Ep89: Ion Yadigaroglu "Pioneering Impact Investor"

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ML: Before we start, if you're enjoying these conversations, please make sure that you like or subscribe to Cleaning Up, it really helps other people to find us. Cleaning up is brought to you by Capricorn Investment Group, the Liebreich Foundation and the Gilardini Foundation. Hello, I'm Michael Liebreich and this is Cleaning Up. My guest today is Ion Yadigaroglu, Managing Partner of Capricorn Investment Group and a 20 year pioneer in impact investing. And it's a very special episode, because it also marks Capricorn joining as a supporter of Cleaning Up. Ion and his partners sit at the centre of an extraordinary network of impact investors and entrepreneurs. Each season for the next few seasons, I'll be bringing a few of them onto the show to shine a spotlight on the latest trends in sustainable finance, climate solutions, and technology. So let's give a warm welcome to Ion Yadigaroglu on Cleaning Up. So Ion, welcome to Cleaning Up.

Ion Yadigaroglu: Thank you, and I'm excited to be on.

ML: Well, I'm excited that you're on. And I'm also excited that with this, we are launching our new partnership. And I along with hopefully the audience is really looking forward to learning more about yourself, about Capricorn and about your portfolio companies and also the funds that you're working with.

IY: Thank you.

ML: So you've been pretty busy since the founding of Capricorn. What I'll start with is by asking you to give us a thumbnail of the organisation. So just the short version, and then we can sort of peel the onion, we can get in deeper and deeper.

IY: Sure. So we started this just shy of 20 years ago. And it is a long story. So the short one is that a bunch of us were at Stanford in graduate school in the early 90s and lived through the first days of the internet, the first steps, and my roommate at the time, who remained of course, a friend called Jeff Skoll came to us about 10 years later, this is now early 2000s. And wanted to spend the many billions he had made at eBay philanthropically over the coming decades, he was one of the originals that had the idea of spending most of his wealth into philanthropy fairly quickly. And that provided an opening to create a new investment company with what to do with the capital in the meantime. And so given that he was going to give it away, he was open minded about doing something different with it. And we shook hands on the idea that we would somehow beat Wall Street and the London financial sector at its own game and drive great returns, but we'd also have a great impact. In fact, we thought of it as a competition. What tool will ultimately be most exciting and when we're really old, we would compare notes and figure out: was it storytelling? Was it traditional philanthropy? Or was it in fact, the investment and business tool. And that's how we got started, like I said, almost just shy of about 20 years ago.

ML: And that was with a focus in your part of that of Jeff's activities. The focus was always on sustainability, environment. Anything else to add to that?

IY: Well, I would say from the… at the beginning, it was and remains frankly, broader. Now, one of the first things that… So put yourself in our shoes, this is almost 20 years ago, there's five, six billion of capital, and a blank sheet of paper what to do. Now we were we had all grown up with, you know, around technology and software and things like that, of course, the money had come from an amazing and entrepreneurial story, which was eBay. And so of course, I was drawn towards a strategy that would leverage innovation to achieve that great return with great impact. And so one of the first strategies that we decided to fund is my own, that I have managed ever since with my partner Dipender Saluja, which is a venture capital strategy into what we used to call cleantech. In between we broaden it to deep tech, I think people have gotten comfortable now with climate tech, which sounds more contemporary. So when you know versions of that right where we're seeking, again, great success and venture capital but also great impact. And certainly climate change has been the vast vast majority of that impact we've sought. But even there, we are excited to solve, to create solutions that can go after other big problems. And then Capricorn continued to back other strategies outside of venture capital, that, you know, many of them don't necessarily relate to climate, they're broader, right? Things like poverty in the world, or, you know, the racial justice, and many other topics that are worthy.

ML: And so you've got these two broad strategy <inaudible> you've got your direct venture investing, and that's the Technology Impact Funds. And then you've got the Sustainable Investor Funds, which is where they seem to be where a lot of that broader activity about inclusion in real estate and financial inclusion and so on seems to be in the more in those fund type investments.

IY: That's exactly right. So the strategy, the venture capital strategy that I co-manage with Dipender and our team, of course, you can think of as one of the strategies that Capricorn has backed, although it has been a very big and very visible piece of that. And Capricorn has also backed other impact funds. As we said, looking for other ways to make money and have impacts, the confusing bit is that I had been involved in all of it. And so it's so that's why it's, you know, it feels like one, you know, one big happy family because to a large extent it is there. There's a lot of overlapping people and ideas that have worked together now for several decades.

