Nurturing Companies that Have a Net Positive Impact on Nature: Insights from Tom Chi of At One Ve...

Name: Nurturing Companies that Have a Net Positive Impact on Nature: Insights from Tom Chi of At One Ve...
Uploaded: 2024-05-23T14:38:26.000Z
Duration: 2 h 6 min 43 s

Hardware Innovations in Climate Change

Introduction to the Podcast and Guest

The podcast "Hardware to Save a Planet" focuses on technological innovations aimed at combating climate change, with each episode addressing a specific challenge and its corresponding solution.

Host Dylan Garrett introduces Tom Chi, founding partner of At One Ventures, whose mission is to create a world where humanity positively impacts nature.

Mission Statement and Investment Overview

Tom Chi's investment approach emphasizes that the planet itself does not need saving; rather, the focus is on preserving life on Earth.

At One Ventures has raised over half a billion dollars across two funds ($150 million in 2021 and $375 million in 2022), primarily investing in hardware or physical technology solutions.

Background of Tom Chi

Tom Chi has an extensive background as an astrophysicist and electrical engineer, having worked at major tech companies like Microsoft, Yahoo, and Google.

He was part of the founding team at Google X, focusing on accelerating product development for real-world impact.

Career Journey and Environmental Awakening

Throughout his career, Tom has been involved in various technical fields but initially did not see nature conservation as part of his professional path.

His early work included astrophysical research and developing advanced computing systems. However, he had a personal awakening regarding environmental issues during his time at Google X.

Personal Experience with Coral Reefs

A pivotal moment for Tom occurred when he witnessed coral bleaching firsthand while vacationing near a beautiful reef in Hawaii.

This experience highlighted the rapid degradation of natural ecosystems due to climate change, prompting him to shift his focus towards environmental sustainability.

The Emotional Impact of Coral Reef Bleaching

Personal Connection to Coral Reefs

The speaker reflects on their deep connection to coral reefs, likening them to a neighborhood where individual organisms are known and observed over time.

Witnessing the decline of the reef felt akin to losing friends and neighbors, creating a profound emotional void for the speaker.

Understanding Coral Bleaching

After consulting marine biologists, the speaker learns that 10% of global reefs experienced bleaching in one year, leading to concerns about future coral extinction.

Statistical analysis suggests that corals could face extinction within approximately 40 years if current trends continue, emphasizing urgency.

Broader Implications for Humanity

The loss of coral reefs would not only affect individuals but also humanity as a whole, depriving future generations of experiencing these ecosystems.

Approximately 25% of ocean species rely on reefs; their extinction would lead to significant biodiversity loss and disrupt food chains.

Urgency for Action

The timeline for action is critical; with only about 30 years left before potential widespread reef collapse, immediate efforts are necessary.

Current climate reports focus on long-term scenarios (by 2100), but the speaker stresses that immediate action is needed now rather than waiting for future generations.

Realizations About Responsibility

Historical context reveals that previous generations had no opportunity to address reef issues until recent decades; thus, current living individuals hold responsibility for change.

Acknowledging the scale of reef loss (1.3 hectares per minute vs. restoration taking a decade), there’s an urgent need for accelerated conservation efforts.

Leadership Challenges in Conservation

As an executive with experience in innovation and leadership, the speaker recognizes a lack of sufficient talent and resources dedicated to addressing reef conservation challenges.

Despite interest from various contributors, there remains a gap between current efforts and what is required to effectively combat ongoing reef degradation.

Understanding the Challenges of Climate Change Regulation

The Limitations of Team Dynamics and Theories of Change

As a leader, it's crucial to assess team dynamics and recognize when an approach is unlikely to succeed, particularly in addressing climate change.

Ineffective theories of change can hinder progress; for example, relying solely on electing the right officials or implementing regulations has proven insufficient historically.

Regulatory Challenges in Environmental Policy

The lengthy process (7 to 10 years) required to ban harmful substances contrasts sharply with the rapid innovation cycle (3 to 4 months) in industry, allowing companies to circumvent regulations easily.

