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Shomik Dutta on Climate Tech Investments · Masters in Business

0:02
Speaker 1: This is Master's in Business with very Rid Holds on
0:06
Speaker 1: Bloomberg Radio.
0:09
Speaker 2: This week on the podcast, I have an extra special guest,
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Speaker 2: show Meek Data, co founder and managing partner at Overture
0:16
Speaker 2: Climate VC, focuses on all sorts of fascinating startup and
0:23
Speaker 2: climate change technology, from concrete to energy production, to storage,
0:28
Speaker 2: to carbon capture, to material science to well turning the fuels.
0:33
Speaker 2: This is really a fascinating discussion about some of the
0:37
Speaker 2: latest greatest technology that's going to help the world get
0:41
Speaker 2: to a carbon neutral status and maybe even a carbon
0:45
Speaker 2: negative status to roll back the impact of two hundred
0:49
Speaker 2: and fifty years of burning fossil fuels. I found this
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Speaker 2: conversation to be absolutely fascinating, not just because show Meek
0:59
Speaker 2: has a little bit of a political background and had
1:02
Speaker 2: worked in both of Obama's campaign where he was frequently
1:08
Speaker 2: fired by the soon to be president but still managed
1:12
Speaker 2: to maintain his job, but because of his deep and
1:15
Speaker 2: broad knowledge of the technologies behind climate change. He said,
1:21
Speaker 2: this isn't a green investment so much as a money
1:25
Speaker 2: making economic investment, and if you're not paying attention, you're
1:28
Speaker 2: going to miss the opportunity. With no further ado, my
1:32
Speaker 2: conversation with Overture Climate VCS show mc dadda.
1:36
Speaker 1: Erry, thanks for having me.
1:38
Speaker 2: So, what was the original plan? Was it politics or finance?
1:41
Speaker 2: Where were you thinking of going?
1:43
Speaker 1: It was always politics. I grew up a political junkie,
1:46
Speaker 1: worked on Senate races and governor's races, and had the
1:50
Speaker 1: really good fortune of linking up with Barack Obama in
1:52
Speaker 1: two thousand and seven. I was one of the early
1:54
Speaker 1: staffers on that campaign, and it ended up obviously being
1:57
Speaker 1: this incredible rocket ship'll kind of start up in his
1:59
Speaker 1: own right, And it was that experience that convinced me
2:02
Speaker 1: that it's really possible to do big, daring, hard things.
2:05
Speaker 1: Watching the president sort of go from a US senator
2:08
Speaker 1: who's still paying off his law school loans to stepping
2:10
Speaker 1: into the most important job in the world was an
2:12
Speaker 1: inspiring and crazy experience.
2:14
Speaker 2: What did you do for the campaign in eight and
2:16
Speaker 2: then what'd you do in twenty twelve?
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Speaker 1: I was his fundraiser, so I oversaw the mid Atlantic states,
2:20
Speaker 1: about nine states. I was twenty four years old, cocky
2:23
Speaker 1: and a little bit insane. I'd read a lot of
2:25
Speaker 1: books about rom and Manuel, so I thought you were
2:26
Speaker 1: supposed to swear at people and yell and push hard,
2:29
Speaker 1: which I did and proud to say that we outraised
2:32
Speaker 1: Hillary Clinton from the very first day that I joined.
2:34
Speaker 1: I turned down an offer from Hillary Clinton at the time,
2:37
Speaker 1: which you know, my father's a risk averse immigrant, so
2:41
Speaker 1: his two pieces of advice to me were to work
2:42
Speaker 1: at Lehman Brothers from investment banking, good call, and to
2:45
Speaker 1: work for Hillary Clinton, not Barack Obama. But those are
2:47
Speaker 1: the only two things I've ignored his advice on.
2:49
Speaker 2: And your dad's O for two.
2:52
Speaker 1: My dad's one thousand for one thousand and two.
2:54
Speaker 2: But that's great. So how did you go from working
3:00
Speaker 2: in the campaign to working at both the White House
3:03
Speaker 2: and the FCCI.
3:05
Speaker 1: You know, you could say a lot of it was
3:06
Speaker 1: political nepotism. Candidly, I was a you know, coffee boy.
3:09
Speaker 1: I was Greg Craig, the White House Counsel's special assistant,
3:12
Speaker 1: and as puffed up and important as I thought I
3:14
Speaker 1: was on the campaign, when it turns to governing, it
3:16
Speaker 1: turns out you need some specialization. So I quickly realized
3:19
Speaker 1: that I didn't have a sort of path to being
3:21
Speaker 1: the National Security Council Advisor at any point. So I,
3:24
Speaker 1: you know, after serving coffee for about a year working
3:26
Speaker 1: on a Supreme Court nomination, shifted to go work for Julius,
3:29
Speaker 1: who is the FCC chairman. And that's when I realized
3:31
Speaker 1: that a lot of the smartest guys in the room
3:32
Speaker 1: are actually in business more often than not, and got
3:36
Speaker 1: really interested in shifting my career that that direction.
3:39
Speaker 2: So someone interested in doing work in politics, how do
3:43
Speaker 2: you get a foot in the door?
3:45
Speaker 1: You know, it really starts with picking a campaign. And
3:48
Speaker 1: a campaign is like a lot like a startup, with's
3:50
Speaker 1: a really flat organization. You have to raise an unbelievablemount
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Speaker 1: of money and spend it in a short period of time,
3:56
Speaker 1: and you have this discrete objective that everyone's nailed towards.
3:59
Speaker 1: And so for a young there's no better experience than
4:02
Speaker 1: working on a campaign, where if you can get something done,
4:05
Speaker 1: there is a job for you. And so that's where
4:07
Speaker 1: I really cut my teeth, working on campaigns, getting stuff done.
4:11
Speaker 1: And you know, no better boss than Obama.
4:13
Speaker 2: So venture capitalists are notorious for having this really in
4:18
Speaker 2: depth network of high performing, plugged in people. How similar
4:24
Speaker 2: is that to what takes place in the world of
4:27
Speaker 2: political networking.
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Speaker 1: It's fine. I heard doug Ley Owne, the founder of
4:31
Speaker 1: the managing partner at Sequoia, have this great phrasing, there's
4:33
Speaker 1: many paths to heaven, And it seems in venture capital
4:36
Speaker 1: there are many paths to heaven. Right. You can have
4:39
Speaker 1: a really well networked media executive, as was Mike Moritz
4:42
Speaker 1: at the time. You can have drilled down operators who
4:45
Speaker 1: have run businesses. There are many different ways venture capitalists
4:48
Speaker 1: can add value. And it was my observation in climate
4:51
Speaker 1: investing that there were no venture capitalists that deeply understand
4:54
Speaker 1: government and regulatory risk, despite the fact that the government's
4:57
Speaker 1: playing this central casting role in the energy transition. And
5:00
Speaker 1: so I thought this might be a pathway to heaven
5:02
Speaker 1: for us, observing Tusk Ventures in New York doing this
5:05
Speaker 1: quite successfully for coinbase and draft Kings and Uber. I
5:09
Speaker 1: just don't really care about sports betting, but I really
5:11
Speaker 1: thought that I could add value to these startups as
5:13
Speaker 1: a venture capitalist that deeply understood government, and so that
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Speaker 1: was my path to heaven.
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Speaker 2: So you grow up in Chicago, you moved to DC
5:20
Speaker 2: after college. Was it for a political campaign or was
5:23
Speaker 2: it just a coincidence? Hey, this local business seems pretty
5:27
Speaker 2: pretty fascinating.
5:28
Speaker 1: No, explicitly for campaigns, and so, you know, moved around
5:31
Speaker 1: zip codes in a lot of sort of post industrial
5:33
Speaker 1: wasteland places. I lived in Baltimore working for Martin O'Malley's
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Speaker 1: first governor's race. I lived in Rhode Island working for
5:39
Speaker 1: a Senate race, and then in two thousand and seven
5:41
Speaker 1: got recruited into Obama and that's when I moved to DC.
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Speaker 2: Huh, so your campaign staff during Obama's re election campaign?
5:49
Speaker 2: What were you doing with the Biden administration when they
5:53
Speaker 2: were running in twenty sixteen.
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Speaker 1: I built an impact venture fund that you referenced called
5:58
Speaker 1: Higher Ground Labs. It was our others that you know,
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Speaker 1: Trump had benefited from a lot of new technology, and
6:04
Speaker 1: Democrats were still campaigning with number two pencils and spreadsheets.
6:08
Speaker 2: Now, let me ask you. That's I'm gonna interrupt you
6:10
Speaker 2: right there, because I very vividly recall reading a Wired
6:15
Speaker 2: piece from Wired magazine about how cutting edge the Obama
6:22
Speaker 2: campaign was with iterative changes and a B testing and
6:27
Speaker 2: they just were raising more money, faster for more people.
