Last week, I was invited to join the BBC World Service program “Business Matters” to discuss business ethics and the trade war. To give a flavor of the Silicon Valley zeitgeist, I shared highlights of my interview with Scott Kupor, a prominent venture capitalist (VC), and author of the book, “Secrets of Sand Hill Road.”
On the never ending drama of the US/China trade war, I came up with an apt way of describing Trump’s strategy: “Like a bull in a China shop.” (Listen at 15:45 in the BBC podcast)
This view was bolstered, just four days later, when we saw the biggest drop in the Dow Jones all year, and experts blamed it on Trump’s escalation of trade tensions. Headlines like this one are now common: Have U.S. Tariffs backfired? I won’t be surprised if an impulsive tweet from Trump plunges the world economy into recession.
But meantime, here’s a transcript of my conversation with the BBC’s Fergus Nicoll and author Jasper Kim in Seoul. It’s been edited (and italicized) for length and clarity.
Fergus Nicoll: Silicon Valley has had its fair share of “fake it till you make it” stories, would-be billionaire entrepreneurs who talk a great game and acquire a loyal and admiring following, then they go bust and sometimes go to jail. And it’s not just the tech sector. It’s fair to say the chance of hearing unvarnished, unpartisan truth from any given politician might be lowish. Alison, who’ve you been discussing ethical behavior with?
Alison van Diggelen: I had a great discussion recently with VC Scott Kupor…We talked about Facebook’s mantra of “moving fast and breaking things” and he feels the rules are different for small startups which have limited impact. He calls them “the pirates.”
I asked him: Are you saying it’s OK to be a pirate in the early stages of a startup?
Scott Kupor: It depends on what pirate means (audience laughter).
Fraud and misleading people is clearly not right. But the idea that you might enter into a market where you’re not exactly sure what the product should look like, you might have a theory on what your regulatory structure is, but you’re not 100% sure.
[Photo credit:Sarah Gonzalez/Commonwealth Club]
I’ll give you a great example: we’re investors in Airbnb and Lyft. These companies probably couldn’t have been successful if they’d asked for permission every time they went into a new market. You could argue that was unethical: They should’ve got permission first. The reality is, they said: we’re going to go into a new market, we believe we have a defensible theory that why what we’re doing is appropriate from a regulatory perspective, but we also know we’re likely to get challenged on that. But over time, if a consumer utility is big enough, there is a way to deal with these issues. So that’s my definition of a pirate: I think that’s reasonable acceptable behavior. Fraud and misleading people is not acceptable behavior.
Alison van Diggelen: In order to create a startup that’s potentially going to change the world, you have to break some rules and the question is: which rules? You have to question the status quo. Theranos –– the blood testing company that famously imploded last year and the CEO has been charged with fraud –– is a great example of going too far, going to the dark side. One of the Theranos whistleblowers, Tyler Schulz, has started a nonprofit called Ethics in Entrepreneurship to teach ethics, get the basics down.
This is why I asked Scott Kupor about ethics. VCs work closely with startups (they often join their board of directors) and I wanted to hold his feet to the fire and say: You (and your colleagues) have a responsibility to make sure your entrepreneurs are thinking about ethics. It’s one thing to be a pirate in the early days, but at some point you have to grow up and be like the navy and play according to the rules and respect the nation’s laws.
Fergus Nicoll: Do you think these internal debates translate across Asia in terms of startups, Jasper? For example, startups in Vietnam saying: we think we’ve got a space in the market, but we’ll have to break the rules to get there, then grow…and then we’ll behave?
Jasper Kim: There are some minute cultural nuances, but similarities. If you look at Steve Jobs. His famous quote is:
“All the great ideas were stolen.”
If you look at Apple in the early days: they flew a pirate flag and were unabashed by the fact that they basically ripped off or stole ideas from here and there. The genius of it was connecting different technologies that existed before, like the touch screen, with ATM machines, like the wheel on the iPod, and use that to make genius products like the iPhone.
What is ethical? That’s a big question. Kupor’s defense is that it’s all for consumer utilitarianism, but there’s also the other side of what’s ethical and that’s Immanuel Kant, and his theory of Categorical Imperative. You have to have certain values as inputs, you shouldn’t just deal with outcomes to justify your behavior.
Of course, the trade war and piracy (of IP) are connected at the core, but that’s a discussion for another day…
The BBC program aired live on August 1, 2019 and my conversation with Scott Kupor took place in front of a live audience at the Commonwealth Club in Silicon Valley on June 10, 2019.
