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By Robert Rapier on Jan 29, 2014 with 36 responses

Like Michael Jordan Playing Baseball

What 60 Minutes Got Right

Following the recent 60 Minutes story The Cleantech Crash, Katie Fehrenbacher at Gigaom wrote a very good article called What 60 Minutes got right and wrong in its story on the “cleantech crash”.

In contrast to some who reacted with righteous indignation against the notion of any troubles in the world of cleantech, Katie noted, “60 Minutes got some key things right in the story”, notably that cleantech HAS crashed from a venture capital (VC) perspective.

Cleantech often requires much longer time horizons and higher capital expenditures before a VC has a chance of seeing a return on the investment. And as I have explained in the past, you can’t really afford to have a 10 percent success rate if that entails building 10 capital intensive biofuel plants before achieving success. It’s a very different model than a couple of guys starting an Internet company in their garage. You run out of money pretty quickly when building plants that fail to perform. 

VCs lost a lot of money investing in cleantech before figuring out that the sector didn’t fit the conventional model that had served them so well in Silicon Valley (a point also driven home by Jigar Shah in this article). 60 Minutes could have put together a solid story on just the VC angle. But the criticism of the 60 Minutes story is that they tried to make their conclusions too sweeping; that while there were some good subplots that could have been developed into different stories, tying them all together — while ignoring any positives — and then declaring that cleantech is dead was a bridge too far.

The Vinod Khosla Subplot

Or, if they had only stuck to the role of the most famous cleantech VC of them all, Vinod Khosla, they could have had a solid story.

I could see after the story aired that Khosla was the main reason they brought me in. After all, I have been a critic of his for years. In the wake of the story, many people have asked why I have been so critical of Mr. Khosla. Let me explain.

For fans of Khosla, he is the guy putting down his money to make the world a better place. He represents everything that we should be doing to advance renewable energy, so he is to be praised, not criticized.

Many of Khosla’s critics would paint a different picture; one of someone who naively and arrogantly believed that the real problem in the energy business was that it lacked Silicon Valley know-how. Because of his previous success in Silicon Valley, he was afforded instant credibility by some members of Congress. He was called to testify on which energy policies we should have in place, and he influenced our energy policy at the highest levels of government. He helped create an atmosphere that ultimately seriously damaged the credibility of cleantech.

There are elements of truth in both narratives. I do believe Khosla wants to make the world a better place, and he has wagered (and lost) a lot of his own money (as well as mine and yours). But his claims helped generate unrealistic advanced biofuels mandates, and encouraged an atmosphere where entrepreneurs were forced to make increasingly unrealistic claims of what they could deliver in order to secure funding. Thus, the $1/gallon fuel that the politicians and the public were promised never materialized, and the advanced biofuel sector lost credibility for repeatedly failing to deliver on wild promises.

Khosla Criticisms

One of my first criticisms of Khosla’s approach was in 2006 when I wrote Vinod Khosla Debunked. He had been writing editorials left and right, testifying before Congress, and giving speeches about what needed to be done to win a war on oil. I took exception to some of his claims, and began to criticize them.

Vinod called me at home twice to discuss my criticisms, and we exchanged a number of emails on the topic. We even discussed writing a white paper together. I became convinced that he was sincerely trying to do something positive for the environment, but I strongly disagreed with his tactics, which I was sure would ultimately backfire (as they did). We were at an impasse on several points.

We talked about the measure of success. He said that his primary objective wasn’t to make money (although that is necessary to drive investment), but rather to make a real impact in the energy markets. Paraphrasing, he said that he was very concerned about the threat of climate change, and that he wanted to provide affordable, low-carbon fuels on a big scale. Thus, his metric of success was whether he actually became competitive, at scale, so he could have an impact on carbon dioxide emissions. (For more background on “success” in cleantech, see Thiel vs. Khosla on Cleantech: Who is Right?)

For Khosla, the end has always justified the means. Exaggeration is OK in his book. Repeating rumors in a public forum to smear an opponent is fine. He criticizes those who criticize him, just as he did in the 60 Minutes piece. For example:

Lesley Stahl: What about this criticism that what it takes to be successful in Silicon Valley does not translate into the energy business? It’s such a completely different field.

Vinod Khosla: That’s fair criticism. But I am learning. And I am trying. [RR: So far, so good. But here comes classic Vinod Khosla]. And they’re sitting there doing nothing. They’re being the nay-sayers, the pundits who say why it can’t be done. But they won’t try. Now, sure we’ve done lots of things that failed in energy. But every time, we learned. Picked ourselves up and tried something new.

Instead of explaining what he has learned and talking about his mistakes, he chastises those who would criticize him as do-nothing naysayers. These people do not have the right to criticize him, because, you know, he has actually accomplished stuff. (Here is my CV in case he needs to be reminded that I have actually done a few things). And sometimes pundits say “it can’t be done” because they understand the laws of physics and chemistry. It isn’t necessarily because they lack his vision.

Failure is a Virtue – Just Ask Michael Jordan

Two quotes are prominently featured on the homepage of Khosla Ventures:

“Our willingness to fail gives us the ability and opportunity to succeed where others may fear to tread.”

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. Twenty six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” —Michael Jordan

Khosla likes to portray failure as a virtue, sometimes citing Michael Jordan or Babe Ruth and the shots they missed and the times they struck out. They failed, you see, because they tried. But they also succeeded on a grand scale because they were fearless.

