SPEAKER_00: hey everybody welcome back it is tuesday we have a big show for you first up in the band train it's the end of the world here in the bay area monsoon season has hit we've got atmospheric rivers and

SPEAKER_02: cyclone bombs and the continuation of the riff train coinbase is on a second major riff 18 the first time now they're doing 20 we'll talk about that yeah the crypto winter is real then we're

SPEAKER_03: going to break down the latest in the microsoft open ai relationship satya nadella is either the

Jason Calacanis: greatest ceo in tech or i have a very contrarian take on open ai yeah and uh very interesting to

SPEAKER_00: think about the relationship between azure and the billions of dollars open ai is apparently spending

SPEAKER_14: on cloud computing with microsoft we'll talk about round tripping and some of the back channel there uh you know what they say here in silicon valley molly no conflict no interest and then we'll talk

SPEAKER_18: about climate tech molly's got a couple stories in climate yeah we got some good news some we're all gonna die news and then a great interview with a climate founder micro chronley on battery recycling

SPEAKER_03: and creating new battery feedstock for all those ebs and the power wall that i'm gonna need any

SPEAKER_20: freaking second now when the lights wink wink out stick with us it's gonna be a great show this week

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SPEAKER_26: launch use offer code twist to save 10 off your first purchase of a website or domain two all right

SPEAKER_28: it's tuesday feels like it's like the third thursday of the week i mean it's been a very long week

SPEAKER_30: already you're living every day where everybody's living every day twice with these storms in the

SPEAKER_32: bay area it's a good day to be talking about climate startups which we're doing today

SPEAKER_33: because people have no idea what's happening here in the bay area but there's a concept of an

SPEAKER_38: atmospheric river i don't know the origin of this word molly i first heard it i think last year right i've heard it in terms of winter storms too i mean it's like when there's a totally

SPEAKER_03: my very base level meteorological understanding is that there's a lot of moisture in the air that's being carried by the jet street so that and then it like zones of pressure and warm air collide and then you get bad storms and it can produce these bomb cyclone winter storms or in our case it's producing bomb cyclone rainstorms uh-huh and there's a lot of mockery of california happening around the internet but what i should explain is that we have like a whole bunch of factors contributing to how insane this is one submit some legit infrastructure situations vis-a-vis pg and e not wanting to bury the lines and like in la there's nowhere for the water to go really like we don't want a lot not a lot of good catchment but also it's like we have this new weather pattern of like drought drought drought drought drought drought so the trees die and then there's like fires and there's whole you know areas and then everything is weakened and then we get all the rain at the same time

SPEAKER_40: so the trees fall down and we flood because there's no way for it to be absorbed because

SPEAKER_42: it's just like too much too soon right so if all your trees are dead or dying or burnt they you should keep the soil nice and tight and then you have an atmospheric river or

SPEAKER_43: a bomb cyclone we're having both we're having both yeah and so it's uh result i mean i must have thirty thousand dollars in damage to my house and grounds in the bay area in the past two weeks uh delightful snow in tahoe which is fantastic but um the good news is i guess the reservoirs are filling up uh we have flooding in our house we had flooding down the sides of our house uh my neighbor has like a big wrought iron fence and so much water was coming down the hill it washed out

SPEAKER_36: the uh i guess the foundation of the fence so anyway i woke up this morning no power internet down everything uh and then tons of people showing up the house to try to save stuff and

SPEAKER_51: so it's crazy what's great like be safe out there we've i think there have been

SPEAKER_38: there have been several deaths maybe as many as 12 i think i mean it's like it's really bad people are dying from this really oh yeah yeah i had this terrible thing happen in the uh

SPEAKER_55: bay area i'm almost like don't want to bring it up but uh a guy drove his car off of devil's slide slide in pacifica pacifica for people don't know you have this beautiful pch pacific coast highway you know when you see those like car commercials and people are driving on those beautiful cliffs looking out at the you know pacific ocean that's the pch this guy drove his family off uh one of the most notoriously dangerous areas but he literally went off an exit ramp you know and then just drove a tesla down a 250 foot cliff everybody survived but it was intentional and i guess the way we know it's intentional is the other people in the car including his wife must have witnessed it be intentional and it's got a two four and a seven-year-old kid in it so that's been spooking me a bunch i hate to get dark but i was just like oh my god what is happening in

SPEAKER_03: the world it just it feels i mean i know i'm trying to have the optimistic note for 2023 please please but it do you do when you have like this many storms and this many stuff and then you hear about that and you hear about you know like people are cracking there's all these terrible things and like randomly like i did not know that like the reason you can't buy eggs right now is because the

SPEAKER_57: avian flu killed 53 million birds in america now there's an actual there's an egg shortage eggs are like

SPEAKER_60: out every and it's because of literal plague like you do have these moments where you're just like maybe it is the end times i don't really know i mean and yeah do what you want to do people no more

SPEAKER_36: rules five dollar eggs coming i mean certainly in the news there must be good news so i don't know

SPEAKER_67: like what's our first story gotta be some great story to kick us off we are gonna talk about some

SPEAKER_03: good we have some great climate news we have some cool funding announcements but before that we have

Jason Calacanis: more layoff news and i'm so sorry because the crypto the crypto winter is also a full-on bomb cyclone

SPEAKER_33: wow that's what i did there there's an atmospheric river that just took everybody's bags and just flushed

SPEAKER_60: them i think it's possible that bill gurley is going to have to like raise his riff minimum because coinbase

SPEAKER_03: did uh we thought what they needed to do which was an 18 rift back in june uh but announced today that coinbase will cut another um roughly 20 percent about 950 employees oh the double double in yeah exactly

SPEAKER_10: a fifth of its workforce after it did a fifth of its workforce before yep yeah wow coinbase says brian

SPEAKER_03: armstrong told cnbc that there are likely more shoes to drop in crypto and that the company is trying to get ahead of this kind of ongoing crypto winter and you know if you remember back to some of our crypto roundtables the grayscale bitcoin trust is the thing that sunny madras pointed to as being a potential like major shoe to drop or you know we have right now the winklevoss twins of gemini accusing genesis of accounting fraud so you you have you know and i think the sec is investigating this dcg company over its lending practices with genesis yes so like you have a lot of big names still unaccounted yes so

SPEAKER_42: this is pretty dark because uh we thought when this flushing would happen you know we saw icos go out then you saw like the nft grifts go out you know it's like what's left well it's like bitcoin's left right bitcoins is a store of value and then there were people who did it right quote unquote and they had like a nice trust and it was all done on the up and up and these are great investors and you know

SPEAKER_43: i've been watching now people say like well we think coinbase has got a risk now um which that would be like the goldman sachs or bank of america the aws if you will of crypto having a challenge and so we're sort of getting to um you know last man standing kind of dynamics here uh in crypto which city is which city hasn't crumbled and been washed out to see um and brian armstrong has really been

SPEAKER_03: trying to reassure you know he's really been saying all the things that you would want to hear like we're fine yeah also we've heard other exchanges say that too also coinbase has audited financials okay which is the key there but but 80 of that revenue is still on trades and trading volume and so if trading volume goes to zero or really so what you might see is if you see retail investors wash out like people who you know amateurs then what you're going to see most likely is more serious crypto investors go back to not your keys not your coin and maybe not want to use exchanges so there is a really i think a high risk if coinbase has not diversified enough and by the way the numbers that they've reported recently that they're kind of basing these concerns on and and these layoffs on like the last quarterly numbers we got from coinbase are before the ftx collapse yeah and network and revenue was already down 54 4 year over year in q3 yeah i if you there's no consumers right now who

SPEAKER_36: are looking at the current employment situation their 401ks the value of their homes and the overall economy inflation the global instability in the world ukraine taiwan etc and saying to themselves you know what i want to do i want to place a bet on a token i want to buy an nft nobody in their right mind is saying that right now what they're saying is hey um let me take a look at my balance sheet let me do a little austerity measures here maybe buy chains or cut that tree down myself maybe i'll

SPEAKER_43: make some cold brew here you know maybe i'll set up my own lighting rig at home and uh you know not

SPEAKER_42: fly out i'm doing my own manicures man i'm i'm going to start my my daughters want me to i think i'm going to be the dad with painted nails now because oh my god you had to get this olive and

SPEAKER_89: june kit that i bought off instagram it's amazingly as look it's got i did freaking glitter manicure

SPEAKER_92: at my own house i like it i like it that it would have cost you normally 40 50 60 bucks in the bay

SPEAKER_93: area to go out 70 70 no it would cost 50. no it would cost 50 because i would have been gel i might

SPEAKER_18: have got i might have gone dip i mean it would be 40 or 50 bucks though like and i did this at home and

SPEAKER_97: i could do it now like it's i got the kit anyway anyway uh just saying austerity yossification my

