Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, you know, we do these episodes on various areas
Speaker 2: of technology in which China is perceived to be ahead
Speaker 2: of the US. Very interesting and I learn a lot.
Speaker 2: It's not obvious to be like, what lessons there are
Speaker 2: or anything some of these things like we're really far behind.
Speaker 2: I don't think we're ever going to catch up. This
Speaker 2: is very interesting and academic. But what exactly is the
Speaker 2: point of talking about all this? I don't know if
Speaker 2: there's anything to do with this information.
Speaker 3: You know, what I thought you were going to say
Speaker 3: is that we are sometimes accused of identifying strategic choke
Speaker 3: points or areas of difficulty on the podcast and then
Speaker 3: coming up with absolutely no solutions for how to fix them.
Speaker 2: I will be the first to admit I have no solutions.
Speaker 2: If someone accuses me of saying you have not offered
Speaker 2: any solutions, you know what, I just say, that's not
Speaker 2: my job. I'm just a mere podcaster. I'm just asking questions.
Speaker 3: We enunciate the problem and leave it to others. To
Speaker 3: figure out.
Speaker 2: We leave it, We leave the problem to others to
Speaker 2: figure out. But there are people who are doing more
Speaker 2: than identifying choke points. There are people who are identifying
Speaker 2: areas and vulnerabilities, et cetera. So people actually are thinking
Speaker 2: about solutions, and they're not all pie in the sky.
Speaker 2: You know, I've seen people on Twitter it's like, oh,
Speaker 2: I know how to be more like Chinese? And you know,
Speaker 2: why do we just adopt to.
Speaker 3: Be more You've seen people on Twitter how to be
Speaker 3: more Chinese? They're Chinese, Joe Wise.
Speaker 2: They're just saying, why do you why doesn't the US
Speaker 2: just adopt Marxist Leninism with Chinese characteristics? It's right, that's well, no,
Speaker 2: and then we can do.
Speaker 3: This on a serious note. The one you see most
Speaker 3: often is well, why doesn't the US just ease up
Speaker 3: on some of its regulation like China in order to
Speaker 3: get things done quickly?
Speaker 2: That's the true Spend more money or something like that,
Speaker 2: encourage actors to pursue things that aren't necessarily so short term,
Speaker 2: et cetera. Yes, there are in theory solutions. Anyway, let's
Speaker 2: have a conversation which we actually talk about ideas that
Speaker 2: may be somewhere in the realm of.
Speaker 3: Feasible excellent, I'm ready. And this is also this is
Speaker 3: not an interesting topic that's come up a number of
Speaker 3: times on all thoughts at this point.
Speaker 2: That's right, So we're going to be talking about a
Speaker 2: very core topic. And of course, this is the US
Speaker 2: vulnerability to strategic minerals where earths et cetera, which we
Speaker 2: know that China dominates, which in theory of China word
Speaker 2: to completely shut off access you know, nadget military, high tech,
Speaker 2: et cetera, all kinds of problems. What could actually be
Speaker 2: done to alleviate is vulnerability.
Speaker 3: And China's dominance was also a crucial turning point in
Speaker 3: the trade negotiations with the US. And also I think
Speaker 3: you got a sense of I don't want to say
Speaker 3: desperation on the US side, but like maybe urgency on
Speaker 3: the US side, just by looking at the headlines that
Speaker 3: seem to come out on a nearly daily basis about like, oh,
Speaker 3: we found a huge critical mineral deposit in Utah, so
Speaker 3: you know, we're all saved.
Speaker 2: It's also worth before we go further, this is an
Speaker 2: area in which there's probably a decent amount of overlap
Speaker 2: from the last administration to this one. We did an
Speaker 2: episode a little while ago with Peter Harrell who talked
Speaker 2: about some of these deals that the administration is making
Speaker 2: with equity stakes and private companies. I think Vulcan came
Speaker 2: up as one of them. And so yes, we're going
Speaker 2: to be talking about what we're further we can go
Speaker 2: in terms of actually having a healthy, robust domestic environment
Speaker 2: for our own strategic commodities, et cetera. Anyway, we really
Speaker 2: do have the perfect guest. We're going to be speaking with,
Speaker 2: Heidi Krebohticker. She's a senior fellow at the Council on
Speaker 2: Foreign Relations, a former chief economist at the State Department,
Speaker 2: and she is the co author of a brand new
Speaker 2: report for the CFR looking at exactly this question, what
Speaker 2: can the US do in this room? So, Heidi, thank
Speaker 2: you so much for coming on the Odd Lots podcast.
Speaker 4: Thanks for having me on.
Speaker 2: Tell us what's this new report all about.
Speaker 4: You're right that everyone's identified the problem and that it's
Speaker 4: been a long time coming. This is like a slow
Speaker 4: train coming at us for decades. At this point, it's
Speaker 4: not a surprise that China has dominated this market for
Speaker 4: a variety of reasons. And it's not a surprise that
Speaker 4: they've weaponized it. They've done it over the years. We
Speaker 4: did pay attention, but we forgot about it in many ways.
Speaker 4: But right now we have an inflection point where we
Speaker 4: really need to get this sort of damicles off of
Speaker 4: the United States. And actually our challenge is the same
Speaker 4: challenge that a lot of other advanced economies have right
Speaker 4: now with this incredible choke hold not just on critical minerals,
Speaker 4: but particularly rare earth, particularly heavy rare earths that are
Speaker 4: the foundation of magnets which go in everything.
