The transcript from this week’s, MiB: Shomik Dutta, Overture Ventures, is below.
You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.
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This is Masters in business with Barry Ritholtz on Bloomberg Radio.
00:00:09 [Barry Ritholtz] This week on the podcast, I have an extra special guest, Shik Dadda. Co-founder and managing partner at OvaTure Climate VC focuses on all sorts of fascinating startup and climate change technology, from concrete to energy production, to storage, to carbon capture, to material science, to alternative fuels. This is really a fascinating discussion about some of the latest,
greatest technology that’s gonna help the world get to a carbon neutral status and maybe even a carbon negative status to roll back the impact of 250 years of burning fossil fuels. I, I found this conversation to be absolutely fascinating, not just because CH Meek was, has a little bit of a political background and had worked in both of Obama’s campaign where he was frequently fired by the soon to be president, but still managed to maintain his job. But because of his deep and broad knowledge of the technologies behind climate change, he said, this isn’t a green investment so much as a moneymaking economic investment. And if you’re not paying attention, you are gonna miss the opportunity. With no further ado my conversation with Overture Climate VCs Show
Shomik Dutta: 00:01:36 Barry. Thanks for having me.
Barry Ritholtz: 00:01:37 So, so what was the original plan? Was it, was it politics or finance? Where were you thinking of going?
Shomik Dutta: 00:01:43 [Shomik Dutta] It was always politics. I grew up a political junkie, worked on senate races and governor’s races, and had the really good fortune of linking up with Barack Obama in 2007. I was one of the early staffers on that campaign, and it ended up obviously being this incredible rocket ship, but kind of startup in his own right. And it was that experience that convinced me that it’s really possible to do big daring hard things. You know, watching the president sort of go from a US senator who’s still paying off his law school loans to stepping into the most important job in the world was an inspiring and
crazy experience.
Barry Ritholtz: 00:02:14 [Speaker Changed] Did you do for the campaign in oh eight, and then what’d you do in 2012?
Shomik Dutta: 00:02:17 [Speaker Changed] I was his fundraiser, so I oversaw the Mid-Atlantic states, about nine states. I was 24 years old, cocky, and a little bit insane. I’d read a lot of books about rah Emanuel, so I thought you were supposed to swear at people and yell and push hard, which I did. And proud to say that we outraged Hillary Clinton. From the very first day that I joined, I turned down an offer from Hillary Clinton at the time, which, you know, my father’s a risk averse immigrant, so his two pieces of advice for to me were to work at Lehman Brothers for investment banking, good call, and to work for Hillary Clinton, not Barack Obama. But those are the only two things I’ve ever ignored his advice on, and it turned out
Barry Ritholtz: 00:02:50 [Speaker Changed] And your dad’s Oh, for two,
Shomik Dutta: 00:02:52 [Speaker Changed] My dad’s 1000 for 1002.
Barry Ritholtz: 00:02:56 [Speaker Changed] That’s great. So, so how did you go from working in the campaign to working at both the White House and the FCC?
Shomik Dutta: 00:03:05 [Speaker Changed] You know, you could say a lot of it was political nepotism. Candidly, I was a, you know, coffee boy, I was Greg Craig, the White House Council’s special assistant, and as puffed up and important as I thought I was on the campaign, when it turns to governing, it turns out you need some specialization. So I quickly realized that I didn’t have a sort of path to being the National Security Council advisor at any point. So I, you know, after serving coffee for about a year, working on a Supreme Court nomination, shifted to go work for Julius, who was the FCC Chairman. And that’s when I realized that a lot of the smartest guys in the room were actually in, in, in business more often than not, and got really interested in shifting my career that would that that direction.
Barry Ritholtz: 00:03:39 [Speaker Changed] So, so someone interested in doing work in politics, how do you get a foot in the door?
Shomik Dutta: 00:03:45 [Speaker Changed] You know, it really starts with picking a campaign. And a campaign is like a lot like a startup. It’s a really flat organization. You have to raise an unbelievable amount of money and spend it in a short period of time, and you have this discreet objective that everyone’s nailed towards. And so for a young person, there’s no better experience than working on a campaign where, where if you can get something done, there is a job for you. And so that’s where I really, you know, cut my teeth working on campaigns, getting stuff done, and, you know, no better boss than than Obama.
Barry Ritholtz: 00:04:13 [Speaker Changed] So venture capitalists are notorious for having this really in-depth network of, of high performing, plugged in people. How similar is that to what takes place in the world of political networking?
Shomik Dutta: 00:04:28 [Speaker Changed] It’s funny, I heard Doug Leone, the founder of SE or the managing partner at Sequoia, have this great phrasing saying there’s many paths to heaven. And it seems in venture capital, there are many paths to, to heaven, right? You can have a really well networked media executive, as was Mike Moritz at the time. You can have drilled down operators who have run businesses. There are many different ways venture capitalists can add value. And it was my observation
in climate investing that there were no venture capitalists that deeply understand government and regulatory risk, despite the fact that the government’s playing this central casting role in the energy transition. And so I thought this might be a pathway to heaven for us observing Tusk Ventures in New York, doing this quite successfully for Coinbase and DraftKings and Uber. I just don’t really care about sports betting, but I really thought that I could add value to these startups as a venture capitalist that deeply understood government. And so that was my path to heaven. 00
Barry Ritholtz: 00:05:17 [Speaker Changed] So you grow up in Chicago, you move to DC after college, was it for a political campaign or was it just a coincidence? Hey, this local business seems pretty, pretty
Shomik Dutta: : 00:05:27 [Speaker Changed] Fascinating. No, explicitly for campaigns and so, you know, moved around zip codes in a lot of sort of post-industrial wasteland places. I lived in Baltimore working for Martin O’Malley’s first governor’s race. I lived in Rhode Island working for a senate race. And then in 2007 got recruited into Obama and that’s when I moved to DC
Barry Ritholtz: 00:05:43 [Speaker Changed] Huh. So, so your campaign staff during Obama’s reelection campaign, what
were you doing with the Biden administration when they were running in 2016?