ML: Now, I'd love to dive into some of the investments. And I think we'll do that in a moment. But before we do, just to finish off on the sort of the strategy of Capricorn, you've opened up to other investors. It's not just Jeff Skoll’s money anymore, as I understand how, how big is it? How many people have you got? Where are you? Just give us the kind of the geography lesson, the footprint there.

IY: Sure. Yeah. So that was that was there from the start. We said we weren't, it wasn't just about how, what can we do with that initial balance sheet that was endowed by Jeff Skoll and the Skoll Foundation. But because we had this theory of, hey, we can invest differently, right, we can, we can be deliberate around seeking impact and do as well or better than other investors. That was sort of the hope, the aspiration. And so it was in part about changing how people invest. And so in so bringing in other capital into all that was, was a was a core idea from the beginning. And now starting in about in practice, we, I’m trying to remember the exact dates, but somewhere around 2007 is where we really started to raise money as well, besides the original Jeff Skoll and Skoll Foundation capital that was fueling this. And so about five years in, we began to raise money. And we do that not just at the Capricorn level, where we can deploy that money into funds, and into seeding new impact funds. But each one of those underlying strategies that we've backed also raises money. So, for example, my venture capital fund is largely non-Jeff Skoll money or Skoll Foundation money today. And that's pretty much true of most of the things we've backed the last 20 years.

ML: And whereabouts in the world? Where have you got offices? And where do you invest? Because some venture capitalists, they will invest only within 50 miles of the Sand Hill Road. That's not what you do?

IY: Yeah, I think, yeah, in terms. So Capricorn itself has offices in in New York, and in Palo Alto, in California. The venture capital strategy shares those offices, although there's a lot more activity in California than there is in New York on that front. And I would say it's the inverse on the fund, impact in seeding work, much of those meetings, much of that team is in New York, and not Palo Alto. But in all cases, and again, the other funds we've backed are all over, right? Certainly a number in London and other places in Europe, but also funds in places like India. And so the certainly, the outlook, the ideas are very global in venture capital, because we're in that heavy engineering, deep tech, climate tech world. Most of what we back still ends up on the West Coast of America. But that's not because we're not interested in the rest of the world. It's just where in the end do we find that you know, really rare mix of amazing technology, amazing team, amazing stakeholders and everything else you need to make it work.

ML: And probably the highest profile of those investments is SpaceX. Now, why does SpaceX exemplify? Why does it fit within this strategy? I mean, it's burning an enormous amount of hydrocarbons to put things in orbit and, and then, and from there, you're gonna save the planet. But how?

IY: Yeah. So when you said the highest profile investment, I actually didn't know which one you were going to pick. But that's, that's certainly a good one. Look, the, you know, when we opened shop, like I said many, very long time ago, the second investment we made was with a fellow called JB Straubel. So put yourself again yourself in our shoes. Now I'm talking about the venture fund. And we so we put up a little sign that says, seeking really difficult technology that's going to change the world. And somebody I knew, because I was his teaching assistant in physics, some years before, the same JB Straubel came around and said, look at these amazing curves of improvement for chips, and batteries. I think if we work really hard, we can make a car that will outcompete diesel and gas cars. So that was of course Tesla. And, and so and because of Tesla, it snowballed into interest in batteries and power electronics, and many other related problems to Tesla. And, of course, the angel investor in Tesla at the time, rightly so named co-founder was Elon Musk. And Elon Musk had arrived two years after me at Stanford in 94’. I had arrived in 92’, for graduate school in physics. And by then the hobby that I had in dealing with these tools called Mosaic, etc, which was the beginning of the internet, which people forget, but started as a collaboration tools in physics departments was starting to feel like a real thing. And Elon was one of the first people to recognise that, so he never got started on the PhD, and quit immediately to form his first company Zip2. And so we also, couple years later, invested in one of those first SpaceX rounds, that wasn't Elon Musk writing the check. And so that's how we got into that. Now you're right, that the impact is not as obvious as an electric car, or, you know, a new solar cell. And people have challenged us on that, but I feel that it has an incredible impact. Some of things people will think about an impact is like, look at what it's enabled, right? We also funded, I think our maybe 14th investment or 11th investment was a company called Planet Labs, it remains, by the way, the only company that we seed funded out of a garage of a house in Cupertino. I don't, it's the only time where we went to an actual house garage. And because that's sort of, you know, the myth of the startup. And so that's how, when we wrote a check to them, that's where they were. So you couldn't do Planet without SpaceX right? Democratising that access to space, and dramatically lowering the cost of access it’s what's enabling this explosion of new companies and hardware that is doing things like Earth observation. And Planet looks at every tree in the world every day, every river in the world, right? It's really every field, every agricultural field. And these tools are becoming incredibly important for climate and many other issues. So I think of it, maybe it's a bit of an enabling impact. But it's very real. Now, if you ask me what its greatest impact is, you can go anywhere in the world, at any level of wealth or education. And if a kid is interested in science and engineering, you ask them, what is making you excited, and usually the response you get is SpaceX. So it is having a absolutely just, you know, magical view of our confidence that humanity can still do incredible things and that science can be… science and engineering can help us really solve problems and create a bright future. And so I think that impact is probably what I care about the most.

