Speaker 1: Welcome to zero. I'm Aukshatrati. This week kobalt competition and
Speaker 1: high octane capitalism. Let's talk about Warren Buffett, the CEO
Speaker 1: of Berkshire Hathaway. Over a seventy year career, he's become
Speaker 1: an investing icon known as the Oracle of Omaha. Berkshire
Speaker 1: Hathaway has become one of the most valuable stocks in
Speaker 1: history and turned Buffett into a mega billionaire. It all
Speaker 1: started in the nineteen sixties when Buffett bought a textile
Speaker 1: business called Berkshire Hathaway. He used that company as a
Speaker 1: stable source of income to place other bets, eventually turning
Speaker 1: it into a holding company for all kinds of investments.
Speaker 1: Buffett's investments are not climate oriented. Berkshire holds shares of
Speaker 1: any carbon intensive businesses and only some clean energy companies.
Speaker 1: My guest today, Chamat Polyhapithia, is a venture capitalist and
Speaker 1: self proclaimed disciple of Buffet. He wanted to create a
Speaker 1: Berkshire for climate and not because it is a morally
Speaker 1: right thing to do. People ask me like, are you
Speaker 1: motivated to solve the climate problem because of your love
Speaker 1: of the environment. I could give you the virtue signaling
Speaker 1: answer which is yes, but that's not really where my
Speaker 1: motivation comes. My motivation is economic. Chamat made his fortune
Speaker 1: as an early Facebook employee and later with well timed
Speaker 1: investments in the tech industry, including through a venture capital
Speaker 1: firm called Social Capital that he has been running for
Speaker 1: a decade. In twenty twenty, Chamat put out a call
Speaker 1: on Twitter, are you interested in decarbonization, sustainability and climate
Speaker 1: change and want to do something about it? I need
Speaker 1: help allocating a few billion dollars into these areas over
Speaker 1: the next two to three years, so I'm turning to
Speaker 1: you for help. In return, you can work with me
Speaker 1: to implement it. Chamat outlined how anyone could write in
Speaker 1: with a way to create a holding company that bankrolls
Speaker 1: the growth of climate tech companies. I missed this until
Speaker 1: I got a call from a material science professor at
Speaker 1: Carnegie Mellon University, Venkott. With Vanathan Venkott and I often
Speaker 1: talk about startups and investments, and we thought, what the hell,
Speaker 1: let's write in. Our group went pretty far in this competition.
Speaker 1: But since that tweet, Chamat has not created a climate
Speaker 1: holding company, but through his firm Social Capital, he has
Speaker 1: invested in climate tech companies, a residential solar startup, a
Speaker 1: battery manufacturer, a marketplace for farmers. So during a trip
Speaker 1: to Silicon Valley, I arranged for him Venkitt and I
Speaker 1: to talk about why he never created the Berkshire for Climate,
Speaker 1: what companies he invest in and why and how much
Speaker 1: can you teach yourself about batteries. Chamat, Welcome to zero.
Speaker 1: Thank you, thanks for including me. Now let's talk about
Speaker 1: what you wanted to build, which was a barksher Hathaway
Speaker 1: for climate, and you started that out. And one reason
Speaker 1: why Professor Venkats, Nathan and I are here today is
Speaker 1: because you put out a tweet saying, hey, guys, if
Speaker 1: you had a billion or three billion dollars and you
Speaker 1: wanted to put it all to climate in a climate
Speaker 1: holding company, how would you structure the climate holding company?
Speaker 1: And Venkat and I used to talk frequently about batteries
Speaker 1: and startups, and we saw the tweet and we were like, hey,
Speaker 1: that's an interesting challenge should be you know a few ideas,
Speaker 1: and so the deadline comes and closes, you end up
Speaker 1: getting fifteen hundred applicants and end up employing a McKinsey consultant.
Speaker 1: I mean it cost us two million dollars. Truth is
Speaker 1: so expensive. I mean we have to probably the most
Speaker 1: expensive tweet you've put out. I mean no, because I
Speaker 1: put on other twets where I've done deals and I've
Speaker 1: lost hundreds of millions. You know that you can rank them.
Speaker 1: But I wanted to make sure that we were being
Speaker 1: thoughtful and signaling to people that this was something that
Speaker 1: we took very seriously. And I just needed intellect. Like,
Speaker 1: we have a very small organization, and so you know,
Speaker 1: when you have seven thousand pages of content or ten
Speaker 1: thousand pages of content from all very very diverse, smart
Speaker 1: people all around the world, you have a responsibility to
Speaker 1: be thoughtful about that. And so we hired McKinsey to
Speaker 1: help us sort through it all and read them all
Speaker 1: and score them. And yeah, I mean it cost me
Speaker 1: a few million dollars, but it was money while spent.
Speaker 1: Why Because at the end of that funnel, there were
Speaker 1: six or seven groups. You guys were one that really
Speaker 1: helped me in clarifying how to think about this. So
Speaker 1: what did I learn from you guys as a class?