Shomik Dutta00:05:55 [Speaker Changed] I built a impact venture fund that you referenced called Higher Ground Labs. It was our observation that, you know, Trump had benefited from a lot of new technology and Democrats were still campaigning with number two pencils and spreadsheets
Barry Ritholtz: 00:06:08 [Speaker Changed] Now lemme ask you that’s, I’m, I’m gonna interrupt you right there, because I rec very vividly recall reading wired piece from Wired Magazine about how cutting edge the Obama campaign was with iterative changes and AB testing and they just were raising more money faster for more people. You’re telling me by 2016 that’s already outta date and fallen way behind.
Shomik Dutta00:06:35 [Speaker Changed] You’re exactly right. That’s exactly the insight that actually led us to start higher ground labs campaigns are like big startups and you, you raise a billion dollars, as was the case with Obama, you build cutting edge technology and after election day the lights go off, everybody leaves, the email addresses go off and you start anew in four years as though none of that mattered. And there was no longitudinal inherent inheritance of learnings and data and technology. And so we
wanted to build for-profit startups that could build longitudinally compounding innovation and standing as freestanding entities that could be even profitable for investors so that we could raise more capital for them. And so we did that. We built companies like Mobilize, which ended up shifting all of the volunteer action in the Democratic party, sold to an insight backed the private equity fund insights backed company. And so things like that can both compound returns for investors, but also compound innovation to the party. So you don’t have to start from zero every four years.
Barry Ritholtz: 00:07:26 [Speaker Changed] So on your LinkedIn iic, you got an BA from Wharton around the same time
as the election. Please don’t tell me you were doing both at once.
Shomik Dutta00:07:35 [Speaker Changed] I did both. It is not recommended. It was a lot of pounds and gray hair. But you know, my deal with my dad who came to this country with, you know, a, a big dream came to this country with about 200 bucks in his pocket. He worked as a security guard at Harvard Business School and attended Harvard Business School at the same time. You know, there’s that line Obama has that every son wants to be live up to his father’s expectations or to be something his father was not sure. And I definitely fell in the first category. And so my dad would always point out like, look, I came to this country with 200 bucks and he ultimately became the president of United Airlines. And it was like an incredible career. And so I felt
Barry Ritholtz: 00:08:09 [Speaker Changed] Your dad was president of United Airlines, he was as an immigrant who
arrived essentially with a handful money in his pocket?
Shomik Dutta: 00:08:15 [Speaker Changed] In his pocket with not WW working as a security guard at night at HBS. And so, you know, those were big shoes to fill. And the thing that I always took away from him was that look, the thing that inspired him about building big businesses and running them was not power. It was not money, though. The money is nice, it’s the ability to just help so many people. He said like the, his heroes were always people that could provide a lot of jobs, businessmen and businesswomen that could provide jobs. And so it was that narrative that was always in my head and the need to sort of live up to his big expectations at something to business school.
Barry Ritholtz: Shomik Dutta:
00:08:44 [Speaker Changed] Huh, really, really interesting. So what’d you study at Wharton? And, and is any of that applicable to what you do now?
00:08:52 [Speaker Changed] You know, thankfully there was no great disclosure at Wharton. I can’t tell you very much of what, I don’t think any MBA can really tell you what they learned, but what I took away from it was an amazing network and some signaling value to say, Hey, maybe this guy has half a brain for business, which I’m not even sure is true today.
00:09:06 [Speaker Changed] Really, really interesting. So you have a quote, I really like you said, you felt much closer to Governor Martin O’Malley than he felt towards me. Isn’t that true? How it is, how it is in all campaigns, everybody is looking and, and sponsoring and loving the candidate, but they have to distribute, oblivious their affection to millions of supporters.
00:09:31 [Speaker Changed] Yeah. You know, there’s, there’s a right and wrong reason to get involved in politics. One of the wrong reasons I think that a lot of people ended up doing is that it’s a pathway to being closer to power. Right? And I observed it, you know, probably succumb to some of it myself, but it’s the wrong reason to be doing the work. And so I was, you know, kind of making fun of myself for that. But yeah, you’re right. You know, these campaigns, you end up blogging a lot of hours with these folks. You know, I was, I was Obama’s call time manager and fundraiser. I, you,
00:09:57 [Speaker Changed] You’re, again, you’re anticipating my next question. How much time did you spend with Obama and did you not feel the love reciprocated or he, because he seems to be kind of an unusual guy in, in politics,
00:10:10 [Speaker Changed] A little more removed, a little more aesthetic and monkish, you know, I think he tried to fire me a few times for being too aggressive in fundraising from his friends, but Oh really? I, I’ll just say, you know,
00:10:20 [Speaker Changed] Wait, you were, you were, Obama said, Hey, that D guy, can we lose him?
This guy is too much. At least twice.
00:10:27 [Speaker Changed] At least twice. Although my favorite moment was in the dungeons of 2007
when, you know, doldrums of 2007. We were 40 points down to Hillary Clinton and I was still producing
multi-million dollar fundraising outcomes for him. And so one time when we dropped him off at the, you
know, he would come, he would start events saying, who do I have to apologize to in here for you
Shameik? And I’d be like, that guy, that guy, that guy. So we dropped him back at his apartment and he
doubled back to the car and he said, Shameik, keep doing what you’re doing. I’ll keep apologizing, it’s
worth it. And it was like the highlight of my career
00:10:55 [Speaker Changed] Is, is that your Obama? Is that as good as it gets? Hello, how are you? I can’t
help but notice that President Obama was probably the first president to take a very strong stance on
climate change. How much of your work with the Obama campaign inspired you to start investing in the
space?
00:11:18 [Speaker Changed] I think the experience from the Obama world was that everybody, you
know, there’s a big great Bill Gates line that everybody underestimates what they can do in 10 years and
overestimates what they can do in one year. And taking a long-term path to doing something really big
and grinding on it for a long time can produce extraordinary outcomes. You know, the president was the
architect of the Paris Accords, which is the framework that the IPCC now uses to ensure that the world is
driving to a net zero future. And so there is a, you know, the sparkle I take away from the Obama days
was a challenge from him, which is that we should do big things. And if you focus and execute every day
for a long period of time, most people probably underestimate what they can accomplish.