Speaker 3: Can I just back up in history for a second,
Speaker 3: because I think it will help us contextualize where we
Speaker 3: are right now. But what were the conditions that allowed
Speaker 3: China to basically gain dominance in this particular area. Did
Speaker 3: they make us strategic to decision at some point saying,
Speaker 3: you know, we're going to be the world's uh not
Speaker 3: manufacturer of min of rare minerals and rare earths, but
Speaker 3: we're gonna we're gonna make this, you know, a priority
Speaker 3: for ourselves.
Speaker 4: Yes, made in twenty twenty five was their big strategic plan.
Speaker 4: They had invested a lot in rare earths, you know,
Speaker 4: particularly their domestic rare earths many many years before that,
Speaker 4: but they decided they wanted to dominate, and they really
Speaker 4: they did a very smart job of creating an entire ecosystem,
Speaker 4: so both domestic China extraction processing, and then they came
Speaker 4: up with the all of the products that were that
Speaker 4: would be the leading demand, which you really need to
Speaker 4: have for the creation of a market, and the demand
Speaker 4: meaning the you know, new energy wind turbines, particularly their
Speaker 4: you know, their evs and also defense, so you have
Speaker 4: a whole like demand pull, and you also have state
Speaker 4: companies that don't have to be profitable, and that's pretty
Speaker 4: key if you're competing around the globe to actually mine
Speaker 4: and process. They also have a low hold on the
Speaker 4: technology for processing, and so in traditional mining, you know,
Speaker 4: they have really they've made a massive strategic investment, and we,
Speaker 4: for a variety of reasons, did not.
Speaker 3: Joe. This reminds me of the episode we did with
Speaker 3: Dan Wong where he made sort of similar points about
Speaker 3: the tech ecosystem that's developed around shen Zen and how
Speaker 3: that allows innovation to really thrive. And then also this
Speaker 3: idea that well, if you don't necessarily care about returns
Speaker 3: on capital as much as the US. Certainly, then you
Speaker 3: kind of have a leg up when you're developing something
Speaker 3: like this that might not pay off for a very
Speaker 3: long time.
Speaker 2: And this always seems to be an issue when we're
Speaker 2: talking about matters of national defense, because right when it
Speaker 2: comes to national security, you have this other priority that
Speaker 2: is not profit related. Everything that we've done, every episode
Speaker 2: we've talked about this comes up with we're talking about
Speaker 2: literally the defense industries and the defense suppliers or other
Speaker 2: strategic things. Here's this other goal that you have in
Speaker 2: which you have at least two bottom lines, ones related
Speaker 2: to security and ones related to profit. And so you
Speaker 2: have this tension. So how did you How did you
Speaker 2: do this report? What was the process by which you
Speaker 2: researched this, Who did you talk to, et cetera so
Speaker 2: that you could ut publish this.
Speaker 4: The report itself is on how while we put all
Speaker 4: of the emphasis on mining, on the extraction, coming up
Speaker 4: with the processing and the end products, for example, magnets.
Speaker 4: The thing is we can't actually outline, out process and
Speaker 4: outspend China, certainly not at scale and not in a
Speaker 4: cost effective way. So what is another we have basically
Speaker 4: a huge timing mismatch will we get there eventually with friends, allies,
Speaker 4: you know, all of the different countries that are working
Speaker 4: on the same problem together eventually, but it's going to
Speaker 4: take a very long time, and we don't really have time.
Speaker 4: So we looked at how innovation could actually leap frog
Speaker 4: that China choke hold on critical minerals and particularly rare earths.
Speaker 4: And so that was really the starting point. How do
Speaker 4: you solve for national and economic security in a way
Speaker 4: that really plays to us strength in innovation. And then
Speaker 4: when we took a look around, we found there were
Speaker 4: some really exciting companies that had taken research and development
Speaker 4: from like fifteen years ago and they were ready to
Speaker 4: scale and starting to scale. And so that was really
Speaker 4: what the excitement was about.
Speaker 2: Just real quickly, when you say you took a look around,
Speaker 2: like who did you talk to and how did you
Speaker 2: identify the people who pointed to you to look, there's
Speaker 2: a lot of interesting, genuine science and tech that can
Speaker 2: be scaled up. How did that process work?
Speaker 4: So I started with the National Labs because we don't
Speaker 4: give enough credit to the fact that a lot of
Speaker 4: the great innovations that come out and are commercialized that
Speaker 4: we all know and love actually had their origin in
Speaker 4: our national lab system. It's sort of a national jewel,
Speaker 4: and so AIMES National Lab has this critical material innovation
Speaker 4: hub and a lot of the Companyanese that are doing
Speaker 4: the various types of breakthrough technology came out of or
Speaker 4: are working with Aimes National Lab. And so I started
Speaker 4: like poking around from there and then really word of
Speaker 4: mouth as soon as we got the word out that
Speaker 4: we were working on this. It's a very enthusiastic mission
Speaker 4: driven community that wants to all leap frog this challenge
Speaker 4: through innovation.
Speaker 3: Plus people like talking about their problems. Right, describe for
Speaker 3: us the state of the US, I guess Rare Earth's
Speaker 3: industry at the moment, and then also what you would
Speaker 3: describe as the key choke point in this particular strategic
Speaker 3: choke point, like where is the biggest source of trouble
Speaker 3: or inability to actually do this at scale.