6:30
Speaker 2: You're telling me by twenty sixteen that's already out of
6:33
Speaker 2: date and fallen way behind.
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Speaker 1: You're exactly right, it's exactly the insight that actually led
6:38
Speaker 1: us to start Higher Ground Labs. Campaigns are like big
6:41
Speaker 1: startups and you raise a billion dollars, as was the
6:43
Speaker 1: case with Obama, you build cutting edge technology, and after
6:47
Speaker 1: election day, the lights go off, everybody leaves, the email
6:51
Speaker 1: addresses go off, and you start anew in four years.
6:53
Speaker 1: As though none of that mattered, and there was no longitudinal,
6:56
Speaker 1: inherent inheritance of learnings and data and technology. And so
7:00
Speaker 1: we wanted to build for profits startups that could build
7:03
Speaker 1: longitudinally compounding innovation and standing as free standing entities that
7:07
Speaker 1: could be even profitable for investors so that we could
7:09
Speaker 1: raise more capital for them. And so we did that.
7:11
Speaker 1: We built companies like Mobilized, which ended up shifting all
7:13
Speaker 1: of the volunteer action in the Democratic Party, sold to
7:16
Speaker 1: an Insight backed the private equity fund insights backed company,
7:20
Speaker 1: and so things like that can both compound returns for
7:22
Speaker 1: investors but also compound innovation to the party, so you
7:24
Speaker 1: don't have to start from zero every four years.
7:27
Speaker 2: So on your LinkedIn, I see you got an NBA
7:30
Speaker 2: from Wharton around the same time as the election. Please
7:33
Speaker 2: don't tell me you would do both at once.
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Speaker 1: I did both. It is not recommended. It was a
7:38
Speaker 1: lot of pounds and gray hair. But you know, my
7:42
Speaker 1: deal with my dad, who came to this country with
7:44
Speaker 1: you know, a big dream, came his country about two
7:47
Speaker 1: hundred bucks in his pocket. He worked as a security
7:50
Speaker 1: guard at Harvard Business Schools and attended Harvard Business School
7:53
Speaker 1: at the same time. You know, there's that line Obama
7:55
Speaker 1: has that every son wants to be live up to
7:57
Speaker 1: his father's expectations or to be something as father is not.
8:00
Speaker 1: It definitely fell in the first category. And so my
8:02
Speaker 1: dad would always point out, like, look, I came to
8:04
Speaker 1: this country with two hundred bucks, and he ultimately became
8:06
Speaker 1: the president of the United Airlines and it was like
8:07
Speaker 1: an incredible career.
8:08
Speaker 2: And so your dad was president of the United Airlines.
8:11
Speaker 2: He was as an immigrant who arrived essentially with a
8:14
Speaker 2: handful of monops.
8:16
Speaker 1: With working as a security guard at night at HBS,
8:19
Speaker 1: and so you know, those were big shoes to fill.
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Speaker 1: And the thing that I always took away from him
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Speaker 1: was that, look, the thing that inspired him about building
8:25
Speaker 1: big businesses and running them was not power. It was
8:28
Speaker 1: not money, though the money is nice. It's the ability
8:31
Speaker 1: to just help so many people he said, like his
8:33
Speaker 1: heroes were always people that could provide a lot of jobs,
8:35
Speaker 1: businessmen and businesswomen that can provide jobs. And so it
8:38
Speaker 1: was that narrative that was always in my head and
8:41
Speaker 1: the need to sort of live up to his big
8:42
Speaker 1: expectations at something to business school.
8:44
Speaker 2: Huh really really interesting? So what'd you study at Wharton?
8:48
Speaker 2: And is any of that appleable to what you do now?
8:52
Speaker 1: You know, thankfully there was no great disclosure at Wharton.
8:54
Speaker 1: I can't tell you very much of what I don't
8:55
Speaker 1: think any NBA can really tell you what they learned.
8:58
Speaker 1: But what I took away from it was an amazing
8:59
Speaker 1: network in some signaling value to say, hey, maybe this
9:02
Speaker 1: guy has half a brain for business, which I'm not
9:04
Speaker 1: even sure is true today.
9:06
Speaker 2: Really really interesting. So you have a quote I really like.
9:09
Speaker 2: You said you felt much closer to Governor Martin O'Malley
9:14
Speaker 2: than he felt towards me. Isn't that true? How it
9:18
Speaker 2: is in all campaigns everybody is looking and sponsoring and
9:24
Speaker 2: loving the candidate, but they have to distribuliviate their affection
9:29
Speaker 2: to millions of supporters.
9:31
Speaker 1: Yeah, you know, there's there's a right and wrong reason
9:34
Speaker 1: to get involved in politics. One of the wrong reasons
9:36
Speaker 1: I think that a lot of people end up doing
9:38
Speaker 1: is that it's a pathway to being closer to power.
9:41
Speaker 1: And I observed it, you know, probably succumbed to some
9:44
Speaker 1: of it myself. But it's the wrong reason to be
9:47
Speaker 1: doing the work. And so I was, you know, kind
9:49
Speaker 1: of making fun of myself for that, but yeah, you're right.
9:51
Speaker 1: You know, these campaigns, you end up liking a lot
9:53
Speaker 1: of hours with these folks. You know, I was. I
9:54
Speaker 1: was Obama's call time manager and fundraiser.
9:57
Speaker 2: You're again, you're anticipating my next question. How much time
10:00
Speaker 2: time did you spend with Obama? And did you not
10:03
Speaker 2: feel the love reciprocated or because he seems to be
10:06
Speaker 2: kind of an unusual guy in politics.
10:10
Speaker 1: A little more removed, a little more ascetic and monkish.
10:13
Speaker 1: You know, yeah, I think he tried to fire me
10:15
Speaker 1: a few times for being too aggressive in fundraising from
10:17
Speaker 1: his friends.
10:18
Speaker 2: But oh really, I'll just say, you know, wait, you were,
10:21
Speaker 2: you were? Obama said, Hey, that dutt a guy. Can
10:25
Speaker 2: we lose him?
10:25
Speaker 1: This guy at least at least twice. Though, My favorite
10:28
Speaker 1: moment was in the Dungeons of two thousand and seven
10:31
Speaker 1: when you know, doldrums of two thousand and seven. We
10:33
Speaker 1: were forty points down to Hillary Clinton and I was
10:36
Speaker 1: still producing multimillion dollar fund raising outcomes for him. And
10:39
Speaker 1: so one time we dropped him off at the you know,
10:42
Speaker 1: he'd start event saying, who do I have to apologize
10:44
Speaker 1: to in here for you, Shamik, and I'd be like
10:45
Speaker 1: that guy, that guy, that guy. So we dropped him
10:47
Speaker 1: back at his apartment and he doubled back to the
10:49
Speaker 1: car and he said, Shimik, keep doing what you're doing.
10:52
Speaker 1: I'll keep apologizing. It's worth it. And it was like
10:54
Speaker 1: the highlight of my career.
10:55
Speaker 2: Is that your Obama is that as good as a guest?
10:57
Speaker 2: WHOA how are you? I can't help but notice that
11:02
Speaker 2: President Obama was probably the first president to take a
11:08
Speaker 2: very strong stance on climate change. How much of your
11:12
Speaker 2: work with the Obama campaign inspired you to start investing
11:16
Speaker 2: in the space.
11:18
Speaker 1: I think the experience from the Obama world was that everybody,
11:22
Speaker 1: you know, there's this big, great Bill Gates line, that
11:24
Speaker 1: everybody underestimates what they can do in ten years and
11:27
Speaker 1: overestimates what they can do in one year, and taking
11:29
Speaker 1: a long term path to doing something really big and
11:32
Speaker 1: grinding on it for a long time can produce extraordinary outcomes.
11:35
Speaker 1: You know, the president was the architect of the Paris Accords,
11:39
Speaker 1: which is the framework that the IPCC now uses to
11:42
Speaker 1: ensure that the world is driving to a net zero future,
11:44
Speaker 1: and so there is a you know, the sparkle I
11:47
Speaker 1: take away from the Obama days was a challenge from him,
11:49
Speaker 1: which is that we should do big things, and if
11:51
Speaker 1: you focus and execute every day for a long period
11:53
Speaker 1: of time, most people probably underestimate what they can accomplish.
11:56
Speaker 2: So we just kind of wrapped up the Climate Accords.
12:01
Speaker 2: Surprisingly in the Middle East, sponsored by a big oil
12:05
Speaker 2: producing nation. How do you look at those events? Are
12:08
Speaker 2: these just photo ops or does something substantial come out
12:11
Speaker 2: of them?
