What Does E = mc² Have to Do With Climate Investing? | Climate x Investing Part 1

Renowned investor, engineer, and physicist Tom Chi joins Marcius for part 1 of a conversation about "planet positive investing" and what that might possibly mean. Marcius opens with his thoughts about venture capital ("VC") before they discuss how it works or doesn't work for climate solutions, and how Tom builds his investment thesis out of matter and energy.

Videography: Stefano Dozza, fourthact.xyz

Show Credits:
Vishrudh Sriramprasad, Producer
Claire Davis, Theme Music (Long Gone, Get It Right) | @clairedavismusic

Kheya Patel, Art | https://kheyapatel.com/

Contact: podontherise@gmail.com

Transcript

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I like to tell people that physics is really nothing more than the study of matter and energy moving through time and space. There's really only four things to keep track of. And if you're trying to understand whether a new piece of tech has the real potential to displace the existing incumbent industry, you just go head to head on those four. How did matter change between old and new? How did energy change between old and new? How did time change? How did space change? If you do not have a huge win, so not like a 5% win, you know, or 10% win, 20% win, that's way too small. If you don't have a huge win on at least one of those four, you can pass on the deal instantly. Hello, my friends, and welcome to the On the Rise podcast. I'm your host, Marcus Extavor. I'm a scientist, I'm an engineer, I'm also a musician and a communicator. So think of me as a creative guy who likes to think about the future in detail. As an energy and climate person, I also like to think about where the solutions to energy and climate problems came from. What's the history? How did we get here? But also the new ideas that we're arguing about today, where are they gonna go and how do they develop? But I also think about the future in another way. I'm a father, I'm a parent, I got kids. So I'm not only thinking about what kind of world are they walking into, but what's the climate solution landscape gonna be like for them? What's gonna be available for them to use or argue about or deploy or even participate and work on? So I'm really interested for a lot of reasons in this question of where do climate solution ideas come from? How do we develop them? How do we support them? How do they grow? And how do they get vetted? And who picks, who does all this stuff? Ideas can come from all over the place. Two people chatting in a bar, the arts, business, technology, science, accounting, whatever, all kinds of places. But any idea or solution that's connected to technology has a special challenge. Where do you get the money to fund it? One of the reasons technology ideas are hard to fund is here's an awkward truth. Most technology ideas suck. They don't work. Same with scientific RD. This is just the nature of being a technologist or a scientist. You have a ton of great ideas that mostly are wrong or don't work out. And your job is to find the few that are great and that can be developed over time into something that's really useful for a broad community of people. Another question that's related, not just to where do the ideas come from and how do you get the money is is it possible to have technology-oriented climate solutions that are not just environmentally sustainable but economically sustainable? And not have to follow the model of, let's say, public transit or waste disposal, which in this part of the world are things that the public just pays for. We all just pay through our taxes. And that's fine. I love those things, I'm glad they're in my life, and I'm happy to pay tax for them. But wouldn't it be cool if some climate solutions could pay for themselves and break even and be economically sustainable that way? Or maybe even go further and generate more than break-even so that it could be reinvested to improve and grow and scale and improve and grow and scale and get big enough so it can be relevant. That's really interesting to me. Different challenges for technology solutions mean different types of money. And there are different flavors of money out there when we talk about investing or supporting or you know just nurturing new ideas. The type of money that is supposed to be the best at taking on this technology risk and not being afraid of it and navigating through it is called venture capital. I'm going to explain what venture capital is and then I'm going to tell you what I think about it before we bring in today's guest to have a conversation. So here's how VC is supposed to work. Venture capital is called VC or Venture if you're one of the cool kids. And remember, it's the type of money that's supposed to be structured to take on big risks and think about the future. Venture is very charismatic. It gets a lot of attention, it sucks up a lot of media oxygen. And there are a lot of big personalities in venture. If you've heard of them, you probably see it on TV or on the internet. They're kind of like the lions and tigers and giraffes at the zoo. They get all the attention, everyone wants to see them. But VC only has something like 1% of the total money supply. Most of the money is in banks, it's in governments, it's in insurance companies, sovereign wealth funds, even things like presidential slush funds. Early stage research, like the kind of stuff I did as a PhD student, that's generally funded by the public through grants, which are paid for by our taxes, our collective money. And that's great for early stage stuff. You don't really know if it works yet. And on the other side of the spectrum, if you're really mature, let's say you're Toyota and you want to build a new manufacturing plant to build the next line of Prius cars, you go to a bank, you say, I've been doing this for 40 years, I'd like a loan. The bank says, We'd love to give you a loan. That's how we make money. Here you go. But what if your idea is too mature for the early stage RD of grants? Maybe you've got a prototype, you've proven that it already works, but it's way too immature for a bank. They would just laugh at you and say, come back in 40 years. That gap is a real problem, and that's what venture capitalists are supposed to fill. How it works in a nutshell is a venture capital investor goes to somebody else that's got a lot of money, says, please invest in me. I am smart, I can see the future, I'm gonna reinvest this money into companies, I'm gonna buy small pieces of them when they're early, I'm gonna buy cheap because they're still young, they're not worth much. I'm gonna nurture them and help them grow. And then when they are growing, I'm gonna sell my ownership stake, get the money back, pay back my investors, and keep what's left over for me. That's how it's supposed to work. Here's my problem with venture capital applied to climate solutions. Most venture capital investors say they want to take a lot of risk and they make a big deal about being risky and on the edge, but they actually don't. They have a herd mentality and they just follow the crowd. There's a handful of venture investors that really are doing this hard work of picking and choosing and analyzing, and everyone else is just kind of looking off of their test paper and doing what they do. Second reason is there's a timing mismatch. It's still an investment thing, which means those investors aren't gonna wait forever, they want their money back, and they specifically usually want their money back in seven to ten years. I'm gonna talk about solar a little bit later, that took around a hundred years from the first science-y idea through to the solar panels we have today. No investor can wait that long. Seven to ten years is just too short for a lot of the climate solutions that we need. Third reason is some VCs can get carried away with the idea of innovation and investing and taking risk and lose sight of actually solving a problem that helps real people. Finally, my last issue with uh the traditional venture model applied to climate