I can think of a more appropriate analogy than Michael Jordan’s basketball success. Everyone knows that Michael Jordan was one of the greatest basketball players in NBA history. But one season, Jordan decided to take his game to the baseball diamond.

Now there’s nothing wrong with Jordan trying something new. He was pursuing a dream. I am sure his presence in the minor league sold lots of tickets. But he was playing the wrong game for his skill set, and after a mediocre season in the minors, he went back to the NBA. Vinod Khosla in the energy sector has been akin to Michael Jordan the baseball player. He struck out because he was out of his element. If a baseball team had been built around his skill set, it would have failed miserably.

Although I hear both men can dunk, one difference between Michael Jordan and Vinod Khosla is that Jordan didn’t go into baseball with the belief that he could revolutionize the game with his superior talent. Khosla has embraced this notion that he is a visionary cleantech pioneer (the 60 Minutes story called him the “father of the Cleantech revolution”), but he hasn’t owned his failures.

Failure because of ineffective due diligence — which is the case with several Vinod Khosla ventures — is not a virtue. Yes, Babe Ruth did strike out a lot, but it wasn’t because he failed to locate the batter’s box.

A Sampling of Misses

People who knew the energy business knew Khosla was way out of his depth when he wrote “My Big Biofuels Bet” in 2006. He talked about old technologies as if they were new, and cited a (nonexistent) Moore’s Law for biofuels that promised to make biofuels more abundant, more efficient, and more affordable. In that article he wrote positively about:

  • E3 Biofuels (went bankrupt)
  • Kergy (became Range Fuels, went bankrupt)
  • LS9 (recently sold to Renewable Energy Group for ~$15 million in cash plus ~$25 million in newly issued stock and additional considerations after $75 million in public funding rounds was raised; still not commercially viable)
  • Greenfuel Technologies (raised $70 million, won many awards, ran out of money and shut down)
  • Mascoma (withdrew an IPO due to weak financials)
  • Celunol (became Verenium and was headed toward bankruptcy before assets were bought by BP, which later scrapped plans to commercialize)

Note that not all of these were Khosla companies, but these were companies that he felt had real potential. Now, more than 7 years after he wrote that article, it is clear that he wasn’t a very good judge of potential.

When Khosla talked up his companies, journalists wrote gushing articles, and generally failed to ask critical questions. As his companies began to fail, Khosla of course said he expects to fail, but he also tried to distance himself from them, downplay his role, and even say “We tried to tell them to do it differently.”

With Range Fuels, he later claimed that he tried to convince them to change to a fermentation process, but they wouldn’t listen. That’s sort of like telling a toy manufacturer that they should switch to making pharmaceuticals — very different processes. If you want to make pharmaceuticals, invest in a pharmaceutical company. And his latest claim regarding Range Fuels — and the first time I heard him say this was in response to the 60 Minutes piece — is that he urged them not to accept federal money (at the same time he was testifying to Congress about the need to fund these sorts of ventures). So it’s not his fault tax dollars were thrown away.

He did the same thing with Cello Energy, a company he backed that was later determined by a jury to be a fraud. After the court ruled against Cello, Khosla downplayed his investment as: “a relatively small amount”, “a non-equity relationship”, “blind insurance”, “a tiny amount.” Court documents showed that Khosla believed in the technology, and thought the investment would pay off. But the court record also showed very shoddy due diligence. The resulting failure is one you have when you are Michael Jordan playing baseball. (See my article Setting the Record Straight on Cello Energy and E3 Biofuels).

Neither Range Fuels nor Cello Energy exist today, and neither ever produced any qualifying fuel for sale despite spending a lot of money to do so. But the vast majority of the EPA’s 2010 advanced biofuel mandate of 100 million gallons was to come from these two companies based on what they claimed they could do. (The mandate was put in place by Congress, but final volumes were determined by the EPA). So the EPA gave us fantasy-based advanced biofuel targets, and escalated them from there. Khosla was attracted to companies that made outrageous claims, but he was unable to separate hype from reality. He then went out and repeated the hype, and the media uncritically lapped it up.

60 Minutes could have spent the entire segment just comparing Vinod Khosla’s claims to what his companies have delivered. Calera, another of his portfolio companies, is another example. Khosla once claimed coal power could be cleaner than solar power, calling Calera the “only viable solution to carbon sequestration, worth more than GE’s power plant business.” But there were some very basic problems with the chemistry of what the company claimed. The company’s claims were challenged in many places, including on my own site. After the initial CEO was replaced, the new CEO admitted that their fundamental assumptions about the process had been flawed. Now let his claim soak in for a minute: He thought the company could be “worth more than GE’s power plant business.” As with other Khosla’s energy ventures, Khosla invested, repeated the hype, and the company failed to deliver.

There is No Downside

Khosla’s style is to create a mystique around a company, but he fails to disclose any negatives associated with it. His pitches always sound too good to be true. Again, from his interview with Lesley Stahl:

Vinod Khosla: Nature takes a million years to produce our crude oil. KiOR can produce it in seconds.

Vinod Khosla: And we take that, add this magic catalyst-

Lesley Stahl: This is the secret sauce?