00:11:56 [Speaker Changed] So we just kind of wrapped up the climate accords, surprisingly in the
Middle East, sponsored by a big oil producing nation. How, how do you look at those events? Are these
just photo ops or does something substantial come out of them?
00:12:12 [Speaker Changed] I think there was a great deal of heart palpitation about this cop in part
because as you correctly note, the head of the largest oil and gas company in Abu Dhabi was the same
man in charge of the cop. And yet all 180 countries left with a firm commitment to decarbonize and to
transition away from fossil fuels and oil and gas with an emphatic, you know, agreement around around
that big daring idea. That’s the first time this has ever come out of a cop. And I think the US
government’s leadership in this, particularly on methane, is gonna start reverberating through the
market in a really positive way.
00:12:52 [Speaker Changed] So I’ve been reading a bunch of stuff on methane lately. Not only is it a
notorious noxious waste that contributes to the greenhouse effect and all sorts of other issues, we just
burn off tons of it in flares. And other thing, not too long ago, 60 Minutes had a episode where they
showed a company was essentially capturing that flare, using it to generate electrical power and running
data service centers right there on the oil field.
00:13:23 [Speaker Changed] It’s called Cruso Energy. I’m actually an investor in that company. It’s a very
00:13:26 [Speaker Changed] Inspiring, tell us a little bit about that. That’s quite fascinating.
00:13:29 [Speaker Changed] You know, the two, the twin problems, we’re gonna realize in the near
future that we’ll have these stranded energy assets that are often leaking methane. We have oil and gas
wells that have sustained casing pressure that are bubbling methane. We need to seal those wells
permanently or make use of the methane because the methane has a great deal of economic value. The
second challenge we have is that our next generation compute is gonna be incredibly electricity
intensive, far more than what we experienced today. And so data centers are gonna become opex pain
points for a lot of companies. And so what Proso wants to do is resolve those two challenges, take
stranded energy assets, utilize that energy creatively, and also ensure that we can decarbonize data
centers, which are increasingly a large pain point in emissions. There’s another company to mention we
invested in recently called BIOS Squeeze, which has invented a new way of permanently sealing oil and
gas wells. Some of these operators like Halliburton are spending millions of dollars sealing and resealing
oil and gas wells with no success. And so these guys have invented a biomineralization technology that is
stronger than cement that can shoot into these wells and permanently seal them, which may one day
even replace cement in all infrastructure one day is what we hope. Huh. There’s some exciting things
happening around methane.
00:14:39 [Speaker Changed] So this year’s COP conference of parties about climate change ends up with
governments making a number of commitments and a lot of nonprofits joining in in those commitments
to get towards a, a carbon neutral. But it kind of raises the question is that as effective as what you do in
terms of venture capital and startups that are looking to, in the private sector, combat climate change
for profit,
00:15:10 [Speaker Changed] It’s all required. Every single aspect of society will be impacted by climate
change. And so every single aspect of society has something to contribute. And every asset class of
capital from, you know, private equity to growth to debt will have to play a role. The reason
governments are so centrally important is that it’s not enough for us to look at business pain points
caused by climate, of which there are many, by the way, supply chain disruption, extreme weather
events. But you also need to start creating sticks at the same time to push fossil fuels off a cliff. And so
I’m encouraged by the fact, for example, that internal combustion engine vehicles will be banned
altogether in the state of California in 10 years. Similarly, France has banned all internal combustion
flights within its own borders in the next 10 years. And so these sticks are also important to intersect
with the carrots that help new technologies mature fast enough to replace them. And there will be a
fundamental rewiring of the economy that takes place as a result. When you think of every single aspect
of industry steel making fertilizer that, you know, $10 trillion of EBITDA will be at stake in this turnover.
And so there’s an enormous prize for those that can innovate quickly and help decarbonize. You
00:16:20 [Speaker Changed] Mentioned the company that seals up wellheads. Bloomberg had an article
not too long ago about what a massive carbon footprint, concrete manufacturing has. Tell us a little bit
about that technology that theoretically might replace concrete in the future.
00:16:39 [Speaker Changed] Yeah, you know, one of the central insights here is that industrial heat is the
key input to manufacturing just about anything. If you think about steel making from iron, if you think
about concrete, if you think about a lot of food and ethanol methanol production, all of it requires in the
United States alone, $140 billion worth of industrial heat, almost all of which comes from natural gas or
coal. And to get really high temperatures from that heat is sometimes difficult. And so there are
breakthrough technologies we’re excited about. One called an Torah in particular financed by Bill Gates
and Chris aka and by Overture. And these three Stanford PhDs have figured out a way to take grid
connected renewable electricity and produce industrial heat above 1800 degrees Celsius. And when you
think about the hardest to decarbonize industries, you know, about 95% of all industrial manufacturing
can be decarbonized with that kind of heat. And what’s amazing about this company is they’re not
going, you know, it’s called the Mr. Burns test. I’m not, I can go to a conglomerate who does not care a
lick about climate change and convince ’em that I can save them opex with this decarbonized solution. It
has nothing to do with climate change in their minds, and they would still
00:17:49 [Speaker Changed] Wanna adopt. It’s a good investment and money saving opportunity for
exactly companies in the space.
00:17:53 [Speaker Changed] So the Koch, Koch Industries is behind this company has taken them to a lot
of their conglomerates, huh. And it’s a really exciting technology because it is just beating natural gas at
its own game. And that is, you know, a theory of change for us is that if you can beat natural gas at its
own game and save conglomerates and big businesses money, they will adopt your technologies. It
becomes more challenging when you’re bringing them green premiums and things that are a little more
expensive. And so, so,
00:18:17 [Speaker Changed] So, correct my ignorance, if you will. I look at natural gas as a transitional
energy source from oil and coal to ultimately renewables. Tell me where that thesis is wrong.
