Subba’s Serendipitous moments

October 28, 2010

Extrapolating the past Vs Inventing the future.

Filed under: Business,Innovation,Leadership,Learning,Perspective,Strategy — Subbaraman Iyer @ 10:41 pm
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Vinod Khosla –a co-founder of Sun Microsystems and its first Chairman is a highly respected Silicon Valley investor as the general partner of Kleiner Perkins. Over the last few years, he has moved away from technology to Energy and Greentech.

Yesterday he delivered an interesting talk at Caltech on Extrapolating the past Vs Inventing the future. The talk was peppered with some brilliant statements, some philosophical musings and scenarios for the future. I found the talk scintillating The entire talk can be viewed here. (The audio quality at the beginning of the session is poor quality, but when Vinod begins his talk, the audio quality is excellent)

Here are some of the excerpts:

Extrapolating the past is ridden with mistakes starting from forecasts:

On why forecasts go wrong (he talks about a number of forecasts that’s gone completely haywire:

Assumptions get embedded in our system. We don’t question our assumptions. Forecasting is about our embedded assumptions not explicitly stated.

On quantitative modeling:

Chasing the false precision, chasing the 3rd order effects

Input the measurable, ignore the immeasurable

Obscured embedded assumptions.

He concludes the section after giving several instances by saying that “The more rapid the change, the less likely are the assumptions to be right”.

On why inventing the future is absolutely critical:

He starts by explaining the Black Swan effect giving several examples and declares that much of what we assume to be true is retrospective predictability. Some great statements that he makes:

Improbable doesn’t equal unimportant and the only thing that’s important is the improbable.

No matter where you look, there’s room for innovation, however unlikely it looks

Bring me the ideas that has a 90% chance of failure!

If you take enough shots at the goal, failure doesn’t matter; it doesn’t exist.

“Imagine the possible”.

His final words in response to a question from the audience sums it all: “The talk is just to give a perspective; but most importantly is to convey an attitude”.

Well said, Sir !


  1. Thank you for referring this interesting piece.

    On Forecasting, Assumptions etc., actually I wrote a wonderful/ seminal paper, “Systems Modelling and Description” published in ACM-Software Engineering Notes, in 1992.

    I have provided a mechanism to do proper classification of assumptions into various categories which give us a better handle on the robustness of the model.

    Comment by Saradhi Motamarri — October 30, 2010 @ 2:20 pm | Reply

  2. That was a wonderful thought provoking session today about failure of forecasting measures and I have been thinking about it. Despite the usage of most sophisticated tools for BI, the vital elements of human psychology are very difficult to capture quantitatively and I believe can only be observed by humans and no analytics would help especially in case of surveys conducted. For instance how do interviews capture certain human gestures like “a sigh of relief” or “a feeling of satisfaction”. Perhaps this falls under the category of “immeasurables” and there are whole lot of them. The need of the hour is to devise mechanisms to effectively measure these “immeasurables” not necessarily by quantifying them. Inherent psychology of quantification is what causes us to convert each response into numbers and ignore the immeasurables.
    The traditional process of extrapolation could soon be displaced by whole lot of radical ideas getting generated and perhaps the emergence of new field!!

    Comment by Amit Kumar — October 31, 2010 @ 6:44 pm | Reply

  3. You seem to be easily impressed! These ideas are some of the foundations of probability theory. Vinod has appropriately highlighted them to an audience “to give a perspective.”

    A book by Scott Patterson, “The Quants”, narrates the real life story of how complex quant modeling developed by really really smart and well-meaning people failed miserably … many times … in the financial world and wreaked havoc all across the globe.

    Comment by Ram Lakshmanan — January 4, 2011 @ 9:21 pm | Reply

    • Thanks Lakshmanan. I just wanted to highlight how some business models and biases that creep into our psyche and even in the best of minds either inadvertently or due to some mental blocks. I haven’t read the book “The Quants” but I have certainly read the book “Fooled by randomness” and it was both enlightening and humbling.

      Comment by Subbaraman Iyer — January 5, 2011 @ 2:15 pm | Reply

  4. I think Goldman’s valuation of Facebook is grossly flawed – ridden with the same false predictive assumptions that Vinod Khosla gave you a heads up on! The Sachs traders are incented to hype securities and sectors in which they take positions, so take it with a grain of salt. They have misled people many times before, and there is no reason to believe that their psychology or intent has changed.

    When the ads do not generate the expected revenues or results, the advertisers will quickly move the dollars out. And Google as an engine has many other capabilities that Facebook does not have and cannot provide. Haven’t we learnt that eyeballs (or footfalls for that matter) per se do not translate to revenue or profits?

    Comment by Ram Lakshmanan — January 5, 2011 @ 10:14 pm | Reply

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