Vinod Khosla: Yeah…

Lesley Stahl: You make it sound almost – sorry – too good to be true. There must be a downside.

Vinod Khosla: There is no downside.

And that’s Vinod Khosla in a nutshell. His catalysts are “magic”, somehow cheating the laws of chemistry and physics. “There is no downside.” Yet there is a downside, it’s just that you won’t hear it from Khosla. But investors in his biofuel companies have learned the hard way.

Beyond my issue that some of Khosla’s early investments were overhyped, took tax dollars on the basis of that hype, and then failed (thus my claim that taxpayers funded his learning curve), I have a real concern when someone promotes advanced biofuels as “easy.” They are not. They are quite challenging to produce economically, for reasons that are well-understood. But when you run around claiming that they are easy and that there is no downside, you do a disservice to everyone who is working to bring them to fruition. Your “cheap and easy technology” may divert funding from approaches that have more merit. After all, why would someone invest in something that’s challenging, when your approach is a piece of cake with no downside? And then when you fail, not only did you perhaps prevent someone more deserving from being funded, the hit to the industry’s credibility means you may prevent future entrepreneurs from being funded.

Conclusions

A book could be written on Khosla’s cleantech missteps. Maybe some day one will be. Although his more recent biofuel IPOs have tanked, as a taxpayer this practice of raising funds via private investors is OK by me. I won’t criticize those failures (although I may advise investors to avoid the companies). I agree that failure is a normal part of trying new things, so don’t confuse my criticism of Khosla as criticism of failure. It is more akin to a criticism of misleading people, which then damages credibility of an entire sector.

It was Khosla’s decision to make a high-profile entrance into the energy arena, and that comes with some responsibilities. 60 Minutes could have held his feet to the fire. But by presenting the story that they did, 60 Minutes allowed him to wrap himself in righteous indignation. He fired off an open letter to 60 Minutes, and then later said he was “amazed” that they would ignore his criticisms.

In his open letter, he ironically wrote “The pontificators at 60 Minutes failed to do the most elementary fact checking and source qualification.” That’s sort of been the problem with so many of his schemes, like Range Fuels and Calera: Ineffective elementary fact-checking, followed by failure to deliver after he hypes a technology.

Khosla has come a long way since his early days in the energy sector, and is now usually more cautious with his claims. The challenges of the energy business are much clearer to him now (he is getting up the learning curve), but it took taxpayer money and some damage to the credibility of an emerging industry for him to get there. I don’t give him a free pass for that.

I am glad he is investing in the sector, but have long-wished he would trade in his style of promising the moon for one that is more sober in its assessment of the challenges. Claims like “No downside” are self-serving, untrue, and ultimately destroy credibility.

Lest you think I am a lone voice with an ax to grind, I can assure you that there are many people in the sector that feel Vinod Khosla has done more harm than good. But to paraphrase a great man, I am willing to write where others fear to tread. I am inspired by Michael Jordan, taking the shot (at Vinod Khosla) that others fear to take.

Link to Original Article: Like Michael Jordan Playing Baseball

By Robert Rapier. You can find me on TwitterLinkedIn, or Facebook.

  1. By voetsak on January 29, 2014 at 1:47 pm

    Robert an excellent piece. I would go a little further on Vinod Khosla. He and his team simply did not understand basic thermodynamics. He wanted to make more money and be famous. He did not set out to fake the whole story but the story was not sound from a second law point of view. Michael Jordan had some skill in baseball not munch skill but some skill. Vinod had absolutely zero degrees Kelvin or Rankine skill in thermo, I am also not so sure of his two home runs Sun and Juniper. Sun was a bust in the end and Juniper is an also ran Look at the stock prices when Vinod sold versus where the stocks ended or are now.

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    • By Crouching Tiger on February 3, 2014 at 11:35 am

      Voetsak,

      I agree Robert did a good job on this piece, but sorry I can not agree some of comments you made to VK. Sure, Vinod is not an expert on thermodynamics, Kelvin or Rankine temperature scale. So what?!!!

      Do you know how many years of education Thomas Edison had? 3 months! Do you know if Edison was good on math? No, he was especially poor in trigonometry, that’s why he failed to understand the AC current and transformer, ended up electrified horses.

      But that does not matter, it does not change the fact that had more than one thousand patents, and more importantly he invented light bulb!

      Taken the same token, George W. Bush was a school dropped off and Donald Rumsfeld does not know how to shoot a riffle, but you can not deny that together they waged a “successful” war in Iraq and Afghanistan!!!!!! How many tax payer dollars (and lives) have been lost????

      The only real fault Vinod should be blamed for (along with all the bad personal traits and the way he handle the press) is the fact he failed to see the shale oil and gas boom the US is experiencing right now.

      But again, I am really amazed by this crowd, who often criticize much more grievously to others’ misjudgement than their own. For all of the Peyton Manning fans out there, could any of you foresee the terrible defeat the Broncos has endure for last night’s game???

      Nooooo, this is how our un-bias press is describing the situation this morning:
      “……the one Manning came back from neck surgery to engineer, collapsed in spectacular fashion……”
      If you switch Manning with Khosla, there probably a totally different tone of voice to describe the similar kind of failure. The funny thing is VK has never hide his low “success” rate, I doubt that will make any real difference.