Speaker 1: The first thing I said, if you look back at
Speaker 1: the history of Burke, they have two seminal transactions that
Speaker 1: allowed them the oxygen, if you will, to become what
Speaker 1: they are today. The first transaction was Berkshire itself, and
Speaker 1: this was a business that had incredibly profound, free casual characteristics.
Speaker 1: It was a dying business, you know, this was they
Speaker 1: sold suit linings, right, but it was an incredibly a
Speaker 1: creative casual business, which allowed Buffett to take that money
Speaker 1: and to reallocate it into things that generated higher returns.
Speaker 1: And then the second seminal transaction was that so much
Speaker 1: of his money of that money went into Geico that
Speaker 1: in nineteen ninety six he was able to buy the
Speaker 1: fifty percent he didn't don't. Geico is a large American
Speaker 1: car insurance company. It's a major source of stable income
Speaker 1: for Berkshire. Hath to Weigh. Warren Buffett has called Geico
Speaker 1: a jewel and his favorite investment. So I said, I
Speaker 1: have to go back to the beginning and say, is
Speaker 1: there a Berkshire hath Towagh like asset in climate today?
Speaker 1: And I found some. The problem was I did not
Speaker 1: have the courage to buy them. What were they? I found,
Speaker 1: specifically a coal company in the United States. I was
Speaker 1: in love with this company, in love with it I
Speaker 1: was like, I should buy this company, but when push
Speaker 1: came to shove where I did not have the courage
Speaker 1: to act. And by the way, this was back then,
Speaker 1: which would have been a sickening trade today. Okay, first
Speaker 1: sickening trade that stunning behind the health issues of the people,
Speaker 1: the ability to keep them employed gainfully over a long
Speaker 1: periods of time, the environmental impact. But that coal asset,
Speaker 1: in my mind, was my version of a Berkshire in
Speaker 1: that it was in climate. I mean, let's be honest,
Speaker 1: it creates energy, maybe not in the best way, but
Speaker 1: it does well. You're using the cash flow from the coal.
Speaker 1: It generates enormous cash flow, and I thought I could
Speaker 1: reallocate this cash flow into now building this portfolio of
Speaker 1: assets that I think are quite interesting, batteries, solar, all
Speaker 1: of this stuff. But you didn't that investment because of
Speaker 1: ESG constraints. You don't have any es G constraints. I
Speaker 1: have no ESG constraints, but I have moral constraints. And
Speaker 1: so you know, I sat down and I was thinking,
Speaker 1: like what happens when a person, a parent says, my
Speaker 1: partner has black lung because of the work he or
Speaker 1: she did. In your mind, what do I do well?
Speaker 1: The old line answer was tough health insurance and then
Speaker 1: you're on your own. I can't do that, not based
Speaker 1: on my background. I would feel too much guilt. So
Speaker 1: I went through those practical issues, and I could not
Speaker 1: tell myself that I would make the decisions that I
Speaker 1: would need to to optimize for free cash flow. Do
Speaker 1: you see what I'm saying? Not in that asset. If
Speaker 1: I own a software asset, it's easy. There's nobody's coming
Speaker 1: to you with black lung. And I just didn't have
Speaker 1: the internal stamina to do it. It's not me. So
Speaker 1: then what I came to the conclusion of is there
Speaker 1: is no anchor asset for me today. So no, the
Speaker 1: reason we haven't started a brokeshire for climate is we
Speaker 1: haven't found our gico. Now, let's just start by talking
Speaker 1: about your climate tech investments, perhaps the biggest one. First,
Speaker 1: I think we've put on the order of about a
Speaker 1: billion dollars to work over the last two and a
Speaker 1: half years, and I would say that most of them
Speaker 1: have been really about learning where we think the future
Speaker 1: opportunities are. And then one has really consumed a lot
Speaker 1: of the capital, which is this company called Palmetto, and
Speaker 1: the simplest way to think about it is that Palmetto
Speaker 1: is driving the bottoms up deregulation of energy. And the
Speaker 1: way that it does that is that it helps consumers
Speaker 1: really simply and cheaply get solar onto their roof in
Speaker 1: a predictable way for a predictable price. And then it
Speaker 1: allows them to manage that energy so that they can
Speaker 1: be self sufficient and resilient, and all the access energy
Speaker 1: can be back into the grid and all of that,
Speaker 1: you know, becomes cheaper and cheaper over time. You've made
Speaker 1: not just solar bets, but other bets. Yeah, if I
Speaker 1: can take a step back, like if I can give
Speaker 1: you the framework in which you know, people ask me, like,
Speaker 1: you know, are you motivated to solve the climate problem
Speaker 1: because of your love of the environment. I could give
Speaker 1: you the virtue signaling answer, which is yes, But that's
Speaker 1: not really where my motivation comes. My motivation is economic.
Speaker 1: The economic motivation that I have is that there is
Speaker 1: going to be trillions of dollars of value that will
Speaker 1: be redistributed over the next decade or two. And the
Speaker 1: simplest lens with which to view that change is through
Speaker 1: the lens of energy. So at the highest level, I
Speaker 1: was really fascinated by the geopolitical capital that it gives
Speaker 1: the United States to make better decisions if we're energy independent.