investing is that most VCs are investing in software. This is how you end up with a million and one apps that can do things like door delivery and food delivery, but not a lot of stuff that's, let's say, making mining more efficient or cheaper and making it so you don't have to clear-cut a forest or blow up a mountain just to get metals out of the ground. It's not solving the problems that we need. So, long story short, it's tricky, it's messy at best. However, I still think it's a very important tool that's at minimum worth understanding and probably uh uh worth learning how and figuring out how to actually deploy a little bit better. So, to help us understand how VC might be well used and how it might be applied to climate solutions in the real world, let me introduce today's uh guest, Tom Chi. Tom Qi is a man after my own heart in some ways. He's a physicist, turned technologist and engineer, turned product developer, and now he's a venture investor. He's best known for working on some of the early stage innovations that have led to some of the consumer products we see around us today. Uh if you've heard of a wearable tech, like an Apple Watch or one SmartWatch, or even that meta glasses thing, which I haven't tried yet, but I hear is out there. Tom worked on really early versions of that stuff in his role at an innovation shop at Google years ago. Self-driving cars and machine learning that goes into that. I live near San Francisco. If you visit that town, you see Waymos floating around the streets, these robot self-driving cars that were clustering like animals or fish or something. Pretty fascinating to see. Tom worked on some of the early machine learning stuff that we now call AI for self-driving cars, and a few other things. Here's a bit of an anecdote about how I met Tom. I was working on a carbon removal project and doing a bunch of calculations related to trees and removal of carbon, and my bosses at the time weren't really ready to press go on the concept. They wanted a third party to sort of bless it and say it was okay. So I was set up to speak to Tom, going into it kind of grumpy at like, man, my bosses don't trust me. Come on, I figured it out, just let me do it. But also a little bit intimidated because he like an old school uh uh video game, he was like a final level boss that I had to get past to get my thing to the next level. Turned out the conversation was great. I learned a ton of things from him, just info I didn't know. And in particular, I learned a few new ways of thinking about these type of problems and about innovation and investing and venture and climate altogether. That's what I admire most about Tom is the way he thinks. Is it possible to have a crush on the way another person thinks? Tom is a first principles thinker. Now look at I'm a scientist. When I hear that phrase, usually I think it's BS. People just throw that phrase around. With Tom, what I mean is his thought pattern to start with what are the fundamentals of energy and matter that we need to constrain and solve these problems? And he builds up his investment thesis from there. Tom's a great person to help us talk through how venture can work, how it should work, how it does work or doesn't. So without further ado, I want to introduce our conversation today with Tom. What we talked about was how to be an environmental investor and what that even means. We talk about the physics of climate investing, and finally we talk about how innovation can actually disrupt some of the big polluting industries that are in front of us, that are the things we actually need to solve to get around this climate problem. Here's my conversation with Tom Chi. I think you have something that you've called a planet positive sort of investment thesis or something along those things. Sure, no, look, well, the the tagline for the firm overall is the purpose of our firm is to help humanity become a net positive to nature. Okay. So it's not just like vaguely, you know, the things that we do should be on the positive ledger. Uh-huh. It is the mission overall is that uh humanity in totality, nature is healthier every year that we're around because we're around, as opposed to damaged in various degrees because we're around. Okay. So, like in terms of distance between here and the goal, it's a very big distance right now. Almost every industry that we have is damaging to nature. Uh, but the way that we work on it in the firm is nature to us has four physical subcomponents air, water, soil, biodiversity. Yes. So we then stack rank the industries that are doing the most damage to nature in each of those four subcomponents. So, for example, there's four industries that are over 90% of global water pollution. So if all you did was change how those four industries related to water, you'd be great. You'd address more than 90%. You know, there's two industries which is more than 90% of fluorinated gas emissions. You say, like, well, great, you just need to hit two industries and you can completely change, you know, one of the four major greenhouse gases. Yes. Now, the way that we address that is we don't, you know, change the industry by like, uh, and this speaks to your question really, we don't change the inter industry by like convincing them to go green. Like we we instead always come in with faster, you know, better, cheaper, greener, basically. But the way that we describe it as opposed to that as like a more common lexicon is something that we call the triad. So the triad is basically disruptive deep tech, which ushers in radically better unit economics paired with radically better environmental economics. So most of the people that are buying from our portfolio companies, and I'd estimate more than 95%, they're buying purely because they make more money or they save more money on the thing, and typically dramatically more. Uh and then there's like maybe 5%, up to 5% that was actually looking around, kicking the tires, trying to find something greener. Yeah. And then they happen to find our portfolio companies like, oh, we love this. Oh, actually, this is this is cheaper too. Oh, I was just gonna do like a pilot in a blog post. We should just change our operations. Yes. Right? Because look, there are people looking to kick the tires, but because there haven't been as many companies that are offering both of those things well aligned, right? The better unit economics with the better environmental economics, people imagine they need to trade it off. Yes. In practice, it's not a it's not a prerequisite that when you have those two things, that they're not in alignment. And actually, I would say that in many of the companies that we're sourcing, like over 80% of the companies that we're sourcing, those two things are in fantastic alignment. But that said, you know, there has been the wrong perception of this for a while because the origin of that perception came from the earlier days when industry would just like all out polluting. And then, you know, organizations like the EPA and you know, and laws like Clean Water Act, Clean Air Act, all that kind of thing started to be like, well, you can't do it that way. And so to the businesses, because they had already been down a polluting route, it was expensive to try to pull that back, like both clean up their pollution, pull back their production, and go a different way with production. But that's like an artifact of how history played out. Now, if you were to say instead, no, we actually, from the outset, um, the environment matters, so go design a system that doesn't hurt the environment while you do this thing, it actually turns out in most cases it's not uh particularly um it's not intractable just to go design it better. Right? Now that said, you typically need some good, you know, invention work, some technology work, some design work to make it to pull it off. Yeah. But this is exactly what we're supporting through the venture. So I want to dig into this a little bit. Um you answered, I think, kind of half of my first question, which was something like how does positive