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      • By voetsak on February 3, 2014 at 12:15 pm

        CT good comments but that does not mean that a guy can violate the laws of thermo. Edison did not even try. As for the Broncos they were outplayed but at least they came to the field with a chance. Vinod came with Cello, Range, Kior and Calera without a hope as they all were playing against the second law of thermo that is inviolable. No wonder in the playing field of thermo it was shut out. At least Payton scored a few points

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        • By Crouching Tiger on February 3, 2014 at 10:24 pm

          voetsak, well said. But don’t forget, KiOR also made a few gallons of renewable fuels and posted on EPA’s website last year.
          Cheers,
          CT

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          • By voetsak on February 3, 2014 at 11:04 pm

            CT if someone gave me $225 million of CAPEX and a pile of wood chips as well as another $370 million (retained losses at year end) to lose, I too could have made 900,000 gallons of bio oil. My data also show that it is likely that the process used a chunk of natural gas to achieve the remarkable results of 20 to 22 gals of oil per bone dry ton of wood in Q4. Add all the electricity, wood and natural gas and the thermal efficiency of the charade there in Columbus is less than 10%. OK $595 million gone and we have 900,000 gals of bio oil. My data also show the cost of catalyst alone in the neighborhood of $8 a gallon. Thermo says soot and CO2 will be the products KIOR mostly makes. CT I am kind of interested to know if CT celebrates Chinese New Year and whether the year of the Horse will be the year KIOR is put to sleep. They shoot horses don’t they? Any way moving away from the year of the Horse to the year of the Dog (2006) That was when BioEcon was founded. CT can you tell me why the founder who was with BioEcon left and then solds tons of shares? CT can you tell us why the CFO quit? CT can you tell us why Condi Rice in no longer a memeber of the board. CT can you please tell me how much natural gas and electricity was needed to produce the 900,000 gals of bio oil and then I can tell you if Fred Cannon is still hyping the company when he told the EPA today in his long response that his team will reduce carbon emission by over 80% with his alchemic wonder. I bet the nat gas bill for the 4th qurter was far more than the revenues for the 4th quarter. I bet the electric power bill for the 4th quarter was more than the revenues. Maybe they should just take the pine and make electric chairs. Vinod can then claim he is being green. Musk has his electric cars and Vinod can have his electric chairs. CT I assume the Crouching Tiger does have a Chinese connection so Kung Hei Fat Choy. For Vinod I say Gone Are The Pines and the same with the $595 million. I probably could have made a listing on the EPA’s website by simply giving Gina McCarthy a call and asking her to give me an honorable mention for obeying the laws of thermo. Gina is another work of art but that is a matter for another day.

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            • By Crouching Tiger on February 3, 2014 at 11:54 pm

              Vwaoit-a-seknd,

              You seem to know a lot of KiOR commercial plant in Columbus, but I don’t. Only one request — if you are so good on figuring out the dollars and cents KiOR was using to make a few barrel of gasoline and diesel, could you give me a good count on:

              MIT’s first vacuum computer built in sometime ago. Did a quick WiKi on, here is a rough discription (will search more if needed):

              ……ENIAC contained 17,468 vacuum tubes, 7,200 crystal diodes, 1,500 relays, 70,000 ….. editors, The First Computers: History and Architectures, 2000, MIT Press, ……
              I can not see an Tablet PC on my palm, which is equivalent of a supercomputer used in military at that time.
              (Gee, how much electricity those Vacuum Tubes gonna consume? And how could they be sustainable? Oh, how many dollars they burnt? How could they make any money????)
              CT

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            • By voetsak on February 4, 2014 at 10:18 am

              CT it looks like you need some explanation of thermo as you know very little about C-H bonds. Ever since the dawn of time the C-H bond has had the same amount of energy and changing the line width on an integrated circuit has absolutely no effect on the energy in a C-H bond. In twenty million years time the alchemy KIOR practices will still be alchemy and the yields will be the same that is if some fool in twenty million years time is as much of a thermo neophyte as Vinod to try this stupid experiment. In twenty million years time if some fool and his dumb government fund another plant like the one in Columbus the results will still be the same. Lots of soot and CO2 and very little Bio Oil. What may be different in 20 million years time is that all the pine trees will be gone, humans may be gone, the DOE and the EPA will be gone but the dumb idea of making bio oil from pine trees and having a an IPO that fooled folks like you will still be a failure. In the year of the horse we have to think about horse power and I suggest you get off of your high horse on Kior and start understanding thermo. The integrated circuit with a line width of 20 nanometers and 10 million gates and the vacuum tube are not the analogy to BTU’s in versus BTUs out. The analogy is the BTU’s in the biomass the horse eats versus the BTUs in the horse poop coming out. CT did you study any chemistry? or is this all still a mystery to you?

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            • By Crouching Tiger on February 5, 2014 at 12:09 am

              Hi veotsak,

              We don’t need to loose cool, be civil. I am just a wild tiger, how could I know anything like thermo? No way. OK, let me pretend to explain, give you my 2 cents.

              First thing first, you seem to be too much obsessed with the first thermo and 2nd thermo laws. From the tiger humble opinion, the first law might be stated as “MC2″ can neither be created nor destroyed, can only be shoveled from one place to the other place. Based on this tiger rule – all your energy production industry is against the natural law, therefore, any time you mention something like producing energy in any form other than god’s creation – basically is – either you don’t know what you are talking about; or you are a big liar!
              What you are talking about next seems to be heat and material balance, has nothing to do with the 2nd thermo. Okay, too late to me.