Speaker 1: Underneath that, I focused on two areas that to me
Speaker 1: seem the most practical ways for us to get to
Speaker 1: energy independence. So Number one is this deregulation of energy.
Speaker 1: If you put one hundred million virtual power plants inside
Speaker 1: of every single home in America, you will completely change
Speaker 1: the nature of our need for hydrocarbons to such a
Speaker 1: degree that every time we look at a problem abroad
Speaker 1: and we take that issue off the table, I think
Speaker 1: will be in a much better position to coordinate and
Speaker 1: do the things that we believe in without having to
Speaker 1: make these very complicated trade offs. I wanted to ask
Speaker 1: you about the climate motivations as we talked about you
Speaker 1: want to make money, but maybe there's the peace and
Speaker 1: prosperity lens, which to me was an interesting way to
Speaker 1: think about it as well, which is, if we don't
Speaker 1: solve this problem, there will be less peace in the world.
Speaker 1: If you solve this problem, there will be more prosperity
Speaker 1: in the world, and there will be more peace. The
Speaker 1: correlation is kind of tip to me, is it not.
Speaker 1: I'm pausing. Okay, I'm not sure that that's true. I
Speaker 1: don't know whether. I just think that the United States
Speaker 1: has more freedom. So actually, let's talk about like if
Speaker 1: you look at the Iran nuclear deal and our position
Speaker 1: and our posture with Iran, one could theorize that if
Speaker 1: we were completely energy independent, we would take a much
Speaker 1: harsher stance, not necessarily because of our need for Iranian oil.
Speaker 1: I don't think we have that, but our friends and
Speaker 1: our friends friends who do need Iranian oil is what
Speaker 1: causes that posture to be more watered down. As an example,
Speaker 1: And I'm not saying that that's the right posture to take,
Speaker 1: but you can go through all of these issues and
Speaker 1: actually come to a very different conclusion if you take
Speaker 1: energy off the table because it's a weight off of
Speaker 1: our shoulders, or it's a weight off of our allies shoulders.
Speaker 1: And I think that that that is an important place
Speaker 1: to be. And so this is why I think the
Speaker 1: energy transition really should be understood in this geopolitical context.
Speaker 1: It is a national security and peace and prosperity objective.
Speaker 1: There's a lot of science that has to go into it,
Speaker 1: and a lot of carbon. Maybe that gets eliminated, and
Speaker 1: who knows how much, because those are all guesses. But
Speaker 1: what is practically true is that our foreign policy changes dramatically.
Speaker 1: It changed dramatically when we were energy independent for the
Speaker 1: few years under Bush, and you know, at the beginning
Speaker 1: of Trump or I think it was, Yeah, maybe at
Speaker 1: at the beginning of Trumpet ended. But well, energy independence
Speaker 1: as a concept is a weird one because even when
Speaker 1: there was enough energy that America was producing on its
Speaker 1: own territory, it was still importing oil because the sum
Speaker 1: of the oil that was making it had to explode
Speaker 1: because the type of oil that was being produced here
Speaker 1: was only being refined in other net energy independence, yeah,
Speaker 1: you're absolutely right, but it has implications for our allies
Speaker 1: as well, Like you know, think of how the degrees
Speaker 1: of freedom it gives. I don't know Europe right now
Speaker 1: when it's going through a gas crisis and is dependent
Speaker 1: on USLNG. Yeah, but beyond the solar bed what are
Speaker 1: the beds that we've made that would so at the
Speaker 1: highest level, I was really fascinated by the geopolitical capital
Speaker 1: that it gives the United States to make better decisions
Speaker 1: if we're energy independent. Underneath that, I focused on two
Speaker 1: areas that to me seemed the most practical ways for
Speaker 1: us to get to energy independence. So number one is
Speaker 1: this deregulation of energy, and then the second is that
Speaker 1: if you unbundle that concept of the virtual power plant,
Speaker 1: there are two practical opportunities today. The first is how
Speaker 1: do you actually deploy the physical systems on top of
Speaker 1: one hundred million homes so that they can generate energy.
Speaker 1: That's what Palmetto does. But then the second is, while
Speaker 1: you're always generating energy every day, if you get solar
Speaker 1: on top of your roof, you need to store it.
Speaker 1: So then the next area that I got really fascinated
Speaker 1: by was batteries. And within batteries it's really a matrix.
Speaker 1: There are different chemistries and different use cases. So if
Speaker 1: you talk to a utility, the battery solution that they
Speaker 1: would deploy are these football field size storage solutions that
Speaker 1: you use a very specific iron based chemistry. Perhaps it's cheap,
Speaker 1: it has very different characteristics than the NMC or NCA
Speaker 1: batteries that Tesla would put in a Model X right,
Speaker 1: and that's nickel cobalt manganese or nickel cobalt aluminium exactly
Speaker 1: exactly now, if you did not catch that, I just
Speaker 1: listed out the elements in the batteries that Chama describes
Speaker 1: as being in one of Tesla's more expensive cars. All
Speaker 1: of these batteries are lithim ion batteries. Lithium is the
Speaker 1: element that has enabled the explosion of handheld electronic devices
Speaker 1: we used today and the electric car revolution. But within
Speaker 1: lithi amine batteries there are different formulations, and these formulations
Speaker 1: have meanings beyond just how the battery works. There's cost.