SPEAKER_100: jacification do it do it get that manny okay if you're a sass or a services company that stores customer data in the cloud well you know it you need to be socked to compliant from a third party

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SPEAKER_42: anyway uh 20 rift significant that's a thousand more tech workers the white collar recession surplus elites

SPEAKER_43: flooding into the market now people have been getting jobs and the jobs report came out we talked about

SPEAKER_36: that yesterday and people are getting jobs so this is like this mixed bag i think tech companies grew too quickly they're cutting but there are apparently some jobs to be had in the world for now i don't believe a lot of these statistics these backward looking statistics feel like we're flying the plane

SPEAKER_43: i feel like we're driving a car on a 90 second delay like imagine you were driving down the freeway and like your windshield was a projection of what happened 90 seconds ago i feel like we're making economic

SPEAKER_36: decisions that way both inside of companies you know companies aren't being thoughtful enough with real-time data the fed transitory inflation you know we can keep rates low forever we can do all this

SPEAKER_111: crazy stimulus omnibus spending everybody i think molly listen you spent all these years at marketplace yeah would it not be prudent for everybody who's not part of the labor movement like to maybe increase

SPEAKER_36: labor participation to maybe have more austerity measures do more with less be more efficient we have to turn this economy around this feels like we're going into like a debt spiral now i hate to be pessimistic but those thousand people now who are in a coinbase on top of the 18 000 losing their jobs at amazon 8 000 people at salesforce what if half of these people get jobs which i think seems

SPEAKER_118: recent but what are the other half going to do 11 000 at meta i mean this again i would say

SPEAKER_03: i what did i say yesterday all every apocalypse is local like every company in the world of any size

SPEAKER_88: needs tech workers not just tech companies okay so i think you like if you have a lot of marketing

SPEAKER_03: people with tech expertise that get laid off they can all go work at schools and insurance companies and bc for it right like all of these companies that now need a level of expertise that comes from the tech industry they can go back to finance frankly like we had this whole wave of people who of mbas who would have in the old days gone to wall street who came out to silicon valley instead so they can go back to finance because finance isn't going to go away like i think there is i think a couple things one you're 100 right about backward looking data and also just the lack of real-time data and some of that is from this like weird isolation that's happened where you don't know what is actually happening you just know what people think about it so like we're making these big economic decisions based on like vibes when we don't have local news or boots on the ground or dinner parties where ceos maybe were comparing notes for a few years and talking about what was happening so there's like a real vacuum effect with the knowledge but also i think there are other sectors that are stronger than we think they are because tech is sucking up so much of the news cycle

SPEAKER_36: i mean health care we need health care workers we need nurses we need doctors the shortage is there we need plumbers we need electricians the shortage is there and professional services they're

SPEAKER_03: desperately desperately also that's a really long cycle that involves a lot of training and schooling and so that's going to be hard to step up too so like i'm of two minds about it there's part of me that's trying to resist the gravity of like the tech collapse narrative becoming the whole economic narrative because i'm not sure that's true but it also does kind of feel like

SPEAKER_130: everything's falling apart and nobody cares and i don't know what to do um i think there's not

SPEAKER_133: enough vets and there's not enough nurses and there's not in school you know just looking at

SPEAKER_42: the job openings health and health education health services big um professional business services

SPEAKER_136: accountants lawyers all that kind of stuff still we have a lot of shortages in some of those areas

SPEAKER_36: i think lawyers we have too many accounts not enough um so you know but are people going to leave coinbase and take a hospitality job is somebody going to leave facebook and become

SPEAKER_139: i don't know a uh a teacher possibly i don't you know and how do you make that jump from i was in sales or i was in you know marketing and i was making 75k 150k whatever the number is depending on how many years of service and now i'm going to go start over and be a teacher at 47 000 or 62 000 you know

SPEAKER_03: well but these districts also need i.t staff and you know i mean they're sort of but they don't pay

SPEAKER_145: very well paid in you know the school system compared to working at let me tell you my brother does it

SPEAKER_03: and not very much some of that may change i will also say and i'm not trying to only talk my book here but there's like a new like i'm talking to so many i cannot tell you how often i get a ping from somebody like a high level person who's like hey can i talk about like can i have 15 minutes to just talk about making a pivot into climate so like there's a new climate tech startup born every minute yep and all of these really highly skilled people coming on to the market and so i think there's like the the assumption is that there won't be new companies to absorb these people from big companies but in fact we know that new companies are being formed and frankly like either between the burgeoning generative ai startup bubble and the climate tech investing bubble yeah i feel like there's plenty of startups where people land that maybe uh you know if you're going to work

SPEAKER_149: at one of these ai companies i think these ai companies are going to be relatively small and

SPEAKER_43: they're going to be eliminating jobs so that's like another one of these like factors i'm looking at

SPEAKER_151: like oh yeah so a hundred phds really high-end wants data big data folks developers go to i don't know

SPEAKER_43: some verticalized ai company that's going to work in this very specific vertical i i mean i think their work is going to result in more of those sort of mid-tier jobs uh high-paying mid-tier jobs getting eliminated or one person is going to be able to do the work of five which we see all the time like how how many jobs have we seen where one person can now do the work of five whether it's graphic design

SPEAKER_36: or marketing or sales or sdrs and then you have this globalization thing happening where people are hiring because of remote work every all the managers have learned how to hire around the world so one of the things i'm hearing and we talked about this i think with the union discussion we had there's a

SPEAKER_43: big discussion about stock-based comp unionization entitlement um and just general expense in the united states and then people were like wait a second i have an office in san paulo i got one in you know manila i got one in ontario wherever it is let's start just hiring people there because

SPEAKER_139: they also need jobs and we know how to manage and those people are half the cost we get two for one or we don't have to deal with the union whatever it is so the globalization remote work thing i think is going to raise the average salary up in the world while reducing it in the united states so the as we reduce to a a new level the the person in who was working at facebook or meta you know in the in the bay area zuck's going to just replace them with somebody in his you know canadian south american

SPEAKER_136: manila office and i think that's what we're going to start seeing whether it's microsoft and microsoft

SPEAKER_120: has big offices outside the us it's just going to be like you know what you want to unionize great i

SPEAKER_03: mean we just shouldn't forget i mean and again this is sort of where like in tech employees got over like excessively well treated if you will right like we have and we have this weird economic confluence of insanely high housing costs coupled with insanely high salaries tripled with the funny

SPEAKER_40: money of stock options where like somebody right next to you is a lottery winner because they got

SPEAKER_03: in the right company early at you know you went to a different one yep so it is a totally distorted market yeah and outside of the bay area and outside of tech you have employees who are the opposite of entitled right that's why you have every freaking nurses union on strike and teachers on strike and like so it's there are so many ways in which we cannot conflate the broader economy with tech but if tech started to operate a little bit more like the broader economy then probably the laughs wouldn't be so big and the housing market wouldn't be so out of hand because i'm sorry like every ceo who is now complaining about entitled you've heard me say this a million times but every ceo who is now complaining about entitled employees entitled to them of course yeah they created it two things we always

SPEAKER_173: talk about on the show number one how to build the best product possible that's critically important you want to have a great product it's obvious but number two you have to find product market fit fast right speed is what startups are all about and those things usually go hand in hand but relying on your gut is not how you should do it many vcs they don't want to wait around for that it's not about your gut right you need to have data investors are looking for founders that can use data-driven solutions to find product market fit faster so you need to check out mixpanel right now and they will give you fifty thousand dollars in credits when you join their startup program they want to help your startup find product market fit and they want to help you do it a little bit faster by giving these powerful pools self-serve product analytics that's what it's all about you can get insights in real time with the help of mixpanels pre-built templates and if you're a data-driven founder that's going to make the best investors in the world respect you more apply today to claim your fifty thousand dollars

SPEAKER_102: in credits at mixpanel.com startups that's m-i-x-p-a-n-e-l.com startups that's startups with an s plural and if your startup was founded under five years ago has raised eight million or less and isn't currently on any of mixpanel's paid plans you're eligible to apply terms and conditions do apply

SPEAKER_43: because they're giving you fifty thousand in credits here's another cynical back channel you know i like to give people the honest truth about what's going on yeah and this doesn't relate to coinbase it's not like i'm back channeling brian here since people know he's been on the show friend of the pod um and by the way they have five billion in cash so if anybody's going to make it out of this and anybody did it right i think it's um yeah they might be the last man standing for sure yeah so um let's say you had a bunch of folks you hired and they were hired in 2020 2021 and they had incredible stock option packages and they had big salaries and um you know you got a clear shot to get rid of 10 000 people or 20 000 people and the 20 000 people you get rid of were the people who were last in and you pay three months severance or whatever now you put those jobs out again and you put them out work from home remote other countries at a third or 25 percent of the total cost because of the stock based comp right you wipe that out what you might see happening here is people saying you know what let's cut the last 20 in because we overpaid for them and now we have a new cost structure people's expectations so i hate to sound really cynical it's 100 what's happening yeah i mean the