This disparity highlights a fundamental issue: regulatory frameworks often lag behind business innovations, making it difficult for effective environmental policies to keep pace.

Rates vs. States: Understanding Climate Change Dynamics

The future is shaped by rates of change rather than static states; slow regulatory improvements cannot compete with rapid industrial advancements.

While government regulation plays a role, its effectiveness is limited if it cannot match the speed at which industries adapt and innovate.

Personal Insights on Climate Data Interpretation

A personal experience led to a deeper understanding of climate data; despite being knowledgeable as a scientist, there was a shocking realization about coral reef decline that had not been communicated effectively.

Investigating raw data from scientific reports revealed that volatility in climate patterns was increasing significantly faster than average temperature changes.

The Importance of Volatility Metrics in Climate Reporting

Average temperatures can obscure critical volatility metrics; extreme weather events are more indicative of climate impacts than averages alone.

Increased volatility—measured through various statistical methods—was found to be rising three times faster than average temperatures, suggesting that extreme conditions will become more common.

Predictions Based on Observed Trends

In 2012, predictions were made regarding the escalation of extreme weather events like droughts and floods based on observed data trends.

Despite lacking public discourse around these issues at the time, confidence in these predictions stemmed from rigorous analysis rather than prevailing narratives focused only on hurricanes.

Exploring Environmental Challenges and Personal Transformation

The Decision to Take a Sabbatical

The speaker reflects on the laws of physics and their calculations, leading to the realization that immediate action is necessary regarding environmental issues.

A desire for a 12 to 18-month sabbatical from Google X emerges, motivated by the urgency of ecological problems.

Initial discussions with Astra Teller about taking time off reveal company policy limitations, suggesting only three months are feasible.

The speaker contemplates leaving the group but expresses confidence in being able to rejoin later, receiving reassurance from Astra Teller.

Ultimately, the speaker decides to quit, creating an unofficial sabbatical despite potential financial losses.

Immersion in Ecological Issues

During the 18-month sabbatical, the speaker visits various sites of ecological damage, including rapidly melting glaciers and deforested areas in Southeast Asia.

Observations include severe environmental degradation where rainforests are replaced by palm oil plantations and slash-and-burn agriculture in the Amazon.

The interconnectedness of poverty and environmental crises is highlighted; solutions must address both issues simultaneously for effectiveness.

Insights Gained from Field Experience

Proximity to problems enhances understanding; abstract statistics become tangible when witnessing conditions firsthand (e.g., lack of clean drinking water).

Specific examples illustrate how engineering knowledge can lead to practical solutions for local water access issues and disease prevention.

Understanding cultural contexts helps identify root causes behind environmental destruction and infrastructure breakdown.

Data Collection and Root Cause Analysis

The speaker aims to gather data points during fieldwork to identify key root causes of ecological challenges but finds complexity instead.

Despite hopes for simple resolutions, multiple significant root causes emerge—primarily greenhouse gas emissions destabilizing climate systems.

Expanding Scope of Problems

After extensive research during the sabbatical, it becomes clear that addressing these challenges involves more than just one or two primary issues.

The realization that there are approximately 60 critical problems needing attention complicates plans for focused entrepreneurial efforts.

Understanding the Urgency of Climate Action

The Root and Branch Problem in Climate Change

The speaker discusses the rapid decline of ecosystems, emphasizing that waiting to address root causes while neglecting immediate issues (branches) can lead to irreversible damage, such as coral extinction.

Addressing global warming by removing CO2 from the atmosphere is deemed impractical due to the immense scale of required action, estimated at three to four trillion tons.

The timeline for effective climate repair is lengthy; even if emissions are reduced, ecosystems like shallow water corals may already be extinct before significant progress is made.

Grief and Realism in Environmental Repair

Acknowledging the grief associated with environmental damage is crucial for realistic problem-solving; society often struggles with this emotional aspect.

Effective engineering solutions require a clear understanding of problems; misperceptions can lead to ineffective design constraints and misguided success metrics.