Speaker 1: There's also supply chain and ethical implications related to buying
Speaker 1: the raw materials. Chamat mentioned iron based chemistry. He's still
Speaker 1: talking about a lithiumine battery, one with a formulation of
Speaker 1: lithium ion and phosphorus, the LFB battery. The F stands
Speaker 1: for fee, which is the chemical symbol of iron. This
Speaker 1: chemistry is behind one of the cheapest lithium ion batteries
Speaker 1: you can buy in the market. That's because the components
Speaker 1: of an LFP battery are widely available elements. The other
Speaker 1: type he mentioned NMC or NCA batteries. NMC or NCAA
Speaker 1: batteries are made with nickel, manganese, cobalt and aluminum. These
Speaker 1: metals are more expensive and they have other problems. The
Speaker 1: cobalt supply chain, for example, suffers from abusive labor practices.
Speaker 1: What chemistry a company chooses is a major decision, very
Speaker 1: complicated issues. So I've started to focus on batteries, and
Speaker 1: in batteries there are a handful things that I think
Speaker 1: are practical solutions today. The first is that if you
Speaker 1: look at the choices that Americans make in terms of
Speaker 1: the kinds of cars that they drive, one of the
Speaker 1: biggest takeaways that you can make practically speaking is you
Speaker 1: probably do not need a Cadillac Escalate to go from
Speaker 1: your house to the Safe Way and back. And so
Speaker 1: there are very different power torque, energy profiles of cars
Speaker 1: that you could give a consumer to meet ninety nine
Speaker 1: percent of their everyday use cases. But then that also
Speaker 1: gives them the added value of knowing that they're not
Speaker 1: emitting carbon into the environment. So you want to build
Speaker 1: a car company that is not a Tesla, because a
Speaker 1: Model three will give you all that power and target
Speaker 1: that is the useless. I think Tesla's actually making the
Speaker 1: right decisions. So if you think think about what Tesla did,
Speaker 1: they started at the upper end of the cost but
Speaker 1: also the upper end of the chemistry curve where they
Speaker 1: picked NMC and NCA because they had to. And Elon
Speaker 1: wrote this in his master plan, I have to sell
Speaker 1: a premium car to get these early adopters. The features
Speaker 1: of a premium car are underpinned by performance, always has
Speaker 1: and always will be. But as he moved down the
Speaker 1: cost curve, what did he do? He went to LFP,
Speaker 1: He went to iron phosphate. Ye going to cause power
Speaker 1: and talk to go down. It's just well the energy no,
Speaker 1: all of it changes. The energy density of these batteries
Speaker 1: are different. You you design a different car from here.
Speaker 1: And I got into a debate about the merits of
Speaker 1: different battery chemistries and how they affect the design of
Speaker 1: electric vehicles. It was charged two point three seconds using them?
Speaker 1: Is that true? But you want to elaborate and then
Speaker 1: maybe we can unpack if you if you think about
Speaker 1: like you cannot do it and just guys, just help.
Speaker 1: Can't do it. All you need to do is put
Speaker 1: enough of LP in there. You can't do that. That's
Speaker 1: not true. You don't have a power tool that moves
Speaker 1: a five ton piece of Yeah, So the reason for
Speaker 1: that is because let's okay, how about I give you
Speaker 1: the answer that satisfy you. In the end, we all
Speaker 1: agreed that the supply chain for A left B batteries
Speaker 1: is preferable to the NMC batteries for reasons that have
Speaker 1: more to do with politics than chemistry. Okay, So my
Speaker 1: point is that I've gotten very interested in that idea,
Speaker 1: which is there are practical solutions that require an energy
Speaker 1: profile that's very different than what we source today. You know,
Speaker 1: if you move away from these ternary chemistries and you
Speaker 1: go from instead of three critical you know, inputs like nickel, manganese,
Speaker 1: and cobalt which are difficult to source, complicated, terrible supply chains,
Speaker 1: to LFP, which is basically everywhere. That's something that I
Speaker 1: really am interested in, and and I think that that's worth exploring.
Speaker 1: Both again from the perspective of cheaper, faster, better solutions
Speaker 1: will only have happen on LFP in my opinion, right,
Speaker 1: And that's what your bet on Metricham is doing. In part.
Speaker 1: Metri Kem is a startup that Chamat's Social Capital invested
Speaker 1: at least twenty million dollars into. The startup has plans
Speaker 1: to manufacture LFP the material needed to make the cheaper
Speaker 1: lithiumine batteries in North America. The batteries will be for
Speaker 1: electric vehicles are energy storage. I think metri Cham is
Speaker 1: two pronged. One is we have to first prove that
Speaker 1: we can make the same LFP that China makes. We've
Speaker 1: proven that now at small scale. We have to prove
Speaker 1: that we can make it at large scale. So we're
Speaker 1: you know, at the kilogram scale, we can do it.
