging technologies is not.

[Podcast Host]

This is why I'm like afraid of like AI regulation. I'm like what are the odds of getting it right? It just seems hard to do.

[Keith Rabois]

Well, 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.

[Podcast Host]

Yeah, I mean 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. And 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 to this country. And 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 doesn't isn't it.

[Podcast Host]

They're really good at robotics, they're really good at manufacturing already.

[Keith Rabois]

Really good at robotics.

[Vinod Khosla]

Look, it's very clear in three years, four years ago at the Hill Valley forum I talked about 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.

[Podcast Host]

What does that look like? What does need to happen there?

[Vinod Khosla]

So I think too much regulation in AI would be a really bad thing. State level regulation is a horrendous idea just generally because they don't understand the global implications. Not everybody abides by American rules. The Chinese for sure don't want. 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 gotta win or we'll live under President Xi's rules.

[Podcast Host]

Yeah, yeah. I mean obviously you've talked about this a lot too.

[Keith Rabois]

It was a bipartisan effort back four or five years ago and fortunately it was very effective. It started changing people's mind. Like there was a lot of people that were very naive about the threat five years ago. And I think if we'd waited too long and there's still debate about like should we export this chip or that chip, what should the restrictions 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. It's pretty mainstream now.

[Podcast Host]

Yeah, it's part of why a lot of the America centric companies and investment firms like it's really resonant for people. Like people want to work at those, you know, like it's like there is a growing patriotism out of necessity. I think probably. I have final question for you, Vinod. Did you see the report that Keith went to Barry's 2,000 times last year?

[Keith Rabois]

That's an exaggeration.

[Vinod Khosla]

Too many times.

[Keith Rabois]

Yeah.

[Podcast Host]

Is it too much?

[Keith Rabois]

It's only 430 years.

[Podcast Host]

Trying to get a hold of Keith, he's just like.

[Keith Rabois]

The interesting thing about it is though, literally this morning I went to Barry's 7:10am and a founder comes up to me after class and he says, nice to meet you. I was like, what do you do? He's like, I run an AI detecting cancer funded by a 16Z. And I was like, that's cool. It's interesting. Who knows if one day we'll invest or whatever. But he said, thank you so much. I said, what are you talking about? He's like, I started getting myself in shape by going to Barry's because I read about you doing it. And so you change someone's life indirectly through that's actually really rewarding.

[Podcast Host]

It's a bit much, but it's good.

[Keith Rabois]

Just this morning. That's great.

[Podcast Host]

All right, you guys, thank you very much for doing this. I had a great time. Really appreciate it.

[Vinod Khosla]

Thanks a lot.