John Doerr: How Will the World Be Different After Your Investment?

The Investment Philosophy of Legendary KPCB Investor John Doerr You may not know him or have read his book, but you have surely heard of Measure What Matters. Its Chinese translation is titled OKR：做最重要的事. ---- John Doerr’s investment methods and characteristics: At the highest level: invest in the future, focusing on a venture’s impact on the world. At the founder and team level: look at the founder’s DNA. In timing: seek companies in stealth. In portfolio management: emphasize network effects. Everyone talks about investing in the future, but not everyone can put it into practice. Many attempts to invest in the future turn into gambling. Is there an element of gambling in Doerr’s approach? Is he merely lucky? Perhaps. He invests very boldly, often backing ventures others do not dare touch. His failure rate is therefore relatively high even within KPCB. Yet repeatedly investing in companies that change the world cannot be explained by luck alone. Doerr often asks entrepreneurs three questions. First: suppose we endorse your idea and invest the amount you want. Can you tell me how the world will be different in two years? If an entrepreneur says, “I will do better than the existing people or companies,” Doerr does not accept that. Existing companies can improve on their own. The industry does not need another duplicate competitor. After Microsoft, everyone building a PC operating system claimed that Windows had shortcomings and that they had solved them. After Google, everyone building search claimed to be better. But whether those claims were true or not, the industry did not need these redundant companies, because the world remained much the same. Second: why isn’t Microsoft doing this? Or Google? Doerr has asked this so often that many entrepreneurs know VCs will ask and have prepared answers. They might say Microsoft is a large company burdened by bureaucracy, so its R&D cannot move as fast as theirs. Or that the opportunity is no longer central to its business model and is beneath its notice, and so on. Entrepreneurs usually elaborate on those two angles. But that is not really what Doerr wants. He is testing whether they have thought things through. Most of the time, young people come up with an idea, find it increasingly convincing, and fall in love with it. Yet large companies have not only considered those ideas but tried them; some failed, and others were abandoned. When students excitedly proposed an idea, Professor Frederick Jelinek would often calmly say that they had tested it at IBM more than ten years earlier and that it did not work because of three factors the students had overlooked. Quickly learning what not to do saved us considerable trial-and-error time and taught us to see the bigger picture. It helped us enormously. Many entrepreneurs complain that VCs do not support their ideas. Perhaps an idea is so new that the VC fails to understand it. In reality, though, most often the entrepreneur has not thought it through, while the VC has seen many similar ideas. Third: if the entrepreneur answers the second question by saying they have greater foresight or newer technology whose value Microsoft or Google has not recognized, or technology those companies have not mastered, Doerr asks: if Microsoft or Google does enter, will it crush you? Where are your barriers to entry? Back in 2003, Google cofounder Sergey Brin wanted to launch a facial-recognition project and invited discussion. Wu Jun said that several years earlier, colleagues around him at AT&T had already been working on it for more than a decade, but could not solve two problems. One was that turning a face sideways by even five degrees made recognition impossible. The second was that different expressions, or even an unshaven face, could prevent recognition. Brin thought this made sense and that he needed to learn more about the technology. After gathering everyone’s views and concerns, he invited leading academic professors from around the world to give presentations, and eventually decided not to proceed. Three years later, he decided to try again and launched the project, which has been very successful as of this account. What changed in those three years? The key was not technological improvement, although technology did improve. More importantly, Google’s relevant data had grown dramatically. That made it possible to accomplish what established laboratories had failed to do for more than a decade, while creating a natural barrier that companies such as IBM and Microsoft would struggle to copy or catch up with. Doerr wants the kind of thinking Brin demonstrated. In 2012, Wu Jun returned to Google wanting to do something Microsoft and other IT companies could not. He eventually chose automated computer answering of complex questions. Why complex questions? Because not only did other companies struggle with them, but academia had failed to solve them for decades. Why might Google succeed? Not because its technology was better or it assigned more people, but because it had the world’s largest volume of data and had already built a very powerful foundation for natural-language processing. Google soon succeeded, while competitors remained unable to catch up. With this question, Doerr hopes to see entrepreneurs approach problems that others have considered but could not solve from a new dimension and a higher vantage point—not claim to have discovered a vast gold mine invisible to everyone else. Even a failed attempt from a new dimension and vantage point contributes to the world. If someone is merely copying or repeating others’ work at lower cost, Doerr will not invest. Doerr rarely judges people solely by success or failure when investing, which is one reason for his high failure rate. Historically, KPCB’s biggest failed investment was Segway, the two-wheeled electric scooter, and Doerr led it. Even the basic model retailed for $6,000. It was unsafe for the rider on roads because it was too slow compared with cars, and unsafe for pedestrians because it was too fast. This high-tech vehicle traveled only 20–30 kilometers on a charge. Most investors and even consumers were skeptical beforehand. Doerr invested anyway, believing that cars were unnecessary for many short trips and that widespread adoption of a small, environmentally friendly vehicle would benefit the world more. At former US Vice President Gore’s urging, Doerr also set up a new-energy investment fund, whose investments proved a complete failure. Gore had long advocated reversing global warming through carbon-emissions reductions and made a highly influential documentary about it. Doerr considered this a genuinely global problem and decided to use capital to address it. He brought Gore to KPCB as an adviser and invested specifically in solar and other new-energy companies, hoping tomorrow’s world could differ from today’s. Given solar power’s limited efficiency, the difficulties of electricity supply and storage, and the environmental issues of manufacturing and disposing of solar panels, whether these projects deserved investment was debatable. Doerr nevertheless pressed ahead without hesitation. He did not want money to be merely a tool for generating more money, but a tool for changing the world. Doerr’s philosophy has influenced many investors. VCs therefore often ask entrepreneurs: if we invest as you hope, how will the world be different? Even a small positive change is worthwhile. ---- #得到 #吳軍矽谷來信 (Dedao; Wu Jun’s Letters from Silicon Valley)