Speaker 1: We're as good as anybody else in China. Now we
Speaker 1: need to prove that we can make it at ton scale,
Speaker 1: so that Samsung or sk or Tesla or anybody else
Speaker 1: who needs LFP can call us and say I need
Speaker 1: it from you guys, And as they do that, what
Speaker 1: we will also prove that with the existing infrastructure that
Speaker 1: makes LFP, we will give you our version of LFP
Speaker 1: which actually moves up the energy density curve at the
Speaker 1: same price point. And we have some tricks. We have
Speaker 1: some things that we've been experimenting with our own trade
Speaker 1: secret which, if they bear fruit, will essentially allow us
Speaker 1: to have a recipe that for the same machines, the
Speaker 1: same infrastructure can just give you a better version of
Speaker 1: the product that you were buying before. So that's one thing.
Speaker 1: But the second thing, which I think is on the
Speaker 1: margins slightly more important, is it domesticates this know how
Speaker 1: an ip in the United States. After the break, I
Speaker 1: talked to Chamat about risk SPACs and ESG, which is
Speaker 1: using environmental, social and governance measures, these non financial metrics
Speaker 1: to make financial decisions. The story of Linthiaman batteries is
Speaker 1: stunning in that you know, almost all the components that
Speaker 1: went into making the first commercial one were invented here
Speaker 1: in America, but then it was commercialized by Sony in Asia,
Speaker 1: and then obviously in the twenty first century it was
Speaker 1: China that scale of the industry. And so now we
Speaker 1: are at least here in the US having to by
Speaker 1: the way, they've be sure they've they've done two things.
Speaker 1: They consolidated the industry with respect to the actual specially
Speaker 1: chemical processing. So all of those pipelines are effectively Chinese zode.
Speaker 1: And we need to do a lot of very hard
Speaker 1: work over the next ten to fifteen years to both
Speaker 1: pull in people to train them if they don't exist,
Speaker 1: and then to figure out how to do it ourselves.
Speaker 1: There's enormous amounts of know how and trade secret ad
Speaker 1: into this stuff, which is what allows these duopolies and
Speaker 1: oligopolies to exist. And then the second thing that China
Speaker 1: did brilliantly is they used their capital to go all
Speaker 1: around the world and essentially by the critical inputs. So
Speaker 1: in the United States, because we fell under the spell
Speaker 1: of ESG, you know, we allowed all these random companies
Speaker 1: to get banner of ESG, which that didn't deserve it.
Speaker 1: You know, all of Big Tech is an EESG company,
Speaker 1: which is so stupid because what did it really do.
Speaker 1: It got all these asset managers to divest and move
Speaker 1: away from these hard capital areas of our world that
Speaker 1: we needed investment mining, specialty chemicals. Nobody wanted to touch it.
Speaker 1: It is putting capital allocators in the position to be
Speaker 1: moral judges and arbiters. And I don't think that's the
Speaker 1: job capitalists should be doing. I think capitalists should focus
Speaker 1: on return uninvested capital only. And when they do that,
Speaker 1: and if they do that, well, they would finance some
Speaker 1: of the things that have been ignored. They would have
Speaker 1: financed the lithium exploration around the world, the lithium extraction
Speaker 1: in the United States, which not only, as it turned out,
Speaker 1: would have made us, and it still can, by the way,
Speaker 1: an enormous amount of money for that capital allocator, but
Speaker 1: it would have given a level of national security that
Speaker 1: we desperately need today. But you've also made the point
Speaker 1: that capitalists are chasing, and have been for some time,
Speaker 1: short term returns, and that's because the people who run
Speaker 1: these investment firms, who run asset managers, are trained to
Speaker 1: do that. They go to the same schools, they meet
Speaker 1: the same people, they hang out with the same people,
Speaker 1: they have all the same thesis, and what they want
Speaker 1: is a set amount of return, stable return, all the time. Right.
Speaker 1: So if that's the kind of capitalism that we have
Speaker 1: right now, how do you think that would have funded
Speaker 1: lithium exploration. It's just high. It's not the only it's
Speaker 1: not the only. Look, here's the thing. I think it's
Speaker 1: unfair to cherry pick a set of decisions by a
Speaker 1: plurality of people in a moment as the total set
Speaker 1: of decisions. It has always been the case that the
Speaker 1: riskier the bet, the higher the returns, and it has
Speaker 1: always been the case that there have been people who
Speaker 1: are willing to take those bets. But I think what
Speaker 1: you're talking about is something else, which is after an
Speaker 1: industry starts to become professionalized, then a plurality of people
Speaker 1: do come in, and they neither have the capability to
Speaker 1: make those decisions nor the risk appetite to make those decison.