00:18:30 [Speaker Changed] It was correct. It it, it was absolutely a better source of fuel than coal,
which, you know, produces black suit and all kinds of problems. And diesel. The
00:18:39 [Speaker Changed] What about clean coal? The key key
00:18:41 [Speaker Changed] With the
00:18:42 [Speaker Changed] Smirk on his
00:18:42 [Speaker Changed] Face, the key is to now transition from natural gas. You know, natural gas is
a, is a nice word for methane. It’s primarily methane. And methane is about 80 times more warming
than carbon dioxide. And so if carbon dioxide is one blanket thick to keep the earth warm, you can think
of LeBron James height blanket to that trap, the molecule traps far more heat and doesn’t allow our
sunlight to radiate back to outer space as it should. And so the key now is that renewables have this
extensive runway since we thought of natural gas as a bridge fuel. And candidly, the sort low lowest cost
of energy today are solar and wind. And so businesses can make rational decisions to adopt them. And
the, the, the key is to now sort of transition us off this sticky drug that we’ve been addicted to for some
time
00:19:31 [Speaker Changed] That wasn’t true a couple of years ago. Renewable energies like solar and
wind were prier than natural gas and, and oil. Today, the price of, of solar and, and wind just keeps
falling and falling. I, is it accurate to say on a per kilowatt basis they are now cheaper than carbon based
fuel? They
00:19:55 [Speaker Changed] Are absolutely the cheapest forms of electricity available in most places in
the world today. A staggering statistic, the CapEx of a new solar plant is today cheaper than the opex,
the annual opex of a coal plant, really. And so these things, you know, the human mind is some
sometimes bad at tracking exponential change. The logarithmic drop in solar and wind prices continually
surprises, even the most bullish analysts. And I think the same is now coming true for lithium ion and a
lot of these other technologies. And so we are dropping down these logarithmic cost curves. And what’s
interesting is I think there’s a geopolitical reality today in a global contest for power with China. The
countries that are able to have the lowest cost of plentiful energy that does not require any kind of
foreign inputs, that has a domestic supply chain underneath it that can produce that energy on their
own, that will be one of the key key drivers to GLO global hedge demonic success in this new world
coupled with next generation compute that’s also within our own supply chain.
00:20:55 And so the last time we saw a great power struggle like this was in the semiconductor boom
where, where Fairchild, semi, semi Fairchild semiconductors, intel Texas instruments were built. Those
were not like the bits that are traded in software today. Those were atoms, it was hardware investing
that governments were deeply involved in. So the 50% of the revenue of Fairchild in the early days came
from the Pentagon. Similarly, TSMC when it was built, 50% of that CapEx was handled by Taiwan. And
when Samsung went into semiconductors, the same proved true of the South Korean government. The
same is gonna be true of climate investing today. A lot of the innovative hardware must be built today
and that will require intense government involvement. And that’s why o overtures thesis is that
investors that deeply understand and can navigate government and regulatory complexity can actually
produce alpha for their investors. Because it’s a bit like in World War ii, if you knew what the US
government needed, if they were gonna need to pay betting manufacturers to make parachutes, you
know, that’s an important insight to be able to drive the best investments through. Huh,
00:21:59 [Speaker Changed] Really, really very interesting. So, so let’s talk a little bit about what you
look for in a climate investment. Is this about looking for companies that are gonna be cashflow positive
right away? Or are you willing to be a little more long term in your thinking?
00:22:17 [Speaker Changed] Venture capital is an incredibly patient game, right? On average 10 to 12
year positions you’re taking, as we saw with Union score ventures is first fund, I think it took them
almost 16 years from start to finish. So it’s an incredibly
00:22:29 [Speaker Changed] Patient and that worked out pretty well. Didn’t
00:22:30 [Speaker Changed] It? Worked out great. It’s an incredibly patient, deeply liquid game. But you
know, to radically oversimplify what we look for, we’re looking for visionary, unbelievable founders.
Founders are the soul of startups and we’re looking for unbelievable founders with deep expertise in
what they’re building, coupled with differentiated technology that can help unlock gigantic markets. And
so to give you a couple of examples, we’re investors in a company called Dex Mat, which has invented a
carbon nano tube technology that is stronger than steel, lighter than aluminum, and more conductive
than copper. Copper is gonna be one of the most important metals in all of electrification. Aluminum is
in every aircraft, in every airplane, a lot of phone, phone poles and wires and steel is steel. This
technology might fully decarbonize in a carbon negative way, a metal that is stronger, more conductive
and lighter. And so those are moonshot examples of what we’re looking for and that require a lot of
technological and go to market innovation to be successful. But if they are, I think there are trillion
dollar rewards on the other side.
00:23:37 [Speaker Changed] So you’re looking to replace the skin of aircraft, perhaps the body of
automobiles, the wires on interstate or local electronic transmission, electricity transmission, and even
things like telephone wires and, and internet wires? Or is it, am I overstating
00:23:57 [Speaker Changed] That? That’s right. And the company today is, you know, the production of
their, of their metal is so expensive that only ultra advanced defense manufacturers and companies
testing r and d can afford it. The bet is that they can drive down the cost by a thousand, you know, one,
1000th the cost over time and produce something that is just better than the industrial inputs that have
very carbon intensive emissions footprints, as we’ve mentioned before. And so if you’re an aircraft and
can find something lighter than aluminum that can help your aircraft travel farther you, that’s a money
saver for the company. And so does, yeah.
00:24:35 [Speaker Changed] Does material science have the equivalent of a Moore’s law?
00:24:39 [Speaker Changed] It does. And interestingly, a lot of the materials today are reaching that high
point, right at, at some point semiconductors are reaching the theoretical limits of how many transistors
you can wedge in. And so that’s why innovating with feral electric materials and using AI to be able to
optimize all of the dizzying different kind of material combinations we can consider is what we need to
do for this next layer of industrial revolution. So when you consider just the 10 trillion in ebitda, start
considering every manufacturing process today as we do it, every food production process, the way we
move ourselves to transportation, the way we grow food and agriculture, all of this is gonna have to
reorient in about 50 years. If you believe the science and old conglomerates, large scale conglomerates
are usually not the places that drive innovation. Right? And that’s what makes venture such an
interesting catalytic asset class to me in climate.