Speaker 4: So, in terms of the two different parts, the US
Speaker 4: used to produce a significant amount of wearors, primarily light
Speaker 4: rearers MP materials in Mountain Pass Mine had a variety
Speaker 4: of challenges including not being commercially viable, but that was
Speaker 4: not the only reason. But we do actually have Rare
Speaker 4: Earth's in the United States, and we were a mining
Speaker 4: you know, a mining powerhouse many years ago. I mean
Speaker 4: remember like California forty nine ers and people going out
Speaker 4: with picks and shovels.
Speaker 3: Yea, many many years, many years ago.
Speaker 4: So we do have mines and we have resources, but
Speaker 4: there are always you know, there are always consequences and
Speaker 4: trade offs there. You know, to mine is often toxic,
Speaker 4: you have environmental concerns, You have a lot of waste
Speaker 4: that through traditional mining gets generated. So we were more
Speaker 4: than happy for the Chinese to take on those set
Speaker 4: of problems and then sell them to us at a
Speaker 4: very low cost. That's how we all became dependent on them.
Speaker 4: And I think where we are right now, we do
Speaker 4: have a lot of partnerships that are being formed, and
Speaker 4: you know with Saudi, with South Korea, are Australia. I mean,
Speaker 4: we're doing what we can to go the traditional mining route.
Speaker 4: But the I think the really interesting thing is how
Speaker 4: we can get there like much faster, much cleaner, and
Speaker 4: with much more cost effectiveness and even competitiveness cost competitiveness
Speaker 4: with China through some of these new technologies mining in
Speaker 4: the US.
Speaker 2: Let's talk about them. When you talk about the technologies
Speaker 2: that could actually get us to parity or something like that.
Speaker 2: Are they more on the mining side, are they more
Speaker 2: on the refining side or both? Like, let's talk about
Speaker 2: these technologies.
Speaker 4: Okay, So let me give you. Let me give you
Speaker 4: a couple of examples. So back when China cut off
Speaker 4: Japan's rare earth access in twenty ten, the Department of Energy,
Speaker 4: I mean, people don't know ARPA E. Generally they think
Speaker 4: of darp But Department of Energy has its own research
Speaker 4: grant facility and they do big problems and put them
Speaker 4: out there. So they did this in twenty eleven. They
Speaker 4: sprinkled around a lot of grant research funding for materials
Speaker 4: that you could create a magnet with that did not
Speaker 4: require rare earth, and lo and behold that a scientist
Speaker 4: in Minnesota, University of Minnesota created a rare earth free magnet.
Speaker 4: So there's a material design approach to this that either
Speaker 4: drastically reduces how much rare earth you actually need in magnets.
Speaker 4: And there's a company called Nirn Magnetics that actually is
Speaker 4: it's commercialized, it's scaling, it actually is scaling up massively
Speaker 4: a new facility in Minnesota. So that's sort of the
Speaker 4: material engineering approach to it, and then there's this whole
Speaker 4: other basket of bio tech innovations and you know, if
Speaker 4: you want me to go into this please yeah, okay.
Speaker 4: So you know they're companies like Alterra Research Technology and
Speaker 4: they again are affiliated with this AIMS National Lab. They
Speaker 4: have programmed proteins. So those proteins are basically like robots
Speaker 4: that go in to waste. And I'll get to the
Speaker 4: importance of waste in a minute, but they will go
Speaker 4: into waste or other types of tailings, things that come
Speaker 4: out of minds, and they will go in and specifically
Speaker 4: target the protein, will target a specific rare earth and
Speaker 4: extract it. And so it is clean, it's fast, it
Speaker 4: relies on a very large resource that we have. We
Speaker 4: have a lot of waste, so you know, it's a
Speaker 4: domestically sourced resource. There are a number of other, you know,
Speaker 4: ways that we are very in a very clean, fast
Speaker 4: and cost competitive way using technology to actually mine waste.
Speaker 4: And that's actually one of our It's like, we shouldn't
Speaker 4: consider waste at this point to be a liability. It's
Speaker 4: literally America's next mind.
Speaker 3: So I have a serious question. But first, no, first
Speaker 3: I'm so curious about the little protein robots. What does
Speaker 3: that process actually look like?
Speaker 4: So I don't know. I'm not a molecular you know, technologist, and.
Speaker 2: Molecular technologists they're listening. That'll be the follow up episode.
Speaker 4: But this is something that's been again long in the
Speaker 4: making in terms of the tech that's been developed, and
Speaker 4: so it's basically you know that this particular company is
Speaker 4: commercializing the technology, but it is. It's a protein that
Speaker 4: is altered so that it can go in and sort
Speaker 4: of micro target specific rare earth elements, and that is
Speaker 4: I think it's kind of revolutionary. It's super disruptive. And
Speaker 4: the same with all of these companies that were part
Speaker 4: of this study that we did, they are at the
Speaker 4: cusp of being ready to scale and scale fast.
Speaker 3: All right, this is my next serious question, which is,
Speaker 3: you know, all of this sounds great. Protein robots sounds amazing.
Speaker 3: Why aren't we doing this already? If the technology exists?