As the seismic impact of Britains’s vote to leave the European Union rocks the political and financial world, the long term impact is still unclear. But it’s likely that the creation of a new political divide could have incessant repercussions around the world. What does it mean for globalization, and for U.S. presidential candidate, Hillary Clinton?
I was invited to take part in a live discussion on the BBC World Service last night with Simon Long, Banyan columnist for The Economist in Singapore; and Diana Furchtgott-Roth, director of Economics21 in New York.
I see Brexit as part of a larger trend: a widespread shift to nationalism and anti-globalization. It could be the beginning of the end of capitalism as we know it – the majority of Britons have voted against the status quo. Globalization is NOT working for them. In the US, it’s a big wake up call to establishment politics here. Hillary Clinton and the Democratic party need to take note.
BBC host, Fergus Nicholl led a lively discussion on the pros and cons of the Brexit vote. Here is a transcript of the globalization discussion (edited for length and clarity). Listen to the entire podcast at the BBC(Globalization focus starts at 38:38) or below:
Robert Hormats (former Under Secretary for Economic Growth for President Obama and Vice Chairman of Kissinger Associates) explained the U.S perspective:
Robert Hormats: We have a great stake in the global economic system…the global economy has a big effect on our own economy, as it does on other countries’ economies and if we give up that leadership or turn inward, it will hurt our economy…
Laura Trevelyan (BBC Correspondent, Washington D.C.):What can be done to restore economic stability?
Robert Hormats: I think it’s very important that political leaders try to help people who do not feel that they’ve benefited from globalization or from technology, to feel more included, to listen to those people. If these people feel more confident about their own lives, they’ll feel more confident about the global economy…We need to make sure the global economic system works effectively and that is now in jeopardy.
Diana Furchtgott-Roth: I’m fully in favor of globalization, but it doesn’t have to mean that Brussels can control what kind of vacuum cleaner you can buy…The EU has become too intrusive. And that’s why the majority of people voted to leave… not having to do with globalization but intrusion in everyday life…
Fergus Nicholl: Simon, take us into Asia with this issue of globalization…
Simon Long: It’s not just that people are uncomfortable with globalization, they’re uncomfortable with some of the byproducts: increased inequality, entrenched elites making decisions for them. And in that context this (Brexit) vote has resonated in some parts of Asia as a revolt against doing what you’re told is best for you. It’s a phenomenon one’s seen in elections in Indonesia in 2014…in the Philippines with the election of Rodrigo Duterte on an explicitly anti-elite, anti-establishment platform. It’s part of an anti-globalization trend…a general revolt by the people who feel excluded from the elites.
Fergus Nicholl: Alison, you’ve got friends and family back home in Scotland. I wonder how they’ve been reacting over the last few days…
Alison van Diggelen: It looks to me like another referendum on Scottish independence is almost inevitable. I’ve heard anecdotally that some Scots who voted “No” to independence in 2014 are now inclined to vote “Yes” – they don’t want to be part of what they see as an isolationist, xenophobic “little England” mentality.
I see Brexit as part of a larger trend: a widespread shift to nationalism and anti-globalization. It could be the beginning of the end of capitalism as we know it – the majority of Britons have voted against the status quo. Globalization is NOT working for them. In the US, it’s a big wake up call to establishment politics here. Hillary Clinton and the Democratic party need to take note of it and start doing more to address the people who’re not benefiting from globalization and doing something to help them.
Fergus Nicholl: Simon, that’s a very bleak message: a sense of fundamental danger to the global financial system?
Simon Long: I think it’s justified. What we have seen is a big step back to the international order of the past 40-50 years. It does reflect a sense of resentment, not just in the UK, against the EU, but felt around the world, against the current economic system. If one looks at pioneering trade agreements, for example, The Trans-Pacific Partnership, it’s hard to find any country where that’s a popular idea: people think it’s either nothing to do with them or is against their interest. The popular mood has disassociated itself from what governments are doing in globalization.
It’s no secret that cleantech has taken a bashing in the last few years, yet Andrew Chung, a partner at Khosla Ventures is still bullish about the sector’s prospects and convinced that it makes sense long-term, both domestically and globally. During our recent hour-long conversation, he admits that “keeping the cleantech fire burning” is the first thing he thinks about when he wakes in the morning.
“The number one thing is to ensure the cleantech industry continues to survive and thrive,” says Chung. He cites several companies in his portfolio that recently raised large rounds at strong valuations.
Keeping the fire burning? It’s curious imagery for someone focused on clean energy; and technologies that lower our carbon footprint. I imagine him cheerfully stoking a bonfire, plumes of black smoke filling the air.
“Would you like to qualify that?” I ask.
He chuckles, “Yes…we would capture the carbon created by the fire and transform it into something else.”