00:25:32 I am not doing this out of the goodness of my heart. I candidly kind of missed the internet. I
was so involved in politics and if you consider some of the mega cycles software eating the world China
opening up ultra low cost interest rates, I think this is another me mega cycle coming and I don’t wanna
miss it. And like all mega cycles being early is the same as being wrong. And so a lot of our job is timing
our betts to make sure where can techno economics just beat fossil fuels? Let’s invest behind that right
now. So,
00:26:01 [Speaker Changed] So let’s talk about some of those different spaces. I, I wanna throw out
some broad topics. You tell me what you think about those and, and what sort of investments you
would be looking at or have already made in, in those. And let’s start with carbon capture. You know,
some people have said we can solve climate change by just taking all this excess carbon that’s in the air.
What, what do you think about carbon capture?
00:26:28 [Speaker Changed] I think if you believe the science, the IPCC has stated, we’re gonna need to
remove 10 billion tons of carbon every year by the year 2050. And if you look at what we did last year,
we did about 6,000 tons. So there’s a 2 million X scale up that has to happen. Wow. Or a 74% cagr,
which is twice the growth of software. So there’s an enormous undertaking. The question for us is what
is the lowest cost, most scalable, more, most efficient version of this direct air capture today? Still
pencils around $1,600 per ton, enormously electricity intensive. We have drifted a little bit more
towards two categories. The first is enhanced rock weathering, where investors in a company called ION
that has pulverized a certain silicate rock called INE that can help basically grow more crops for farmers.
They’re very familiar with it. It’s basically a form of fertilizer. While it also sucks carbon outta the
atmosphere permanently, very excited about technologies like that. We’re also investors in a company
called Climate Robotics that is similarly taking agricultural waste and izing it, basically cooking it in an
oxygen free environment and producing something called biochar, which is an excellent soil
amendment. It helps crops grow more farmers crave biochar, but it also sequesters carbon for at least a
thousand years according to a new white paper. And so we’re really excited about companies and
technologies like this. Huh,
00:27:49 [Speaker Changed] Really interesting. What about just straight up energy production? We, it
seems like it’s been mostly incremental improvements in the cost of solar and wind, but not so much the
productivity. They, they’ve also been very, very gradual. Do, do we need an order of magnitude
improvement in the production of energy or is it just something we’re gonna grind away at for decades
at a time?
00:28:17 [Speaker Changed] We need a paradigm shift in energy production. You know, if you’re gonna
electrify everything, think for a moment about electrifying every form of vehicle transportation, you’re
not gonna have gas stations anymore. You’re gonna have to charge them. And so the estimates are that
the United States is gonna have to triple its energy product, it’s electricity production in its borders
alone over the next 15 to 25 years. An enormous undertaking, right? This is, we’re talking about trillion
dollar CapEx required to be able to reinvent the grid. And at the heart of this is where can you dry drive
the lowest cost electricity and have it be available plentifully and in firm power 24 7. And so storage and
I think batteries
00:28:57 [Speaker Changed] Will be, that’s my next question is, you know, I, I don’t believe lithium ion is
the end game in battery storage. They’re just too big and too heavy and they have a fairly short life
cycle. What’s the next phase in batteries that are gonna be lighter, are going to improve range, allow
you to use smaller batteries and aren’t going to start dying after a thousand full charges and discharges,
but have a lifespan of 10,000 or a hundred thousand charges.
00:29:27 [Speaker Changed] You know, there are a lot of interesting things happening in fusion right
now that we’re tracking. We have not made an investment, but I think the rate of exponential
improvement and possibility in fusion is coming much faster than people realize. And in the
00:29:41 [Speaker Changed] Nuclear fusion, like what drives the sun and, and stars throughout the
universe. Correct.
00:29:46 [Speaker Changed] And so Commonwealth fusion companies like Avalanche, which are, which
are in the lower carbon portfolio, are incredibly exciting. In the interim, there’s interesting innovation
for grid scale storage coming from companies like Form Energy and hopefully, and Torah in our portfolio
is also gonna be provide a huge storage buffer. And so as you correctly note, lithium ion is ill suited for
long duration storage, right? For four to six hours. If you need to slam something quickly, it’s perfect.
And so we think lithium ion will continue to power most electric vehicles, electric aircraft, but for grid
scale, long duration storage, you’re gonna require innovation. And that innovation’s gonna have
hundreds of billions of dollars of reward waiting on the other side of
00:30:22 [Speaker Changed] It. You mentioned fusion. What about, I keep reading about the smaller
scale traditional fish in nuclear plants. We, we haven’t built a new nuclear plant in the United States for
decades. That seems to be changing now, there are a few small scale plants coming online. How, how do
you look at at nuclear?
00:30:42 [Speaker Changed] You know, I’m a bit of more of a skeptic. I think in the tech communities,
you get a lot of folks who roll their eyes and say, just build nuclear and you’ll be fine. The cost overruns
in nuclear have been astronomic. And in building the grid scale plants, everyone is different. Whereas
the South Koreans are stamping out units and learning from them increasingly over time. We don’t have
that, those learnings here. And so on average, a nuclear plant is taking 20 years to build way too long.
It’s going 300% over cost. And so I am excited about the miniaturized nuclear applications. We’re gonna
need a lot of energy to do things like electrolyze hydrogen and that’s gonna be incredibly electricity
intensive and potentially power direct air capture. So I think there’s certain use cases there. But again,
to learn that you have to modularize and build a factory method that allows you to iterate and improve
on your production, not build these one-off plants that are all looking different, all running out of money
all over cost.
00:31:34 [Speaker Changed] I remember about a decade ago, the great reactor hope was thorium kind
of fell off the off the front pages. What, what’s going on in in that space?
00:31:45 [Speaker Changed] You know, I think a, a big challenge here is that there’s real national
security issues around building nuclear plants. And if you talk to the national security community, you
know, they’re very worried about being able to take enriched uranium and, and, and build dirty bombs
out of it. And so if you couple the amount of intense regulatory scrutiny out of the nuclear reg
regulatory world, which is the most brutal place, if you wanna talk about regulatory risk Sure. National
cons, security considerations, costs overruns time and a lack of like deep specialization in this country. I
think candidly, we’re better off investing in wind water through hydroelectric power, solar and batteries.