12:12
Speaker 1: I think there was a great deal of heart palpitation
12:17
Speaker 1: about this COP in part because, as you correctly note,
12:19
Speaker 1: the head of the largest oil and gas company in
12:22
Speaker 1: Abu Dhabi was the same man in charge of the COP.
12:25
Speaker 1: And yet all one hundred and eighty countries left with
12:28
Speaker 1: a firm commitment to decarbonize and to transition away from
12:33
Speaker 1: fossil fuels and oil and gas, with an emphatic agreement
12:41
Speaker 1: around that big daring idea that's the first time this
12:43
Speaker 1: has ever come out of a cop and I think
12:45
Speaker 1: the US government's leadership in this, particularly on methane, is
12:49
Speaker 1: going to start reverberating through the market in a really
12:51
Speaker 1: positive way.
12:52
Speaker 2: So I've been reading a bunch of stuff on mething lately.
12:55
Speaker 2: Not only is it a notorious noxious waste that contribute
12:59
Speaker 2: to the greenhouse effect and all sorts of other issues.
13:03
Speaker 2: We just burn off tons of it in flares. Another thing.
13:07
Speaker 2: Not too long ago, Sixty Minutes had a episode where
13:11
Speaker 2: they showed a company was essentially capturing that flare, using
13:16
Speaker 2: it to generate electrical power and running data service centers
13:22
Speaker 2: right there on the oil field.
13:23
Speaker 1: Called Crusoe Energy. I'm actually an investor in that company.
13:26
Speaker 2: Tell us a little bit about that.
13:27
Speaker 1: That's quite fascinating, you know, the two the twin problems.
13:31
Speaker 1: We're going to realize in the near future that we'll
13:34
Speaker 1: have these stranded energy assets that are often leaking methane.
13:37
Speaker 1: We have oil and gas wells that have sustained casing
13:39
Speaker 1: pressure that are bubbling methane. We need to seal those
13:42
Speaker 1: wells permanently or make use of the methane because the
13:45
Speaker 1: methane has a great deal of economic value. The second
13:48
Speaker 1: challenge we have is that our next generation compute is
13:50
Speaker 1: going to be incredibly electricity intensive, far more than what
13:54
Speaker 1: we experienced today, and so data centers are going to
13:56
Speaker 1: become opex pain points for a lot of companies. And
14:00
Speaker 1: what CRUSO wants to do is resolve those two challenges.
14:02
Speaker 1: Take strained energy assets, utilize that energy creatively, and also
14:06
Speaker 1: ensure that we can decarbonize data centers, which are increasingly
14:09
Speaker 1: a large pain point in emissions. There's another company to
14:12
Speaker 1: mention we invested in recently called bio Squeeze, which has
14:15
Speaker 1: invented a new way of permanently sealing oil and gas wells.
14:18
Speaker 1: Some of these operators, like Halliburton, are spending millions of
14:21
Speaker 1: dollars sealing and resealing oil and gas wells with no success.
14:25
Speaker 1: And so these guys have invented a biomineralization technology that
14:28
Speaker 1: is stronger than cement, that can shoot into these wells
14:31
Speaker 1: and permanently seal them, which may one day even replace
14:34
Speaker 1: cement in all infrastructure one day, is what we hope.
14:37
Speaker 1: There's some exciting things happening around methane.
14:39
Speaker 2: So this year's cop Conference of Parties about Climate change
14:44
Speaker 2: ends up with governments making a number of commitments and
14:48
Speaker 2: a lot of nonprofits joining in in those commitments to
14:52
Speaker 2: get towards a carbon neutral But it kind of raises
14:55
Speaker 2: the question is that as effective as what you do
14:59
Speaker 2: in entire terms of venture capital and startups that are
15:03
Speaker 2: looking to in the private sector combat climate change for profit.
15:10
Speaker 1: It's all required. Every single aspect of society will be
15:14
Speaker 1: impacted by climate change, and so every single aspect of
15:17
Speaker 1: society has something to contribute, and every asset class of capital,
15:22
Speaker 1: from private equity to growth to debt, will have to
15:25
Speaker 1: play a role. The reason governments are so centrally important
15:29
Speaker 1: is that it's not enough for us to look at
15:32
Speaker 1: business pain points caused by climate of which there are many,
15:35
Speaker 1: by the way, supply chain disruption, extreme weather events. But
15:39
Speaker 1: you also need to start creating sticks at the same
15:42
Speaker 1: time to push fossil fuels off a cliff. And so
15:44
Speaker 1: I'm encouraged by the fact, for example, that internal combustion
15:47
Speaker 1: engine vehicles will be banned all together in the state
15:49
Speaker 1: of California in ten years. Similarly, France has banned all
15:53
Speaker 1: internal combustion flights within its own borders in the next
15:56
Speaker 1: ten years, and so these sticks are also important to
15:59
Speaker 1: intersect with the care that help new technologies mature fast
16:02
Speaker 1: enough to replace them, and there will be a fundamental
16:05
Speaker 1: rewiring of the economy that takes place as a result.
16:08
Speaker 1: When you think of every single aspect of industry, steel making,
16:11
Speaker 1: fertilizer that you know, ten trillion dollars of ebidel will
16:14
Speaker 1: be at stake in this turnover, and so there's an
16:17
Speaker 1: enormous prize for those that can innovate quickly and help decarbonize.
16:20
Speaker 2: You mentioned the company that seals up well heads. Bloomberg
16:24
Speaker 2: had an article not too long ago about what a
16:27
Speaker 2: massive carbon footprint concrete manufacturing has. Tell us a little
16:33
Speaker 2: bit about that technology that theoretically you might replace concrete
16:38
Speaker 2: in the future.
16:39
Speaker 1: You know, one of the central insights here is that
16:42
Speaker 1: industrial heat is the key input to manufacturing just about anything.
16:47
Speaker 1: If you think about steel making from iron, if you
16:49
Speaker 1: think about concrete, if you think about a lot of
16:52
Speaker 1: food and ethanol methanol production, all of it requires in
16:56
Speaker 1: the United States alone, one hundred and forty billion dollars
16:59
Speaker 1: worth of industrial heat, almost all of which comes from
17:02
Speaker 1: natural gas or coal. And to get really high temperatures
17:05
Speaker 1: from that heat, is sometimes difficult, and so there are
17:08
Speaker 1: breakthrough technologies. We're excited about one called Antra in particular,
17:12
Speaker 1: financed by Bill Gates and Chris Sokka and by Overture,
17:15
Speaker 1: and these three Stanford PhDs have figured out a way
17:18
Speaker 1: to take grid connected renewable electricity and produce industrial heat
17:22
Speaker 1: above eighteen hundred degrees celsius. And when you think about
17:25
Speaker 1: the hardest to decarbonize industries, you know, about ninety five
17:29
Speaker 1: percent of all industrial manufacturing can be decarbonized with that
17:32
Speaker 1: kind of heat. And what's amazing about this company is
17:35
Speaker 1: they're not going you know, it's called the mister Burns test.
17:37
Speaker 1: I can go to a conglomerate who does not care
17:40
Speaker 1: a lick about climate change and convince them that I
17:43
Speaker 1: can save them opex with this decarbonized solution. It has
17:47
Speaker 1: nothing to do with climate change in their minds, and.
17:49
Speaker 2: They just still want investment of money saving opportunity for
17:52
Speaker 2: companies in the space.
17:53
Speaker 1: So the coke industries is behind this company has taken
17:56
Speaker 1: them to a lot of their conglomerates and it's a
17:58
Speaker 1: really exciting technology because it is just beating natural gas
18:01
Speaker 1: at its own game. And that is you know, a
18:03
Speaker 1: theory of change for us is that if you can
18:06
Speaker 1: beat natural gas at its own game and save conglomerates
18:09
Speaker 1: and big businesses money, they will adopt your technologies. It
18:12
Speaker 1: becomes more challenging when you're bringing them green premiums and
18:15
Speaker 1: things that are a little more expensive.
18:17
Speaker 2: So correct my ignorance, if you will. I look at
18:20
Speaker 2: natural gas as a transitional energy source from oil and
18:25
Speaker 2: coal to ultimately renewables. Tell me where that thesis is wrong.
18:31
Speaker 1: It was correct. It was absolutely a better source of
18:34
Speaker 1: fuel than coal, which you know produces black suit and
18:37
Speaker 1: all kinds of problems and diesel.
18:39
Speaker 2: Now the what about clean coal? The case face.
18:43
Speaker 1: The key is to now transition from natural gas. You know,
18:45
Speaker 1: natural gas is a is a nice word for methane.