Disconnect from Nature and Its Consequences

Many people today lack direct connections to nature, making it difficult to grasp the urgency of climate issues. Abstract temperature changes feel distant and less impactful.

Reporting on climate volatility rather than average temperatures could provide a clearer picture of risks, similar to how weather forecasts communicate probabilities.

Experiencing Climate Change Firsthand

Individuals will inevitably face personal experiences related to climate grief within the next century, regardless of urban living conditions.

Recent extreme weather events illustrate how quickly safety can be compromised; towns previously considered safe have faced devastating wildfires due to changing climates.

The Need for Urgent Action

Modern infrastructure does not guarantee safety against natural disasters; even well-built communities can be devastated by rapidly spreading fires.

While there has been an increase in awareness and funding for climate initiatives, the pace of addressing these challenges remains insufficient compared to what is needed.

Transitioning to a New Way of Being

Understanding the Migration Gap

The discussion highlights the urgent need to migrate to a new way of being, emphasizing the gap between required and current rates of transition.

Frustration arises from knowing what needs to change but witnessing excuses, particularly financial ones, that hinder progress.

The cost of inaction is underscored; failing to address issues could lead to costs exponentially higher than those associated with proactive measures.

Old Mindsets and Their Impact

Acknowledgment that old mindsets are obstructing faster transitions despite having some solutions ready for implementation.

Dark humor is used to express how time may ultimately favor those working on necessary changes as systems continue to collapse.

Future Awareness and Investment

As time progresses, awareness of the necessity for innovative solutions will grow, increasing demand for technologies currently under development.

Emphasis on maintaining focus and capital investment in projects that will eventually be recognized as essential.

Building vs. Financing Innovations

The speaker reflects on their unique position as an inventor turned venture capitalist (VC), noting the rarity of this career path.

Direct experience in building provides valuable insights when engaging with potential investments, allowing for efficient communication about technical challenges.

Technical Discussions and Problem-Solving

Engaging discussions often reveal deeper issues beyond initial presentations, leading teams toward practical problem-solving rather than surface-level explanations.

Valuable interactions occur when technical details are quickly addressed, allowing more time for substantive discussions about real problems faced by teams.

Manufacturing Expertise in Venture Capital

The firm differentiates itself through its manufacturing expertise among partners, which enhances support throughout investment processes.

A dedicated team focused on manufacturing further strengthens their approach, ensuring comprehensive assistance for portfolio companies.

Understanding Value Arbitrage in Venture Capital

The Herd Mentality and Investment Opportunities

The speaker discusses the phenomenon of investors chasing trends, likening it to children running after a soccer ball. This herd mentality often leads to inflated prices for popular investments while undervaluing others.

Contrarian investors find success by identifying value arbitrage opportunities that arise from this herd behavior, allowing them to invest in overlooked areas with potential.

Manufacturing as an Investment Advantage

The conversation shifts towards the importance of addressing industry challenges, particularly in manufacturing, which many investors shy away from due to perceived risks.

The speaker emphasizes their firm's expertise in manufacturing, noting that few venture firms possess this skill set. This gives them a competitive edge when investing in manufacturing-related deals.

Valuation Dynamics in Manufacturing Investments

Investing early (e.g., at a $15 million post-money valuation) before a company completes its manufacturing journey can lead to significant returns (up to $200 million post-manufacturing).

Despite the challenges associated with manufacturing, the speaker argues that these investments are where substantial value creation occurs.

Challenges from Zero to One and One to Many

A discussion arises about the difficulties companies face transitioning from proving technology viability (zero to one) to scaling production (one to many).

The speaker notes that their team’s background as scientists helps mitigate risks during the zero-to-one phase but acknowledges that scientific experimentation can introduce unpredictable timelines.

Risk Assessment: Engineering vs. Scientific Uncertainty

Engineering risks are more predictable compared to scientific risks; thus, they prefer not engaging with investments involving high scientific uncertainty.

They highlight how past experiences as scientists inform their understanding of project timelines and potential pitfalls during experimental phases.

Investment Strategy Based on Technology Readiness Levels (TRL)

To better align with venture capital needs, they adapt government TRL levels into a simplified six-level system focusing on late lab bench and early commercialization stages.