Those are scaled and ready to be deployed right now. And fusion already happens, right? We are already
harnessing the energy of the sun in our, in our solar panels. And so I am personally more bullish on that
as a, as a method of deployment.
00:32:32 [Speaker Changed] What, what do you think is the most exciting climate innovation that we’ll
see come out in 2024?
00:32:40 [Speaker Changed] I think a lot of the IRA incentives, the inflation reduction act incentives have
yet to be realized in the market. There’s a provision in the IRA called 45 x. And what 45 x does is for the
first time since World War III pays OEMs to make things. So back to my betting analogy, if you are a
betting manufacturer and the government wanted you to make parachutes, they would just pay you to
make those parachutes before they even bought the parachute. And so you are gonna see a staggering
scale of deployment where investors in a company called Harbinger, which is an electric mid duty truck,
one of the most important vehicles on the road, the workhorses that drop off all of our e-commerce
delivery equipment. There is nobody building a good mid duty truck today. Harbinger is building a mid
duty EV truck that is gonna beat ice trucks at their own game before incentives.
00:33:28 And when you factor in things like 45 x, this company Harbinger could have negative cogs. And
so when you think about what that means for the scale of deployment, I would say the big surprise is
not a particular technology, it’s just gonna be the speed and scale of deployment is gonna send your
eyebrows. It’s gonna be incredibly exciting. You know this, we’re talking about a trillion dollar wall of
money coming from the US government, from the Inflation Reduction Act, the chips bill and the
infrastructure bill to scale the deployment of a lot of decarbonized technologies to remake the world as
we’ve described it. And so that’s what gets me really excited.
00:33:58 [Speaker Changed] Yeah, that sounds really, really interesting. So one of the things I wanted to
ask you about, you had referenced how in a lot of technologies the government is the big mover and
and we could talk about everything from railroads and, and the telegraph to more recently
semiconductors. The one thing we didn’t mention is how the government essentially has driven the
creation of the internet through everything they did with DARPA. And having a essentially hardened
response to a nuclear attack is effectively where the internet came from.
00:34:39 [Speaker Changed] You know, surprised to learn every single component of the iPhone from
the touchscreen on down has an origination story from US government programs.
00:34:49 [Speaker Changed] I mean, if you look at what came out of the moon landings in nasa yeah, it,
it’s everything from the microwave oven to arguably tang. But, but I think we underestimate the impact
of that private public partnership. Yeah. Tell us a little bit about what you see in that space and what it’s
gonna mean for climate transition.
00:35:08 [Speaker Changed] You know, I just watched Oppenheimer with my business partner Tameem,
I don’t know if you’ve seen that yet. Oh,
00:35:12 [Speaker Changed] Fantastic.
00:35:13 [Speaker Changed] Sensational. And it’s such a terrific example of how the US government can
do things so much faster when it puts its mind to it and in emergencies. And I believe climate change will
be an emergency that every will affect everybody and will all have to spend the rest of our lives solving
together. There is no entity large enough that can scale innovation quickly enough to hit these net zero
targets. And that’s what makes it such an important place. And, you know, these national labs started
their origin from the Manhattan project and they gave us vision, right? Ultimately our, our nuclear
plants came out of the Manhattan Project. And it’s a good example of what happens when you get a lot
of buy-in and a lot of focus from government to unlock things, which is what the period of time we’re
about to enter right now in climate.
00:35:54 [Speaker Changed] So, so what other technologies do you find interesting? What, what types
of companies are you looking at?
00:36:00 [Speaker Changed] So the heating and cooling of big buildings is a place of major focus. The
built environment buildings are responsible for
00:36:07 [Speaker Changed] That. That doesn’t sound sexy and exciting. That sounds like it should
00:36:11 [Speaker Changed] Efficiency
00:36:12 [Speaker Changed] And blocking and tackling. You’re right. But, but every large, you know, you
look in a city like New York or Chicago, it’s an immense amount of, of energy consumption,
00:36:21 [Speaker Changed] An immense amount amount of fossil fuel energy using natural gas, still
using diesel, still using coal in some cases of parts of the world. And yet everybody’s urbanizing. We’re
building bigger buildings and it’s becoming an opex headache in some cases. And so we’re investors in a
company called Bedrock that I’m excited to announce. This is a technology founded by Jocelyn Lai and
her co-founder Sylvie, who’s the chief scientist of Baker Hughes. And he’s basically taken a lot of ultra
advanced oil and gas rig technology and in invented a miniaturized rig that can drill subsurface to the
depth required to unlock heating and cooling for huge buildings. So CIM, the largest asset owner
America with a million square feet under our ownership invested in this technology. And the, this
00:37:02 [Speaker Changed] Sounds like geothermal,
00:37:03 [Speaker Changed] It is geothermal heating and cooling, which is previously inaccessible to big
buildings because of the depth required to drill would meet a rig that can’t operate in urban
environments, right? And so the magic of this company is they can go to companies and say, look, I can
beat your heating and cooling bills with a decarbonized solution that will save you money in opex and
get you an unbelievable amount of credits from the US government. And so those are technologies we
get really excited about. Built environment is 40% of global emissions, 40%. So, wow. It is not a sexy
sounding thing, but it’s very important if you want to think about some of the more interesting sort of
risk on parts of our portfolio, there’s a unbelievable company called Linean Labs. We recently invested in
alongside Union Square Ventures and a bunch of other unbelievable funds.
00:37:46 They’re building sustainable aviation fuels. Sustainable aviation fuels, can take industrial CO2
waste and repurpose it and remake it using a Fisher trough process and a reverse water gas shifter to
then produce sustainable aviation fuels. And we think this company can do it cheaper ultimately than
what jet fuel a costs in the market over time. And so when you consider United Airlines and these
companies, all of which have made commitments to use half of their fuel mix for jet for sustainable
aviation fuel, there’s a software like scale up a thousand x increase we’re gonna need to see in the
coming years. And so that gets really exciting. If you can beat jet fuel at their own game and produce
something cheaper, why wouldn’t an airline want to use that? And so,
00:38:26 [Speaker Changed] So it’s funny, funny you mention airlines. So when we look at ethanol,
they’re notoriously subject to, they’re, they’re not as stable as petroleum if you put them in marine
engines, especially in a salt water environment. There’s a problem with with, they tend to gunk up and
they don’t do well. And the tolerances in aviation fuel are even more stringent than than maritime or, or
automotive. You can come up with some form of aviation fuel that is able to fit those demands and that
incredibly high requirements from from the aviation industry.