18:49
Speaker 1: It's primarily methane, and methane is about eighty times more
18:52
Speaker 1: warming than carbon dioxide. And so if carbon dioxide is
18:55
Speaker 1: one blanket thick to keep the earth warm, you can
18:58
Speaker 1: think of Lebron James height blanket to trap the molecule
19:01
Speaker 1: traps far more heat and doesn't allow our sunlight to
19:04
Speaker 1: radiate back to outer space as it should. And so
19:08
Speaker 1: the key now is that renewables have this extensive runway
19:12
Speaker 1: since we thought of natural gas as a bridge fuel,
19:15
Speaker 1: And candidly, the lowest costs of energy today are solar
19:20
Speaker 1: and wind, and so businesses can make rational decisions to
19:23
Speaker 1: adopt them. And the key is to now sort of
19:27
Speaker 1: transition us off this sticky drug that we've been addicted
19:30
Speaker 1: to for some time.
19:31
Speaker 2: That wasn't true a couple of years ago. Renewable energies
19:35
Speaker 2: like solar and wind were pricier than natural gas and oil. Today,
19:41
Speaker 2: the price of solar and wind just keeps falling and falling.
19:47
Speaker 2: Is it accurate to say on a per kilowatt basis
19:52
Speaker 2: they are now cheaper than carbon based fuel.
19:54
Speaker 1: They are absolutely the cheapest forms of electricity available in
19:58
Speaker 1: most places in the world today. A staggering statistic. The
20:02
Speaker 1: capex of a new solar plant is today cheaper than
20:05
Speaker 1: the opex the annual opex of a coal plant real
20:08
Speaker 1: and so these things, you know, the human mind is
20:10
Speaker 1: some sometimes bad at tracking exponential change. The logarithmic drop
20:15
Speaker 1: in solar and wind prices continually surprises even the most
20:19
Speaker 1: bullish analysts. And I think the same is now coming
20:22
Speaker 1: true for lithium ion and a lot of these other
20:25
Speaker 1: technologies and so we are dropping down these logarithmic cost curves.
20:29
Speaker 1: And what's interesting is I think there's a geopolitical reality
20:33
Speaker 1: today in a global contest for power with China, the
20:35
Speaker 1: countries that are able to have the lowest cost of
20:38
Speaker 1: plentiful energy that does not require any kind of foreign inputs,
20:42
Speaker 1: that has a domestic supply chain underneath it, that can
20:45
Speaker 1: produce that energy on their own, that will be one
20:47
Speaker 1: of the key key drivers to global heged demonic success
20:50
Speaker 1: in this new world, coupled with next generation compute that's
20:54
Speaker 1: also within our own supply chain. And so the last
20:57
Speaker 1: time we saw a great power struggle like this was
21:00
Speaker 1: in the semiconductor boom, where where Faild, Fairchild, semiconductors, Intel
21:05
Speaker 1: Texas instruments were built. Those were not like the bits
21:09
Speaker 1: that are traded in software today. Those were atoms. It
21:11
Speaker 1: was hardware investing that governments were deeply involved in. So
21:15
Speaker 1: the fifty percent of the revenue of Fairchild in the
21:18
Speaker 1: early days came from the Pentagon. Similarly, TSMC when it
21:21
Speaker 1: was built, fifty percent of that CAPEX was handled by Taiwan,
21:24
Speaker 1: And when Samsung went into semiconductors, the same proof true
21:27
Speaker 1: of the South Korean government. The same is going to
21:29
Speaker 1: be true of climate investing today. A lot of the
21:31
Speaker 1: innovative hardware must be built today and that will require
21:35
Speaker 1: intense government involvement. And that's why overtures thesis is that
21:41
Speaker 1: investors that deeply understand and can navigate government and regulatory
21:44
Speaker 1: complexity can actually produce alpha for their investors. Because it's
21:47
Speaker 1: a bit like in World War Two, if you knew
21:49
Speaker 1: what the US government needed, if they were going to
21:51
Speaker 1: need to pay betting manufacturers to make parachutes, you know,
21:55
Speaker 1: that's an important insight to be able to drive the
21:58
Speaker 1: best investments through.
21:59
Speaker 2: Really really very interesting. So let's talk a little bit
22:03
Speaker 2: about what you look for in a climate investment. Is
22:08
Speaker 2: this about looking for companies that are going to be
22:11
Speaker 2: casual and positive right away or are you willing to
22:14
Speaker 2: be a little more long term in your thinking?
22:18
Speaker 1: Venture capital is an incredibly patient game, right on average
22:20
Speaker 1: ten to twelve year positions you're taking, as we saw
22:23
Speaker 1: with Union Score Ventures is first fund. I think it
22:25
Speaker 1: took them almost sixteen years from start to finish.
22:28
Speaker 2: So it's an incredibly that worked out pretty well, didn't.
22:30
Speaker 1: Worked out great. It's an incredibly patient, deeply liquid game.
22:34
Speaker 1: But you know, to radically oversimplify what we look for.
22:37
Speaker 1: We're looking for visionary, unbelievable founders. Founders are the soul
22:41
Speaker 1: of startups, and we're looking for unbelievable founders with deep
22:46
Speaker 1: expertise in what they're building, coupled with differentiated technology that
22:51
Speaker 1: can help unlock gigantic markets. And so to give you
22:55
Speaker 1: a couple of examples, we're investors in a company called Dextmat,
22:59
Speaker 1: which has invented a carbon nanotube technology that is stronger
23:03
Speaker 1: than steel, lighter than aluminum, and more conductive than copper.
23:07
Speaker 1: Copper is going to be one of the most important
23:09
Speaker 1: metals in all of electrification. Aluminum is in every aircraft
23:12
Speaker 1: and every airplane, a lot of phone poles and wires,
23:16
Speaker 1: and steel is steel. This technology might fully decarbonize in
23:21
Speaker 1: a carbon negative way a metal that is stronger, more conductive,
23:25
Speaker 1: and lighter. And so those are our moonshot examples of
23:29
Speaker 1: what we're looking for, and that require a lot of
23:31
Speaker 1: technological and go to market innovation to be successful. But
23:34
Speaker 1: if they are, I think there are trillion dollar rewards
23:36
Speaker 1: on the other side.
23:37
Speaker 2: So you're looking to replace the skin of aircraft, perhaps
23:42
Speaker 2: the body of automobiles, the wires on interstate or local
23:48
Speaker 2: electronic transmission, electricity transmission, and even things like telephone wires
23:54
Speaker 2: and internet wires or is it am I overstating that
23:58
Speaker 2: that's right?
23:58
Speaker 1: And the company today is, you know, the production of
24:02
Speaker 1: their of their metal is so expensive that only ultra
24:07
Speaker 1: advanced defense manufacturers and companies testing R and D can
24:12
Speaker 1: afford it. The bet is that they can drive down
24:14
Speaker 1: the cost by one thousand, you know, one one thousandth
24:17
Speaker 1: the cost over time and produce something that is just
24:21
Speaker 1: better than the industrial inputs that have very carbon intensive
24:24
Speaker 1: emissions footprints, as we've mentioned before. And so if you're
24:27
Speaker 1: an aircraft and can find something lighter than aluminium that
24:30
Speaker 1: can help your aircraft travel farther, that's a money saver
24:33
Speaker 1: for the company.
24:34
Speaker 2: And so those does material science have the equivalent of
24:38
Speaker 2: a Moore's law.
24:40
Speaker 1: It does, And interestingly a lot of the materials today
24:44
Speaker 1: are reaching that high point. Right at some point, semiconductors
24:49
Speaker 1: are reaching the theoretical limits of how many transistors you can
24:51
Speaker 1: wedge in. And so that's why innovating with ferro electric
24:55
Speaker 1: materials and using AI to be able to optimize all
24:58
Speaker 1: of the dizzing different kind of material combinations we can
25:00
Speaker 1: consider is what we need to do for this next
25:03
Speaker 1: layer of industrial revolution. So when you consider just the
25:06
Speaker 1: ten trillion in ebidah, start considering every manufacturing process today
25:11
Speaker 1: as we do it, every food production process, the way
25:14
Speaker 1: we move ourselves with transportation, the way we grow food
25:17
Speaker 1: in agriculture, all of this is going to have to
25:20
Speaker 1: reorient in about fifty years. If you believe the science
25:23
Speaker 1: and old conglomerates, large scale conglomerates aren't usually not the
25:27
Speaker 1: places that drive innovation, and that's what makes venture such
25:30
Speaker 1: an interesting catalytic. A SI class to me in climate.
25:32
Speaker 1: I am not doing this out of the goodness of
25:34
Speaker 1: my heart. I candidly kind of missed the Internet. I
25:37
Speaker 1: was so involved in politics. And if you consider some
25:39
Speaker 1: of the megacycles software eating the world, China opening up
25:44
Speaker 1: ultra low cost interest rates, I think this is another
25:47
Speaker 1: megacycle coming and I don't want to miss it. And
25:50
Speaker 1: like all megacycles, being early is the same as being wrong.