SPEAKER_03: corollary is us passing on deals that eight months ago we might have done sure like eight months ago we would have been like this is a normal valuation in this market and now reset market with the reset market we have you know frankly the opportunity to say we don't want to overpay for this last 20

SPEAKER_40: of companies that we were talking to in the like narrow two to three week window right before the

SPEAKER_72: economy collapsed it's nobody's fault yeah it is what it is it is what it is but those are 100 the decisions that are being here's the best thing you could do right now if you hear my voice you listen

SPEAKER_36: to this week in startups for a reason find two other friends who know how to write code who know how to design apps who actually have a skill in the world right they're like an actual growth person like they actually do work three worker bees get together start a company take a you know lower your

SPEAKER_139: cost uh whatever your monthly burn is as much as you can go to an accelerator uh raise a seed round yeah it's not going to be at 25 million yeah you're not going to be able to pay yourself 150 or 250k

SPEAKER_197: you're gonna be able to take a five or 10k draw a month maybe but this is when you know there's not

SPEAKER_36: going to be a lot of competition and you can take market share so it's it's the best time ever to start a company but safety in numbers three co-founders i'm literally looking at the founder university cohort and i asked kelly and presh find me uh i want a list of the startups that have three co-founders i want to meet them first then i want to meet the ones with two and when i meet the three prioritize them three developers two developers one and so dig into that a little more why three i think you're

SPEAKER_72: going to have a founder quit that's pretty typical right somebody they're going to have to like get a

SPEAKER_139: job for whatever yeah they get a job they move it's not for them and then you have two left kind

SPEAKER_204: of like why do you have a spare tire because sometimes you need a spare tire now you have two

SPEAKER_139: and one quits okay now we're back to the solo founder problem really challenging so three to me

SPEAKER_204: seems like the perfect number four seems okay yeah sure why not um four founders they take 20 each they give 20 to their investors that's okay company's going to move a lot faster you're going to have to have you're not you're not going to have to raise as much money you have four founders uh and principles in there three seems like the perfect number to me and so i get why y combinator was really uh militant about this no solo founders they just know like solo founders is like probably three or four times the chance of failure and not having a tech person on the founding team a developer means just gotta you know have idea people and idea people are not bad or business people or sales people design people it's all great airbnb two designers well then when you do that be

SPEAKER_03: intentional about the verticals that you choose right like again we're gonna probably be talking for all of 2023 about the two bubbles that are inflating right now ai specifically generative ai and climate we're going to talk about climate funding in a minute it's booming yeah so like and and i guarantee that funding for these ai companies that create utility around ai and we're going to go back to open ai for just a second are also going to be booming so like be intentional about the vertical that you choose when you start this company and there will likely be funding for

SPEAKER_43: you all right open ai everybody's talking about this 29 billion dollar valuation selling 300 million dollars to jared kushner and founders fund reportedly buying secondary shares uh the cynical take on that is people are quote unquote buying a logo what's buying a logo you're a vc you want to impress your

SPEAKER_197: lps you want to impress the world you have a logo page and you're like look i have uber on my logo page oh i have airbnb oh i've got com oh i've got coinbase whatever logo makes you feel good about

SPEAKER_111: yourself so putting the open ai chat gpt logo on your page will make jared kushner's i was just

SPEAKER_214: going to say that is so freaking kushner that is that is classic kushner with a k people did this

SPEAKER_139: with spacex a lot you know they would buy secondary shares and then they're i'm a spacex i meet so many people i'm a spacex investor and then i'm like oh that's great congratulations like can you introduce

SPEAKER_204: me to elon and i'm like oh you said you're a spacex investor like oh yeah no i bought it on the secondary market from this secondary person in this llc and you know they're they're eight derivatives away from the company they've never been to spacex they don't know anybody at spacex they just

SPEAKER_43: watch spacex and they put the logo on the website it's it's a it's a tried and true little hack um

SPEAKER_219: but but we think i'm seeing with open ai is microsoft seems to be doing the most cynical way of looking at

SPEAKER_43: this is there some sort of round tripping which is an illegal activity so i want to be careful using that term um okay wait i don't want to back up and make you be even more careful one microsoft is

SPEAKER_03: doing a thing maybe we should describe what they're doing and then go to the cynical take first because

SPEAKER_224: i'm hearing like lots of you're already like describing the cynical thing but we don't know but

SPEAKER_03: so let's start with the facts of what microsoft is definitely doing okay thank you mom and then captain all-in is going to bring us the bummer take apparently again um okay so what microsoft

SPEAKER_20: is doing is this very unique deal this was recently reported by semaphore okay so we already know

SPEAKER_03: sam bankman freed's publication right exactly one of them one of the one of the spf's many

SPEAKER_174: one of the bankman free media collection pet pubs if you will i think he put five million in that puppy

SPEAKER_60: we don't know for sure but that's what we're guessing uh okay so we already know that microsoft

SPEAKER_03: invested a billion dollars in cash and cloud credits into open ai in 2019 uh now we have found out via semaphore uh it's anonymous sources so take that for what it is microsoft is in talks to invest 10 billion dollars into open ai at that 29 billion dollar valuation both of those were reported by the information already but here's what's new as part of the deal microsoft would get 75 of open ai's profits until it recoups its total 10 billion dollar investment then after microsoft gets its investment back okay it will own 49 of open ai okay other investors will only other 49 and open ai's non-profit parent company gets two percent it is also not clear whether money that open ai spends on as a client of microsoft as in paying for cloud server cloud computing services via azure would count toward evening its account we assume that they just mean profits when they say profits okay so this is a smoking deal

SPEAKER_36: for microsoft begin the cynical take yeah i mean okay we don't know the details so in event and this is like you know journalists get a tip when you get a tip as a journalist we both are journalists who

SPEAKER_42: knows what the agenda is this could be somebody who got fired or you know from uh open ai could be somebody at microsoft who doesn't like the deal and is trying to subvert the deal they open up a

SPEAKER_43: burner account they send it to semaphore semaphore runs with it whatever so i'm just putting all those

SPEAKER_42: disclaimers out there journalists when something is hot like chat gpt or sam bankman freed they get a tip they run with it especially in today's click bait environment now semaphore theoretically uh like

SPEAKER_38: a higher-end publication i guess but let's just say semaphore is new and trying to make a name

SPEAKER_111: okay so okay on the cynical to generous scale yeah that too that's an option too that's trying to get

SPEAKER_42: people to say the word semaphore uh sam bankman free production um i say semaphore the s and semaphore

SPEAKER_239: is for sam uh just so you know the sa semaphore just saying there was so um semaphore was uh and

SPEAKER_36: the f it's sam and the freed is the semaphore so when you hear sam semaphore that's the same and the freed sem bath four yes the s and the f in there is for sam bankman free they got to put a

SPEAKER_245: couple of letters into the name anyway uh sorry to the people at seven before for doing that whatever

Jason Calacanis: they got so much freaking unearned media for their media pub that like i'll i'm fine with this

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SPEAKER_102: time we love you squarespace thank you uh on behalf of all the the startups capital allocators and tech enthusiasts who listen to this podcast for being our longest running partner it means the world to us

SPEAKER_179: squarespace.com slash twist use the promo code twist please yeah anyway so you have to as a journalist

SPEAKER_36: and just as a consumer of news understand like what is the agenda of an unnamed source exactly what we do know is microsoft obviously and uh open ai have a deep relationship it started as a non-profit became a for-profit it's now one of the largest private unicorns in the world so that's worthy of what just happened that like a non-profit is now 30 billion like whoa how did that happen so and i don't have any inside information on that um but that's weird and then all these weird deals where you're capped at the amount you can get returned and these weird deal terms now let me explain what round tripping is um when one company uh invests in another company and then that company does a transaction with that company one could look at it and say the money is making a round trip just like a

SPEAKER_139: round trip airfare so i think they the there was a number that was whispered that they were spending three million on cloud computing a day at open ai oh right right we report on microsoft and amazon and google and what is one of the hottest sectors when we do that little ribbon chart i forgot the name of

SPEAKER_261: the ribbon chart stanky the stanky chart yeah stankey stanky stanky not stanky the stanky ribbon

SPEAKER_265: oh that's a stanky one anyway there's always that little piece of the ribbon yeah that is cloud

SPEAKER_267: computing and we're like oh azure's growing this amount well i mean if they're spending three