00:39:08 [Speaker Changed] Yes. Think of being able to drop something into their existing engines
molecularly identical to jet fuel a that happens to be entirely carbon neutral. Something that is actually
derived from captured CO2, either atmospherically or otherwise. And so this is what gets us excited,
right? Hydrogen aircraft would require you to invent a new aircraft, right? Think about how long FAA
approvals take. Electric aircraft will be great for short distances, but for long-haul aircraft, we don’t see a
path given the weight and density of those lithium ion batteries that you mentioned. And so if you can
provide the multi, you know, hundreds of billions of dollars of jet fuel that is consumed every year with
something, you know, fully decarbonized, it’s gonna be a much attractive and more easier path for
airlines to adopt.
00:39:50 [Speaker Changed] So you had mentioned how complex the regulatory environment is for
nuclear. How much have the recent legislation, the IRA, the semiconductor acting infrastructure bill,
how much has that allowed things to happen more quickly than they have in the past in terms of, of
regulatory approval?
00:40:09 [Speaker Changed] It’s hard to overstate how staggering and ambitious and exciting the
Inflation Reduction Act is. This is the single most comprehensive and aggressive climate bill ever
produced by any country or anywhere. And what this is doing is allowing OEMs and asset owners to pull
forward innovation because it is simply making these things cheaper than fossil fuel alternatives because
of these eye watering incentives. And so, interestingly, I’ll give you an example. We actually have a
company and a software company called Crux, which is the marketplace for tax credits generated by the
IRA. The ITC and PTC tax credits will be about $83 billion per year according to Credit Suisse, which is
about 17% of total corporate tax liability. And so this will have to flow from the producers of those
credits to big banks, family office places, places like where you work that can actually monetize those
credits and help their client, your clients save money today on taxes. And so these software
marketplaces will be really an interesting way of demonstrating how giant the IRA opportunity is today.
00:41:11 [Speaker Changed] So what’s the big obstacle that, that this form of investing faces? There’s
been pushback to ESG and, and the concept of greenwashing. What you’re really talking about is
innovation on the level of basic sciences of physics, chemical chemistry, material science. Tell us a little
bit about what, what sort of skepticism you face.
00:41:36 [Speaker Changed] Well, for one, we can never bend the laws of physics or chemistry. And so
we are, we are taking engineering risk, but we don’t take science risk as a fund. I think the two hardest
things to bet on are sticks that come from the federal government that will actually, you know, put a
price on carbon and ultimately ban a lot of fossil fuel alternatives. And second higher interest rate
environments are gonna be enormously punishing for capital intensive transitions. And so I think the
two obstacles we face today are thankfully not technology, right? A lot of the technology we need to do
this transition is here. The two obstacles are, one, what’s the regulatory environment that will force
fossil fuels off a cliff? And then two, how do we ensure that this isn’t more expensive? Because if you go
to working class Americans and a bunch of, you know, afe, overeducated, coastal elites say, take this
electric vehicle, take this heat pump, it’ll be better for you, and it ends up more expensive. That will
break the Democratic party apart. And so we need to really focus on how do we do this as a, what they
call a just transition. How do you help, you know, working class Americans actually save money on their
bills? How do you produce, give them something that is not just better but cheaper. The median, you
know, savings account in America right now is $400 if total savings. And so if you go to someone and
say, I need 90% of that for a heat pump today.
00:42:51 [Speaker Changed] No
00:42:51 [Speaker Changed] Good, that’s gonna be a problem.
00:42:53 [Speaker Changed] What do you, what do you think of products like the Ford Lightning one 50,
which I think the base price is something like $40,000 that looks like a truck that could find it Or did it go
up? It’s $50,000 to start. It’s quite expensive. Yeah, it started originally at 40, maybe it’s 50 now, like the
cyber truck started at 40, at 60 now. But the lightning seems to be sort of, that looks like a regular truck,
but you could power your house with it. Are, are these things gonna be useful in our energy transition?
00:43:26 [Speaker Changed] You know, one of the tensions I have just to speak plainly is that Americans
like to drive big things. Yeah. But from a climate perspective, ultimately it is kind of a joke to say like the
ev hummer is good, you know, you, you’re actually better off driving a used F-150 RA Ford Ranger than
buying a new EV Hummer because of the, you know, carbon intensity of the manufacturing process. And
so that, that’s the thing we need to massage. We do need to make this transition. You should probably
surprise and delight customers, but buying giant heavy vehicles that are not traveling very far and don’t
need to be as giant and heavy is not the ideal outcome. Though probably this sort of consumer taste is
here and we need to fulfill it.
00:44:04 [Speaker Changed] What what we need to do is take like a 1980s era Porsche nine 11 and
convert those to now
00:44:11 [Speaker Changed] We’re talking. Yeah. That can be my gift after doing this podcast if you
wanted to send that to me.
00:44:15 [Speaker Changed] So let me jump to my favorite questions. We only have you for a few
minutes and starting with, tell us, tell us, you mentioned Oppenheimer. Tell us what, what you’re
watching or streaming, what’s keeping you entertained?
00:44:28 [Speaker Changed] There’s an unbelievable TV show about the French intelligence service
called the Bureau that is a must watch. And it’s sort of the like what a US allied intelligence service, how
they dealt with Syria, how they dealt with Iraq, how they dealt with the United States from their
perspective. Must watch,
00:44:46 [Speaker Changed] I just finished The Bodyguard, which was very interesting. And it’s the UK
and anytime you get to see how a different country, even the entertainment, how they portray Yeah,
their, their national security and, and police is, is always fascinating. Tell us about your mentors who
helped shape your career.