Speaker 4: So we're focused on and this is you know, this
Speaker 4: takes a strategy, and a strategy that focuses on the
Speaker 4: innovation side. We're very focused on the how do we
Speaker 4: compete head on with traditional mining? And that's good and
Speaker 4: it's important. This is a huge compliment to that. We
Speaker 4: haven't really done it yet. We've done it piecemeal. So
Speaker 4: you have a lot of a lot of people in
Speaker 4: this community that are highly focused on the technology commercializing
Speaker 4: at early stage and then figuring out how to go
Speaker 4: from there. I think we have Again, it's a huge
Speaker 4: opportunity that's out there. When I think about where we are,
Speaker 4: I think about the shale revolution and how we had
Speaker 4: fracking technology for decades and then we reached a point
Speaker 4: where that technology unlocked and energy revolution in the United States,
Speaker 4: and it was like an overnight switch flipped and suddenly
Speaker 4: we're an energy giant, an energy producing giant. And so
Speaker 4: I do feel there's something similar in what we're seeing
Speaker 4: right now in the technology around critical minerals and mirrors.
Speaker 2: I think we could really use a big switch flip
Speaker 2: to suddenly have abundance. Those don't come along very often.
Speaker 2: We should people have to appreciate that more. I'm reading
Speaker 2: this press release from Berkeley. As reported in Nano Letters,
Speaker 2: the researchers genetically engineered a harmless virus to act like
Speaker 2: a quote smart sponge that grabs rare earth metals from
Speaker 2: water and with a gentle change in temperature in acidity
Speaker 2: releases them for collection. Sounds really cool. I'll have to
Speaker 2: go watch your YouTube later talk to us about. One
Speaker 2: of the themes that comes up in a lot of
Speaker 2: these conversations is the importance of off take agreements. So
Speaker 2: right like right now, American companies, they currently do have
Speaker 2: access to Chinese where Earth's and so it might be
Speaker 2: very risky for anyone to invest in these technologies knowing
Speaker 2: that at least for the very you know, the beginning years,
Speaker 2: when before the cost curve has come down, the competitors
Speaker 2: might be.
Speaker 3: Cheaper the proverbial valley of death.
Speaker 2: Yeah, how do you solve that problem of guaranteeing that
Speaker 2: there is demand when these companies release harmless viruses that
Speaker 2: act like a smart sponge and rare earth metals from water.
Speaker 4: So first there has to be This is not just
Speaker 4: on government to do. I mean a lot of people
Speaker 4: point at the massive, very muscular industrial policy that the
Speaker 4: Trump administration is using right now, and I think that
Speaker 4: is a very good thing. But it also it takes
Speaker 4: companies actually coming together more in a consortia type of
Speaker 4: arrangement to have collective off take agreements. You have certain
Speaker 4: companies that have been very forward leaning in their off
Speaker 4: take agreements with certain I mean, Nyron is a good
Speaker 4: case that they have some autooems that have been working
Speaker 4: with them for years.
Speaker 1: Now.
Speaker 4: You have I mean Vulcan you brought up earlier, but
Speaker 4: Vulcan is kind of the poster child for when you
Speaker 4: get the technology, the industrial policy, and the commercial all
Speaker 4: together working to solve and they actually are. I think
Speaker 4: they're the first innovation targeted industrial policy scale up rapid
Speaker 4: scale up. Vulcan's only three years old. They close their
Speaker 4: Series A in August. I mean we're talking about one
Speaker 4: point four billion that they got in a CONSORTIU together
Speaker 4: with a company called re Element that recycles magnets. They
Speaker 4: take the rare earths and they actually manufacture magnets. That
Speaker 4: is incredibly interesting. They do it on it. They're doing
Speaker 4: it on a a super fast scaling time horizon. I
Speaker 4: think they are aiming for twenty twenty seven to start
Speaker 4: rolling product out and have been going through the validation
Speaker 4: process with all of their different types of magnets, so
Speaker 4: they're doing this on an accelerated basis. They got funded
Speaker 4: by every branch in the military, so they have a
Speaker 4: built in supply a demand from the US military right there.
Speaker 4: They also have semiconductor and an aerospace. They're really looking
Speaker 4: to target the national security and the top economic security
Speaker 4: challenges and they have the partners to do that. So
Speaker 4: I think that's a good example of how we want
Speaker 4: to do.
Speaker 3: This moving forward. Adjacent to the off take issue, who
Speaker 3: actually owns the waste water that we could potentially be
Speaker 3: you know, extracting valuable things from.
Speaker 4: So we have lots of different types of waste. So
Speaker 4: we have industrial waste that comes from mines where you
Speaker 4: have primary metals that are that are extracted, but you
Speaker 4: have the piles of tailings that sit there on the
Speaker 4: side because they're either there's no commercial viability to extract
Speaker 4: them or they are you know, they're just considered they're
Speaker 4: considered piles of waste. Both in operating mines and in
Speaker 4: minds that have closed down. You have coal ash that
Speaker 4: is toxic leftover waste from coal mining. You have e waste,
Speaker 4: which is I think one of the more promising areas
Speaker 4: we Actually if you look at old hard drive and
Speaker 4: cell phones and batteries and the like, there are tons
Speaker 4: of rare earths that are in there and actually magnets
Speaker 4: that are in there from years you know, when we
Speaker 4: actually had much greater rare earth's you know, intensity in
Speaker 4: those magnets before we started to like having to have
Speaker 4: to scale back. So if you look at the waste ecosystem,
Speaker 4: we have a lot of domestic opportunity. And that's actually
Speaker 4: why I think Bulkan is a really good example. They
Speaker 4: pull from domestic recycled e waste and then they process
Speaker 4: and manufacture magnets in a completely domestic cycle.