Speaker 1: The capability, meaning you know, if you're if you're going
Speaker 1: to be a good biotech investor, I think at some
Speaker 1: level you need to have either built a biotech company
Speaker 1: or at least understand biology. If you're going to be
Speaker 1: a really skilled technology investor, I think you need to
Speaker 1: have built a technology company. I think everybody else can
Speaker 1: be good, and some of them have turned out to
Speaker 1: be excellent, But mostly those folks are doing a job,
Speaker 1: and I think that's okay. So I think my retort
Speaker 1: to you would be there are all kinds of people today,
Speaker 1: it's just that there's not enough of them doing some
Speaker 1: of the riskiest work. And I think right now we're
Speaker 1: at a moment where there may be enough wins so
Speaker 1: that people get very excited to follow. So, for example,
Speaker 1: I am pretty sure that when people see the returns
Speaker 1: or that we will generate in some of our companies,
Speaker 1: it will open their mind to consider those kinds of
Speaker 1: companies when they never would have before. I'll give you
Speaker 1: a different example of one. So we made an investment
Speaker 1: in a business that, again this is in the theme
Speaker 1: of climate, but it's helped landhold farmers in India. And
Speaker 1: you guys know this, but there's it's India's a highly,
Speaker 1: highly fragmented farming infrastructure. These folks are in a very
Speaker 1: difficult position. You know, if you look at the suicide
Speaker 1: rates among farmers, it's off the charts. It's crazy. It's crazy.
Speaker 1: And what are the problems underneath that? Yield management, the
Speaker 1: ability to source crops at a reasonable I mean, like,
Speaker 1: these are very simple problems. That it's a coordination problem.
Speaker 1: I mean exactly because of funding farmers on audit right.
Speaker 1: So my point is it's very easy to identify, like,
Speaker 1: it's not a mental health crisis amongst farmers. These are
Speaker 1: capital and coordination problems that can be solved by a
Speaker 1: company with software, et cetera. We've made that bet we're
Speaker 1: seeing some really interesting early progress. What was the company
Speaker 1: called Harvesting Farmers Network. Anyways, I think if I walked
Speaker 1: around Silicon Valley, people would say two things. Moth's a
Speaker 1: great investor. He's made billions and billions of dollars. What
Speaker 1: the hell is farming in India? Who the hell cares?
Speaker 1: They would say both of those two things. If this
Speaker 1: farming and India thing works, I guarantee you, guys, okay,
Speaker 1: that more organizations and local value will say maybe there's
Speaker 1: agriculture based opportunities that we should really be focused on
Speaker 1: that can be improved by software. Because look, Jimals just
Speaker 1: made a billion dollars off this thing. If he can
Speaker 1: do a week into it, I agree with that. You know,
Speaker 1: I don't think we're particularly that special. We're just willing
Speaker 1: to take risk a few years earlier than the plurality.
Speaker 1: If you're talking high risk, let's talk about failures. What
Speaker 1: are the failures that you've had personally and how have
Speaker 1: you learned from them? Tons? Okay, so in general or
Speaker 1: in climate, Well, in climate, let's focus on climate. But
Speaker 1: like if it gives you a bigger lesson, look to
Speaker 1: get to Palmetto. I probably burned a couple hundred million dollars.
Speaker 1: How did I burn it? I made some bad investments.
Speaker 1: I made some investments that were okay investments. I made
Speaker 1: some investments that actually made a little bit of money.
Speaker 1: But All of those things had a capital cost to me,
Speaker 1: the some total of the money I had to spend,
Speaker 1: meaning money in versus money out. I lost a bunch
Speaker 1: of money. So, for example, I invested in the solar
Speaker 1: financing space. I didn't know what I was doing. I
Speaker 1: wanted to learn about it. I thought I could understand it.
Speaker 1: I did understand it. But what I didn't understand was
Speaker 1: how horribly the market valued such companies. They couldn't care less,
Speaker 1: you know they. I thought, wow, here's a great cost
Speaker 1: of capital trade and you know, this makes sense, and
Speaker 1: I talked myself into it, and the market was like,
Speaker 1: this sucks. I invested in a renewable energy business in India,
Speaker 1: and I thought, this is a no brainer. Ninety percent
Speaker 1: ebit to Margins, who's seen a company like this, Everybody's
Speaker 1: gonna love it. It's like great entrepreneur, but you know
Speaker 1: it doesn't have the market characteristics to be rewarded. I
Speaker 1: did electric buses, you know, market didn't reward it. So
Speaker 1: all these signals I take on the way in. I'm
Speaker 1: willing to use my money as risk capital to learn,
Speaker 1: and so I go in thinking, if I have one
Speaker 1: hundred percent impairment on this would I be okay? And
Speaker 1: my answer typically is as long as I am fundamentally
Speaker 1: further along in my understanding of the space, that's the
Speaker 1: cost of doing business for me, you know, because like,
Speaker 1: I am not in the business of hitting a ninety
Speaker 1: seven percent average batting average. That's not my business. It's
Speaker 1: not been my career. It's not what I'm good at. Lose, lose, lose,
Speaker 1: lose one massive giant outcome, a couple of good outcomes,
Speaker 1: and you replenish the pot. And the way that that
Speaker 1: happens iteratively over years can build great fortunes, but it
Speaker 1: can also build great progress. And the way that I
Speaker 1: do it is I just start, you know, honestly, Like
Speaker 1: I started in Wikipedia. I was like what is a battery?