SPEAKER_139: million dollars or 10 on azure that's a billion dollars a year if azure if microsoft's valuation is based on that and you've got a billion dollars and chat gpt is open to the public and the more people who use it the more google's cloud i'm sorry uh microsoft's cloud computing revenue goes up and they're trying to remember we were saying azure's percentage growth was greater than aws's yep one thing that microsoft needs is to see that cloud computing number go up chat gpt is an application that makes that number go up it costs six cents remember people were saying oh that costs six seven cents a search it needs to be like a hundred x cheaper in order for it to be viable not for azure for microsoft it's great that it costs six or seven cents right they're the person who's making this six or seven cents so open ai could lose a billion dollars two billion three billion dollars a year of microsoft's investment money and round trip it back to azure and then sec gets involved and says hey what's going on here now it doesn't mean that they've explicitly said hey we're going to give you 10 billion you have to give us that back in azure but this is a related party transaction

SPEAKER_259: if they are shareholders in one and the other a related party transaction is like a bell that goes

SPEAKER_139: off if you're on the board of a company and the founder says i want to hire my brother uh and you've

SPEAKER_269: got shareholders okay you got a problem uh or you want to i don't know buy my brother let's say my

SPEAKER_36: brother owns like a bunch of office buildings and then i rent space and i'm publicly traded company

SPEAKER_197: and my brother's office buildings that's a related party transaction the board has to then sign off on it so that that's what everybody is starting to that's the back channel in silicon valley right now about

SPEAKER_03: this is like what is it well yeah right i mean this because somebody put this comment on linkedin saying the real story here for vcs is why a company that has positioned itself as primarily a research laboratory for the benefit of humanity is now reorienting itself as the deal of the century come on folks that's the conversation we want to have and so then when you look at like this like incredible i mean there's one the non-cynical interpretation of that is that satya nadella remains the freaking goat that microsoft made this unbelievable mafia deal that is frankly worthy of bill gates at his peak in the 90s remember that simpsons episode buy him out boys he comes and homer starts a um yeah internet company buys amount smashes it anyway uh and that microsoft like saw this coming in a way that nobody else did and it just so happens that right like that's all possible but you do have to ask yourself why this thing that like as you have said probably should be open source as it develops like ai at this level should be transparent it should be available to everyone it's so transformative that

SPEAKER_18: it should probably not be locked up by you haven't helped us even though they seem nice now microsoft

SPEAKER_111: top to bottom that was literally uh that was literally sam altman's pitch was this technology

SPEAKER_36: somebody can pull up a clip of this or uh you know a quote this technology is so important it shouldn't

SPEAKER_42: be owned by any one company it should be open sourced and then he flipped that and said you know what it is so powerful that nobody should have access to it and we have to lock it down i don't want anybody to

SPEAKER_38: see the code base so they have kind of fly them out boys exactly that's how microsoft gets you they do

SPEAKER_282: think they changed but they didn't uh i think by the way that person i i don't want to um dox the person

SPEAKER_43: who made that comment or anything but i don't i don't know i mean the public comment so i yeah i think it's fine i i was going to mention where he works but he doesn't work at microsoft or an ai company so

SPEAKER_38: just so we're clear that's there isn't an agenda there uh but it's a that is the key question to be

SPEAKER_03: asking here because right because it's true we have focused on the valuation and like microsoft's making so much money on this but like what we are now realizing i think more and more is that this tool is training microsoft's internal ai it's operating on microsoft's cloud and microsoft

SPEAKER_18: is going to take 75 percent of its profits up to 10 billion and then own half of it that is a big deal

SPEAKER_287: i mean this is this is like going to be like hats off to sam and the team over there

SPEAKER_36: you know great deal making at a very high price you know the company's probably worth two or three billion and to get 10 times what it's worth and give away half of it well if you gave away 20 of it at three billion you know better to give away half at 30 billion and cash in your chips i don't know how much of this is going to the founders of the non-profit or the employees um but this is a huge transaction and this is where one of the things you do when you're running a startup is you look for somebody who's got a problem and then you craft a solution uh and this is how great m a can work what's microsoft's problem cloud uh in relation to amazon okay how do you solve their problem okay make them the number make them grow faster than amazon's aws is growing uh what would be a way to do that create the most intensive application to run on a cloud computing platform that is addicting to billions of people problem solved now that doesn't mean it's round tripping that just means they created an application for the cloud that utilizes the cloud in a massive way and that

SPEAKER_291: everybody's enamored with the non-cynical view is that this is the biggest corporate bc deal that's ever

SPEAKER_43: been done sure um i think there's a lot of haters going on i think people like probably really hate the fact that sam maltman's gonna make you know whatever he owns and maybe he owns 20 of this i

SPEAKER_03: don't know i mean listen selling out a thing that you positioned as good for humanity and a non-profit is always gonna feel like watching that happen is always gonna feel a little icky especially when you see the numbers go up as fast as they have but this is also where like this is also where the media should start sounding a note of caution the media in this case being us like every other time that we've seen something hit evaluation this out of the blue so quickly there have been reasonable questions to ask about how good it actually is or how good it is for right it's like

SPEAKER_30: when do we start getting we work theranos vibes here yeah i i think this is real technology

SPEAKER_43: that is really impressive by really smart people yeah and it's a very conflicted transaction and as we like to say here in silicon valley no conflict no interest and so you know the reason this is

SPEAKER_42: super conflict is because there's a lot at stake this could really help bing compete against google it could help microsoft office run away with you know new features that help it compete against

SPEAKER_43: salesforce and google you know docs and everything it's just it's really groovy technology now you have to ask yourself what the hell is google waiting for what the hell is facebook waiting for facebook is on

SPEAKER_42: a crazy adventure to spend 10 billion dollars on vr headsets and you know brad gerson we're saying

SPEAKER_36: over and over again why aren't they spending that on ai right why aren't they and they have invested a lot in ai that's what i'm saying okay so i'm just gonna go made the wrong bet now i'm going contrary says i have for this entire data set of human behavior i'm taking the entire headset business i'm spinning it off and i'm putting all of my effort this would be the power move for some i'm spinning out the headset it's got to stand on its own here's 10 billion dollars in cash spend three billion dollars a year you got three years of runway i'm spinning it out it's going to be a public company and i'm putting this person in charge of it spin that out boom done and then put all your effort into

SPEAKER_38: ai and catch up to this stuff i mean can you imagine what you could build based on the facebook

SPEAKER_03: data set i mean facebook has been working on ai for years they were a leader they're like the silent killer in ai so this raises this question again unless it doesn't work i'm going full contrary

SPEAKER_88: for 2023 open ai is secretly a dud we're going to find out by the end of the year it's going to be a

SPEAKER_43: bust i also want to know the creators and the data set how i mean if chat gpt was built off of like google crawling or some web crawling or bing's crawl of the web it's facebook's data it's we all

SPEAKER_03: gave it we all gave it i don't know they're using a bunch of facebook data i mean we don't know what else they're using but they are training a lot of microsoft and open ai are training a lot of their tools on facebook's data huh microsoft is oh we don't know about open ai okay i don't know if i

SPEAKER_141: don't think he would get i don't think exactly give open ai access to it you know he doesn't even

SPEAKER_212: let google search it right like he robot txt yeah that's true and they don't they legitimately don't

SPEAKER_313: sell it they share it with partners but they don't sell it yeah that's their business is to collect it

SPEAKER_43: so and then google where the hell's google in all this like google's going to need to start releasing some product here and i think the big win here is allowing consumers to play with it i think and

SPEAKER_315: letting people api it and and have fun with it and training what happens which is what what's that

SPEAKER_141: every time we play with it we train it exactly and so let you know google's and facebook being

SPEAKER_151: super precious about this and not putting it out in the world open ai is kind of blown that open with

SPEAKER_315: chat gpt and they're just like yeah have added people we'll lose three million dollars a day

SPEAKER_320: on compute power which means open ai is going to just uh get more um data like you're saying and they get more use cases on it so yes i think they got to open it up um but i mean

SPEAKER_141: who where's all the money for the creators that the day if open ai sells 10 billion dollars worth of this to microsoft i don't know why you continue to call them creators like we gave all our data over

SPEAKER_03: we have signed every term of service like i'm not this is my maximum cynical take we lost the deal yeah whatever you put on the internet without reading the terms of service every time that the terms of service change to include selling your party to third party cookie collectors or this or that or whatever we lost the bargain we are no longer creators we literally gave up all ownership of everything that we put online sorry yeah and the machines took it and we're like thanks appreciate

SPEAKER_57: you all right yeah that's great that's great hey let's let's instead uh let's talk about let's move

SPEAKER_03: on from ai bubble to climate bubble and talk about the ways um that very excitable sci-fi fans and tech bros are actually gonna just destroy the planet with geoengineering good times yeah when people

David Friedberg: start talking about geoengineering i'm like i kind of feel same way i feel about like gain of function research at the wuhan lab i'm like what's the worst that could happen yeah turns out yeah okay so there