25:53
Speaker 1: And so a lot of our job is timing our
25:55
Speaker 1: bets to make sure where can technoeconomics just beat fossil
25:59
Speaker 1: fuels invest behind that right now?
26:01
Speaker 2: So let's talk about some of those different spaces. I
26:04
Speaker 2: want to throw out some broad topics. You tell me
26:07
Speaker 2: what you think about those and what sort of investments
26:10
Speaker 2: you would be looking at or have already made in those.
26:14
Speaker 2: And let's start with carbon capture. You know, some people
26:18
Speaker 2: have said we can solve climate change by just taking
26:22
Speaker 2: all this excess carbon that's in the air. What do
26:26
Speaker 2: you think about carbon capture?
26:28
Speaker 1: I think if you believe the science, the IPCC has
26:32
Speaker 1: stated we're going to need to remove ten billion tons
26:36
Speaker 1: of carbon every year by the year twenty fifty. And
26:40
Speaker 1: if you look at what we did last year, we
26:41
Speaker 1: did about six thousand tons. So there's a two million
26:44
Speaker 1: x scale up that has to happen, or a seventy
26:46
Speaker 1: four percent cager, which is twice the growth of software.
26:49
Speaker 1: So there's an enormous undertaking. The question for us is
26:52
Speaker 1: what is the lowest cost, most scalable, more most efficient
26:56
Speaker 1: version of this. Direct air capture today still pencils around
27:00
Speaker 1: sixteen hundred dollars per ton, enormously electricity intensive. We have
27:04
Speaker 1: drifted a little bit more towards two categories. The first
27:07
Speaker 1: is enhanced rock weathering. We're investors in a company called
27:10
Speaker 1: ion that has pulverized a certain silicate rock called olivine
27:14
Speaker 1: that can help basically grow more crops for farmers. They're
27:18
Speaker 1: very familiar with it. It's basically a form of fertilizer,
27:22
Speaker 1: while it also sucks carbon out of the atmosphere permanently.
27:25
Speaker 1: Very excited about technologies like that. We're also investors in
27:28
Speaker 1: a company called Climate Robotics that is similarly taking agricultural
27:31
Speaker 1: waste and pyalizing it, basically cooking it in an oxygen
27:34
Speaker 1: free environment and producing something called biochar, which is an
27:37
Speaker 1: excellent soil amendment. It helps crops grow more, Farmers crave biochar,
27:42
Speaker 1: but it also sequesters carbon for at least a thousand
27:45
Speaker 1: years according to a new white paper. And so we're
27:47
Speaker 1: really excited about companies and technologies like this.
27:49
Speaker 2: Huh, really interesting. What about just straight up energy production?
27:53
Speaker 2: It seems like it's been mostly incremental improvements in the
27:59
Speaker 2: cost of solar and winds, but not so much the productivity.
28:04
Speaker 2: They've also been very very gradual. Do we need an
28:09
Speaker 2: order of magnitude improvement in the production of energy or
28:14
Speaker 2: is it just something we're going to grind away at
28:16
Speaker 2: for decades at a time.
28:17
Speaker 1: We need a paradigm shift and energy production. You know,
28:21
Speaker 1: if you're gonna electrify everything, think for a moment about
28:24
Speaker 1: electrifying every form of vehicle transportation. You're not gonna have
28:28
Speaker 1: gas stations anymore. You're gonna have to charge them. And
28:30
Speaker 1: so that estimates are that the United States is gonna
28:32
Speaker 1: have to triple its energy product, its electricity production, and
28:36
Speaker 1: its borders alone over the next fifteen to twenty five years.
28:39
Speaker 1: An enormous undertaking. Right this we're talking about trillion dollar
28:43
Speaker 1: capex required to be able to reinvent the grid. And
28:46
Speaker 1: at the heart of this is where can you dry
28:49
Speaker 1: drive the lowest cost electricity and have it to be
28:52
Speaker 1: available plentifully and infirm power twenty four to seven and
28:55
Speaker 1: so storage and I think batteries will be there.
28:58
Speaker 2: That's my next question is, you know, I don't believe
29:01
Speaker 2: lithium ee on is the end game in battery storage.
29:04
Speaker 2: They're just too big and too heavy and they have
29:07
Speaker 2: a fairly short life cycle. What's the next phase in
29:11
Speaker 2: batteries that are going to be lighter, are going to
29:14
Speaker 2: improve range, allow you to use smaller batteries, and aren't
29:18
Speaker 2: gonna start dying after a thousand full charges and discharges,
29:24
Speaker 2: but have a lifespan of ten thousand or one hundred
29:26
Speaker 2: thousand charges.
29:27
Speaker 1: You know, there are a lot of interesting things happening
29:30
Speaker 1: in fusion right now that we're tracking. We have not
29:32
Speaker 1: made an investment, but I think the rate of exponential
29:36
Speaker 1: improvement and possibility in fusion is coming much faster than
29:39
Speaker 1: people realize.
29:40
Speaker 2: And in the nuclear fusion like what drives the sun
29:43
Speaker 2: and stars at the universe.
29:45
Speaker 1: Correct, So commonwealth fusion companies like Avalanches, which are in
29:49
Speaker 1: the lower carbon portfolio, incredibly exciting. In the interim, there's
29:53
Speaker 1: interesting innovation for grid scale storage coming from companies like
29:56
Speaker 1: form Energy and hopefully and Torah in our portfolio is
29:59
Speaker 1: also going to to provide a huge storage buffer. And so,
30:02
Speaker 1: as you correctly note, lithium ion is ill suited for
30:05
Speaker 1: long duration storage, right for forty six hours, If you
30:07
Speaker 1: need to slam something quickly, it's perfect. And so we
30:10
Speaker 1: think lithium ion will continue to power most electric vehicles,
30:13
Speaker 1: electric aircraft, but for grid scale, long duration storage, you're
30:17
Speaker 1: going to require innovation, and that innovation is going to
30:19
Speaker 1: have hundreds of billions of dollars of reward waiting. On
30:22
Speaker 1: the other side of it.
30:23
Speaker 2: You mentioned fusion. What about I keep reading about the
30:27
Speaker 2: smaller scale traditional fission nuclear plants. We haven't built a
30:32
Speaker 2: new nuclear plant in the United States for decades. That
30:36
Speaker 2: seems to be changing now there are a few small
30:38
Speaker 2: scale plants coming online. How do you look at nuclear?
30:42
Speaker 1: You know, I'm a bit of more of a skeptic.
30:44
Speaker 1: I think in the tech communities you get a lot
30:46
Speaker 1: of folks who roll their eyes and say, just build
30:48
Speaker 1: nuclear and you'll be fine. The cost overruns in nuclear
30:51
Speaker 1: have been astronomic, and in building the grid scale plants,
30:54
Speaker 1: everyone is different. Whereas the South Koreans are stamping out
30:58
Speaker 1: units and learning from them increasingly over time, we don't
31:01
Speaker 1: have those learnings here and so on average, a nuclear
31:04
Speaker 1: plant is taking twenty years to build. Way too, it
31:07
Speaker 1: is going three hundred percent over cost, and so I
31:09
Speaker 1: am excited about the miniaturized nuclear applications. We're going to
31:13
Speaker 1: need a lot of energy to do things like electrolyzed hydrogen,
31:15
Speaker 1: and that's going to be incredibly electricity intensive and potentially
31:18
Speaker 1: power direct air capture. So I think there's certain use
31:22
Speaker 1: cases there, But again to learn that, you have to
31:24
Speaker 1: modularize and build a factory method that allows you to
31:27
Speaker 1: iterate and improve on your production, not build these one
31:30
Speaker 1: off plants that are all looking different, all running out
31:32
Speaker 1: of money, all over cost.
31:33
Speaker 2: I remember about a decade ago the Great reactor hope
31:38
Speaker 2: with thorium kind of fell of the off the front pages.
31:43
Speaker 2: What's going on in that space? You know?
31:45
Speaker 1: I think a big challenge here is that there's real
31:48
Speaker 1: national security issues around building nuclear plants. And if you
31:51
Speaker 1: talk to the national security community, you know they're very
31:53
Speaker 1: worried about being able to take enriched uranium and build
31:56
Speaker 1: dirty bombs out of it. And so if you couple
32:00
Speaker 1: the amount of intense regulatory scrutiny out of the nuclear
32:02
Speaker 1: regulatory world, which is the most brutal place if you
32:05
Speaker 1: want to talk about regulatory risk, national con security considerations,
32:10
Speaker 1: costs over runs, time, and a lack of deep specialization
32:13
Speaker 1: in this country, I think candidly we're better off investing
32:16
Speaker 1: in wind water through hydroelectric power, solar and batteries. Those
32:20
Speaker 1: are scaled and ready to be deployed right now. And
32:23
Speaker 1: fusion already happens right We're already harnessing the energy of
32:26
Speaker 1: the sun in our solar panels. And so I am
32:29
Speaker 1: personally more bullish on that as a method of deployment.