Speaker 3: Joe, that's interesting about coal ash. I could have been
Speaker 3: mining my ashes from burning the coal stove in Connecticut
Speaker 3: that first year, mining them for rare earths if only
Speaker 3: I had.
Speaker 2: None at another missed opportunity to exploit.
Speaker 3: To monetize my natural resource.
Speaker 2: To monetize the natural resources on your land that you
Speaker 2: had in Connecticut. Let's talk about Okay, so we understand
Speaker 2: there's various measures and opportunities and resources and technological opportunities
Speaker 2: and things that we're going to allow because that are
Speaker 2: already us scaling up, et cetera. Talk to us more
Speaker 2: like from a policy perspective, what do we need to
Speaker 2: do to get from what we already have cooking and
Speaker 2: what's already in the works to where we feel good
Speaker 2: about where we are and from does policy what it
Speaker 2: needs to happen in the form of legislation, or does
Speaker 2: the government the federal government as currently constituted, have the
Speaker 2: cash and the policy levers to pull without new laws
Speaker 2: being passed.
Speaker 4: So policy plays an enormous role. And the first thing
Speaker 4: we need to do is actually understand that we can't
Speaker 4: do a fragmented approach to this because you end up
Speaker 4: losing innovation that might actually change the chessboard entirely. With China,
Speaker 4: you also have to deal with waste from a policy basis,
Speaker 4: because we actually don't track waste. It's very hard to
Speaker 4: find data on how much e waste the US pretty uses.
Speaker 4: We ship some of it to Asia that is very
Speaker 4: likely fed back into China's massive recycling machine. We shouldn't
Speaker 4: be exporting if you consider this as America's next mind.
Speaker 4: There are ways to address policy that can provide the data,
Speaker 4: maybe restrict the exports till we know exactly what value
Speaker 4: is hidden inside all of the stuff that we're exporting,
Speaker 4: and then come up with a whole a whole strategy
Speaker 4: that is a critical minerals innovation strategy. That sits alongside
Speaker 4: our other critical minerals strategy and develop that through not
Speaker 4: only the policy tools around waste, but also financial tools.
Speaker 4: Where are the values of death? Where do we find them?
Speaker 4: How can we solve them? How can we use government
Speaker 4: as a poll to get companies together in consortia to
Speaker 4: actually have those off take agreements early on and also
Speaker 4: work with the material engineers to design what they're going
Speaker 4: to need earlier on in the process. They're like, there
Speaker 4: are a lot of ways to do this. One of
Speaker 4: the big takeaways is that there is a specific equity
Speaker 4: value of death that a venture like entity could help
Speaker 4: solve this for because you don't have the venture outside
Speaker 4: of some really big frontier you know, risk takers that
Speaker 4: will invest in difficult technology. So I think having some
Speaker 4: kind of a counter that we have now in the
Speaker 4: you know, in the instruments the d D has. You know,
Speaker 4: we have a whole range of different agencies that have
Speaker 4: all loan based they're almost all loan based instruments, and
Speaker 4: that's not what this is. These are tech companies and
Speaker 4: they really can't sustain debt. They're not there. You need
Speaker 4: to have that VC come in early on and help
Speaker 4: them through various series of fundraising, partner with others, bring
Speaker 4: in other parts like private vcs throughout the process, and
Speaker 4: we need to and we do have one of those
Speaker 4: right now that is INQTEL. It is not technically I
Speaker 4: don't know if you've heard of Intel, but it is okay,
Speaker 4: very good. They are. Actually they recognized this gap in
Speaker 4: the capital structure and the actual ability for these breakthrough
Speaker 4: technologies to fundraise, and so they actually created a separate
Speaker 4: fund within in QTEL called their Compass Fund. And they're
Speaker 4: not it's not just the CIA, They're a nonprofit. They
Speaker 4: worked sort of across the intelligence agencies and they've grown
Speaker 4: over the past twenty five years from what they started out,
Speaker 4: which was really a very like a boutique VC for
Speaker 4: specific solving specific problems for the intelligence world. So they
Speaker 4: have invested in actually going back to one of your
Speaker 4: earlier questions, how did I find these companies? Well, it
Speaker 4: ends up that they have invested. They invested in two
Speaker 4: companies that I had found through Aims National Lab and
Speaker 4: so I think they were extremely helpful in thinking through
Speaker 4: what the gaps actually were, and we really nailed this
Speaker 4: early stage VC needing to come from government. It's a
Speaker 4: market failure. Until we have solved for that market failure,
Speaker 4: these will just lie on the shelf.
Speaker 3: Inktel has one mission to be the most sophisticated source
Speaker 3: of strategic technical knowledge and capabilities to the US government
Speaker 3: and its allies. That's through capital. That's an interesting one,
Speaker 3: an episode on we should for sure. Okay, So since
Speaker 3: we're talking about the CIA and you brought up the
Speaker 3: military earlier, this is going to be a natural segue.
Speaker 3: I promise you bring up a historical analogy in your paper,
Speaker 3: a previous choke point that was militarily, very very significant
Speaker 3: for the US at a very very historical time, which
Speaker 3: we actually managed to solve through industrial policy. How much
Speaker 3: relevance does that particular analogy have to our current situation.
