Open Letter to 60 Minutes and CBS
On January 5, 2014, CBS’ 60 Minutes aired a segment titled, “The Cleantech Crash” that grossly misrepresented the state of the sustainable energy industry.
At Khosla Ventures, we are focused on finding real solutions for energy independence, rather than just pontificating. The pontificators at 60 Minutes, with their agenda-driven bastardization of news reporting, failed to do the most elementary fact checking and source qualification, as was the case with your Benghazi reporting. No wonder one major media outlet wrote that you have been “widely criticized for leaving out crucial information about the state of the clean tech sector.” Is this the new CBS standard?
The errors in your story are numerous.
Fact: I have not invested over a billion dollars of my own money into cleantech. It is substantially less, and a simple query to us would have corrected this error. We manage a balanced portfolio, and it has not “crashed” nor is it “dead”. In fact, our returns are significantly above the venture capital average.
Fact: Contrary to your assertion, the U.S. Department of Energy (DOE) Loan Guarantee Program has created 55,000 new cleantech jobs.
Fact: The DOE loan program, despite your implications, has a 97% success rate.The former program head, Jonathan Silver, expects it to make money, not be a subsidy.
Fact: There is $51 billion remaining in DOE loan money. The amounts in the CBS report are far from “spent” or allocated. You seem to want to cite big numbers, whether they are true or not!
Fact: A substantial portion of DOE loans is allocated to nuclear energy, not just cleantech segments like biofuels, solar or wind, a fact conveniently left out despite your being aware of it.
Fact: The U.S. spent $502 billion subsidizing fossil fuels in 2011. This is the result of directly lowered prices, tax breaks and failing to properly price carbon’s negative externalities. You ignored the fact that energy is far from being a level playing field. Many other subsidies are hard to account for like MLP partnerships, accelerated depreciation and below-market royalties that are never categorized as fossil fuel subsidies that disadvantage cleantech.
Fact: According to a senior U.S. Navy official, last year alone, $80 billion of taxpayer money was spent patrolling just the oil sea-lanes in the Arabian Gulf. There are many sea-lanes we patrol. Globally and over time, the U.S. has spent $7 trillion patrolling them. Such “protection spending” of U.S. taxpayer dollars for the oil industry is a much larger subsidy than any amount spent to support the cleantech industry, a fact CBS chose to overlook despite my statements on camera. This may be the largest U.S. subsidy in history, and it was purposely ignored because it is inconsistent with your agenda. Cleantech subsidies are a miniscule fraction of one-percent of these amounts.
The Department of Energy said it themselves, “Simply put, 60 Minutes is flat wrong on the facts. The clean energy economy in America is real, and we are increasingly competitive in this rapidly expanding global industry. This is a race we can, must and will win.”
You fundamentally do not understand how innovation works with platitudes like, “for every 10 startups, nine go under”. At Khosla Ventures, we invest in companies that have high failure probabilities, but the wins far outweigh the losses. I clearly explained that we expect 50-percent of our portfolio companies to make money and today, our cleantech portfolio is profitable – yet another fact that was purposely edited out. CBS also chose to air sources who have never looked at the details of a quality venture portfolio.
You falsely implied that our companies have received disproportionate taxpayer money, despite my repeatedly telling you that to the best of our knowledge, a substantial amount of funding (greater than 90%) for our cleantech portfolio has come from private sources. In fact, the former head of the DOE loan program stated publicly that some of the projects cited as failures by CBS never even got loans in the first place. You also failed to note that while Range Fuels took federal loan money, we strongly opposed their decision to do so. Others like Kior and Stion refused loan awards at our recommendation. Repeatedly, your story reinforced the 60 Minutes thesis rather than objectively reporting the facts. It is a disservice to disseminate misleading information on the advances in sustainable energy.
At scale, new technologies must compete with conventional fossil fuels on price and performance – in the U.S., as well as in India and China. Khosla Ventures does not believe in subsidy-dependent markets. Subsidies force innovation into a niche and create dependence on financial incentives that will eventually disappear. I have publicly stated that I am against corn ethanol and wind subsidies, among others, and in favor of reducing solar and biofuel subsidies over time.
There were many opportunities for you to showcase cleantech successes such as the dynamic glass company, View, which you visited as part of your research. Weeks before your program aired, View secured an additional $100 million in private funding to ramp production at its Mississippi-based manufacturing facility, which is creating scores of new American jobs. Other success stories we shared, which you refused to cover, focused on energy storage, solar, engines, agriculture and a number of other areas. Already, the Brookings Institute reports that the clean economy employs over 2.7 million workers despite your implications to the contrary!
New industries are created by entrepreneurs who don’t necessarily have subject matter expertise when they get started, yet they are still responsible for most of the innovation we see in society. We should celebrate these entrepreneurs, not pillory them for fighting entrenched incumbent industries that have political influence and money. Your “experts” pontificate about the hard problem of energy; we heard similar things about the difficulty of telecommunications with trillions invested in infrastructure. Then, the Internet came along, despite the indifference of every major telecommunications carrier, and upended the industry. Did Google know much about media? Or Amazon about commerce? Tesla about cars? SpaceX about rockets? EBay about classifieds? Juniper about telecommunications? What did I know about computing when I started Sun Microsystems?
To get to the energy-independent future we need, we must try and sometimes fail, but the consequence for not trying is guaranteed failure. Even oil prospecting has a greater than 55-percent failure rate, yet we still do it. In the venture industry, we make risky bets all the time because that’s what it takes to innovate.
The future will run on energy. At Khosla Ventures, we are focused on making big bets to ensure a sustainable future even if some of them fail. It is unfortunate that stories like yours employ Benghazi-style reporting standards that overshadow the truth. I will continue to try and make the future happen and, when it does, hopefully someone else will do a better job reporting it.
As Robert F. Kennedy said, “Only those who dare to fail greatly can ever achieve greatly.”
— Vinod Khosla
Read the unabridged version of this letter here.