32:32
Speaker 2: What do you think is the most exciting climate innovation
32:36
Speaker 2: that we'll see come out in twenty twenty four.
32:40
Speaker 1: I think a lot of the IRA incentives, the inflation
32:44
Speaker 1: reduction X incentives, have yet to be realized in the market.
32:47
Speaker 1: There's a provision in the IRA called forty five X,
32:51
Speaker 1: and what forty five X does is, for the first
32:53
Speaker 1: time since World War Two, pays OEMs to make things.
32:57
Speaker 1: So back to my betting analogy, if you are a
32:59
Speaker 1: betting manufacturer and the government wanted you to make parachutes,
33:02
Speaker 1: they would just pay you to make those parachutes before
33:04
Speaker 1: they even bought the parachute, and so you were going
33:06
Speaker 1: to see a staggering scale of deployment. We're investors in
33:09
Speaker 1: a company called Harbinger, which is an electric mid duty truck,
33:12
Speaker 1: one of the most important vehicles on the road the
33:15
Speaker 1: workhourses that drop off all of our e commerce delivery equipment.
33:18
Speaker 1: There is nobody building a good mid duty truck today.
33:21
Speaker 1: Harbinger is building a mid duty EV truck that is
33:24
Speaker 1: going to beat ice trucks at their own game. Before incentives,
33:28
Speaker 1: and when you factor in things like forty five x
33:30
Speaker 1: this company Harbinger could have negative cogs. And so when
33:33
Speaker 1: you think about what that means for the scale of deployment,
33:36
Speaker 1: I would say the big surprise is not a particular technology.
33:39
Speaker 1: It's just going to be the speed and scale of
33:40
Speaker 1: deployment is going to singd your eyebrows. It's going to
33:43
Speaker 1: be incredibly exciting. You know this. We're talking about a
33:45
Speaker 1: trillion dollar wall of money coming from the US government
33:48
Speaker 1: from the Infliction Reduction Act, the Chips Bill, and the
33:50
Speaker 1: Infrastructure Bill to scale the deployment of a lot of
33:53
Speaker 1: decarbonized technologies to remake the world as we've described it.
33:57
Speaker 1: And so that's what gets me really excited.
33:58
Speaker 2: Yeah, that sounds really really interesting. So one of the
34:01
Speaker 2: things I wanted to ask you about. You had referenced
34:05
Speaker 2: how in a lot of technologies the government is the
34:08
Speaker 2: big mover, and we could talk about everything from railroads
34:14
Speaker 2: and the telegraph to more recently semiconductors. The one thing
34:19
Speaker 2: we didn't mention is how the government essentially has driven
34:24
Speaker 2: the creation of the Internet through everything they did with
34:28
Speaker 2: DARPA and having a essentially hardened response to a nuclear
34:34
Speaker 2: attack is effectively where the Internet came from.
34:40
Speaker 1: You know, surprised to learn every single component of the
34:43
Speaker 1: iPhone from the touchscreen on down has an origination story
34:47
Speaker 1: from US government programs.
34:49
Speaker 2: I mean, if you look at what came out of
34:50
Speaker 2: the moon landings and NASA, it's everything from the microwave
34:53
Speaker 2: oven to arguably tang But I think we underestimate the
35:00
Speaker 2: impact of that private public partnership. Tell us a little
35:04
Speaker 2: bit about what you see in that space and what
35:06
Speaker 2: it's going to mean for climate transition.
35:08
Speaker 1: You know, I just watched Oppenheimer with my business partner
35:11
Speaker 1: to me, and I don't know if you've seen that.
35:12
Speaker 1: Oh fantastic sensational and it's such a terrific example of
35:16
Speaker 1: how the US government can do things so much faster
35:19
Speaker 1: when it puts its mind to it, and in emergencies,
35:22
Speaker 1: and I believe climate change will be an emergency that
35:24
Speaker 1: every will affect everybody, and we'll all have to spend
35:26
Speaker 1: the rest of our lives solving together. There is no
35:30
Speaker 1: entity large enough that can scale innovation quickly enough to
35:34
Speaker 1: hit these net zero targets, and that's what makes it
35:36
Speaker 1: such an important place. And you know, these national labs
35:38
Speaker 1: started their origin from the Manhattan Project and they gave
35:42
Speaker 1: us fission right. Ultimately, our nuclear plants came out of
35:44
Speaker 1: the Manhattan Project, and it's a good example of what
35:47
Speaker 1: happens when you get a lot of buying and a
35:49
Speaker 1: lot of focus from government unlock things, which is what
35:52
Speaker 1: the period of time we're about to enter right now in.
35:54
Speaker 2: Clim So what other technologies do you find interesting? What
35:58
Speaker 2: types of companies are you looking at?
36:00
Speaker 1: So the heating and cooling of big buildings is a
36:03
Speaker 1: place of major focus. The built environment buildings are responsible
36:07
Speaker 1: for that.
36:07
Speaker 2: That doesn't sound sexy and exigning that sounds like it
36:10
Speaker 2: should be basic efficiency and blocking and tackling. But every
36:15
Speaker 2: large you know, you look in a city like New
36:17
Speaker 2: York or Chicago, it's an immense amount of energy consumption.
36:21
Speaker 1: An immense amount of fossil fuel energy, using natural gas,
36:25
Speaker 1: still using diesel, still using coal in some cases as
36:28
Speaker 1: parts of the world, and yet everybody's urbanizing, we're building
36:31
Speaker 1: bigger buildings, and it's becoming an opex headache in some cases.
36:34
Speaker 1: And so we're investors in a company called Bedrock that
36:37
Speaker 1: I'm excited to announce. This is a technology founded by
36:40
Speaker 1: Joscelyn Lai and her co founder Sylview, who is a
36:42
Speaker 1: chief scientist of Baker Hughes, and he's basically taken a
36:45
Speaker 1: lot of ultra advanced oil and gas rig technology and
36:49
Speaker 1: invented a miniaturized rig that can drill subsurface to the
36:52
Speaker 1: depth required to unlock heating and cooling for huge buildings.
36:56
Speaker 1: So CI am the largest asset owner America with a
36:58
Speaker 1: million square feet on her ownership invested in this technology.
37:01
Speaker 1: And this sounds like geothermal, It is geothermal heating and
37:05
Speaker 1: cooling which is previously inaccessible to big buildings because of
37:08
Speaker 1: the depth required to drill would meet a rig that
37:11
Speaker 1: can't operate in urban environments. And so the magic of
37:15
Speaker 1: this company is they can go to companies and say, look,
37:17
Speaker 1: I can beat your heating and cooling bills with a
37:20
Speaker 1: decarbonized solution that will save you money and op X
37:24
Speaker 1: and get you an unbelievable amount of credits from the
37:26
Speaker 1: US government. And so those are technologies we get really
37:28
Speaker 1: excited about. Built environment is forty percent of global emissions
37:31
Speaker 1: forty percent, So it is not a sexy sounding thing,
37:34
Speaker 1: but it's very important. If you want to think about
37:35
Speaker 1: some of the more interesting sort of risk on parts
37:38
Speaker 1: of our portfolio. There's an unbelievable company called Linean Labs
37:41
Speaker 1: we recently invested in alongside Union's coare Ventures and a
37:44
Speaker 1: bunch of other unbelievable funds. They're building sustainable aviation fuels.
37:49
Speaker 1: Sustainable aviation fuels can take industrial CO two waste and
37:53
Speaker 1: repurpose it and remake it using a Fisher trough process
37:56
Speaker 1: and a reverse water gas shifter to then produce sustainably
37:59
Speaker 1: aviation fuels. And we think this company can do it
38:02
Speaker 1: cheaper ultimately than what jet fuel a costs in the
38:05
Speaker 1: market over time. And so when you consider United Airlines,
38:07
Speaker 1: in these companies, all of which have made commitments to
38:10
Speaker 1: use half of their fuel mix for jet for sustainabiliation fuel,
38:14
Speaker 1: there's a software like scale up a thousand x increases
38:16
Speaker 1: we're gonna need to see in the coming years. And
38:18
Speaker 1: so that gets really exciting. If you can beat jet
38:21
Speaker 1: fuel at their own game and produce something cheaper, why
38:24
Speaker 1: wouldn't an airline want to use that?