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            • By voetsak on February 5, 2014 at 12:33 am

              Hi CT the MC2 story is actually quite good except for Vinod and his team where MC2 stood for Make Cash Squared. The energy production industry is not mine but basically can produce natural gas with a profit for $5 per mmbtu. Your MC2 make cash squared alchemy produced 900,000 gallons of bio oil for $600 million or a cost of $5,333 per mmbtu. The Make Cash Squared team at KIOR were 1,000 times as expensive as the shale gas boys. To call me a liar or to say I don’t know what I am talking about is just another way for CT to hide the fact that he is heavily invested in KIOR and CT stands for Crying Trader who lost his money on the alchemy. CT maybe you are even a very big invester in KIOR and sit on the Board of Directors now that CR (Condi Rice) has resigned. CT I bet you are in tight with KIOR. KIOR will write the fourth law of thermo hat essentially states that as KIOR approaches absolute zero in $ per share the people in Columbus will have lots of pine logs and an many broken dreams and the entropy and mess in Columbus will approach a ever increasing maximum. CT I have a feeling you have a lot invested in KIOR am I right. I have no position in KIOR and do not intend to take any position ever not even the crouching position.

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            • By voetsak on February 5, 2014 at 5:26 pm

              Hey CT your Reply to BC on Methanol looks like you have studied chemistry. At the next BOD meeting of KIOR (I assume you are a big shareholder) tell them to take all the nat gas they use and make methanol or maybe just compress the nat gas an run CNG vehicles. As for all of the FCC and the HT they can shut that down and just make wood chips and sell these to folks who have buck stoves for heating

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        • By Forrest on February 4, 2014 at 5:30 pm

          Not my expertise, but the theoretical yield of corn ethanol often discussed as a target to compare commercial process to. Conversion efficiency of C5 and C6 sugar also a measure. Utilization of co-products or improving quality of these products important measure of economic viability of process yet has little concern within H&T calculations. Gasification technology often utilizes steam within process to increase hydrogen disassociation an important contributor to fuel values. This chemical process found to occur within wood combustion as well. Power plants had experimented with wood fuel dryness and found optimum heat value from green wood if within correct process parameters. May this Kior process have such an extra energy bump?

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          • By voetsak on February 5, 2014 at 12:10 am

            Forrest the KIOR process is rapid pyrolysis using a catalyst but in the absence of air. Not gasification. KIOR had hoped their catalyst would yied more bio oil and less char, coke and CO2 but alas thermo wants C or CO2 as end products not CH2 n times in an oil with some oxygen that has to removed in the hydrotreater. The hydrotreater at KIOR probably derived its hydrogen from nat gas. This is never mentioned by Vinod and his team of alchemists. My guess t what is happening is a lot of the catalysts is coked and then rendered in active hence the catalyst cost of $8 to $10 a gallon for catalysts only. This is really difficult chemistry and had they simply burned the wood to raise steam and make power it probably could have been 30% efficient but they are about 8% to 10% efficient and have a lot of ruined expensive catalyst as well. CT claims he knows nothing and is all about ICs and tubes but maybe he can pipe in that KIOR is a catalyzed pyrolysis technology.
            see this link
            http://www.biofuelstp.eu/bio-oil.html

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      • By Forrest on February 3, 2014 at 3:58 pm

        My personal experience of thermal dynamics per oldest brother whom lived for TD. He was a top grad at UW Madison with advance degree. He really did believe all professionals within energy management should be equipped with similar training. He was also a prof and hired as consultant. He could do all the math, but woefully inept in inventing any “new” technology. This field of study seems to lock mindset into the impossibility of advancement. For, example upon evaluating the IC engine this guy would point out the generations of R&D and huge capital expenditures. Only minimal improvements could possibly be made! But, guess the TD guy didn’t count on improvements in material science, combustion technology, DI technology, low friction engineering, computer control, computer engineering, digital control of machinery, variable valve control, hybrids, mini-hybrids, turbo power, shutting off engine, pulse and glide cruise control, EGR reducing horsepower, ten speed transmissions, etc. The R&D doesn’t start or end with therm analysis….it’s just a tool among many. The math can tell you typical power conversions of engines, btu of fuel, and attempt an approximation of hp and conversion efficiency. But, all of must be tested real world. Was reading an article on ethanol mid level blends and testing. They were thermal guys who realized they underestimated some element of formula and upon real bench testing was surprised at efficiencies of E30 fuel. The attributes of the ethanol max out current engine efficiency at this blend. An engine designed for E30 suffered no loss of fuel consumption as compared to straight gasoline. Also, this blend had the lowest pollution stream…they predict this is the fuel for next generation engine. BTW, the key word is success in Iraq, whereupon were losing lives and the war upon current regime guidance. Wonder why the soldiers suffer so much depression? Rules of engagement and aloof CIC.

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      • By Robert Rapier on February 3, 2014 at 11:29 pm

        “If you switch Manning with Khosla, there probably a totally different tone of voice to describe the similar kind of failure.”