By investing at these later stages, they minimize technical failure risk since substantial scientific uncertainties have been resolved by then.

This structured approach allows for clear insights into investment strategies within venture capital focused on manufacturing and technological readiness.

Understanding Manufacturing Risks and Market Dynamics

The Importance of Manufacturing Experience

Emphasizes the need to tune manufacturing processes, suggesting that intensifying reactions can lead to successful tech development. The speaker notes zero failures in their companies' tech production.

Highlights a lack of in-house manufacturing experience among firms, with many relying on external contacts from companies like Tesla or Samsung for insights.

Competitive Advantages in Deal-Making

Discusses how having a team with substantial manufacturing background leads to winning deals, as clients recognize the ability to provide effective assistance.

Navigating Market Risks

Raises concerns about various risks associated with scaling operations, including market traction and project financing complexities.

The Triad Concept: Disruptive Deep Tech

Introduces the "Triad," which consists of disruptive deep tech that offers improved unit economics and environmental benefits.

Critiques the idea of charging a green premium for eco-friendly products, arguing it limits market share significantly (1-2%).

Challenges of Achieving Parity

Explains that achieving parity (equal cost between clean and traditional options) is problematic due to existing industries' stronghold and large operational bases.

Describes how presenting an equal cost option does not incentivize factory owners to switch if it requires significant capital expenditure without clear benefits.

Economic Viability Over Green Premium

Stresses the necessity of beating industry unit economic numbers significantly; suggests aiming for production costs at least 40%-90% lower than current margins depending on industry standards.

Training Wheels Contracts: A Strategic Approach

Introduces "training wheels contracts" as agreements made before product availability, allowing businesses to gauge demand without overcommitting resources.

Discusses the balance needed in production—avoiding both overshooting and undershooting inventory levels—to maintain cash flow flexibility while meeting market demands.

Understanding Supply Limits and Debt Level Risk

The Importance of Addressing Supply Limits

Before achieving success, it is crucial to address supply limits, which are tied to debt level risk. This understanding is essential for effective hardware and climate investing.

The concept of addressing supply limits involves recognizing that these limits represent a form of debt level risk, which can be managed through strategic financial planning.

Revenue Realization Through Offtake Agreements

Revenue realization is not based on predictions but rather on confirmed sales through off-take agreements. Successfully addressing supply limits allows companies to achieve this revenue.

By managing supply limits effectively, businesses can transition from debt-level risks to equity-level returns, breaking traditional finance models where high returns typically come with high risks.

Financing Strategies and Capital Equipment Purchases

Debt level risk encompasses financing needs such as capital equipment purchases and operational costs. Understanding these requirements helps in securing appropriate funding.

Companies can explore financing options beyond traditional venture capital (VC), allowing for more flexible funding strategies that align with their operational needs.

Overcoming the Valley of Death in Funding

Traditional funding challenges arise when large amounts of equity are needed for capital expenditures. However, demonstrating strong order volumes can attract debt financing instead.

With solid unit economics and confirmed orders, businesses can secure asset-backed financing options that reduce perceived risks for lenders.

Evolution of Venture Capital Practices

Reflecting on the evolution of venture capital over 50 years reveals stagnation compared to advancements in other engineering disciplines. There’s a need for innovation within venture practices.

Despite improvements in various fields like electrical or bioengineering, venture capital has not significantly evolved; this calls for a reevaluation of methodologies used in the industry.

Financial Planning and Use of Proceeds

New terminologies like "training wheels contracts" highlight innovative approaches to inventory planning and financial structuring within ventures.

Historical failures in clean tech stemmed from misallocation of equity funds into areas yielding only debt-level returns; reversing this strategy could enhance financial outcomes by leveraging debt appropriately.

Contrarian Investment Strategies and Carbon Sequestration

Understanding Contrarian Approaches

The speaker discusses a contrarian investment approach, suggesting that while many run away from certain areas, there are opportunities in underpicked markets.