38:25
Speaker 2: And so so it's funny funny you mentioned airlines. So
38:28
Speaker 2: when we look at ethanol, they're notoriously subject to they're
38:34
Speaker 2: they're not as stable as petroleum. If you put them
38:38
Speaker 2: in marine engines, especially in a salt water environment, there's
38:42
Speaker 2: a problem with with they tend to gunk up and
38:45
Speaker 2: they don't do well. And the tolerances in aviation fuel
38:50
Speaker 2: are even more stringent than maritime or or automotive. You
38:57
Speaker 2: can come up with some form of av fuel that
39:01
Speaker 2: is able to fit those demands, and that incredibly high
39:05
Speaker 2: requirements from the aviation industry.
39:08
Speaker 1: Yes, think of being able to drop something into their
39:11
Speaker 1: existing engines molecularly identical to jet fuel, a that happens
39:15
Speaker 1: to be entirely carbon neutral, something that is actually derived
39:18
Speaker 1: from captured CO two, either atmospherically or otherwise. And so
39:22
Speaker 1: this is what gets us excited, right. Hydrogen aircraft would
39:24
Speaker 1: require you to invent a new aircraft. I think about
39:26
Speaker 1: how long FAA approvals take. Electric aircraft will be great
39:29
Speaker 1: for short distances, but for long haul aircraft, we don't
39:32
Speaker 1: see a path given the weight and density of those
39:34
Speaker 1: lithium ion batteries that you mentioned. And so if you
39:37
Speaker 1: can provide the multi you know, hundreds of billions of
39:40
Speaker 1: dollars of jet fuel that is consumed every year with
39:44
Speaker 1: something fully decarbonized, it's going to be a much attractive
39:47
Speaker 1: and more easier path for airlines to adopt.
39:50
Speaker 2: So you would mentioned how complex the regulatory environment is
39:53
Speaker 2: for nuclear How much have the recent legislation the IRA,
39:59
Speaker 2: the same Doctor Acting Infrastructure Bill. How much has that
40:03
Speaker 2: allowed things to happen more quickly than they have in
40:06
Speaker 2: the past in terms of regulatory approval.
40:09
Speaker 1: It's hard to overstate how staggering and ambitious and exciting
40:13
Speaker 1: the Inflation Reduction Act is. This is the single most
40:17
Speaker 1: comprehensive and aggressive climate bill ever produced by any country anywhere.
40:23
Speaker 1: And what this is doing is allowing OEMs and asset
40:27
Speaker 1: owners to pull forward innovation because it is simply making
40:30
Speaker 1: these things cheaper than fossil fuel alternatives because of these
40:34
Speaker 1: eyewatering incentives. And so interestingly, I'll give you an example.
40:38
Speaker 1: We actually have a company and a software company called Crux,
40:40
Speaker 1: which is a marketplace for tax credits generated by the IRA.
40:44
Speaker 1: The ITC and PTC tax credits will be about eighty
40:47
Speaker 1: three billion dollars per year according to Credit Suites, which
40:49
Speaker 1: is about seventeen percent of total corporate tax liability. And
40:52
Speaker 1: so this will have to flow from the producers of
40:55
Speaker 1: those credits to big banks, family office places like where
40:59
Speaker 1: you work. That connecttion you monetize those credits and help
41:01
Speaker 1: their client. Your clients save money today on taxes, and
41:04
Speaker 1: so these software marketplaces will be really an interesting way
41:07
Speaker 1: of demonstrating how giant the IRA opportunity is today.
41:12
Speaker 2: So, what's the big obstacle that this form of investing faces.
41:17
Speaker 2: This has been pushed back to ESG and the concept
41:20
Speaker 2: of greenwashing. What you're really talking about is innovation on
41:26
Speaker 2: the level of basic science as a physics, chemical chemistry,
41:30
Speaker 2: material science. Tell us a little bit about what sort
41:34
Speaker 2: of skepticism you face.
41:36
Speaker 1: Well, for one, we can never bend the laws of
41:38
Speaker 1: physics or chemistry, and so we are taking engineering risk,
41:41
Speaker 1: but we don't take science risk as a fund. I
41:44
Speaker 1: think the two hardest things to bet on are sticks
41:48
Speaker 1: that come from the federal government that will actually, you know,
41:51
Speaker 1: put a price on carbon and ultimately ban a lot
41:54
Speaker 1: of fossil fuel alternatives. And second, higher interest rate environments
41:57
Speaker 1: are going to be enormously punishing for capital and teens transitions.
42:00
Speaker 1: And so I think the two obstacles we face today
42:04
Speaker 1: are thankfully not technology, right, A lot of the technology
42:07
Speaker 1: we need to do this transition is here. The two
42:09
Speaker 1: obstacles are one, what's the regulatory environment that will force
42:12
Speaker 1: fossil fuels off a cliff. And then two, how do
42:15
Speaker 1: we ensure that this isn't more expensive? Because if you
42:17
Speaker 1: go to working class Americans and a bunch of you know,
42:20
Speaker 1: a feat over educated coastal elites say take this electric vehicle,
42:25
Speaker 1: take this heat pump, it'll be better for you, and
42:26
Speaker 1: it ends up more expensive, that will break the Democratic
42:29
Speaker 1: Party apart. And so we need to really focus on
42:32
Speaker 1: how do we do this as what they call a
42:34
Speaker 1: just transition. How do you help you know, working class
42:37
Speaker 1: Americans actually save money on their bills, how do you
42:39
Speaker 1: produce give them something that is not just better but cheaper.
42:43
Speaker 1: The median you know, savings account in America right now
42:46
Speaker 1: is four hundred dollars of total savings. And so if
42:48
Speaker 1: you go to someone say I need ninety percent of
42:50
Speaker 1: that for a heat pump today, that's going to be
42:52
Speaker 1: a problem.
42:53
Speaker 2: What do you think of products like the Ford Lightning
42:59
Speaker 2: one point fifty, which I think the base price is
43:01
Speaker 2: something like forty thousand dollars that looks like a truck
43:05
Speaker 2: that could find it. Did it go up?
43:07
Speaker 1: It's fifty thousand dollars expensive.
43:09
Speaker 2: It started originally at forty, maybe it's fifty now, Like
43:12
Speaker 2: the cyber truck started at forty at sixty now, but
43:15
Speaker 2: the lightning seems to be sort of that looks like
43:19
Speaker 2: a regular truck, but you could power your house with it.
43:22
Speaker 2: Are these things going to be useful in our energy transition?
43:26
Speaker 1: You know? One of the tensions I have, just to
43:27
Speaker 1: speak plainly, is that Americans like to drive big things.
43:32
Speaker 1: But from a climate perspective, ultimately it is kind of
43:35
Speaker 1: a joke to say, like the EV hummer is good.
43:37
Speaker 1: You know, you're actually better off driving a used F
43:39
Speaker 1: one to fifty Ford Ranger than buying a new EV
43:43
Speaker 1: hummer because of the you know, carbon intensity of the
43:45
Speaker 1: manufacturing process. And so that's the thing we need to missauge.
43:50
Speaker 1: We do need to make this transition. You should probably
43:52
Speaker 1: surprise in the like customers, but buying giant heavy vehicles
43:56
Speaker 1: that are not traveling very far and don't need to
43:58
Speaker 1: be as giant and heavy is not the ideal outcome.
44:01
Speaker 1: Though probably this sort of consumer taste is here and
44:04
Speaker 1: we need to fulfill it.
44:05
Speaker 2: What we need to do is take like a nineteen
44:07
Speaker 2: eighties era portion nine to eleven and convert those.
44:11
Speaker 1: To who we're talking. Yeah, that can be my gift
44:12
Speaker 1: after doing this podcast if you wanted to tend that
44:15
Speaker 1: to me.
44:16
Speaker 2: So let me jump to my favorite questions. We'll only
44:19
Speaker 2: have you for a few minutes, starting with tell us
44:22
Speaker 2: you mentioned Oppenheimer. Tell us what you're watching or streaming,
44:26
Speaker 2: what's keeping you entertained.
44:28
Speaker 1: There's an unbelievable TV show about the French intelligence service
44:33
Speaker 1: called The Bureau that is a must watch and it's
44:36
Speaker 1: sort of the like what a US allied intelligence service?
44:40
Speaker 1: How they dealt with Syria, how they dealt with a rock,
44:42
Speaker 1: how do they dealt with the United States from their perspective?
44:45
Speaker 1: Must watch.
44:46
Speaker 2: I just finished The Bodyguard, which was very interesting, and
44:49
Speaker 2: it's the UK. And anytime you get to see how
44:52
Speaker 2: a different country, even the entertainment, how they portray their
44:58
Speaker 2: national security and police, it is always fascinating. Tell us
45:02
Speaker 2: about your mentors who helped shape your career.