00:45:05 [Speaker Changed] You know, my father, who is still one, the closest person to me in my life,
apart from my wife, was my earliest mentor. And I couldn’t be luckier to have had him. And he was the
one that always challenged us, let us said, you can do anything but whatever you do, be the best at, you
know, push yourself and do something big and help a lot of people. And so that is the sort of challenge
that continues to push me today. I was also really lucky to work for Governor Martin O’Malley really
closely with, with with President Obama, the, and, and, and learn from them. And then guys like Julius
Jankowski, who is the FCC chairman, who’s a partner at Carlisle now an investor in Overture, has been a
long time mentor and friend to me. And I’m also mentored by my friends, you know, they say to be
happy, make friends that are less successful you and maybe to be successful, make friends more
successful than you. And all of my friends are more successful than me. I learn from them all the time.
And it, although, you know what’s like gore doll line, every time a friend succeeds, a small part of me
dies. You might still feel a little bit of that,
00:45:58 [Speaker Changed] But it’s such a terrible, terrible, I mean, I’m familiar with the quote, it’s such
a terrible, terrible perspective. I had a buddy from grad school who was wildly successful and people
always asked me, doesn’t it kill you? How, how great Jeff is doing.
00:46:12 [Speaker Changed] I gotta root for your friends. No,
00:46:14 [Speaker Changed] He is for my friends. He’s awesome. He is one of my favorite people in the
world. No one deserves it more and pe no one believed me. Absolutely. Absolutely nobody, nobody
believed me. So tell us about some of your favorite books. What are you reading right now?
00:46:28 [Speaker Changed] Books to recommend to the listeners? I think Ministry for the Future is the,
probably the best book on climate I’ve ever read. It’s
00:46:33 [Speaker Changed] A ministry for the future,
00:46:35 [Speaker Changed] Ministry for the future. It’s a climate dystopia of, you know, the first
chapter involves 20 million Indians dying in a heat wave, you know, and we are gonna start seeing
thermal temperatures around 155 degrees, which just got clocked in Tehran. Wow. And so it imagines
what happens to human life, how does human life flourish in those temperatures? And then every other
chapter is a, is a scientific sort of examination of the underlying sort of science transition. So ministry for
the future is fantastic. I just read David Wallace Wells’s book, the Uninhabitable Earth, which is
excellent. You’ll need a shot of whiskey after reading it, but Oh
00:47:08 [Speaker Changed] Really? A little, little si depressing. A little
00:47:11 [Speaker Changed] Tough. It’s a great, yeah. But you know, he has this sort of line that our kids
will look us in the eye one day and say, what were you thinking? Or were you even thinking at all? Which
kind of haunts me
00:47:19 [Speaker Changed] There, there is a fascinating book that was very early in energy investment
called Windfall. And it’s really fascinating ’cause it goes to the various investment banks and funds and
talks about whatever’s hot’s gonna get hot or whatever’s wets gonna get wetter. And here are all these
companies and technologies that climate is almost secondary their for-profit. And some of them have
done exceedingly well. It really, really was a fascinating book. And now we’re down to our last two
questions. What sort of, unless you have more books, did I interrupt the book flow? No, no. All right.
What sort of advice would you give to a recent college grad interested in a career in either climate
change investing, venture investing, or politics?
00:48:11 [Speaker Changed] I think a startup is the equivalent of a campaign, which is incredibly flat,
incredibly labor intensive. And so my advice to anyone that wants to get involved in politics or in climate
is go work at a startup or go work in a campaign and just be the person they can turn to. If you figure
that out. If you can be a person that I can turn to or any, any leader can turn to and, and know that
they’re gonna handle that task well, you know, there’s a really quick ramp rate for you
00:48:37 [Speaker Changed] And our final question. What do you know about the world of venture
investing today? You wish you knew 10, 20 years ago when you were first getting started,
00:48:46 [Speaker Changed] That it would’ve been better to get started 10 years ago than today.
00:48:50 [Speaker Changed] So that wasn’t too early 10 years ago.
00:48:52 [Speaker Changed] No, I think 10 years ago it was still a little bit more of a cottage industry
with ultra low cost interest rates. And the zero interest rate environment allowed folks to take
rewarding betts that, you know, delayed revenue recognition for 10 years because it was aqui,
effectively free. And so Right. That was a heyday. I wish I had been doing venture more consciously then.
00:49:13 [Speaker Changed] You know, it’s funny, I I say the same thing about running an investment
firm. ’cause I see these firms that have been around 30, 40 years and it’s like, God, if I would’ve started
in, you know, 82, we’d be a trillion dollars. I can’t, I feel like I’m late to the party. I I, I recognize the same
thing with you. Yeah. But it’s never too, you know, 10 years ago was always the best time to do
something. And the second best time is, right now
00:49:36 [Speaker Changed] There’s a Chinese proverb. The best time to plant a tree was a hundred
years ago, but the second best time is today probably
00:49:42 [Speaker Changed] Proves Perfect. Perfect.
00:49:44 [Speaker Changed] But I will say, you know, I do think Invest Climate is one of these mega
trends that is going, that is just here. And it doesn’t, you know, it is probably the easiest arbitrage
investment I can imagine, which is to bet on scientists or you know, an opinions editor at the Wall Street
Journal. And so, you know, I, I just recommend to the listeners to really start paying attention to this.
Once you start looking at it, the investment opportunity, the opportunity to make money is eye watering
in addition to being able to sleep well at night. That’s
00:50:12 [Speaker Changed] Great. We have been speaking with Shik dda, co-founder and managing
partner at Overture Climate vc. If you enjoy this conversation, well be sure and check out any of the
previous 500 or so we’ve done over the past nine years. You can find those at iTunes, Spotify, YouTube,
wherever you find your favorite podcasts. Sign up for my daily reading list@riol.com. Follow me on
Twitter or x or whatever you want to call it. Hopefully it’s still around by the time this broadcast at
Ritholtz. Follow all of the Bloomberg Family of podcasts at podcast. I would be remiss if I did not thank
the crack team that helps me put these conversations together each week. My engineer this week is
Kaylee Lara. A of Al Run is our project manager. Sean Russo is my head of research. Anna Luke is my
producer. I’m Barry Ritholtz You’ve been listening to Masters in Business on Bloomberg Radio.
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