or how how can investing in companies lead to a better, more planet positive environment for all of us. You spoke about the planet positive part. Yes. And you started to talk about better, cheaper, faster, and I'm gonna get into that in a second. But the other part, the investing part, I think this is where this is what sticks in a lot of people's throats. Planet positive is great. How can we be sure that we can actually make money and return money to a fund if it's gonna be a commercial fund? And I'll just go a little deeper into some of the answers you gave. You talked about better, faster, stronger, or better unit economics. Better, faster, cheaper, and greener. Thank you. Better, faster, cheaper, and greener. And better unit economics and better environmental outcomes. That's right. Do you think that that's a little more tricky and it takes a little bit better careful design, like you've alluded to? Or do you think there's another challenge, which is people just don't believe that it's possible? Or maybe both, or maybe to think about it another way. It is actually both because because of that history with environmental regulation, then there's a lot of business people that just intrinsically don't believe it's possible. Yes. You know, in our company, we've sourced many thousands of companies, you know, relative to doing our diligence. That I think not quite 10,000 yet, but like that order of magnitude. Yes. And I'm gonna say, like, like I was mentioning, over 80% of the time those things are actually well aligned. Okay. And let me give you a really concrete example. So I mentioned, you know, there's four industries that are generating most of the water pollution. One of them is the textile industry, and textile dyeing generates a lot of water pollution. Well, in this case, our triad is basically the deep tech is a new type of textile dyeing machine. Yeah. The unit economics, it's two and a half to three X better opEx, which means that if you're not doing it our way, like imagine competing against somebody with one-third your cost structure, right? If you're not doing it our way within 10 years, we're putting you fully out of business. This is why I mean it's like we don't need to sugarcoat or slow down at all around the success of the business. Like that type of business should actually just win. Yes. But on the environmental economic side, we go down from a textile dyeing station generating, you know, uh multiple metric tons of wastewater per day to an ounce or two a week. Yes. And and I can tell you exactly how that physically happens, but but let me tell you like why it's obviously in alignment, right? Like the the if you look at the cost structure of textile dyeing, one of the major costs is heating up all that water. So if you actually have a system that uses a tiny fraction of the amount of water, and we only use the minimum amount of water that's required to use as a transport vehicle of the dye into the fabric, right? Most most textile dyeing shops, this is huge vats with concentrated dye. Not all that dye is going to end up on fabric. Most of it's gonna end up in the river, actually. Sure. Right? For us, it's basically every bit of dye is used to go dye the fabric, and the tiniest amount of water is used to go transport that. Yeah. Now, given that, you know, the major cost structure for textile dyeing is heating water. If you get rid of all the water, that's where we get the OpEx wind from. Yeah. So effectively, the the unassailable OpEx wind is exactly the same thing as the environmental wind. Yeah. I um I really like how you're framing it because you know I'm somebody that wants to develop and does work on developing solutions too, and I think this is part of the mindset you have to have. But I just want to push you again because I see this a lot all over the place. Like I spoke at a sort of corporate sustainability meeting not long ago, and I introduced this idea I've been working on the last year or two, which is rather than trying to, as climate or nature-oriented solutions people, try to say, hey, world, I know you care about a lot of stuff like your kids and your health and your job and your community and the election and whatever. But you know what? Fuck all that, because there's something really complex over here called climate, and it's complicated and it's invisible, but not really, and it's scientific, and it sounds political. So you see where I'm going with this. Like the argument sort of weakens, weakens. And we say, Here are all the things you care about, but don't worry about those in your life or in your business. Care about this new thing. And well I I'm definitely not trying to ask the majority of people to go care about this. I think this is actually an on-purpose tactic. Well, with the plastics industry, we know it was an on-purpose tactic in order to go and shift the blame over to consumers where they didn't need to do more. Now, in practice, like would you rather solve the problem when there's 10 billion bottles in the ocean? And that's not total, that's like what we do every year, right? Do you want to go solve the problem where we're dumping 10 billion, you know, billion plastic bottles in the ocean every year? Or do you want to solve it at the extruder nozzle? Yes. Right? If you solve it at the extruder nozzle, you don't need to convince a billion people to handle their bottles differently. Okay. If you solve it at the extruder nozzle, you need to convince eight engineers and two process folks, and you know, right? Solving a problem with the source. Exactly. No, and this is what and this is actually the main way that we need to do the upgrade. Because the way that we're damaging the planet is not intentional, right? When people are driving from here to there, they weren't like waking up in the morning and be like, oh, I'm excited to go damage the planet this much more because I'm driving. No, they just wanted to get from here to there. Yes. And the main reason that, you know, human beings overall, if you just were to survey a hundred human beings and ask them how they feel about nature, it's going to end up being real positive. It'll be neutral to crazily positive. Yep. So the sentiment that human beings have toward nature is they honestly love nature. It's general positive sentiment. But are the net effect of the actions of all these people that love nature is that they're damaging nature right now. Not because they intend to. Like, like I said, that's not their sentiment. They they damage nature because the industrial defaults can't help but damage nature. Because you didn't choose when you picked up, you know, your clothes or whatever, oh, I want the one that had no wastewater from textile dyeing. That's right. The defaults were already set. Yep. And no individual is going to be like, well, I should be the one who then sets a textile dyeing plant and puts it in India or because this is the issue that I have. This is a total issue that I have with sort of all consumer-facing sort of initiatives, star program, lists, packaging labels. There's a part of me that believes in those things because as a scientist, I believe that giving people giving the information is good. But there's another part of me that just it sort of agrees with what you've just said, which is you can see these problems as a net effect of unconscious decisions, or a thousand cumulative or ten million cumulative small decisions that are themselves not intentional, really, but the net effect is quite big. Okay, but something you just said, I want to take it back to something you said earlier. You said, how can you know, imagine trying to only convincing those eight engineers? Or why would you solve the 10 billion bottle problem when you could solve the eight nozzles problem? Or you know, sentiments of that nature. You talked about some of the portfolio companies and they're making sales where the unit economics is is the environment sort of improvement, or the opex improvement is the environment. They're in full alignment, yes. Do you believe that the sales that some of your portfolio companies are making are based exclusively on things like better opex or better traditional business metric? Almost all of it is traditional business metrics. And what fraction, maybe answered already, but like what fraction is hypothetically the CFO at the buyer company getting uh some positive, appropriate pressure from the head of sustainability saying this is something we should try to do, and it's about even, so let's go this way. Or even maybe more extreme, this is the right thing, we should try to start from that basis. Do you see? The split is about 95.5. 