Consider the subtitle for this entry "Disagree with Vinod Khosla at your own risk." Khosla, in case you're not aware, is a titan of Silicon Valley (he cofounded Sun Microsystems) and one of the most influential venture capitalists in the world. In particular, he's a dedicated proponent of green business, working less from a moral standpoint than from the intellectual conviction that there's a lot of money to be made in alternative energy sources in the coming years. So as I take issue here with some of his recent public comments, it's with the acknowledgement that he's likely to play an important role in the solution to our current fossil-fuel woes.
His problematic comments come from the interview quoted in this VentureBeat item:
Vinod Khosla: Hybrid-electric cars won’t make a difference
You have to pay $5,000 more on a Prius in order to save half a ton of carbon a year, which is more than most consumers will go for, he explained. Buying hybrids “is mostly about personal guilt trips.” It’s like wealthy investors giving money to “art museums instead of to starving people” in Africa, he said.
“Are electric cars going to make a difference any time soon? No. Are they going to be material? No. If something costs $2,000 more, nobody buys it.” He said these cars are likely to get a one percentage point market penetration. [...]
Khosla also singled out wind power, saying it is in the same camp as electric cars. Utilities are dabbling in the sector, using wind for between one and two percent of their grid capacity. “But they think of it as a tax,” Khosla says.
Let's work from back to front here:
● Is it better for utilities to dabble in wind power, or not? The answer: it's better. Period. High-wind areas like West Texas represent an attractive place to build wind farms, as the recent spate of wind project development there -- by giant banks and utilities, no less -- makes clear. Austin Energy's residential and commercial ratepayers have consistently bought up every available watt of wind energy that the utility has been able to provide. And even that's small potatoes compared to the wind boom in Denmark, which derives one-fifth of its electricity from wind power. Demand for wind power is there, and not just at the margins. So even if other sources like solar or cellulosic ethanol draw more interest, that's no reason to scorn wind power.
● One percentage point of market penetration for cars equals a huge economic opportunity for car makers, simply because the automobile market is so vast. As Khosla well knows from his work with high-tech startups, converting one percent of a huge consumer market into a new market niche that your company can exploit -- it's a huge opportunity, and one well worth pursuing. Surely Khosla doesn't think that Toyota -- not just the biggest and best-run car company in the world, but maybe the best large manufacturing company of any type -- is wrong-headed to step up its production of Priuses?
● Khosla might be right about guilt trips, but so what? Sure, on a moral level, I wish that more rich people would channel their donations toward Partners in Health rather than the local art museum. But is that to say that art is bad, or that no one should donate to support the arts? That argument is a non-starter. Besides that, if someone gets in the habit of steering their purchases in an environmental direction, is that a bad thing? I will love it if the Prius serves as a beneficial "gateway drug" toward more deep-down forms of environmentalism.
● There are plenty -- plenty -- of well-to-do folks in the United States and other rich countries who happen to have that extra $5,000 to spend and who might be convinced to pay it to save that extra half-ton of carbon each year. For a lot of Americans, an extra five grand isn't much when you amortize it across a 36- or 48- or 60-month note. So let them. In an ideal world, we'd stop buying new cars altogether so we could stop burning the fossil fuels that go into making them. But in the real world, we keep making and buying new cars. Lots of folks pay a substantial markup for luxury SUVs, whose high profit margins have been the cash cow of the automotive industry for the past decade. Why not convince them to pay a modest markup for the superior technology in a hybrid-engine car?
Put it another way: setting aside market percentages, is it better in an absolute sense for someone to buy a new Prius or a new Escalade? The answer is obvious, and it's not even close -- the Prius wins hands-down. And if it's a drop in the bucket, so what? It's a useful drop in the bucket.
Which leads me to the short version for all of this: If it helps, it helps. Or, to put it colloquially: Don't be hatin' on the 2 percent solutions, Mr. Khosla. Given the environmental challenges facing the world, We need every iota of better solutions that we can muster.
Tim Walker blogs about business at hooversbiz.com.