The analogy of picking apples illustrates the concept of underpicked versus overpicked resources; focusing on underpicked areas can yield better quality outcomes despite some bad options.

Investment Opportunities in Carbon Sequestration

Emphasizing the importance of investing in areas where others are retreating, particularly in nature-based carbon sequestration solutions.

The speaker highlights the need for serious efforts to scale nature-based sequestration and address measurement and accounting challenges.

Challenges with Direct Air Capture

Direct air capture is critiqued as being inefficient due to its position on the entropy curve, requiring excessive energy to extract CO2 from ambient air.

Comparisons are made between capturing CO2 from various sources (e.g., ethanol plants vs. coal power plants), illustrating how much easier it is to capture from concentrated sources.

Mass Transfer Issues in Carbon Sequestration

The "aperture issue" is introduced, explaining that carbon sequestration fundamentally involves mass transfer problems that can be quantified by mass flux metrics.

Two methods to improve mass flux are discussed: increasing the rate through a small aperture or utilizing a large aperture for more efficient collection.

Limitations of Industrial Solutions

Natural systems like forests and oceans have vast apertures compared to industrial solutions, which struggle with scale and efficiency.

Current industrial approaches often fail because they do not adequately address the fundamental issues related to mass transfer and energy consumption.

Realistic Perspectives on Plastic Recovery

The speaker expresses skepticism about closed-loop plastics recovery systems due to high reverse logistics costs making them less viable than virgin production.

Even if plastic waste could be perfectly sorted and processed, it would still likely be more expensive than producing new plastic materials.

Understanding the Challenges of Reverse Logistics

The Feasibility of Reusing Materials

The potential for a closed-loop system is higher in controlled environments, such as corporate cafeterias, where physical scattering of materials is limited.

In large corporations like Coca-Cola or Procter & Gamble, reverse logistics becomes impractical due to the vast number of endpoints and associated costs.

Economic Viability and Industry Resistance

Unless foundational changes occur in capitalism or reverse logistics becomes cost-free, recovering post-consumer materials will remain economically unfeasible.

Significant investments are being made into improving industries; however, broad displacement of traditional production methods remains unlikely without addressing economic barriers.

Urgency for Technological Advancements

There is an urgent need to upgrade industries causing environmental damage by removing obstacles and promoting advanced unit economic technologies.

If new regulations align with improved unit economics, industries may embrace change more readily rather than resist it.

Environmental Impact Considerations

A shift towards technologies that reduce carbon emissions and other pollutants is essential for creating a net positive impact on nature.

The focus should be on upgrading industries that harm air, water, soil, and biodiversity while ensuring they can still meet civilization's needs.

Optimism vs. Pessimism About Climate Change Solutions

Perspectives on Future Outcomes

The speaker expresses cautious optimism about climate solutions due to their better unit economics but acknowledges the inevitability of further ecological damage before recovery can begin.

Inspirational Figures in Climate Action

Ayana Young’s podcast "For the Wild" is highlighted as an inspiring source that addresses deeper questions regarding climate change beyond conventional business frameworks.

Encouragement for Diverse Skill Sets in Climate Action

Call to Action for Individuals

Individuals from various professional backgrounds are encouraged to contribute their skills—be it accounting, engineering, science, design—to address climate challenges effectively.

Importance of Narrative Change

Emphasizing the need for better narratives around climate action suggests that disciplines like poetry can play a role in reshaping public perception and engagement with environmental issues.

The Importance of Sharing Successful Outcomes

Encouragement to Share Successes

The speaker emphasizes the necessity of achieving consistent outcomes in order to attract capital into the space, highlighting that success breeds further investment.

The speaker advocates for transparency among firms, urging them to share successful strategies and detailed insights to foster collective progress within the industry.

A call to action is made for all stakeholders to contribute their findings, reinforcing a collaborative approach towards problem-solving and innovation.

The discussion underscores a shared mission among participants, suggesting that unity in purpose can lead to more effective solutions and advancements.

The segment concludes with an acknowledgment of the support from Synapse, indicating their role in developing hardware solutions for ambitious projects.