95% is people just wanting the better unit economics. Okay. And 5% is like, well, I was in the market looking for a thing. And sometimes because of shareholders, sometimes it comes from the top down. Because there are some companies where you know they were originally founded by. A family or just the the values of the corporation, they want to go do that type of thing. Do you think that's where that 5% comes from? But actually, I don't think most of the forcing will come through those sorts of forces. Yeah. Well, well, look, I mean, if we had like a bunch of Carl icons that were going on there and there was like a and uh honestly, he obviously does it to just enrich himself, but if you had like a bunch of corporate raiders for the environment that just like went after every corporation in a kind of contested shareholder type situation, yeah, you could probably make something happen like that. Um, but yeah, we don't need that in the way that we do investing. It it people buy it because it it just makes better business sense. All right. So you are uh an investor now, experienced investor, experienced technologist, someone who's designed consumer-facing and non-consumer-facing technologies, and you're pretty well known for that. How does it feel to be raising money, making investment decisions, doing diligence in, let's say, a broad Silicon Valley influence context on this topic relative to some of the other topics you've worked in in the past? Is it are people's reactions different? Is it easier or harder to raise money? Is it more or less typical? Like, how would you describe it? Are there any differences? Yeah, so a lot of people told me that it'd be really, really hard to raise money because um we're kind of breaking all of the conventional wisdom, right? Most people are like, oh, you're getting to venture. Oh, it should mostly be software. Try to enterprise SASIFI this thing. Yeah. We have like none of that. Okay. Right? All of our businesses are physical. None. None. I was looking at the website, and this is like we I think we've had this conversation before, but you look at a climate fund, you get excited, click into it, start reading more, and then you realize, like, oh, cool, enterprise software? Like, yeah. And then for me, I'm like, my heart sinks a little bit when I see that. I get that you can get in and out of a fund and return the buttons. Yep, yeah, but it takes less capital and more. Are we taking time to nibbles around the edges, or are we getting to the heart of a problem here? Outside of that, though, I think that time has also made that approach less attractive. Oh, okay. And that when when you do enterprise SaaS and you're like the very first that does some HR software like Augusto or like I guess Zen Payroll, Legusto or whatever, right? Then great, you can make a name for yourself. When you're the 30th one, people are like, why do I need more of that? Yeah. Why would I need more enterprise SaaS procurement? Why do I need da-da-da? And people try to sprinkle a little AI on it and be like, well, this is why it matters now. It's like, no, no, this is just a weakening approach. Yep. But long story short, we're against the conventional wisdom in a bunch of ways, right? Our stuff's all physical and hardware and not software. Our stuff is all deep tech and not kind of consumer, easily approachable kind of stuff. So sometimes it's deep tech that gets presented to the consumer, but the stuff behind the scenes is pretty hardcore. And our thing is all about climate and environment. And really, any one of those three could be considered a handicap relative to fundraising and all that sort of thing. But we do all three for every deal. And the the for me actually, fundraising was um, you know, it takes time and it takes a bunch of energy, but I I would say that our close, our our conversion and close rate was very high. And the reason that I I think that it's high is that um I just really speak to uh a different perspective compared to the conventional wisdom, right? Because most people are like, well, you can't get into hardware because hardware is hard. And I actually I take a position that like investing in physical and hardware things in many ways are easier. And people are like, the easier the hell are you talking about? And it's like it's actually very easy to explain, which is when you work on physical things, everything that you work on follows the laws of physics, right? It's called physics because it's the study of how the physical universe works. The constraints are well known. Right, the constraints are really well known. And when I'm trying to go understand whether a new piece of technology has any possibility of beating an old piece of technology, I can just cover it from physics first principles. That's interesting. So at the end of the day, like I was a physicist before, I was a working physicist, I was an astrophysicist for six years with the Harvard Smithsonian Lab for astrophysics and also Cornell Space Sciences. So I do know how to do the fancy math, but I like to tell people that physics is really nothing more than the study of matter and energy moving through time and space. There's really only four things to keep track of. And if you're trying to understand whether a new piece of tech has the real potential to displace the existing incumbent industry, you just go head to head on those four. How did matter change between old and new? How did energy change between old and new? Yeah. How did time change? How did space change? If you do not have a huge win, so not like a 5% win, you know, or a 10% win, 20% win, that's way too small. If you don't have a huge win on at least one of those four, you can pass on the deal instantly. So I pass on deals in five minutes that I know other people have spent five meetings on. It's interesting. I mean, like I'll contrast this with another uh, I mean, you're speaking by language as a physicist as well, right? Or a former physicist. Yes. And, you know, things like dimensional analysis. Yes, yes. This is like our siren song. We just love this case. Right. And when people have like an up and to the right curve, then you can actually like physicalize how much actual material needs to move on, how much over how much space to go do it. And you're like, no, that will fully not happen. I know you can make that next cell in the spreadsheet and it goes up to there and it models out great greatly, but yes, no, when you physically work it through, it's like that will not happen. I was trying to come up with like a very quick and dirty sort of I wouldn't even call it techno economic analysis. It's like a very quick and dirty order of magnitude tip calculation for carbon removal technologies and um Ram as Nam, you know this guy probably gave me this idea, which was he was like, well, just look at it in terms of energy and materials only. Exactly, which is like I can totally do. Yeah, mass energy flow analysis. It I found it to be pretty, you know, I just wanted something that was 80% correct that I could do in 10 minutes type of thing. And it was really helpful. Okay, but let me I know that I agree with what you said, but I also am biased to believe in it because I love that physics way of thinking. Um I also think there's a weird perversion where people are, and I I shouldn't say this out loud, but people are a little more enamored with physics than maybe they should be in the Silicon Valley culture. So I can imagine, especially somebody like you with your reputation, coming