SPEAKER_03: is this uh new climate tech startup formed by um a former y combinator employee okay luke eisman and he it's called make sunsets it's raised 750 000 led by boost vc and pioneer fund and the company's mission was inspired by this recent neil stevenson book that i read which was super interesting called termination shock about a texas an eccentric texas-based billionaire who decides to do some rogue geoengineering not a good idea so luke reads this book and is like cool cool cool i'm gonna do that and raise some money for it and the geoengineering is to cool the earth's temperature by releasing sulfur into the atmosphere to reflect the sun's rays this became a concept in the 90s actually because after mount pinatubo this big volcano in the philippines erupted the it sent 20 million tons of sulfur and sulfur dioxide into the air and that resulted in global temperatures falling by one degree fahrenheit the following year so there has been like real research into whether this is a thing but every time somebody does that real research into whether this is a thing they're like well

SPEAKER_333: okay sure but how does it affect the like monsoon season in bangladesh right what are the second and

SPEAKER_43: third order impact of a bunch of sulfur being in the atmosphere would be the obvious question here

SPEAKER_03: exactly however luke eisman uh reportedly according to the washington post didn't ask any of those questions he just made a big balloon full of sulfur and released it into the atmosphere and let it pop to spread the silver he did he took no measurement tools he doesn't know if it even made it into

SPEAKER_60: the stratosphere he just this kid hi wants to try it and sell credits cooling credits as a way to drive

SPEAKER_10: revenue i don't i don't mean to be like ten dollars a pop i don't mean to be um cavalier here but

SPEAKER_339: is this kid high i mean you're sending this everybody up and you blew it up and you're selling credits on the blockchain i mean dude are they on the blockchain i don't even know if they're on

SPEAKER_341: watching yeah i mean come on they have to be though right he literally said he didn't send a

SPEAKER_60: balloon up with sulfur in it he did come on he did and he popped it no popped it and he raised seven hundred fifty thousand dollars this is talking about a bubble a literal bubble so he's

SPEAKER_51: selling these cooling credits i mean look this is gonna happen right like people are going to mess

SPEAKER_03: around with geoengineering because neil stevenson did all the research for them in his book or whatever but also because we're gonna pretend you know i don't know maybe it's a quick way to make a buck on

SPEAKER_60: cooling credits the market is ballooning i'm gonna give that one to producer brian because he doesn't make

SPEAKER_36: a lot of jokes the air out of this uh innovation but um no don't please this is a message to smart people please don't do geo engineering or terraforming on planet earth like do that in a simulation

SPEAKER_357: there's some compute platform where you can kind of just model this stuff out you don't need to throw

SPEAKER_139: sulfur balloons into the air also like with crisper don't start doing experiments on babies and i mean unless you're in china and they gave you the okay apparently like they have been doing some uh you know

SPEAKER_308: bioengineering over there but yeah let's not we need some new laws i think we're gonna need some new rules please don't throw stuff into the atmosphere i mean you know the idea of mirrors i think guitar i think maybe

SPEAKER_40: qatar and the uae are already doing this they're like doing cloud seeding and they're doing some

SPEAKER_03: geoengineering to like i mean it's there will need to be global treaties especially as climate change get continues to get worse but yeah i mean this reminded me so much of um fast breslow you know like he went

SPEAKER_291: on to form that health startup and he was like my superpower is i don't know anything about health

SPEAKER_368: like you know what no yeah i mean listen elizabeth holmes didn't know anything about blood yeah

SPEAKER_291: reslow's bolt thank you uh let's get them wrong yeah there we go dubai is artificially creating

SPEAKER_36: rainstorms guys it's gonna get crazy yeah you're just gonna have to pump the brakes here please don't do crazy stuff like this i do like the idea of the mirror stuff like uh there was a group that

SPEAKER_108: was saying hey you know if we just put reflective material on top of some of these glaciers we would reflect the sun off of them and therefore they wouldn't melt as fast and i was like well there's a simple

SPEAKER_43: idea uh sure why not give that a shot on an iceberg and monitor it and if that glacier you know melts

SPEAKER_320: 50 slower that could be good i guess um so it does seem like there's some good interesting experiments

SPEAKER_03: there's one that's also in ministry for the future that's like pumping water from under the glaciers up to the top so it can refreeze like it's a whole circular thing but yeah it's funny i think that the response to this was best summed up by somebody who retweeted it when i tweeted it and i think brian has it queued up it's just like i love that first of all this tweeter's name uh the twitter name is optimistic nihilist and he replied and said this seems like a terrible idea and i'm certain something is going to go catastrophically wrong if this continues yeah thanks captain obvious but yes

SPEAKER_36: i mean he said fast and break things uh in you know social media we saw what happened like breaking elections democracies people's brains young girls body images like that was just software like we

SPEAKER_111: move fast and we break things in social media and we now have a generation of people who are on sris

SPEAKER_219: anti-anxiety medication eating disorders like all this crazy storming the capital storming the capital

SPEAKER_111: misinformation election interference whatever like there there will be second and third order effects

SPEAKER_246: when you move fast and break things so move fast break less how about less good break less now for

SPEAKER_03: the brakes good climate tech good climate tech good climate tech news one we've talked a little bit about up rounds german-based solar panel startup and pal basic solar panels lets people rent them put them on their house power systems like solar panels energy storage batteries and ev chargers uh has let's see the last time it was valued was in october 2021 at a billion dollars a raise from soft banks vision fund two is close to closing a deal with a pe firm tpg that values it at 2.4 billion dollars okay so almost double up round just more proof that like there's a there's a little bit of a bubble forming in climate tech those valuations are still strong for and also you can apparently raise 750 000 for your

SPEAKER_14: sulfur balloon idea so i mean it only takes a couple of like weirdos to be like yeah sure give it a

SPEAKER_322: shot you know why not a lot of weird folks now and and a pal or and pal and pal german and pal e-n-p-a-l is the name of this company they provide solar panels they let homeowners rent them ah so it's sort of

SPEAKER_03: like the leasing model um i guess like well that became so popular here it must be it must be sort of like a bit of a financing hack i think that makes it more accessible to people um i think what's interesting about this is that one solar is where all of the clean tech 1.0 money went but we're still trying to figure out how to just get that i mean like when you look at the most simple solution it's solar it's the fusion reactor in the sky get it on every house you know get it on every building so anything that like reduces friction for that has become really popular and then second when you look at the funding explosion the us invested more climate tech vc in 2022 than in the entire 2006 to 2011 cleantech 1.0 boom and at the current pace of investment according to the wall street turner according to global market intelligence company holon iq by the end of 2023 the us will have invested over 100 billion dollars in

SPEAKER_396: bc climate tech vc since then um 83 unicorns the cost of solar for your home had dropped dramatically

SPEAKER_401: six kilo yeah six kilowatt hour residential solar system used to cost 50 000 now outright costs for total home installation ranges from 16 to 22k average of 62 percent annual

SPEAKER_14: decrease this was on the sunrun website so they're a little bit actually a lot of people to say that it

SPEAKER_03: should be cheaper my first newsletter was about solar financing and how the solar industry feels so sketchy to people and this is why i think companies like n pal are able to raise easily because it's less of a it's not really a product industry it's a financial it's banking like the money in solar is not from selling panels or creating a beautiful product that makes people happy it's from getting a bunch of consumers to lease their solar bundling the leases and selling them like it's it was literally a financial innovation that made solar more accessible but now it means that the money that's made on solar primarily comes from reselling these leases it's asset-backed securities

SPEAKER_259: solar is now cheaper than everything cold nuclear offshore wind onshore wind everything i think it's

SPEAKER_10: now cheaper it is it's the cheapest electrons on the planet solar and wind so we have this massive win

SPEAKER_308: that has occurred dropped by a factor of like five since 2010 so we are now in the deployment phase i don't understand i guess it's because of the physical nature of installing these panels on your home the aesthetics and all that is what is holding people back or the fact that just energy is so cheap anyway people aren't thinking about the only time you really think about it is when you have some disturbance in your electricity so this is a tragedy of the commons it's just easier to keep

SPEAKER_320: yeah paying your 300 a month electrical bill than to you know cut it to 200 by your utility makes it

SPEAKER_03: like utilities make it really hard sometimes they actually have these sort of punitive weird things that make it really complicated like it's not you don't it's not as easy as just putting up solar which is you have to be a homeowner you have to be a homeowner in a place that can get enough sun to justify solar you have to maybe get permission from your hoa you have to figure out the utility part of it like it still is there are enough barriers that it has impeded adoption and frankly a lot of utilities are making it even harder than they should i think honestly it's moving a lot faster in europe well in

SPEAKER_320: europe like a lot of thing they charge so much for energy dependency on you know russia and this war

SPEAKER_315: uh russia's absolutely unjust invasion of ukraine has i think opened people's eyes a bit to hey maybe