Speaker 1: And then I went to YouTube, like show me how
Speaker 1: a battery is made? What is an anode? What is
Speaker 1: a cathe? And like, look, I mean, I'm being kind
Speaker 1: of phycegious. I have a background in electrical engineering. My
Speaker 1: undergrad was in Doube. You know, I spent a lot
Speaker 1: of time in semiconductors, so I know that world. So
Speaker 1: I was able to short circuit some of the learning steps.
Speaker 1: But to be very honest, with you. It is. If
Speaker 1: you look at my calendar in a week, call it
Speaker 1: fifty hours in the office. I have maybe eight hours
Speaker 1: of schedule time. So what am I doing the other
Speaker 1: forty two hours? You'll see me for all you know.
Speaker 1: I could be sleeping at my desk, but I'm reading constantly, reading,
Speaker 1: reading YouTube, reading YouTube, back and forth, over and over
Speaker 1: and over again. And then at some point I say, okay,
Speaker 1: I jump in with my two feet. I make a
Speaker 1: bet I learned. Sometimes I jump in with ten millions,
Speaker 1: sometimes a jump with fifty, sometimes M one hundred, trying
Speaker 1: to learn, trying to make sure that that you know
Speaker 1: that that was a good investment, trying to reinforce my
Speaker 1: body of knowledge, and over time, for me, that has
Speaker 1: proven to be a successful way to approach the job.
Speaker 1: One of the things that Chamat is most known for
Speaker 1: is popularizing a kind of investment called a spack. He's
Speaker 1: often called a spack king. But what is a spack?
Speaker 1: I'll tell you about it through one of Chat's most
Speaker 1: famous ones. Today, Virgin Galactic, makes its debut here at
Speaker 1: the New York Stock Exchange as a spack, joining me
Speaker 1: in a first on CNBC interview, Virgin Galactic bunder Sir
Speaker 1: Richard Branson, Social Capital CEO Chat Palata. It's twenty nineteen
Speaker 1: and Chamata is on the floor of the New York
Speaker 1: Stock Exchange along with Branson, who is dressed in a
Speaker 1: blue space suit. It's the day that Virgin Galactic, the
Speaker 1: spaceflight company, went public bya as the reporter notes, a spack.
Speaker 1: SPACK stands for special purpose Acquisition company. Two years earlier,
Speaker 1: Chamata and other investors created a special company with no
Speaker 1: operations or employees, just a shell company that was publicly traded.
Speaker 1: It existed solely to find another company that was not
Speaker 1: public to merge with in the process making it public,
Speaker 1: which shares on a stock exchange. They had six hundred
Speaker 1: and ninety million dollars to do it, and they decided
Speaker 1: to acquire Virgin Galactic. What they're celebrating at the Stock
Speaker 1: Exchange is the completion of that merger. Fireworks, literally, it's
Speaker 1: probably the first time I've ever seen fire technics on
Speaker 1: the floor of the New York Stact Exchange splash with
Speaker 1: a conventional IPO or initial public offering, the majority of
Speaker 1: the stock sold on the first day goes straight to
Speaker 1: large banks, investment firms, or rich individuals. With a SPAC,
Speaker 1: many more people can buy shares. They are heavily marketed
Speaker 1: to retail investors, people like you and me. That's largely
Speaker 1: Chamats doing now. It's wonderful tri enable the public recomment
Speaker 1: and invest alongside us. Taking a company public through a
Speaker 1: regular IPO can take over a year because of the
Speaker 1: amount of oversight required by financial regulators. SPACs can be
Speaker 1: rolled out faster, which has its own benefits. SPACs were
Speaker 1: popular with climate tech companies because they're not seen as
Speaker 1: great investments through the lengths of the traditional IPO loot.
Speaker 1: These companies are developing technology that are riskier, and they
Speaker 1: need lots and lots of money to develop those technologies
Speaker 1: before they can turn a profit. Chamatha as an investor
Speaker 1: in this company. Now, I know one of the things
Speaker 1: you've come on CNBC and talked about the past is
Speaker 1: how impressive the girls march. Chamat is a promoter of
Speaker 1: the SPAC. It's a role with compensation. Chamath could go
Speaker 1: on CNBC and promote Virgin Galactic. I generally don't put
Speaker 1: my own principal capital on the table unless I think
Speaker 1: there's a really compelling risk reward and I'm doing that,
Speaker 1: he said Virgin Galactic would have revenues of close to
Speaker 1: four hundred million dollars. By twenty twenty two, SPACs became
Speaker 1: bigger than Chamat. Celebrities like Tiger Woods, Shaquille O'Neal, and
Speaker 1: Serena Williams launched them. Chamat claimed he would create one
Speaker 1: for every letter of the alphabet. Virgin Galactic was spack
Speaker 1: a Chamat ended up stopping at f in twenty twenty one.