into a meeting saying some interesting physics-sounding stuff, yeah, and people going, wow. Not because it's not impressive, but maybe not quite as impressive as it could be or or maybe seems to them. So the question is, do you believe what I just said? Do you think there's any a little bit over-indexing on sort of people using phrases like first principles or fundamental who I know don't really know what those mean? But those are the same things. Yeah, I say like when people say that, then I listen to whether they're actually doing a first principles analysis. Right. And I oftentimes say it's not. And um, and for the most part, they are they agree with me. Okay. So so I like look, I'm I'm a pretty low bullshit person. Uh, and the reason I like to speak in physics is that it's just what will happen. Yeah. Right? So, like, I I like it because unlike uh an entrepreneur which needs to be a little hot and ahead of the curve, where it's like, oh, let me talk about what will happen. And unlike, you know, like uh whatever, like cable news people where they're just grumbling about what already happened, and then it's like, no, no, no, no. Like this moment, that's the thing. And physics basically will just literally tell you if you put the matter and energy in the right time and space, it'll tell you what will happen in this moment. So I like the neutrality of it. It's not leaning forward, talking about speculative stuff, it's not, you know, arguing about the past or dwelling on the past. It's like this will what this is what will happen when you put that matter and energy in this configuration, period. So I I think it it cuts through. Look, when you're actually a physicist and you can actually present it correctly, yeah, then it cuts through because it's actually just true. Yes. Now, if you are not that and you're just using the terms, then I like hear it immediately because you know, um, you can just tell a person doesn't know what they're talking about. I uh this is a fun conversation. We should talk about this more sometimes. I think I'm a little self-conscious about it because I've received, I'm familiar with the positive attention that's saying something like, I have a PhD in quantum physics, and people go, ooh, and I'll be like, cool, I want you to think highly of me, but I barely know what that means, and I studied it for years. You don't know what that means. Are you just impressed because I'm this sounds like physics mumbo jumbo to you? Or are you really getting what I'm saying? That's why it's something I muse about. It's not, it doesn't keep me up at night. Uh I appreciate your answers. But if you needed to I wonder if you run into that. If you need to make a choice, you should hire applied physicists instead of theoretical. And this is my bias because I'm a builder. I've You're not just blowing smoke, right? I'm on the applied side. And and look, as an astrophysicist, I studied actual objects. I wasn't like theoretically talking about multiverses in a way that there wasn't any experimental way to investigate it. But like the so if you had to choose a physicist, you should probably lean toward the applied side if you actually need to make something. But physicists are actually really great at math too. So if you need them as investors, you can make them, you can have theoretical physicists be quants. They're they're good at it. I've had that job. Yeah. I didn't know, uh, and I was a lab person, I didn't know we were gonna have a detour into physics, but I'm appreciative. Oh, no, it it truly is central to the way that we invest, and it it really does make a big difference in in LPs being able to go understand the thesis. Because here's the thing, actually, to the previous question that you had, like, why is it possible for things that are good for the planet to be good economically? It's actually really simple. If you had a major reduction in the matter used, you're saving on feedstock costs, a direct improvement to unit economics. If you have a major reduction in energy, you're saving on opex. Major reduction in time means that the same capex is able to go pay itself back in in a shorter amount of time. Yeah. And it also means that the that the capex depreciation contribution to opex is gonna be much smaller, right? And then at the you know, if you save on space where you need to transport logistics-wise, move it less distance, obviously economic benefits, right? Um, so at the end of the day, it's obvious how the physics translates directly to the unit economic wins. So it's not like some, oh, I'm just gonna impress you with some fancy numbers or terms and and you'll be, you know, so hypnotized into investing. It's like, no, no, I'm directly talking about how we're gonna make this decision as a function of how the physics works, and I will show you on the last five deals if you want. Right? I'm gonna switch gears to another talk in a second, but we should write a paper, or maybe somebody already has. It's like um, you know, Bill Gates wrote this climate book a couple years ago, and he's Yeah, how to avoid a climate disaster. The green premium. Oh, the green premium, yeah. Yeah, that concept. I was like so-so on the book. I'm glad he wrote it. Green premium. That was a concept I noticed that spread. The gap between what the thing that we want costs and what the thing that we have costs. Then we should invest in things with big premiums. It's actually poorly, yeah, it's poorly described. It's really the green penalty. And like in practice, like the investments that we do are like a green bonus. You popped over to something greener, and by the way, and actually, it's even that's the wrong phrasing because when the people pop over to buy our things, most of them are not even interested in anything green. Right. They're just doing something very green. So I'm a I'm a little uneasy with that concept, that's why I brought it up, because I want to contrast, and this is the paper we should write. So Bill Gates wrote the book about green premium. Cool. Yeah. The paper to be written is what are the known, let's say the terminal point could be opex savings. What are the known or near or high fidelity estimates of opex savings in various processes that we have on Earth from a physics perspective? Let's rack all the mechanical processes, chemical processes, largely, um, maybe some biochemical, and say, based on what we know now, you know, this is right for a 50x improvement, this one is more like 3%. That would be interesting to see. I haven't anyone like worked that out, but oh yeah, you know, like Buckminster Fuller worked out something like this in Critical Path in the 60s. Okay. And he kind of traced through all of the all of the elements that are used in industry and where they come from and how they get transformed and all that kind of thing. Now, that's obviously, you know, 60 years old or whatever at this point. So, you know, find time for a refresh because there's a lot of a lot of you know things on the periodic table that we use now that we didn't use back then. Yeah. All right, changing gears a little bit, I want to ask you about how it feels as a person, as a professional, to be working in these topics right now. Now, right now can mean a lot of things. It can mean the state of venture investing and marketplace. Um I see a bit of the unraveling of the ESG sort of frameworks that were not frameworks, but culture that was building up in the United States, that's kind of unraveling. But and there's also an element, I know some friends that are more maybe traditional conservation people. They'll say things like, I experience fatigue working on this hard topic, which feels like an uphill climb over years. So, more personal question to you from where you sit. How does it feel personally to be involved in these topics at this moment? So, yeah, I I adjust my feeling based on the physical reality of what it will take to do the work. And and and this is this is not really meant to like be, you know, a conversation only about physics, but because I'm a physicist, I do understand that a lot