SPEAKER_108: being off the grid is a good idea this is one of the counterbalancing things i think is happening in

SPEAKER_36: climate when you have an atmospheric river or you have an ice storm in texas and everybody loses power and then people start dying uh all of a sudden people are like you know it would be interesting if i had power walls and solar or a gen tech you know natural gas thing or maybe i should start thinking

SPEAKER_42: about having a starlink on my roof and having you know a wire connection like i am you know adaptation

Chamath Palihapitiya: it's literally climate adaptation yeah climate adaptation but the adaptations reduce dependency on the bad

SPEAKER_108: stuff by default i was talking to somebody and they said one of the great joys of their life was building

SPEAKER_320: their ranch and it's not like a super rich person they're okay but they have like a ranch and they have solar they have a well they have sterling and this person was telling me like i don't need any connection to civilization i am you know just off on this mountain and or this range and i'm good decentralization is the future i i still would like you to come back jeremy renner and renner and play some uh what's it hawkeye okay i'd still like you to do some hawkeye movies but but get get better uh future bestie i feel like jeremy renner and i are because we're both i think we're gonna start

SPEAKER_308: hanging when he's on the mend i just so anybody who knows jeremy like uh you know let him know

SPEAKER_14: like we're both going to be mounted dudes and we'll cut some logs together safely and i'm glad he's okay

SPEAKER_03: oh my god all right let's let's let's move on to our this week in climate startups yeah we have a great uh super interesting climate interview michael cronley is the ceo of ascend elements which is an engineered materials and lithium-ion battery recycling company and they're recycling the feedstock for lithium-ion battery materials and then actually and this is super interesting what comes out is like ready to go cathode material that's apparently the very hard part like people are able to extract the cobalt and the nickel and the lithium from batteries and recycle those materials but they don't necessarily just like pop out ready to go new cathode material and that's what ascend has figured out so it's key to this whole i mean you know i'm like weirdly obsessed with batteries like a weirdo but they are the key to it all we had a really fun conversation awesome we'll enjoy everybody michael cronley is ceo of ascend elements which is an engineered materials and lithium-ion battery recycling company and welcome to this week in climate startups molly it's great to be here thanks um i guess tell me

SPEAKER_18: you know first of all in your own words what are you guys doing yeah so um at ascend elements we are

SPEAKER_445: a new i guess disruptive technology that's coming in bringing this this advanced technology to really take

SPEAKER_446: new and make sustainable battery materials out of recycled lithium-ion batteries and so it's a new technology really that um that really hasn't been uh introduced anywhere else in the world and so it very efficiently takes spent lithium-ion batteries and these could be end-of-life batteries they could be from even manufacturing scrap out of a large gigafactory and so we take that we begin to process it and it's not just a process of recovering the critical elements that are in lithium-ion batteries such as lithium and cobalt and nickel and manganese things like that that's what a typical recycling process does today what we do is when we process that we process it directly back into very high value cathode materials so this is very very different in that the economics of this process are very different so rather than producing a commodity metal as our output product we're producing an engineered material as you mentioned in the in the intro and so these materials can be sold at a much higher price and as a result we're able to really incentivize additional amounts of recycling because our process is so much more efficient and so much more economical to the point where we're actually able to pay for battery feedstock to supply it and so that's a little different than what is maybe typically done today where if you have a spent lithium-ion battery you essentially you you give it or you donate it to the little recycling bin but now we're moving into a direction now where there's a lot of valuable material inside these lithium-ion batteries and now that the scale becomes

SPEAKER_451: completely different when you talk about an ev battery and these these ev batteries are you know

SPEAKER_452: a thousand two thousand pounds not just the little small ones that we're used to in our households right

SPEAKER_18: so well let me let me stop you there there's a whole lot going on here and i want to back up to

SPEAKER_03: take this like piece by piece okay so one you're recycling lithium-ion batteries is it specific to ev batteries at this point or is it it's any size battery so we can take any type of lithium-ion battery

SPEAKER_455: so and there's different chemistries and different lithium-ion batteries certainly the the chemistry that is

SPEAKER_451: in your cell phone battery as an example is different than the chemistry that is in your ev battery but

SPEAKER_03: it doesn't matter we can take those and process all of them got it and then as you process them it sounded like you are recovering the materials inside but what is the sort of new aspect the creating a new

SPEAKER_18: material or explain that one dig a little deeper there yeah sure sure um so in a in any battery there's

SPEAKER_455: something that's called an anode and a cathode this is the positive and negative side in a battery so these materials that are used in a battery to create the anode and cathode are very specific

SPEAKER_451: engineered materials um the cathode material is uh is is a very specific material to make sure that you have the uh the energy density uh to make sure that the battery can charge and discharge at a certain amount um or a certain rate um as well as you know it also contains a lot of various metals so in the cathode material that is really where the majority of the lithium exists the the nickel or the cobalt or the manganese metals like that those are all metals they're even cathode material right on the anode side um there's there's different materials that are used there but predominantly it's graphite or a form of

SPEAKER_455: carbon and so they're they're different materials are used but they're um they're made and generated very specifically to function in a battery and so you take these raw materials and you transform them

SPEAKER_451: into an more of an engineered material and that's really um the the big difference so when you move from a commodity or a raw material and you take it and you elevate that value into an engineered material that's really what's driving the economics here is that that engineered material and also of course

SPEAKER_03: you're recovering i mean that list of materials you gave us cobalt and nickel um and lithium itself i guess yeah right the big ones are hard to come by yes they they are hard to come by and increasingly in high demand as a result of other batteries so like it sounds like what you've created is a real value

SPEAKER_451: chain a dual value chain here yes so essentially it's uh i like to think of it as is really uh just stacking value yeah or you know sometimes uh people refer to it as margin stacking so there's there's essentially a recycling piece where you recover these metals but then there's also a piece of where you transform these metals into this higher value engineered material and so there's there's essentially essentially an economic value of just recovering the metals and then there's an economic value of then transforming these metals into a um an engineered material right what can you do with the what can you do with the engineered material so that engineered material is the cathode material that's in a battery oh it is okay got it and and what our unique technology is is we've developed a

SPEAKER_455: way to take a lithium ion battery and essentially skip that intermediate step and go right to this

SPEAKER_451: engineered material the cathode material gotcha it's a much higher and value material that we're making um and really it's it's enabling a lot of uh or higher amounts of recycling because the economics are just

SPEAKER_474: much much better and are you then producing new batteries or are you strictly in the recycling

SPEAKER_454: business the recovering recycling so i we're actually in the materials business so um so our raw materials

SPEAKER_446: and there are many other cathode uh manufacturers out there um but they they make their materials from primary sources or mine doors so someone's got to dig this stuff out of the ground they've got to you know concentrate it and refine it and then eventually make a cathode material out of it our raw materials or our process starts a little different uh where we we acquire spent lithium ion batteries and that is our raw material and we begin to process that into this highly engineered cathode

SPEAKER_03: material gotcha and then go back to that was another chunk of that big first answer where you get those batteries it's to the point you said where people are paying you to take them yeah yeah so um

SPEAKER_455: um so there's you know looking at the size and of batteries not all lithium ion batteries are the same so there's you know there's there's um i'm sure there's there's batteries in in your drawer at home uh in old cell phones or so many batteries things like that yeah so there's a lot that's in there

SPEAKER_446: and it's you know it's effectively not being recycled because nobody knows really what to do with these things um so that is a source of lithium ion batteries and actually the collection and return rate of those call them consumer electronics batteries uh is not very high you know there's there's some estimates that it was around five percent and maybe it's it's creeping up around ten percent now but it's still relatively low those those batteries um you know are way a quarter of a pound maybe or even less um you know they're measured in grams that's very very different from an ev battery

SPEAKER_464: so an ev battery is much much bigger and like i said it's uh it's around you know they could be a thousand pounds um some of the bigger ones are even up to three thousand pounds so these are massive

SPEAKER_451: batteries yeah um and so they uh they all need to be eventually recycled when they hit their end of life and they all need to go somewhere and we certainly don't want to let them go into a landfill that's actually the worst thing we can do environmentally or even economically we don't want that to happen so we have to develop a way in a system of bringing back all of these batteries into a processing facility that can process it and use that as raw material and make something much

SPEAKER_03: much more valuable out of it and are you at the stage where you are also dealing with ev batteries like is that part of yep yeah your facilities does it require a separate facility or just separate

SPEAKER_455: kind of machinery within because of the dramatic size difference no i actually it's um it's the same type of facility i mean it's actually the same process equipment so the process that we've developed

SPEAKER_446: is able to take any type of lithium ion battery whether it's you know a small cell phone battery or a gigantic ev battery uh we we take it in and process it the exact same way gotcha um what

SPEAKER_474: percentage would you say in terms of the processing is like smaller but i mean not that many ev batteries