Speaker 4: Well, I love this analogy because as we were contemplating
Speaker 4: entering World War Two, the Japanese cut off the supply
Speaker 4: chain for natural rubber in Southeast Asia, and we were
Speaker 4: dependent on this flow for ninety percent of our rubber, right.
Speaker 3: And we can't go through rubber trees.
Speaker 4: Rubber came from Southeast Asia for a reason. And what
Speaker 4: we did was we actually we took technology, synthetic rubber technology,
Speaker 4: and we scaled it like crazy, so we actually were
Speaker 4: able to provide for you know, for trucks and tanks
Speaker 4: and everything that rubber goes into that we had never
Speaker 4: even thought about but until it was gone, and we
Speaker 4: were not able to actually enter World War two without
Speaker 4: the ability to provide something in replacing that rubber supply.
Speaker 4: And so we did it both through a rapid warp
Speaker 4: speed Manhattan Project. I mean, we think of Manhattan Project
Speaker 4: for the atomic bomb. But at the same time I
Speaker 4: think there's a good case to be made that without
Speaker 4: synthetic rubber, we would not have won World War Two.
Speaker 4: The other side of that was that we did a
Speaker 4: huge you know, all of the population should check in
Speaker 4: their extra rubber tires and their raincoats and their garden
Speaker 4: hoses and whatever you could for the war effort, so
Speaker 4: that we could actually use and recycle rubber that we
Speaker 4: had already here. So it's a too pronged I think
Speaker 4: the analogy that works.
Speaker 3: There are some great like posters from World War two
Speaker 3: about recycling your tires and things like that, nice graphic design.
Speaker 2: I have boxes of like old iPhones and stuff that randomly,
Speaker 2: I bet I have ten lap ten old laptops and
Speaker 2: Ringdom stuff.
Speaker 4: And the way that I mean, the way that the
Speaker 4: cycles of like upgrades happen. I mean, everybody has tons
Speaker 4: of like old laptops where the software doesn't work anymore,
Speaker 4: and so this is actually a huge opportunity. So we
Speaker 4: could actually make it a national priority. And there are
Speaker 4: ways to do that through government incentive, you know, you
Speaker 4: can there are ways that companies can do that through
Speaker 4: paying for old you know, old unused, unusable technologies and
Speaker 4: then have maybe get a government credit. There are like
Speaker 4: a lot of ways you can be creative about getting
Speaker 4: this this entire system to rev up.
Speaker 3: You mentioned warp speed just then, and so you know,
Speaker 3: the obvious thing that comes to mind is also the
Speaker 3: COVID vaccination efforts. Can these types of programs exist without
Speaker 3: a coinciding national emergency to galvanize everyone into action. And
Speaker 3: I totally take it that competing with China is one
Speaker 3: of those rare areas of bipartisan agreement nowadays. But at
Speaker 3: the same time, shortages potential choke points in rare Earth's
Speaker 3: has been a long running issue. We've been aware of
Speaker 3: it for a while. So far, we haven't really done
Speaker 3: that much. What's going to galvanize people now and really
Speaker 3: lend this whole effort a sense of urgency.
Speaker 4: So I think we actually do have a national emergency.
Speaker 4: And certainly, you know, policy makers and companies understand that
Speaker 4: when China shut off.
Speaker 3: Access and so you that was the moment.
Speaker 4: I think that was the moment where it really hit
Speaker 4: that not only over reliance, but up to one hundred
Speaker 4: percent reliance. That's like that. I mean, the Chinese cut
Speaker 4: off access to the technology that they had developed for refining,
Speaker 4: for extracting. They actually when we had that one year pause,
Speaker 4: one of the things that the Council on for relations
Speaker 4: partner Silverado Policy Accelerator, they had done a lot of
Speaker 4: work on what China was actually exporting after that October
Speaker 4: lifting of the of the export controls. They're exporting magnets,
Speaker 4: but they're not exporting those rare earths or the technology
Speaker 4: that we need to actually produce the same for ourselves.
Speaker 3: Yeah, it's interesting that like they won't export the rare earth,
Speaker 3: they'll export the finish material, which.
Speaker 2: Is the component.
Speaker 4: Yeah.
Speaker 2: Yeah, well you want to you want to climb the
Speaker 2: value chain, yeah, right and away the low margency. You know,
Speaker 2: I mentioned it seems like there is some continuity on
Speaker 2: some of this stuff from the last administration to this one.
Speaker 2: When you're in DC talking to people, do you sent
Speaker 2: from the on the policy side or on the government side,
Speaker 2: do you feel that there is a sort of intensity
Speaker 2: and focus, Because again, when you you know, you go
Speaker 2: back to World War Two, one thing I associate with
Speaker 2: that time is just an incredible amount of like focus
Speaker 2: on solving specific things in coordination. Do you sense that
Speaker 2: that exists?
Speaker 4: So just as with World War Two, there were there
Speaker 4: were a lot of officials flagging the fact that we
Speaker 4: were over dependent on single sources or the toe point
Speaker 4: was the shipping lanes, and there's a huge parallel here.
Speaker 4: During the bid deministration, one of the first things during
Speaker 4: the first hundred days the Biden administration did it resilience
Speaker 4: study and basically looked at where the choke points were.
Speaker 4: This was after COVID, It was looking at pharmaceuticals, it
Speaker 4: was looking but one of the big takeaways was that
Speaker 4: we were so overdependent on China for rare earth and
Speaker 4: critical materials, critical minerals, that we had to do something asap.