of the repair of the earth is going to take some time. Yeah. Like if I could snap my fingers right now and we fully decarbonized all of industry on planet Earth, and I instantly pulled out 1.8 trillion tons of excess carbon dioxide that is in the atmosphere and dissolved in the oceans. If I could do that with a snap of a finger, it would still take 80, 200 years for the ice caps to get back into shape. Yeah. And that's if I could magically fix that part. Yes. So like the part that I was saying, oh, I would magically fix, no, that will actually probably take on the order of 50 to 100 years. Yeah. Now, I I do want us to move faster in a lot of fronts. Um, I know that it's physically possible to move faster. That's the physicist lens on the thing. It may not be politically possible to move faster, but like given that, you know, but even when I when I say, like, oh, get rid of all politics and we can just do the right things as fast as possible, that's still a thing that will take longer than the rest of my life. Right. So I think we already need to be thinking, right? And and that's in a very optimistic case. Like world peace exists, we all decide to cooperate, you know, like we are sharing with each other openly, we are we are building, you know, uh infrastructure together, like thinking over country lines as we as we build infrastructure, all that kind of thing. Yeah, that's not the world that we're in right now. But like, even if that all needed to happen, you think through the physical build-through and you're like, oh no, no, it's not all gonna fit in a lifetime. So I think like, you know, the idea of being fatigued in a specific year is wild when you think the frame is a lifetime. Yes. Right? Okay, so I I like this perspective, not again, just taking back to physics, not just because I can relate to it in that way. But I would summarize what you've said as it's a marathon, not a sprint, a little bit. The physical reality is that it will take that long. So then the main question is how do you want to psychologically respond to that physical reality? Now I can be, I can have a bunch of freakouts, because there's many things that are breaking about the earth system, yeah, and every year they're a bit worse. Yes. Right? So in any given year I can freak out about a specific thing. I think in practice, though, if one were to play through, how does that psychology serve the actual physical task that is likely to take like 150, 200 years? Right. Yeah. I like, I um there's another phrase in my mind. Like Vaclav Smiel is one of my favorite writers about energy, and he is part of his public persona now as an intellectual, is I think he's known for being a bit of a currently person to be like, listen, your 20, 35 targets are a joke because what you need to understand is an energy system transition is probably two or three generations long. So like buckle up for the next 50 to 100 years. Yeah. And with my physics hat on, I'm like, I'm with you, I'm gonna read your next book. But you know, this expression happiness is a function of expectations. I was chatting with a friend's, I think, 17-year-old daughter, and she said something like this Well, I've kind of given up the government, these companies, they're not serious, they were lying and fake. They wanted they say they want to do something, but they're not. I'm like, oh, okay, you know, what do you think? And she's like, Well, you know, when I was 14, which to her is maybe a lifetime ago, 17, I used to go to the marches, and then I realized two years later, nothing was happening, and so now I'm off it and I don't want to really engage with this anymore. Yeah. And when pressed, I said, like, you really think the world's like gonna end? And she was like, Yeah, I think it's all gonna end like just after my lifetime. So even though I had that physics, I've got to be patient, I don't think this is gonna be long-term, you know, things like electricity, new materials, carbon removal, digital and climate, things I like to work on. I have no sense, expectation that this is happening in two or three years. But sometimes I struggle. Like if I were that 17-year-old, do you think the physics response would work? Does it work? Do you have another response to that 17-year-old? What do you think? It's important to break this up into two general playing fields. Okay. One is the physical playing field. And my calculations or Vakov's calculations or what have you are about that sort of thing. So when when I'm saying, or he's saying that it's going to take 150 years or X number of generations at least, then that's effectively what's happening. We're working on the physical playing field, right? That physical territory. But there's another territory, which is the psychological territory. And on this territory, we've, you know, I guess what you were saying there was that Vakov was saying, like, guys, like get realistic, right? But that to me is um, that to me is, and he's not trying to play on that field. So I'm not even gonna try to say, like, oh, what a what a silly thing to say. Um, because he's just trying to play on this field well, right? The physical field well. But when you take the the psychological landscape seriously, yeah, then you ask yourself, well, what is the psychological relationship that I need to have, that that my work group needs to have, that's that civilization needs to have toward the unfolding of this. Now, when something goes over generations, resilience, longevity, like a you know, a clear mission that everybody keeps going back to, yeah, are things that really, really matter. And we have like really mucked up the psychological landscape. If you look at the theories of change, including the one that you just mentioned, we have a couple theories of change and they're and they're all pretty poorly constructed in the psychological landscape perspective. One of them is, oh, if I march in the streets enough, then we'll eventually elect the right person, and the the right person will save us all. I think we know from enough cycles of politics that even if you have, you know, some great people top of the tip ticket, they're not going to solve everything. There's a lot of solved that needs to happen everywhere. So, like, there's already that flaw in it. But then there's a further flaw, which is like, what if you do all those marches and the person you didn't want gets elected, and then you feel really disheartened? Well, on one hand, you could say, like, well, that's natural, that's part of the cycle. But on the other part of it, if you were to think about the emotional psychological landscape, you could see how something like that would be a ringer that would go and and completely exhaust people before they could actually get into the real work of doing the thing. Now, when something becomes a thing, it's not because there was just a single march, right? Sure. And look, I'm not trying to say that there wasn't any benefit to any specific march, right? Like in collective, it adds up to something interesting. But when something really becomes a thing, that it becomes part of how society works. And if we want the economy and ecology to change this much, it will be foundational to everything about how the economy works, right? If you want it to be at that depth, you're building disciplines, right? So, like when somebody like think about the discipline of computer science. It literally didn't exist a hundred years ago. Well, so okay. When you say disciplines, you mean like what we would call academic subjects or fields, areas of study, concentration. Right. And what happens is people get incredibly good at it and they spend decades on it. Yes. We're right at the beginning of this for climate. We have almost nobody in the discipline. We have a couple people that were kind of the early pioneers and mentors, and they were in it for 20 years. Yep. And there's a couple other folks that are right about to die, basically, in terms of age, and they even preceded this, you know, the the 20 years ago folks. But that number of people is tiny. And and now we're