SPEAKER_03: it's my understanding are coming out of spent vehicles yet um so what does the percentage

SPEAKER_478: look like now and what do you think it'll look like in the future yeah so there's actually the

SPEAKER_446: majority of the batteries are coming back are ev batteries and as it's not measured on not a battery level as as a tonnage level so remember there's a massive size difference here so you know you you need uh roughly around 10 000 cell phone batteries to make up one ev battery so you need a lot of cell phone batteries to to come back and have the same uh same weight or same mass coming in so right on a

SPEAKER_445: mass basis or you know a weight basis we're uh we're actually bringing in a lot more ev batteries okay and yes you're right this is more economical for you too like yeah yeah just one battery coming in uh you know on a pallet is uh is you know equivalent to all of this collection point from you

SPEAKER_446: know think of uh you know 10 000 drawers and 10 000 homes that are someone's going to return their their cell phone or their battery back in so it is much more economic to uh to think about can focus on the evs and the ev batteries because um they're just they're just larger

SPEAKER_491: right totally it's more efficient do you want to take a drink you got time i guess just to and then

SPEAKER_474: just to put a really fine point on it we jumped right into the technology because i'm or you know

SPEAKER_03: the process a little bit obviously we can go a lot deeper into the tech but just to put a fine point on it for people who may not realize what is the the problem that this solves you know what is the profound climate impact that this has and why it's so necessary yeah so we're actually in the

SPEAKER_455: midst of an energy transition um and so the energy transition and it's been talked about a lot what

SPEAKER_446: what really is that and that's really to address a lot of our climate issues so it's the the backbone is is really climate change in ways that we we get and we consume energy is is dramatically shifting not only in the united states but throughout the world and two industries are being dramatically affected by this and it's really energy and how we consume energy one is in the transportation industry so you know this is when we're talking about evs now so we are slowly starting to transition our entire automotive fleet from fossil fuels to um using uh electricity and preferably renewable electricity so uh you know tailpipe emissions really from from your um are going to be going away and so many governments are behind this oems are behind this and really consumers um whether they're slow adopters or they're uh you know they're early adopters it doesn't matter eventually they're part of this transition and it's going to take time so that's going on and it's really to address climate change the other industry that's massively affected by this energy transition to help and improve climate change is really um the way that we receive electricity the way we generate it and really store it and and manage it so if you look at the number of coal-fired power plants or the use of coal in the united states or anywhere else it's dropping and it's being replaced by renewables particular solar and um and wind so both those combined are on the dramatic increase whereas coal is uh is decreasing dramatically so that's part of the energy transition with that you know unfortunately the fortunately or unfortunately it's just the way it is the wind doesn't always blow and the sun doesn't always shine so what's being used and being deployed are these massive massive lithium-ion batteries and so they're there's they're as big of a house or as big as a house or as big as a you know very large commercial buildings they're just packed with batteries and that's essentially the storage that is being placed on the grid so really at the center of this energy transition in the automotive space and also the um you know the utility grids uh scales uh or industry is really lithium-ion batteries

SPEAKER_455: yeah and so that's really what what we're helping to solve and so we're going to have a lot more

SPEAKER_277: batteries now yeah um and then we have a massive shortfall of it may not seem like it from my early

SPEAKER_03: questions but i did a whole narrative podcast before becoming a climate tech investor on like i became obsessed with batteries and the technology that we need and the you know materials that go into those batteries and the lithium shortfall in particular i think is something people don't understand right this entire transition rests on batteries and we are not pulling anywhere near the amount of materials

SPEAKER_484: out of the earth or other sources that we need yeah exactly so yeah and we'll just use lithium as a

SPEAKER_446: as an example you're exactly right so to make these batteries because they're at the center of this energy transition to make these batteries you need a lot of materials um lithium cobalt nickel are three of the you know the most uh critical minerals uh in that uh transition so um you can throw copper in there as well um in the dramatic increase in copper but if you just focus on lithium for a second you know all of our lithium sources essentially come from the earth you know we've been mining metals out of the ground since the dawn of man so that's that's nothing new right just what we're mining out of the ground is is different shifting over time and now there's an increased focus on lithium as opposed to maybe iron so um so that's that's our new iron is lithium um and the part of the problem that we're having is there's this now dramatic uh increase in demand for lithium ion batteries uh and we as a as an industry are not able to supply enough lithium and so what we're seeing is is a huge spike right now in lithium prices so as an example lithium has uh has jumped up in price almost 10x in the last two years and it's going to stay elevated for a while and part of the reason is the demand is is growing a lot faster than our ability to mine and refine the lithium and so we need ways to kind of offset that and certainly recycling the lithium once you spend all that time and effort to try to get the lithium out of the ground you certainly don't want to put that in a landfill and also with it being so valuable you want to be able to process it and put it right back into the supply chain to make new lithium ion batteries and that's really the part of the problem that we're solving there's a there's another part of the problem we're solving is essentially uh as this new industry is growing lithium ion batteries and or the refining of these critical minerals it's highly highly concentrated in east asia and specifically in china and so now you're starting to get governments involved um certainly in the united states also in the european union very same regulations incentives to really uh diversify that uh that concentrated um source that's that for all of these minerals that are there in china right so you know you see some new recent legislation that's happening with the infrastructure law that was passed last november in the united states also the uh the uh inflation reduction act had a lot of uh provisions in there to really help build a domestic us-based uh lithium ion battery supply chain all the way from for mines to refining to batteries to everything so we're we as a country are not so reliant upon places like china for these critical materials and that's you you're a part of that supply chain yes we are we're right in the middle of that supply chain so yeah um yeah so it's a it's really it's a it's a great time for this technology that that has started that this this industry and really to kind of enable all of this energy transition we're right in the middle of

SPEAKER_474: all of that and then back to your business more specifically who then ends up being your customers is it other battery manufacturers are they domestic like who do you sell these materials to

SPEAKER_446: yeah so uh battery manufacturers is the short answer it gets a little more complicated than that because it could be uh these materials could be introduced elsewhere in the whole supply chain so it could be at another cathode manufacturer if they're going to take one of our precursor materials or you know uh you know that's made slightly before uh cathode active material so it could be introduced there also increasingly uh our customers could be in our uh oems so ev manufacturers that are now investing in and becoming battery manufacturers so you've you've probably seen a lot of the announcements that that virtually every single oem is now getting into battery manufacturing because that's such a vital part you know they every one of them always used to make their own engines and transmissions well they no longer need that but they need things like batteries in order to make their evs work and so they've been investing very heavily uh on the scale of billions of dollars each of them uh to build out their supply chain and their capability to manufacture and assemble batteries but these these huge gigafactories

SPEAKER_459: need materials in order to make them and that's really where we we supply the materials directly

SPEAKER_474: back into them so how might that work in the case of an oem let's say ford wants to create like is is

SPEAKER_03: are we to the point yet where some of these manufacturers can really create a closed loop system where they're off you know they're recovering evs at end of lease or end of life sending the batteries to you getting the materials back like is that the kind of ideal ecosystem that you want to create yes but they would exactly they wouldn't set it up themselves they would

SPEAKER_504: contract with you they they would contract with us or or someone else in the industry to do exactly that

SPEAKER_446: um there's a lot being written about um you know circularity of materials um you know essentially closing the loop this helps everybody's sustainability goals so there's a lot of uh esg type requirements that exist now for public companies they all have to be making steps to become more sustainable a way of doing that is recovering materials processing them and reusing them and so that's certainly uh transcends into evs and ev batteries so they're they're incentivized to do this um it helps with not only their sustainability goals but it also it really helps with economics as well so the ideal state and we are very close to doing this i'll say as an industry is closing the loop so oems and battery manufacturers have access to and can acquire lots and lots of batteries through end of life vehicles or you know various buyback programs there's there's complete uh i guess reverse logistics companies that sometimes the oems have control of sometimes their partners have control of but they're able to to bring these vehicles back um at end of life and then process the entire vehicle but then pulling the battery out of it but there's also another source that they have much more direct control of and that's in the manufacturing process itself of lithium-ion batteries so many people don't know that when when you make a battery um there's a lot of uh considered manufacturing scrap that comes from these large battery factories anywhere from eight to ten percent of everything they produce ends up in the scrap hopper and some of that is you know there's there's manufacturing scrap uh which is just truly scrap but also there's a portion of it that is by design they they essentially there's certain cutoffs or stampings that they uh that they cut out and so um so there's a lot of material that they generate themselves that also needs to be recycled so eight to ten percent of their total output needs to be processed and recycled even before it makes it into an ev so uh so we help them with that so there's and that material is available today or when every single battery manufacturer starts up they need a recycling partner to bring all that material in process it and return it right back to them and so as new uh battery factories are coming online and starting to produce um they need a partner and to the point where every single battery manufacturer or every single battery plant and these are very very large plants now they they need a recycling partner or company that's almost right alongside them and starting up the same time they are so you know the the number of battery factories that have been announced in the us there's a lot of them um and we're going to need just as many recycling plants in the united states to just keep up with that uh and then we're just going to need to be even multiplied again when we start to get serious amounts of end-of-life uh ev batteries coming back in so so those are the the two main sources of feedstock that come in to our uh one of our facilities but then you know we're we're really working with primarily battery manufacturers and ev manufacturers to help them close that loop and how many facilities do you have so right now we have uh four facilities so two are at a smaller scale that are doing a lot of the uh the piloting and r&d and development of our critical materials and um the other two are uh facilities that are operating more at a commercial scale so one is one's operating and the other one is is actually under construction