Speaker 1: Chamath sold his shares of Virgin Galactic while they were
Speaker 1: still high and made two hundred million dollars. He stated
Speaker 1: his money would go to word flighting climate change. Virgin
Speaker 1: Collected did not make four hundred million dollars in revenue
Speaker 1: as projected. By twenty twenty two, it brought in less
Speaker 1: than two million dollars in revenue and was operating at
Speaker 1: a loss of three hundred and forty six million overall.
Speaker 1: Given the macro environment, etc. But also your specific investments
Speaker 1: climate and non climate, it's a rough time for you
Speaker 1: with SPACs all down. The plan that you had to
Speaker 1: have a spack for every letter of the alphabet. Where
Speaker 1: is that now? I think that that could still be
Speaker 1: something that we do, but it'll happen over a much
Speaker 1: longer period of time. I think like spacks are really
Speaker 1: they're really interesting because I think there are a lot
Speaker 1: of companies that are working in industries that don't fit
Speaker 1: the neat model of how folks have wanted to historically
Speaker 1: invest in technology. In the past, people have wanted to
Speaker 1: invest in software ninety plus percent gross margins, you know,
Speaker 1: ideally recurring revenue. These things are not possible in many
Speaker 1: areas that really matter, and in those the capital markets
Speaker 1: will need different tools in order to bring investors together
Speaker 1: for hundreds and hundreds of millions of dollars billions of dollars,
Speaker 1: and I think Auspact can still do that. I will
Speaker 1: do them from time to time, but it was always
Speaker 1: a tool in my toolbox. You know. You have to remember,
Speaker 1: like in the last couple of years, I think we've
Speaker 1: done like fifty investments you know, eight verspects or sorry,
Speaker 1: six verspects, right, So there's still a lot of our
Speaker 1: body of work is much bigger than that. I think
Speaker 1: people know us for that, or know me for that
Speaker 1: in part, but I would encourage them to, you know,
Speaker 1: read the annual letter to really understand, like we are
Speaker 1: doing a lot of stuff. We've been on the ground
Speaker 1: floor in Silicon Valley for eleven and a half years
Speaker 1: building tech companies. That's what we do. If you look
Speaker 1: at the amount of money that was put into climate
Speaker 1: tech through SPACs, yeah, it's astronomical, astronomical. It would have
Speaker 1: never happened otherwise. A right. That is probably the singular
Speaker 1: moment that has happened for climate right that in twenty
Speaker 1: twenty one there was capital that was ingested at a
Speaker 1: level that was that has never happened happened before. I agree,
Speaker 1: and I'm very proud of that. I think that that's
Speaker 1: that's a very good start. And then I think this,
Speaker 1: you know, the IRA is going to be profoundly impactful,
Speaker 1: profoundly impactful. I think that was an incredible, incredible piece
Speaker 1: of legislation on the whole, and I think Chuck Schumer
Speaker 1: deserves an enormous amount of credit for that. How he
Speaker 1: negotiated that with Mansion, I don't know the TikTok of
Speaker 1: that deal, but that is a transformational piece of legislation.
Speaker 1: This is American government at its best, which is mostly
Speaker 1: getting out of the way, creating very bright line incentives
Speaker 1: and then letting the free market operate. You have a
Speaker 1: billboard outside your house with a message to the world.
Speaker 1: What would it say, Oh, I know the answer to this.
Speaker 1: It's the same billboard that when I first moved tier
Speaker 1: in two thousand, blew me away. It was right as
Speaker 1: you entered Menlo Park and it was on the freeway,
Speaker 1: the one on one south you're going on, and it
Speaker 1: said high octane capitalism ahead. I loved it. I loved it.
Speaker 1: I was like, Wow, I'm home. That's what I thought.
Speaker 1: I was like, I'm home. I've found my people. So
Speaker 1: that's the billboard. It would say, high octane capitalism ahead.
Speaker 1: Be passionate, but don't be emotional. Come to me with
Speaker 1: your best ideas. And did I say, this was a
Speaker 1: lovely conversation. Thanks for having this. Thank you. Chamata is
Speaker 1: one of many venture capitalists trying to make it big
Speaker 1: with climate investments. Given the decline in the stock market globally,
Speaker 1: investors are being more careful about where to put their money,
Speaker 1: but relative to other industries, climate tech continues to get
Speaker 1: a healthy dose of investments. And while we talk about
Speaker 1: Buffet's disciples, if you'd like to learn why Buffett thinks
Speaker 1: an oil company can be a climate bet check out
Speaker 1: our episode in the archive that features Occidental Petroleum CEO
Speaker 1: Vicki Hollob. Thanks so much for listening to Zero. If
Speaker 1: you like this episode, please take a moment to rate, review,
Speaker 1: and subscribe on Apple Podcasts or Spotify, Send it to
Speaker 1: a friend, or send it to someone who wants to
Speaker 1: get rich quick. Get in touch at zeropod at Bloomberg
Speaker 1: dot net. Zero's producer is Oscarboid and senior producer is
Speaker 1: Christine riskoll Our team music is composed by Wonderley. Special
Speaker 1: thanks to Benkuet, viscern Athan Brian Eckhous, Bailey Lipschulz, and
Speaker 1: Kira Bendon. I'm Axtrati back next week.