Speaker 4: The Trump administration and Trump one also understood that we
Speaker 4: had this huge vulnerability and critical minerals, and they had
Speaker 4: they passed it, you know, a number of executive orders
Speaker 4: and tried to get the whole process started for mining permitting,
Speaker 4: you know, reducing permitting times, environmental you know, restrictions and timelines.
Speaker 4: But it's again, it's a it's a complete parallel with
Speaker 4: what happened in the run up to World War Two.
Speaker 4: We actually have seen this coming for a very long time,
Speaker 4: and it wasn't until China shut off the access that
Speaker 4: it that the US and Europe kind of woke up
Speaker 4: to the fact that this is a big problem.
Speaker 2: You know, one thing you mentioned the national labs. They're
Speaker 2: under threat, right, I mean, like you talked about them
Speaker 2: as being this important crown jewel of the US economy,
Speaker 2: US industry. All these stories about funding cuts, et cetera.
Speaker 2: What is the intersection there, And from your perspective anyway,
Speaker 2: are we undercutting our own efforts through some of these
Speaker 2: budgetary choices.
Speaker 4: Absolutely, I mean this is something that we do really
Speaker 4: really well. The whole world looks at the way that
Speaker 4: DARPA and ARPA E and the national labs that are
Speaker 4: associated are actually like huge innovation engines. Often it's a
Speaker 4: matter of people coming in entrepreneurs coming in and understanding
Speaker 4: what the applications of the science can be to commercialize it.
Speaker 4: But this is exactly the time where we have to
Speaker 4: double down on the innovation and the investment in R
Speaker 4: and D that is not only in the national labs,
Speaker 4: but also universities, because that's where this is coming from
Speaker 4: as well. Nyron's you know, breakthrough came from University of Minnesota,
Speaker 4: So I think, you know, you want to make sure
Speaker 4: that right now, in this particular moment, the solutions can
Speaker 4: come from biotech as opposed to mining tech. You don't
Speaker 4: want to be cutting off any channels of investment in
Speaker 4: R and D right now.
Speaker 3: How often do you hear people in DC talk about
Speaker 3: the potential for capital misallocation when it comes to rare
Speaker 3: earth or is the idea of I guess Cylindro with magnets,
Speaker 3: is that not as much of a looming concern given
Speaker 3: the urgency of the problem.
Speaker 4: I think that the demonization of risk taken on Cleindra
Speaker 4: has really plagued us for a long time. We have
Speaker 4: to be much more ready to take risk and be
Speaker 4: like hold hands on a bi partisan basis and realize
Speaker 4: that this is a big moment where we have to
Speaker 4: actually take more risk.
Speaker 3: So I do love all the analogies we've used in
Speaker 3: this conversation. So obviously synthetic rubber, but you mentioned fracking before,
Speaker 3: and a lot of people will conceide that fracking was
Speaker 3: incredibly crucial to America's economic well being nowadays and we've
Speaker 3: become an energy exporter. But at the same time, there's
Speaker 3: an externality, a negative externality associated with fracking, which is
Speaker 3: environmental damage, and there's a lot of concern and also
Speaker 3: controversy about how much impact that actually has. What are
Speaker 3: the trade offs that the US would have to think
Speaker 3: about as we encourage more of a domestic rare earth industry.
Speaker 4: So again, there are trade offs, and I think one
Speaker 4: of the you know, I'm going to pivot back to
Speaker 4: the innovation because I think one of the ways we
Speaker 4: can do this in a clean way is through some
Speaker 4: of these new technologies you were talking about, and they're
Speaker 4: you know, the so Rio Tinto is using a proprietary
Speaker 4: new microbe that they have that they've just started utilizing
Speaker 4: in some of their old minds in Arizona where they
Speaker 4: didn't have the ability to economically extract copper but using microbes,
Speaker 4: they are able in a clean way to use a
Speaker 4: biotech solution to actually extract copper on a cost competitive
Speaker 4: basis that they were not able to extract. And they're
Speaker 4: rolling this out right now, they'll be doing it in
Speaker 4: the months ahead. And I think it's really noteworthy that
Speaker 4: that you have, you know, a large mining company that
Speaker 4: is taking a plunge into a biotech solution to how
Speaker 4: to unlock value that they thought the mind was basically,
Speaker 4: you know, it was closed. So we can do that
Speaker 4: in a way that is clean. We can do it
Speaker 4: in a way that's fast and cost competitive, and so
Speaker 4: I think that there are ways to do that using innovation.
Speaker 4: I think we need to be very mindful of that
Speaker 4: because mining and refining our dirty businesses. That's just that's life.
Speaker 4: And if we can do them, if we do them
Speaker 4: in a cleaner way, then that is a much more
Speaker 4: sustainable way to actually have, you know, have an industry
Speaker 4: moving forward that actually suits the national interest.
Speaker 2: We did that Biotech VC episode so much interesting biotech
Speaker 2: stuff that I never really thought.
Speaker 3: About that I never thought.
Speaker 2: Much more to do on learning about some of the science.
Speaker 2: Howd Kribohdicker, thank you so much for coming on odd laws,
Speaker 2: fascinating report. Encourage everyone to go read it and check
Speaker 2: it out or actually some ideas out there, not just
Speaker 2: people identifying problems.