It’s a fitting segue into one of his favorite investments: LanzaTech, a company that happens to do just that. It takes carbon capture one step further, capturing waste gases like carbon monoxide from heavily polluting steel plants and converting them into “valuable fuel and chemicals.”
He calls it one of his Black Swans – highly improbable investments, that are not incremental improvements on business as usual, but giant technological leaps.
So compelling that the company recently announced a joint venture with Baosteel, a major steelmaker in China, which is investing in a new commercial facility due to come online in 2015. LanzaTech’s zero capital contribution to the deal means it can continue to scale up and pursue other partnerships in Japan, Europe, India and Russia.
I was curious to learn who helped with the initial discussions to broker the deal? None other than former British Prime Minister, Tony Blair. Those paying close attention to Khosla Ventures will remember he joined the team as a strategic advisor in 2010.
So what makes it such a compelling deal? Chung calls it a confluence of events. The blanket of smoke over Shanghai being a palpable one, leading to pressure from the Chinese government on major polluters like steel makers to clean up their act. There’s also the global ambition of many Chinese businesses who view such partnerships as strategic moves.
Societal tensions add to the pressure to solve China’s huge environmental problem. Even Jack Ma, China’s Andrew Carnegie is focusing his new philanthropic trust on health and the environment.
CONSPICUOUS ABSENCE
You’ll notice that the United States is conspicuously absent from LanzaTech’s partnership list. That fact is also at the top of Chung’s mind. Several of the potentially transformative technology companies he backs are finding it easier to get global partners than American ones.
“How do we communicate this message to D.C.?” says Chung. “If technology is not supported here, it will leave our shores.”
Chung feels the regulatory environment means that American companies are more complacent and have less appetite to take risks. He cites the U.S. car industry where employees get bonuses whether or not they achieve product improvements.
“It needs a regulatory push to compel them to take greater risk,” says Chung. “We don’t have the dire need like in China where (almost) 1 million people are dying of pollution every year.”
KINDRED SPIRITS OF ELON MUSK
Talking of risk taking, Chung sees himself and his boss Vinod Khosla as kindred spirits of Elon Musk, who staked all his PayPal wealth on transforming the electric car sector with Tesla Motors.
“It’s a major cleantech success story,” says Chung. “Elon deserves a lot of credit…he stepped on the gas when others were giving up.”
What makes them kindred spirits? It’s more than just their strong belief in technology explains Chung. He quotes Irish playwright and cofounder of the London School of Economics, George Bernard Shaw:
“All progress depends on the unreasonable man.”
“So are you and Vinod Khosla unreasonable?” I ask.
Chung laughs. “We are contrarians!” he says. “We’re willing to do what it takes.”
He points to Khosla’s investment in Ecomotors, an internal combustion engine targetting energy efficiency gains of up to 50%. The company also has backing from Bill Gates and entered into two joint venture partnerships to build plants in China, deals involving hundreds of millions of dollars. He anticipates 200,000 engines for cars and diesel generators will roll off the production lines by the end of 2016.
“We’re addressing the transport problem from both angles,” says Chung. “We are focused on the electric revolution…battery technology investments. EcoMotors is a hedge to reflect the 99% (of the transport sector) that’s not yet electricity…electric vehicle infrastructure is still a challenge.”
SINGING FOR THE WORLD
We finally touch on what Chung calls his “secret identity,” his singing career. A finalist in Hong Kong’s version of American Idol, Chung says he has no regrets about choosing business over a singing career. Although he enjoys “bringing joy” to an audience, he’s very aware that it’s fleeting. Such momentary joy pales in comparison to his goal of having a major societal impact, or as he puts it, “Enabling 5 billion people to live like 1 billion do now.”
Chung plans to continue singing the praises of disruptive cleantech innovation. He’s firmly committed to keeping that cleantech fire burning.
Did you know that buildings account for almost 40 percent of total energy use in the U.S.; almost 40 percent of carbon dioxide emissions; and 12 percent of total water consumption? The climate friendly solution is “green building.”
But what does green building mean? And what is the future of green building? Phil Williams, VP of Webcor Builders sat down with Fresh Dialogues to answer these questions and explain how the venture capital and building sectors work together to deliver innovative green building products – like smart glass – that reduce energy consumption and environmental impact.
Here are some highlights of our conversation (edited for clarity and length):
What is green building?
“The term actually started here in San Francisco in the mid-1990s, and starts with a certification of a building under the LEED standard (Leadership in Energy and Environmental Design), developed by the US Green Building Council. We try to reduce the energy, the water, be responsible in the use of materials and create healthy interior environments.” Phil Williams
Why build green?