45:05
Speaker 1: You know, my father, who is still the closest person
45:08
Speaker 1: to me in my life apart from my wife, was
45:11
Speaker 1: my earliest mentor and I couldn't be lucky to have
45:13
Speaker 1: had him. And he was the one that always challenged us.
45:16
Speaker 1: Let us said, you can do anything, but whatever you
45:18
Speaker 1: do be the best at you know, push yourself and
45:21
Speaker 1: do something big and help a lot of people. And
45:23
Speaker 1: so that is the sort of challenge that continues to
45:25
Speaker 1: push me today. I was also really lucky to work
45:28
Speaker 1: for Governor Martin O'Malley, really closely with President Obama and
45:33
Speaker 1: learn from them. And then guys like Julius Genakowski, who
45:36
Speaker 1: is the FCC chairman, who's a partner at Carlisle now
45:39
Speaker 1: an investor in overture, has been a long time mentor
45:41
Speaker 1: and friend to me. And I'm also mentored by my friends.
45:43
Speaker 1: You know, they say, to be happy, make friends that
45:46
Speaker 1: are less successful you to be successful, make friends more
45:49
Speaker 1: successful than you. And all of my friends are more
45:51
Speaker 1: successful than me. I learned from them all the time.
45:52
Speaker 1: And although you know what's like gorviy doll line, every
45:55
Speaker 1: time a friend succeeds, a small part of me dies,
45:57
Speaker 1: you might still feel a little bit of that.
45:59
Speaker 2: But such a terror terrible I mean, I'm familiar with
46:01
Speaker 2: the quote. It's such a terrible, terrible perspective. I had
46:05
Speaker 2: a buddy from grad school who was wildly successful, and
46:09
Speaker 2: people always ask me, doesn't it kill you how great
46:12
Speaker 2: Jeff is doing?
46:12
Speaker 1: I got a root for your friends.
46:14
Speaker 2: He's one of my favorite people in the world. No
46:16
Speaker 2: one deserves it more, and no one believed me, absolutely
46:20
Speaker 2: absolutely nobody. Nobody believed me. So tell us about some
46:25
Speaker 2: of your favorite books. What are you reading right now?
46:28
Speaker 1: Books to recommend to the listeners. The Ministry for the
46:30
Speaker 1: Future is the probably the best book on climate I've
46:32
Speaker 1: ever read.
46:33
Speaker 2: It's Ministry for the Future.
46:34
Speaker 1: Ministry for the Future. It's a climate dystopia of you know,
46:37
Speaker 1: the first chapter involves twenty million Indians dying in a
46:41
Speaker 1: heat wave and we are going to start seeing thermal
46:43
Speaker 1: temperatures around one hundred and fifty five degrees, which has
46:45
Speaker 1: got clocked in Tehran, and so imagine what happens to
46:48
Speaker 1: human life? How does human life flourish in those temperatures?
46:51
Speaker 1: And then every other chapter is a scientific sort of
46:54
Speaker 1: examination of the underlying sort of science transition. So Ministry
46:57
Speaker 1: for the Future is fantastic. Just read David Wallace Wells's
47:02
Speaker 1: book The Uninhabitable Earth, which is excellent. You'll need a
47:07
Speaker 1: shot of whiskey after reading it.
47:08
Speaker 2: Oh, really a little depressing, a little tough.
47:11
Speaker 1: But you know, he has this sort of line that
47:13
Speaker 1: our kids will look at us in the eye one
47:14
Speaker 1: day and say what were you thinking? Or were you
47:16
Speaker 1: even thinking at all? Which kind of haunts me.
47:19
Speaker 2: There is a fascinating book that was very early in
47:24
Speaker 2: energy investment called Windfall, and it's really fascinating because it
47:28
Speaker 2: goes to the various investment banks and funds and talks
47:33
Speaker 2: about whatever's hot's going to get hotter, whatever's what's going
47:36
Speaker 2: to get wetter? And here are all these companies and
47:40
Speaker 2: technologies that climate is almost secondary their for profit, and
47:45
Speaker 2: some of them have done exceedingly well. Really, really was
47:48
Speaker 2: a fascinating book. And now we're down to our last
47:51
Speaker 2: two questions. What sort of unless you have more books?
47:54
Speaker 2: Did I interrupt the book? Fly? All right? What sort
47:58
Speaker 2: of advice would you give to a recent college grad
48:01
Speaker 2: interested in a career in either climate change investing, venture investing,
48:08
Speaker 2: or politics.
48:11
Speaker 1: I think a startup is the equivalent of a campaign,
48:14
Speaker 1: which is incredibly flat, incredibly labor intensive, and so my
48:19
Speaker 1: advice to anyone that wants to get involved in politics
48:21
Speaker 1: or in climate is go work at a startup, or
48:23
Speaker 1: go work in a campaign, and just be the person
48:26
Speaker 1: they can turn to if you figure that out, if
48:28
Speaker 1: you can be a person that I can turn to,
48:30
Speaker 1: or any leader can turn to and know that they
48:33
Speaker 1: are going to handle that task. Well, you know, there's
48:35
Speaker 1: a really quick ramp.
48:36
Speaker 2: Rate for you. And our final question, what do you
48:39
Speaker 2: know about the world of venture investing today? You wish
48:42
Speaker 2: you knew ten twenty years ago when you were first
48:44
Speaker 2: getting started.
48:46
Speaker 1: That it would have been better to get started ten
48:48
Speaker 1: years ago than today.
48:50
Speaker 2: So that wasn't too early ten years ago.
48:52
Speaker 1: No, I think ten years ago it was still a
48:54
Speaker 1: little bit more of a cottage industry with ultra low
48:56
Speaker 1: cost interest rates and the zero interest rate environment allows
49:00
Speaker 1: folks to take rewarding bets that you know, delayed revenue
49:05
Speaker 1: recognition for ten years because it was a quick, effectively
49:08
Speaker 1: free and so that was a heyday. I wish I
49:11
Speaker 1: had been doing venture more consciously then.
49:14
Speaker 2: You know, it's funny I say the same thing about
49:16
Speaker 2: running an investment firm, because I see these firms have
49:19
Speaker 2: been around thirty forty years and it's like, God, if
49:22
Speaker 2: I would have started in you know, eighty two, we'd
49:24
Speaker 2: be a trillion dollars. I can't. I feel like I'm
49:27
Speaker 2: late to the party. I recognize the same thing with you,
49:30
Speaker 2: but it's never too you know, ten years ago was
49:33
Speaker 2: always the best time to do something, and the second
49:36
Speaker 2: best time is right now.
49:37
Speaker 1: There is a Chinese proverb the best time to plant
49:39
Speaker 1: a tree was one hundred years ago, but the second
49:41
Speaker 1: best time is today. Perfect. But I will say, you know,
49:45
Speaker 1: I do think in climate is one of these mega
49:48
Speaker 1: trends that is going that is just here and it
49:51
Speaker 1: doesn't you know, it is probably the easiest arbitrage investment
49:54
Speaker 1: I can imagine, which is to bet on scientists or
49:57
Speaker 1: you know, an opinions that editor at the wall Stree Journal.
50:00
Speaker 1: And so, you know, I just recommend to the listeners
50:03
Speaker 1: to really start paying attention to this. Once you start
50:05
Speaker 1: looking at it, the investment opportunity, the opportunity to make
50:08
Speaker 1: money is eyewatering. In addition to being able to sleep
50:11
Speaker 1: all night.
50:12
Speaker 2: That's great. We have been speaking with show Meek Dutta,
50:16
Speaker 2: co founder and managing partner at Overture Climate VC. If
50:20
Speaker 2: you enjoy this conversation, well, be sure and check out
50:23
Speaker 2: any of the previous five hundred or so we've done
50:26
Speaker 2: over the past nine years. You can find those at iTunes, Spotify, YouTube,
50:31
Speaker 2: wherever you find your favorite podcasts. Sign up from my
50:35
Speaker 2: daily reading list at Ridhelts dot com. Follow me on
50:38
Speaker 2: Twitter or x or whatever you want to call it.
50:42
Speaker 2: Hopefully it's still around by the time this broadcast. At
50:45
Speaker 2: Ridholt's follow all of the Bloomberg Family of podcasts at
50:49
Speaker 2: podcast I would be remiss if I did not thank
50:52
Speaker 2: the crack team that helps me put these conversations together
50:55
Speaker 2: each week. My engineer this week is Kayleie Lapara uh
51:00
Speaker 2: A tick of Al Brown is our project manager. Sean
51:02
Speaker 2: Russo is my head of research. Anna Luke is my producer.
51:07
Speaker 2: I'm Barry Ritolts. You've been listening to Masters Business on
51:11
Speaker 2: Bloomberg Radio.