        Ah, but Manning didn’t guarantee a Superbowl win. If he had, people would judge him differently. Khosla has been guaranteeing a Superbowl victory for 10 years. He has done it over and over with one company after another. And his arrogance and contempt for his competition makes it hard to cheer for him.

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  2. By CarbonBridge on January 29, 2014 at 5:05 pm

    RR: A wonderful, well-written article. And I’m glad that you don’t fear Vinod nor his attorneys and have repeatedly ‘self-checked’ for liable.

    I totally agree with you that Vinod and his hype ahead of several key bankruptcy failures continue hurting the credibility of the Biofuels sector of domestic CleanTech.

    This man who does not possess enough chemistry experience to interpret the difference between a tarry-version Gasifier and Steam Reformation front-ends OR superheated steam vs: genetically-modified biobugs such as E. coli used as back-end process drivers — is totally out of his league in this still-emerging alternative fuel sector. Perhaps he should go back to discerning the difference between bits and bytes in Silicon Valley instead of pursuing CO2 issues within the cement industry. I assume that he would be astounded to learn that sequestered CO2 can substitute for corn starch as carbonaceous feedstock for particular fuel synthesis.

    You didn’t mention any resulting private lawsuits which have been kept under wraps from most of the public nor the fact that this man hid his $37M purchase of private Martins Beach before locking out Californians who used to have access to this piece of pristine, hidden Pacific Coastline. Why would Vinod bury his private ownership of California beachfront via Legal Eagles and Holding Companies? Citizens and Surfers near San Francisco, CA, have filed lawsuits — while Vinod invites selected rich guests to a $32,500 per plate private dinner in his own home last Fall with President Obama. This type of aristocratic big-shot activity doesn’t align himself with the 99%.

    What continues to bother me years downstream is the fact that Range Fuels was repeatedly hyped to produce ‘lignocellulosic ethanol’ and that is where this firm’s DOE and USDA grants and loan guarantees came from. Yet at the exact same time, Range’s Minnesota patent attorney was busy filing 32 USA patent applications on various aspects of ‘higher mixed alcohols GTL synthesis’ which is absolutely the opposite of what lignocellulosic ethanol actually is. In my opinion, specific elements this multi-year saga known as the Range Fuels Fiasco were outright lies to the public as well as government funding agencies.

    My advice to Vinod is “stick with what you know” in the world of computers and electronics. Retire from the U.S. energy sector’s liquid fuel business as you are hurting others by your “No Down Side” hype and continued exploits. My tax dollars also went down the toilet via your government-assisted escapades.

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  3. By Eric on January 29, 2014 at 6:40 pm

    Hey Robert,

    Don’t forget how Vinod bought the the Range Fuels facility that the US taxpayer invested $65M in … for $5.1M. Apparently no one bothered to ask if Vinod had a spare five million to spend on Range Fuels – why he let the plant go into bankruptcy in the first place.

    http://www.theblaze.com/stories/2012/01/05/failed-georgia-based-ethanol-plant-sold-taxpayers-lose-millions/

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  4. By Robert Rapier on January 29, 2014 at 8:36 pm

    This is how he thought it was all going to play out. He was going to take down ExxonMobil, and here was his proof. Quoting from Statement of Vinod Khosla to Committee on Finance hearing on “Grains, Cane, and Automobiles: Tax Incentives for Alternative Fuels and Vehicles.”

    “For those of you who don’t believe this is possible, there are many precedents for massive change. In 1982 when I started Sun Microsystems, I was told that one could not compete against IBM, Digital Equipment Corporation, Data General, Burroughs, Control Data and other stalwarts of the computer business. Most of them are now gone and a few have adjusted, humbled by the seemingly “toyish” microprocessor. In 1996 I got in a room with the CEO’s of nine major US media companies, including the Washington Post, New York Times, Knight-Ridder, Tribune, Cox, Times-Mirror and others and tried to explain how the internet would disrupt their business models, and little companies like Yahoo, Ebay, Google and others would be a threat. Today Google is worth as much as all of them combined.”

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  5. By Russ Finley on January 29, 2014 at 10:23 pm

    In Pinker’s book “The Better Angels of Our Nature:” he does a good job arguing that pretty much everyone means well. To say that someone “means well” is therefore a moot point. The results of our actions are all that matter.

    Certainly, the baseball analogy is a fitting one.

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  6. By Forrest on January 30, 2014 at 8:16 am

    Press hype of R& D potential always brushed to tantalizing. Start-up Companies want as much positive buzz they can achieve to attract VC and government financing. Investors will hype their picks to promote interests. What’s new? The nation was tired of War and blamed much on petrol interests. We tired of economy damaging costs spikes within the petrol supply chain. Remember the condemnation for gutting the Carter’s Ethanol investment and how Brazil was acting prudently and now benefited from their long term investment? Bush spiked interest and kick started interest of alternative fuel per State of Union speech with speculation of plentiful switch grass fuel. Soon, politics made alternative energy a keystone of political platform, hiking public investments, expectations, and regulations. The country was soon floating in easy free public money for the taking. Dr. Steven Chu was presented as authority to pick best technology. Internet was full of easy solutions and soon to propagate cheap energy solutions. This was all jacked up a magnitude per the parallel and intertwining warning of CO2 global destruction. Khosla riding the popular wave and reaped popularity by reflecting to cheering public what they wanted to hear. The first warning of successful investors is not to fall in love with investments. I only disagreement with Roberts article as it’s putting to much responsibility for bad decision making per country upon shoulders of Vinod. We should hold the fire to feet of those in charge of public money period. The buck stops upon those elected!