“There’s a high probability of climate change due to man’s impact; it’s seen as good business, it’s my energy bill today in terms of what is my overall cost of doing business.” Phil Williams
What should we expect from green building in the future?
It’s like a box of Cheerios…you’ve got some healthy products, you’ve got some less healthy products, some with sugar, some with fat. The consumer can now make a choice. When we didn’t know, the consumers were blind to the health or the energy consumption of a building. The marketplace will determine what happens, but now the information will be available.” Phil Williams
How do new green building products get in the supply chain?
“We work closely with several venture capital firms that are specifically focused in the built environment, and we have a strong engineering background…We can be part of that next breed of product…we have that advantageous viewpoint that we can lend to our clients and we can help those new innovative firms get a foothold in a very competitive industry. Any insight that we can provide benefits everyone.” Phil Williams
Webcor is sponsoring a four part interview series all about Green Building. Check back soon for more details.
Meantime, you can check out other green building interviews and stories by clicking here or on the Green Building Tab above.
“The ad that it was responding to was an ad sponsored by a SuperPAC…sponsored by the Koch brothers… two oil billionaires … and it was an attack particularly on the Solyndra issue but it was really an attack on the whole green energy initiative of the president’s. We’re proud of that initiative…we’re proud that we’re on par to double renewable energy during the course of his first term. He believes very strongly that we need to command the clean energy technology of the future and that as a country we need to be encouraging the development of clean energy technology or we’re going to see that go to other parts of the world.”
Solyndra appears to have become a thorn in the side of Obama. How does he intend to remove the thorn?
“All you can do is be open and candid about it. We knew when made investments in clean energy technology that some would do well and others would not. That’s the nature of this…these are speculative investments. And that’s the reason why they needed some nudging from the government in order to blossom…We’ve seen real growth in solar and wind energy and so these are investments that are paying off for the country. I’m very certain that we’re going to look back at the seeds that were planted during this period and we will say that it has made a big difference for the country in a positive way.”
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What percentage of the program’s investment went to Solyndra?
“There were forty under this specific program, so it was a small percentage of the entire program. It was a program… that was begun under the Bush Administration and we accelerated that program because we do believe that we are in a real competition for the clean energy technology of the future and we as a country have a great interest in developing alternative energy and home grown domestic energy and renewable energy. These were investments that made sense. Some will pay great dividends, others unfortunately will not.”
Note: in a recent report at ClimateProgress, Stephen Lacey confirmed that Solyndra’s loan guarantee amounted to 1.3% of the DoE’s total loan portfolio.
On the importance of clean energy technology
“We have our eye on the future and really encourage and develop renewable sources of energy. It’s good for the planet, it’s good for the economy, it’ll create great jobs…high end manufacturing jobs.”
On the future
“This is going to continue being a thrust for us. We’re not going to back off.”
The interview took place backstage at Foothill College’s Celebrity Forum on January 27, 2012. Check back soon for more with David Axelrod:
On Michelle Obama’s influence on green policy
On The First Lady’s organic garden at the White House
Read transcripts, see photos and check out our ARCHIVES featuring exclusive interviews with Tom Friedman, Paul Krugman, Vinod Khosla and many more green experts and visionaries…
and join the conversation at our Fresh Dialogues Facebook Page
Innovation and Silicon Valley go together like bits and bites. Another month another innovation competition. But Intel’s Global Challenge caught our attention for the breadth and quality of its innovators from around the world, who competed for $100,000 in prize money and the chance to pitch some of the valley’s top venture capitalists at UC Berkeley’s Haas School of Business.
Fresh Dialogues was delighted to see a good number of environmentally conscious innovators made the cut, including PolySol, a recyclable alternative to plastic, made from coconut husks; Nitrate Production System, a low-cost earth-friendly fertilizer and ValleyFeed, a wireless wildfire detection system. These innovative teams came from India, Jordan and Saudi Arabia/Lebanon respectively. Closer to home, NextDrop, a Berkeley based team demonstrated a ground breaking system that uses crowd-sourcing technology to monitor and facilitate efficient water use in India. The venture capital judges agreed and gave NextDrop the Social Innovation Award.
The award winning team includes National Science Foundation Fellow, Emily Kumpel (pictured) who is a PhD candidate in Civil and Environmental Engineering at the University of California at Berkeley. She brings her water management experience in Madagascar and Tanzania to NextDrop’s diverse team who include Ashish Jhina, Thejovardhana Kote, Anu Sridharan, Madhusadhan B, and Ari Almos.
We look forward to following their progress blog as they scale up NextDrop’s project in India.