we're roughly 100xing it, which is fantastic. Because look, I also remember the development of computer science. Sure. If I were to say, how many computer scientists in the world, 1975? Yes. It's a very small number. It's basically similar to the number of people that were pushing real hard on climate back then. And you fast forward, there was a point where it's like, oh no, this is going to be important discipline. And actually, it won't, it's and look, after the pioneers, then there's like the interested folks. And that was like me studying advanced technical disciplines back in the day, and that was me also interested in the climate stuff back in the day. Me too. But I was just like an avid learner of and just trying to catch up with what they learned over 20 years. But once you do that, then you become some of the first professional practitioners, and you are meant to go teach the next group of professional practitioners. And when one is talking about teaching that group of professional practitioners, then the psychological landscape is the thing. So when I was a corporate, you know, executive, then, you know, very normal on a quarterly basis, we would have the updated strategy. We have our quarterly all hands, and I sure I would often need to get on stage and like motivate everybody. It's like, all right, really focused in on so and so, chasing this down. We got to knock down these three milestones, great work on so and so over the last three quarters, right? That kind of thing. Yeah. And what I'm really working on. In that medium-wise, is the psychological landscape of my team. If I've done a fantastic job of that, after the all hands, like strategy clear, heads down, like you know, like people high five in, just because shit's like like banging it in terms of how it's working. Yeah. Right? But like the way we've managed the climate movement from the psychological landscape is chaos. It's like young people with all the energy, let me throw you in the political thresher. I hope you come out okay out the other side. And some of them come out stronger, but a bunch of them come out like, holy shit, what just happened, right? There's a there's a thought out there that, and I think in the framework that you've just set up, that this thought lives entirely in the psychological landscape. Yeah. And I think the idea, if I can do it justice, goes something like this. One, that is the battleground. And the the physical basis that you've described is not meaningful or possibly is a trick. I might be I'm really trying to be fair to this point of view. Second, because the psychological battleground is the thing, the most important thing there is psychology and communication and language. So our language matters the most. I tend, as a more techno-oriented person, I tend not to believe that. But I have two questions for you. One, do you see any merit in that view? And follow-up question, do you think it matters what we call these things in these early days of practice? For instance, I've noticed the phrase climate tech might be falling out of favor, I'm not sure. Or nature tech. So do you use or care for those phrases? But also, what's your thought on this notion? I mean, you I think you've spoken against it a bit, but what's your thought on this notion that really the psychological playground is what we need to focus on, specifically language, because that's what's in front of most people most of the time. So I think both landscapes are really critical. Like you we do not succeed without both of them. Because if everybody is psychologically convinced of a thing that can't physically happen, well, you're cooked too, right? So you need to be real enough about the physics of it to make sure that the things can actually physically happen and in a way that is economically advisable, right? And that's just all, you know, uh that's what that playing field is. And then the other playing field, if you fail at the psychological playing field, you'll know exactly what to physically do. You just won't do it. So at the end of the day, you do need to succeed at both. Uh, the reason I mention, you know, how it's being handled right now, I I talked about the political marches as like one theory of change, which is doing a bad job of talent management. If if one were to put on the executive hat, you'd be like, we threw a lot of talent at that, and it was very little outcome for all the energy and talent that we threw into that, right? So think about this like as an executive for a second. So that as a theory of a change was like a talent thresher. Like me, as if I was an executive, I was running the whole climate movement. Not that this exists as sure. I'm with you. I'd be like, holy shit, we're we're putting all these young, passionate people into this, and there's maybe like a 5% efficacy rate here. Like the young woman I spoke to who was like, after two years of this, I'm out, I don't even want to work in the structure. And I'm sure she marched passionately and she read the things diligently. It's great, right? But it's like maybe 5% efficacy. So if I was an executive over this, it's like, well, how could we retain some of that efficacy but remap some of this talent to other places? Yeah. When I say remap it to other places, this is why I was talking about building the discipline. Because we're now at the point where there's a bunch of careers that will happen in climate, and there's a bunch of people in their early 20s where they're deciding what discipline to be in. And if they decide to be computer scientists, like you know, some people decide in the 80s and 90s, they're gonna build this whole discipline with us. You know, if they so if they decide to pop over to climate right now, they will build this whole discipline with us over the next 30, 40 years, and they will be the first in the baton race, you know, of the four-generation baton race to be like, hey, we did our 20, 25% of the problem. Here you go. And like I said, oh yeah, I'll toss out one other thing here, because the marching in the streets is not the only theory of change. The other theory of change, which I think is a failed theory of change, is the goal, thou shalt not exceed 1.5 degrees C. And on this point, this is where the language matters. Now, people don't literally say thou shall not exceed 1.5 degrees C, but the way the goal is constructed, it is a thou shall not goal, right? And the thing about thou shall not goals in the psychological landscape is thou shall not goals do not create motivation psychologically. Right? The most famous collection of thou shall not goals is the Ten Commandments. People rarely read the Ten Commandments and say, like, I'm so jazzed about living an amazing life. They're terrified. And similarly, like when they when you have a goal like thou shall not exceed 1.5 degrees C, your main things are oscillating between I think we're okay and terrified. Well, I mean, let me pick up on that because I like just for the audience, so I think the part of the history of the 1.5 degree goal is through the UN's climate change process, uh, scientific consensus through the IPCC, International Panel of Climate Change, developed this idea that we don't want to let the average surface temperature go beyond 1.5 degrees. Extremely bad things happen, specifically maybe irreversible things. And there was a bit of uncertainty between 1.5 and 2 degrees. And then let me layer on sort of a bit of politics at the UN level. I know the small island nations, nations that literally are at risk of their islands disappearing from minor sea level rise or major sea level rise, they tend to be the group that is the most adamant that the 1.5 degree thing be preserved for the audience. Um, because their argument is this isn't an abstract concept for us. And you know, if you live in, I don't know, North America, you could say, oh, two or three is worse than 1.5, like I say. So there's always something to fight for. They're like, this means the end for us. All that to say, um, I think the prospect of staying below 1.5 is vanishingly small, perhaps