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    • By Robert Rapier on January 30, 2014 at 10:26 am

      “I only disagreement with Roberts article as it’s putting to much responsibility for bad decision making per country upon shoulders of Vinod.”

      I view him as sort of the index case of a viral outbreak, which led to numerous companies making unsupportable claims and getting funded on that basis. He ushered in an era of funding biofuel ventures that weren’t grounded in reality.

      And no, our elected officials shouldn’t have been taken in. They should have never invited him up to pontificate on what kind of energy policies that country needs. Was he an expert in the field? No, he was a novice, so why ask him what we need to do? It was asking for trouble.

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      • By Forrest on January 30, 2014 at 2:55 pm

        Khosla had shallow experience within V.C. business, as well. This business extremely difficult and risk laden, but if one has amazing abilities, much money to be made. It’s a job critical to countries job retention and formation. So, Mitt gets blasted for 15 years of success at running Bain Capital, because of the callousness of business. The country turned away from such bare knuckle business practices, instead giving all a chance, if promoting the ideals. Al Gore a top advisers per his political experience, business contacts, and ability to excite the environmentalist. Appears Khosla had a lot of that magic as well. Politician are incompetent upon the energy sector, they listened to Vinod because of this. Politician expertise opposite from the talent to make good venture capital investment decisions. They didn’t know enough to ask the tough questions nor who to ask. The most successful, know enough to surround themselves with talent and they know enough to trust those with experience. Not to assume that it’s easy, that industry/business is just an act of greed.

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  7. By Benjamin Cole on January 30, 2014 at 9:45 pm

    Excellent blogging.

    Another downside to the fascination with biofuels—that fascination seems to have closed off a reasonable look at methanol. A company named Methanex converts natural gas to methanol for a sale price of $1.90 a gallon. That’s now, in the marketplace. No government subsidies (that I know of), no fancy promises. It is not a pipe dream.

    I agree with RR. Never criticize an effort, and even failed efforts generate knowledge. To know that something has limits is valuable information.

    Hopefully, the USA can move away from its biofuel focus (ethanol) and towards better options, perhaps just free markets and the price signal. Simply taxing gasoline more heavily at the pump might be a good idea.

    I continue to think lithium batteries will improve, and at some point become a compelling technology. Luxury PHEVs (not the mid-range Volt) strike me as ripe for batteries that allow a 100 mile range. No stopping at smelly gasoline stations.

    I see a cleaner and more-prosperous future, if we can have even mediocre government.

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    • By Crouching Tiger on February 3, 2014 at 11:09 pm

      I actually think this could be the new direction for the whole sector to follow. Methanol Synthesis is a marture technology, invented in 1920 by BASF (high pressure process), re-invented by ICI in 1950′s (low pressure, economics is much better). Combining with the newly available abundant shale gas (NG boom we are experiencing now), the economics could work in it’s favor. The only short-coming is the fact it’s still a fossil fuel, but probably a good choice for the interim (who worries about global warming anyway?). Only need to SMR + MeOH Syn (oh, SMR can be subs with POX, ATR, all the goodies…… ) a simple way to do non-FT GTL. Lurgi, Davy, Topsoe, they all have their own technologies. Another drawback is its capital cost, relative high.
      Ben, do you know where this $1.9 per gallon number come from? I am interested in. Thx,
      CT

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    • By William McDill on February 9, 2014 at 3:21 pm

      Not only can methanol provide low cost, liquid energy, the North Slope oil fields also contain TCF of natural gas which, if converted to methanol could be shipped to the (already built and under-used, Alyaska pipe line). Instead the NG is pumped back into the ground (boosting oil production). Eventually, however, the North Slope fields will be exhausted and the NG will be forgotten.

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  8. By Jigar Shah on January 31, 2014 at 8:23 am

    Well said Robert. As you pointed out earlier, I have been very public with my criticisms of Vinod’s approach. In solar he really thinks that unless solar is cheaper than “old coal” we are a failure because that is the standard for India. I have no idea why he old trusts his gut. I would love to help him through this thought process, but alas he is committed to his own learning curve.

    On a positive note, Khosla Impact seems to be focused on business model and financial innovation over technology innovation. He is learning.

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    • By Robert Rapier on January 31, 2014 at 10:38 am

      Thanks for commenting Jigar. I respect what you do a lot, and recognize that you have been a voice of reason. I have been consistent for a decade in my belief that it would be solar that would make the really big impact over time, and that it could benefit from a Moore’s Law-type of effect. You have been instrumental in making that a reality.

      My issue with Khosla has always been that if one keeps promising the moon and delivering a handful of rocks, pretty soon people sour on the sector in general. Advanced biofuels have taken an unnecessary beating that could have been avoided if we had just been honest about the challenges.