SPEAKER_533: when did you start how new are you at this so that's a good question so the technology dates back

SPEAKER_446: about a decade um and so um the technology itself was a spin out of uh worcester polytechnic institute so it's a it's a technical university outside of boston um and there was a battery lab there and a few professors that had developed this process and so you know our intellectual property and the process is you know date back 10 years now the company itself was uh was incorporated and started back in in 2016 but it was operating more in a stealth mode for uh you know for about four years further developing the process and getting it right and uh we we essentially came out of stealth mode beginning of 2020 and really started going out raising more funding because the technology was at mature enough point where we could you know raise the funds and then start opening uh and constructing facilities to to process you know very large amounts of of batteries um and by very large we should say there's a very

SPEAKER_03: there's a correspondingly large amount of money that has to go into an endeavor like this so you raised it looked like a little under 500 million in grants and then a 300 million dollar series c right led by

SPEAKER_445: fifth wall correct yes so uh yeah that was what we did in 2022 so this year so it was a very good year for for raising money um we so this business that we're in you got in just under the wire and then yeah yeah so um but it is a very capital intensive business uh so it's it's it's not like we're a

SPEAKER_446: software company that you know needs development time and then once you've got it developed you can you can replicate it um it's uh you know we call it a hard tech or deep tech uh type business where it takes a lot of capital um but on the flip side what we're really doing is we're building infrastructure that's needed for the long term and so this is a you know it's a very sustainable business it's a long-term business and so those are the type investors that we look for um it's the whenever i get on a phone call with with an investor that is you know used to developing and investing in software companies you know it's it's usually not a good fit right so um so we have to find the right investors and there's plenty of those out there that are interested in in clean tech or the deep tech they they really understand it and get it and they're in it for the long haul and helping us build this infrastructure and and now the fact that we're getting the support from the us government in these uh department of energy grants is is very very helpful but they're also

SPEAKER_543: making a long-term investment in building this infrastructure we need in the us

SPEAKER_474: yeah talk to me more about that landscape have you been there since 2016

SPEAKER_446: um i've been involved with the company since 2017 yeah so i've been been around a long time

SPEAKER_474: and so you must have seen because there's a there's been a bit of a shift in climate tech investing

SPEAKER_03: toward a greater willingness like you described there are more investors now who are saying we'll take this longer journey and you know potentially lower margins for a longer more like you said sustainable in all the sense of the word um business have you seen that shift it sort of feels like now all of a sudden there's like a bubble in a really good way around

SPEAKER_398: making these type of investments or firms that are specifically focused on frontier tech or hard

SPEAKER_446: tech or deep science yes yes exactly so there's a lot of funds and and that's really i think a lot of the deals that are actually getting done the companies are getting funded these days of course we're not in a very good economic environment right now um but uh the companies that are involved with uh climate change or climate tech uh or deep tech they're the ones that are really um they're still progressing because there's a broader thing that's going on and yes we have economic uh ups and downs or the market goes up and down but but this this um this climate issue is not going up and down it's only continuing to get worse and so there's there are a lot of people really investing in this because they know it's it's something we've got to do something about and um and so that is more or less

SPEAKER_459: staying fairly steady that uh people are still doing deals and getting deals done making those

SPEAKER_03: investments so um so i see that tell me more about the um speaking of the the hard tech tell me more about the technology because it's my understanding you know battery recycling technology exists it's my understanding that you're able to recover 98 of the materials within the battery talk to me about that

SPEAKER_445: technology and why it's better why how are you so awesome yeah how are we so awesome so uh there's there's several technologies that actually will recover high amounts um 98 of some of these critical

SPEAKER_446: metals what uh what what is truly different though is what we are is our output product our output product is very different from other methods and so there there are other methods that that exist um you know such as a uh a smelting process or you know they refer to it as a pyrometallurgical process this is actually a very very old process um that it dates back you know thousands of years um to to smelt metals and refine them that doesn't essentially like just melt them down yeah and and so that's the most crude basic way of doing it um it's not very environmentally friendly uh it takes a lot of energy to do that but so it's that's a process that has been adapted to recycling lithium ion batteries uh of recent there's there's another process um that's more of a chemical process it's referred to as

SPEAKER_455: hydrometallurgical uh recycling but what that does and it's it's a process now that's it's going on 100 years

SPEAKER_446: old uh again that process has been used extensively in the mining industry uh to essentially refine certain ores that come out of the ground and so that process has also been adapted to recycle lithium ion batteries but again the output product of both that that smelting process or that chemical process only recovers the metals itself because that's what those processes were designed for okay this this process that that we have we actually call it hydro to cathode and so it's a it's it's a brand new process and what that process actually does is it starts out with the spent lithium ion batteries and goes directly to this high value cathode active material that's what's very very different so we're not just we're not just recovering those those metals we're going directly to this um this highly engineered material and this is a process that was uniquely designed to recycle lithium ion batteries so there's there was a problem that you know that the professors at uh wpi were trying to solve back when we just started making evs and putting them out on the road you know back in 2010 2011 nobody was thinking about recycling these things and and back at that time we had these older technologies that okay they they worked but they weren't very economical and so if you don't have an economic process to recycle and it's a cost then that's going to be a problem for broader adoption so they set out to to find a more economical way to recycle these batteries and and really what their their answer was is they wanted to make the most valuable product possible from spent batteries yeah and their answer was the cathode material right and so the cathode material in a battery is important because that's about half of the cost of a total of a lithium ion battery is all in one material in the battery so everything else all of the energy all of the labor everything else is the other half and so if you can synthesize that really expensive material that's in a battery from spent batteries so making something really really valuable from from trash that's you you can make some margins you can make an economic case for recycling and that's exactly what they set out to do and that they they developed that process they've patented that process and like i said it's it was uniquely designed to recycle lithium ion batteries and and really nobody else is doing it this way and as efficient as what ascend elements is doing and so in that way we're bringing something new and transformative to

SPEAKER_03: the industry gotcha so it's more than it's it's urban mining in the sense that it is some metals recovery but it sounds like what you're saying is what your competitors are doing is they're recovering metals but if you want to make batteries you still have to engineer that cathode material and then

SPEAKER_484: process these metals these recovered metals into new batteries you have your purpose built for

SPEAKER_03: recovering battery material essentially and it sounds like almost the same state so that you can just pop

SPEAKER_88: i'm obviously dramatically simplifying but like pop it right into a new battery ready to go that's that's

SPEAKER_446: exactly it and so um and i'll say it is that simple you know the uh the phd chemists that are standing behind me uh wouldn't describe it somebody's had a heart attack i know but they don't go like you just pop it over yeah and there you go so but that's exactly it and that's how we help battery manufacturers and ev manufacturers close the loop you know they they uh we we get the material from them we process it and we

SPEAKER_474: deliver material they can use right back to them awesome micro chronley ceo of ascend elements thank you so much uh my obsession with batteries will never die i couldn't have been more excited about

SPEAKER_567: this conversation thank you molly it's great talking to you today appreciate the time we'll see you

SPEAKER_02: tomorrow on this week in startups if you love the show oh well you're welcome i'm glad that you're here

SPEAKER_219: follow mollywood i mean what do you want me to say it's freaking awesome i'm still gonna say that every

SPEAKER_38: day thanks uh for can we just make that the new can we write that into every outro for the for all of

SPEAKER_577: time we're here and we're here to discuss this uh producers at this weekend startups.com if

SPEAKER_00: have ideas for the show follow jason follow at mollywood and uh calacanis.substack.com i'm gonna

SPEAKER_582: try to keep writing you just wrote a nice piece uh are you emwood or mollywood at mollywood

SPEAKER_72: substack mollywood.substack.com yeah and uh if you sign up for hers or mine we i think we co um we have a circular economy going for sure yeah that's i think this is the best part i'm gonna

SPEAKER_00: i invited the um or i asked the producers to invite the substack founder back on we've done a really good job of this like network effects i got a lot of people recommending our stuff and so i was kind of liking it um yeah we'll see you next time bye bye bye bye