Billionaire venture capitalist Vinod Khosla is defending his firm’s decision to double down on OpenAI, even as the AI industry faces what he describes as a “hype cycle.” Khosla Ventures was OpenAI’s first investor when the company transitioned to a “capped-profit” model in 2018, and the firm has now reinvested in OpenAI’s latest funding round that raised $6.6 billion at a $157 billion valuation.
While notable early investors like Sequoia Capital chose not to participate in this round, Khosla remains bullish on OpenAI’s prospects. “There’s plenty of companies in the public markets that have higher revenue multiples with much lower growth than OpenAI,” the 69-year-old investor stated, predicting “very, very rapid growth” ahead.
Khosla dismissed concerns about high-profile departures from OpenAI, including former CTO Mira Murati and founding team members Ilya Sutskever, Andrej Karpathy, and John Schulman. He attributed the exits to individuals wanting to start their own ventures and described the changes as organizational rationalization for “agility and speed.” Khosla emphasized his and CEO Sam Altman’s shared commitment to velocity, suggesting competitors lack the same pace.
Interestingly, while OpenAI has reportedly asked investors not to back five competitor companies including Sutskever’s Safe Superintelligence, Khosla said he would be open to backing OpenAI alumni startups “if the plan was good.”
On AI’s broader impact, Khosla is combating what he calls AI’s “PR problem,” arguing that “Luddites” are spreading too much doom and gloom. In a recent 10,000-word essay, he outlined AI’s potential societal benefits, from reducing crime to eliminating menial labor. Khosla predicts that over the next 25 years, AI will replace 80% of the work in 80% of jobs, from doctors to salespeople. “Most jobs today are not jobs, they’re servitude,” he argued, advocating for freeing humans from repetitive work “as long as we take care of their needs.”
Khosla also weighed in on social media, criticizing Elon Musk’s X (formerly Twitter) for becoming “like 4Chan” and a haven for extremism, despite crediting Musk for advancing electric vehicles and climate change efforts.
Key Quotes
There’s plenty of companies in the public markets that have higher revenue multiples with much lower growth than OpenAI. It appears likely we will continue to have very, very rapid growth.
Vinod Khosla defended OpenAI’s $157 billion valuation, arguing that the company’s growth trajectory justifies the price tag compared to publicly traded companies with similar or higher revenue multiples but slower growth rates.
Most jobs today are not jobs, they’re servitude. You work on a farm in a hundred-degree heat for eight hours a day your whole life, or you work on the GM assembly line doing the same assembly job for eight hours a day for 30 or 40 years.
Khosla articulated his controversial view on labor, suggesting that AI-driven job displacement could be beneficial by freeing humans from repetitive, physically demanding work, provided society addresses workers’ needs.
I think a number of people who left recently really want to start something of their own, but the organization is also being rationalized for agility and speed. Sam [Altman] is a big fan of speed. I’m a big fan of speed.
Addressing concerns about high-profile departures from OpenAI, Khosla downplayed the significance of the exits, framing them as both entrepreneurial ambition and necessary organizational streamlining for competitive advantage.
It definitely has a PR problem. People are afraid of it.
Khosla acknowledged that AI faces public perception challenges, with fear and skepticism overshadowing potential benefits in public discourse, prompting him to publish a lengthy essay advocating for AI’s societal upside.
Our Take
Khosla’s doubling down on OpenAI reveals the stark divide between Silicon Valley’s techno-optimists and broader public sentiment. His dismissal of executive departures as inconsequential may be premature—losing founding team members and a CTO simultaneously typically signals deeper organizational or strategic tensions. The 80% job displacement prediction, while attention-grabbing, lacks nuance about implementation timelines, regulatory barriers, and social resistance.
Most telling is the tension between OpenAI’s competitive restrictions and Khosla’s openness to backing alumni startups, suggesting investors recognize that AI talent is increasingly mobile and that the next breakthrough could come from anywhere. The comparison to the dot-com era’s “hype cycle” is apt, but history shows that even during bubbles, picking winners is extraordinarily difficult. Khosla’s track record gives him credibility, but his framing of manual labor as mere “servitude” reveals a disconnect from the complex relationship people have with work, identity, and purpose.
Why This Matters
This story illuminates critical tensions within the AI investment landscape as the industry navigates between genuine innovation and speculative excess. Khosla’s unwavering support for OpenAI, despite executive departures and a frothy market, signals continued confidence from sophisticated investors in the company’s long-term prospects. His willingness to defend a $157 billion valuation suggests that leading VCs believe we’re still in the early innings of AI’s commercial potential.
The prediction that AI will transform 80% of jobs within 25 years represents one of the most aggressive timelines from a major investor, raising urgent questions about workforce displacement, retraining, and social safety nets. Khosla’s framing of many jobs as “servitude” reflects a techno-optimist view that may underestimate the dignity and purpose people derive from work, regardless of its nature.
The executive exodus from OpenAI and investor restrictions on backing competitors reveal growing competitive dynamics in the AI space, with talent increasingly willing to strike out independently. How OpenAI manages this brain drain while maintaining its technological edge will be crucial to justifying its valuation and market position.
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Source: https://www.businessinsider.com/openai-vinod-khosla-fixing-ai-image-2024-10