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  9. By ben on February 1, 2014 at 12:13 pm

    Oh, Oh, Rapier is at it again. There he goes picking on billionaires who are intent of leveraging a little of his money, a good deal more of other investors’ dough, and, my goodness, yes, a rather big slug of the taxpayer funds wherever available. hey, it’s all in the name of advancing R&D for the benefit of energy security (quick, get me the American flag!), job creation (where are they?) and major contributions to environmental protection and Global Climate Change (could you get me a warmer sweater:)

    There is much that could be written here. Oh, yes, there really is quite a story that will eventually be told by someone with the brains and guts to tell it like Sergeant Friday. Until that full-telling, we can look to trouble-makers like RR and even Ms.
    Fehrenbacher (but she is so much better looking than Rapier!) who are willing to point out when the emperor has no clothes. That, to my humble mind, is a valuable public service even if it sort of irritates that a billionarire should have to withstand such indignities after making all that money the old-fashion way: leveraging the the public treasury and other people’s money. Ah, but that’s they great thing about having investment-banker friends out in the SF Bay area. Perhaps, in pressing the baseball analogy a bit further, Silicon Valley has sort of become the principal farm team for the crew on Wall Street. Hmm, then again, it may be the other way around in due course. We certainly know some folks overlooking the Pacific who rely on the synergy.

    Thanks for exercising those First Amendment rights. You never know what might eventually flow in their wake.

    Ben

    BTW, we have friends in Boston who know Terry Francona (Jordan’s minor league manager) and he offered “the curve ball was Jordan’s Achilles” and other than that “he made remarkable progress in a single season of pro ball.”)

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    • By Robert Rapier on February 1, 2014 at 12:24 pm

      “we can look to trouble-makers like RR and even Ms. Fehrenbacher (but she is so much better looking than Rapier!)”

      I will concede that this is an accurate statement.

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  10. By Usedtobe Fishfry on February 8, 2014 at 2:43 pm

    “When Khosla talked up his companies, journalists wrote gushing articles, and generally failed to ask critical questions.” And when have tech journalists ever done THAT before?

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    • By Robert Rapier on February 8, 2014 at 3:01 pm

      Wasn’t just tech journalists though. It was the mainstream media — New York Times, Fortune, Scientific American.

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      • By Jonathan Koomey on February 9, 2014 at 11:55 am

        Alas, this is a problem with journalism in our technological age. It is ill equipped to deal with complicated topics, for reasons that I explore in my recent post “Separating Fact from Fiction”: http://www.koomey.com/post/75494794096

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  11. By ecr on February 8, 2014 at 4:22 pm

    Robert, excellent article and wonderful point by point tenacity in making a highly coherent case. Your rebutting of Vinod’s fallacious point that critics are on the sidelines doing nothing is highly meaningful.

    The view here is that the case against Khosla is far, far worse. Not only did he act as Michael Jordan leaving basketball for baseball where he had no skill, the overwhelming statistical probability is that America’s best path to getting beyond oil is exactly in the electronic space that Khosla abandoned. Here’s the case:

    Dr. Steven Chu misled Obama to believe he’d nail a battery for EVs. So Chu and Khosla have

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    • By william on February 9, 2014 at 3:26 pm

      As an unintended side effect, Road Electric would enable automatic driving.

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      • By ecr on February 10, 2014 at 8:48 am

        William,

        It’s possible that In Road Electric would emerge as a key enabler to automatic driving. Three items:

        1) Airplanes have duplicate safety systems. Given the very legitimate concerns on self-driving cars, wouldn’t duplicate systems also make sense?

        2) As a practical political reality, states (which own the roads) are getting shortchanged on road taxes. The burden is too high, as the gas tax was not indexed to inflation. In Road Electric is an easy way to move to a per-mile driven tax. Getting states involved matters…

        3) The rise of automated driving is now threatened by liability rules, with attorneys pursuing modest amounts in wrecks due to driver error, but vast sums for product liability charges. State policy requiring regulated, duplicate systems that must provide net lives saved and crash reductions (with class action lawsuits availed in case of broad statistical failure) is the sensible response that benefits the public.

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  12. By Walt on February 20, 2014 at 8:03 am

    Robert, great article. You should update your resume. Some of us in the space of converting biomass or natural gas to fuels often get criticized by those heavily funded companies…whether they be in Silicon Valley, Arizona or Houston. It is one thing to build something from scratch and boot strap it vs. those who have $200+ million in cash to bring a technology to market…as you know. I hope you will give our new video some coverage when we release it next month. The last one you took down when I offended you, and hopefully this one will be worthy of a positive note. We don’t have the deep pockets that some new technology companies have behind them, but I really hope our new video will demonstrate that some are making progress even in the face of some who would rather steal it rather than fund it. This new 3-4 minute video will be the first of a planned 45 minute documentary on those who want technology, but refuse to pay for it if they can reverse engineer it with dozens of the brightest PhD engineers.

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  13. By TimC on March 20, 2014 at 10:51 am

    News update, KiOR’s latest 10k filing said, “We have substantial doubts about our ability to continue as a going concern. To continue as a going concern, we must secure additional capital to provide us with additional liquidity.” Their operations are burning about $5 million a month, which apparently is real money even to a billionaire. So I guess when Khosla told 60 Minutes “There is no downside” he was not talking about the stock price, which is now about sixty-five cents and falling. Seems strange, since KiOR previously told us their biocrude would be competitive with oil at $65/bbl. WTI has hardly dropped below $90/bbl the whole time the Columbus plant has been running, so why aren’t they making truckloads of money?

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