zero, perhaps it's been zero to the same. I'm actually making a slightly different point, and maybe it lets us parse it through this framework, sure, right? Because, like you said, a good collection of scientists got together, the IPCC helped to organize a number of things, the data were processed well. And in the realm of the physical landscape, they were able to determine, well, here's, you know, as you move up the temperature gradation, then here's how the risk level changes. And they did a good job of that. It is a boundary with some physical meaning. Now, this, you can't just bulk import this to that. So the failure was not that people did some, you know, reasonable science and said, well, this is an important inflection point. The failure was like, it's like if I was the corporate executive and I got up for the all hands and said, like, guys, so I looked at the numbers, and the numbers are bad. So thou shalt not make the numbers worse. I'd be like a terrible executive. Yep. That that would be the worst all hand speech I would. Well, let me let me like frame it even more because I think this is what scientists do is they say, okay, what I need to do to motivate the team to be better is show them where we are and show them how off the mark we are. Yeah. And the data will set us free. Sure. And then they give the talk and it's like, here's the data, it shows we've got to stay below 1.5. And people say, okay, what what do I do now? And I just like go back to work now. And then we're sort of shocked. Scientists are stunned because, well, we showed you the thing. Aren't we supposed to act now? And I think you're saying is no. No, no, it's there has to be something else on top of the basic data and information. No, it's truly a different medium. Yep. Right? It's like one is painting and the other is music. It's a truly different medium. So like if you it's not that you can't do a painting that makes people think about a song they want to write or like imagine a song that they heard, right? Yeah. So it doesn't mean that there isn't some resonance between the two like territories of work, but it's truly different work. So you can be fantastic at the science side, but fully fail at the psychological landscape, emotional landscape, communication side. And and I've said it in a bunch of different ways, but like one way in like, you know, like contemporary parlance is that it it, you know, climate movement doesn't have any swag, right? There's it doesn't have like a vibe, it doesn't have that kind of energy. It's just a bunch of folks working on the material plane of things. Yep. And look, I speak that language too. I'm a physicist, so I can go consume it that way. But I would be embarrassed to get in front of an audience and try to be like, okay, I'm just going to read out some numbers to you. That would mean be just not even trying to write the song in the other discipline. This is this is the whole thing of what we're trying to do with this conversation and others is like bridge that gap and recognize that look, there's a few playing fields, at least two. Yeah. None is really subservient to the other. You can have your favorites or they can have utility, but it's recognizing that they need to work together or that there's an interface play there. And we need some people that are brilliant at that discipline. There we go. Right? So so, like, look, I think I do good calculations, like Ivakov is film, you know, quite famous for doing, you know, Hans Rosling, a bunch of people are famous for doing some good calculations. It's great. But like that's just all in this one discipline. And we need the folks and the other discipline that are really coming up uh effectively. And I think the bridge between the two is really helpful because I've seen like really great speakers and leaders like push everybody into that low efficacy theory of change. Right? And it's like, well, look, okay, we're you have the chops in terms of being able to like connect, inspire, motivate. That's really important because we will need tens of millions, hundreds of millions of people working in some capacity over the next you know century in order to go make this happen. So like it's already very powerful and important that you have that ability to engage, inspire, motivate. That's great. But if you are inspiring people to go down a route that doesn't, is not the high potency, high leverage route relative to what will materially change, then you're also wasting people's energy and time. So I I think we are woefully weak on the psych, you know, psychological, emotional landscape discipline. And amongst the people that are good at it, they're not always well grounded by like what are the things that are gonna have highest efficacy. So I I think what's what a nice thing about our firm is we try to do a good job at both. Yep. And uh in the process, like I have a lot of talks online if anybody wants to go watch, because like our firm's doing really well as well. And a lot of times people are like, you know, when you have something that's working really well, you want to like hide it because it's your secret sauce and you're like competing for LP dollars or whatever. But for for me, that's just a completely ridiculous frame. Like the the more prescient frame is we have so little time to go solve these problems. Yep. And every year that we don't solve the problem, the addressing the problem gets substantially more expensive. So this is not even just a little ticking time bomb, it's like a bomb that's getting bigger, you know, every year that you don't go solve the thing. So even though we have a bunch of approaches that are successful, we don't want to go hide that as our secret sauce. Like we want everybody to have that as soon as possible. So all the dollars are successfully doing a kick-ass job in these physical businesses and this industrial transformation. And if everybody raises the whole bar because they're doing everything that we do, then great, we'll just raise the bar further. I actually think we're not even 10% there to how well this firm is gonna do the work that it's gonna do. Well, I wish you nothing but success with that, and I would take that analogy and extend it further. I think we're nowhere near like hitting our stride or as our level at our level of a community of people that are trying to be innovative in solving these problems. Like you said, I think we're at the beginning of field building, and so like people often ask me if I'm optimistic or what my feelings are, and I probably more of a glass half-old person than glass half empty, but I'm more than optimistic, I may be determined. Yeah. Because I think there's something for me personally that excites me. There's something for a group, I can contribute to a thing, but like you just said, we need more people at the interface, and so if you're hearing this, I want out. That's the end of part one of my conversation with Tom Chi. Now, if you like this episode, there is a part two. So check that out. It's up now on YouTube, on Spotify, on Apple Podcasts. You can also sign up for our sub stack to get updates and periodic news about what we're up to and what's coming next. We also want to know what you're thinking, what you thought about this episode, what do you think about this intersection of investing and venture and climate solutions? We'd love to hear from you, and you can always email the show at podontherise at gmail.com. That's podontherise at gmail.com. We'd love to hear from you. Now, in part two of my conversation with Tom, we talk about why the climate world is so white and why that matters. We get into how and when and whether artificial intelligence might be useful for climate solutions or not. And finally, I challenge Tom to try explaining planet positive investing at the level that a 10-year-old child could understand. That was a fun one. You're not going to want to miss it. Thank you to Tom. Thank you to him for letting us film at his place in San Francisco. Thank you to my producer, Vic. And here is the music of Claire Davis to take us home.