Speaker 4: That was great, Thank you so much.
Speaker 5: Great to be with you, Cracy.
Speaker 2: Want to learn more about industrial biotech, Yeah, I mean
Speaker 2: we mentioned it during the conversation, but I feel like
Speaker 2: there could be tons of interesting episodes on the crossover
Speaker 2: of so that sort of natural science and mining and
Speaker 2: stuff like that.
Speaker 3: Well, I'm looking at a page on Rio Tinto's website
Speaker 3: right now, and the title is Life finds Away Microbes,
Speaker 3: and then it says while dinosaurs vanish their tiny companions,
Speaker 3: microbes adapted and thrived, proving their resilience over time, and
Speaker 3: now they can be used as some of our most
Speaker 3: groundbreaking advancements in mining.
Speaker 2: So that's pretty cool.
Speaker 3: Yeah, it's exciting.
Speaker 2: Let's let's get a sciencest or something on there. I
Speaker 2: talk about microboscience.
Speaker 3: I kind of want to see how all of this works,
Speaker 3: But of course you can't actually see the microbes, so
Speaker 3: I'll just have to think about it.
Speaker 2: Just imagine you've got to be YouTube. At least we
Speaker 2: could go on the road to some mine. Right, I'm sure,
Speaker 2: and like water just looked like no. But I thought
Speaker 2: that was really interesting. I guess I thought, you know,
Speaker 2: in my mind when I think about some of the
Speaker 2: when I thought about the rare Earth's challenge before, I
Speaker 2: sort of assumed I suppose that, Okay, the US probably
Speaker 2: could overcome our industrial reliance at the cost of a
Speaker 2: lot of money. It caught basically a lot of loss
Speaker 2: making investment, because again that's the nature of defense. National
Speaker 2: security is Okay, you just say, have to sometimes spend money,
Speaker 2: et cetera. So it's interesting the prospect that there are
Speaker 2: technologies that not only could solve perhaps the sort of
Speaker 2: strategic element, but that actually could be cost competitive, perhaps
Speaker 2: could create export opportunities, could perhaps also be for provid
Speaker 2: That's very interesting and I hadn't really appreciated that prior
Speaker 2: to Heidi's report.
Speaker 3: Yeah, I think the overall thrust of the report this
Speaker 3: idea of like, Okay, you're not going to beat China
Speaker 3: necessarily on its own territory. You're certainly not going to
Speaker 3: beat them in the same way that China has developed
Speaker 3: this industry by you know, basically ignoring a lot of
Speaker 3: environmental concerns and things like that. So you have to
Speaker 3: turn to the US's own competitive advantage, which is research
Speaker 3: and developed. Yeah, and also like huge amounts of government capital,
Speaker 3: which you know, sometimes we have an issue deploying, sometimes
Speaker 3: we don't. It was super interesting that Heidi described, you know,
Speaker 3: the recent cutting off of China's rare earths as like
Speaker 3: the moment where people have really realized this is an issue,
Speaker 3: and so there is a potential to actually galvanize some action.
Speaker 2: I have no doubt in my mind that the US
Speaker 2: has the sort of capacity we know how be science,
Speaker 2: the natural resources, the money, et cetera, to do it.
Speaker 2: The only question, of course, whether we have the sort
Speaker 2: of organizational capacity. And of course, you know, the the
Speaker 2: National Research Labs are sort of the prime example of
Speaker 2: the concern here is the site with liter a lot
Speaker 2: of these innovations come from. There's this widespread acknowledgment that
Speaker 2: this is a very serious thing, and apparently you know,
Speaker 2: they're seeing their budgets impaired. At the same time, Can
Speaker 2: everyone get on the same page. Can we prioritize things,
Speaker 2: Can we say that we want to move in concert
Speaker 2: or do you just have these like say, political fights
Speaker 2: and these various factions et cetera. They are not coordinated,
Speaker 2: they're not on the same page. They are working at
Speaker 2: cross purposes. That remain my main source of concern. But
Speaker 2: I would say, perhaps to your point, maybe there has
Speaker 2: been some galvanization and maybe there are some paths here.
Speaker 3: Wow, I'm still in this Rio Tinto side. Yeah, it's great.
Speaker 3: It's they keep making references to Jurassic Park, which is
Speaker 3: not something I expected from Rio Tinto. But anyway, shall
Speaker 3: we leave it there.
Speaker 2: Let's leave it there, all right?
Speaker 3: This has been another episode of the Odd Lots podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our producers Common Rodriguez at Carmen armand dash Ol
Speaker 2: Bennett at Dashbod and Keil Brooks at Keil Brooks. From
Speaker 2: well Odd Lodge content. Go to Bloomberg dot com flash
Speaker 2: Odd Lots for the daily newsletter and all of our episodes,
Speaker 2: and you can chat about all of these topics. Twenty
Speaker 2: four so, I mean in our discord discord gg slash
Speaker 2: odlines and if.
Speaker 3: You enjoy Odd Lots, if you want us to go
Speaker 3: on a microbe mining tour, then please leave us a
Speaker 3: positive on your favorite podcast platform. And remember, if you
Speaker 3: are a Bloomberg subscriber, you can listen to all of
Speaker 3: our episodes absolutely ad free. All you need to do
Speaker 3: is find the Bloomberg channel on Apple Podcasts and follow
Speaker 3: the instructions there. Thanks for listening.