ML: Right, and you understand that when I asked you the question, it's a provocation, because of course, you know, I know exactly what's going on in terms of Earth observation, whether it's precision agriculture, whether it's tracking flaring, some extraordinary companies, looking at where gas is flaring and how much money could be made by not flaring it, but capturing it, or whether it's methane and that's probably the most urgent of all action that we need to take on climate is actually around capturing fugitive emissions of methane. Very, very severe and very short lived warming gas. So I'm very persuaded, but you understand I need to ask the question. But it's interesting because it points to one of your strategies as being an enabler strategy. And I think we'll probably come back to that. But I want to go into some of the kind of, you know, hardcore energy companies that you've backed. And by exploring them, we'll understand a little bit more about how you see the world because you've got some kind of a mental model you and your colleagues have. How does one actually turn the supertanker of energy? So let me ask you about a few of them. You've got another very well, let's stick with JB Straubel, we're going to talk about Redwood Materials, because after Tesla, he went on to found Redwood materials, right?

IY: He did. Now, if you, if that's okay. Let me just do a quick aside because you did mention methane, and, and, you know, methane, and how space is enabling something there. So before we get to JB, you know, I fell in love with a project some years ago, called MethaneSAT. And as you know, and you know all this, Michael, but methane is, you know, several percent of the whole warming effect depending on what timeframes you're considering, it's actually more than a few percent. And it seems like really low hanging fruit, because a lot of that methane is leaking from oil and gas operations, really one of the dumbest things to do, because it seems like that should be easy to fix, much easier than shutting down coal plants or changing all our cars out. And what it's lacking is a policing tool. Because if no one's watching, you know, lots of actors left and right, leak a little bit of methane, and no one really cares. So we needed this global policing tool. And it looked like you could literally observe most of the methane is leaking directly from space, image it and point, you know, image it well enough that you could actually tie it to a specific company that was leaking it. And it was a bit at the limit of what spectroscopy, imaging spectroscopy can do from space, but not impossible. And a team had come together to try to do this and there was lots of stakeholders and I felt like I was born to help because I was an astronomer, so I knew what spectroscopy was. And I had great respect for EDF and other environmental organisations that wanted to house this and take this forward. And we had funded companies like SpaceX and Planet Labs. So it really felt like a match made in heaven. So I got really, really I jumped into that.

ML: Yeah, and I'm just gonna just for a second breaking because I have this kind of an acronym. klaxon. You've mentioned EDF. And I think we need to point out that that is the Environmental Defense Fund, not EDF the French utility, and it's just to avoid confusion. So back to you.

IY: Exactly yes, that that EDF not the other. Although we like all EDFs so that project came together and it's about to get lifted in you know, many months from now but still now measured in months not years. And on a project like that rough order of magnitude 100 million dollars for the hardware, the lift back in the day would have been a major portion of that budget. And today the lift that is planned on a SpaceX rocket it still appears in the budget but it's not the piece that anyone really looks at and also getting a slot, right, meaning having to wait a year or two or three to get your slot on the rocket well that's kind of completely gone away so when when that rocket, when that satellite’s ready it will go up and it will go up with you know hopefully great, great metrics on reliability and in a very very low cost.

ML: And that is MethaneSAT if I'm not wrong, isn't that what it's been dubbed that but MethaneSAT? Okay, that's great.

IY: I call it MethaneSAT but it's the same thing. Yeah. Oh, yes.

ML: Tomatoes and tomatoes. But we know what we're talking about here. Very good. No, that's that's and that does kind of that's a very concrete example of, of one of these enablers and it sort of rounds out you've got SpaceX your planet and then the work on MethaneSAT I can see I can I can do MethaneSAT as well. But let's come back to let's come back to them the battery materials recycling.

IY: Yes. Yeah. And by the way, just to be clear, that one was we thought about it and didn't think it would work as a as a commercial company. There were no advantages and some disadvantages. So MethaneSAT pure philanthropic project. So, recycling, completely opposite. JB, that was the co-founder of Tesla, real genius, right? He's the one that figured out that you wanted to leverage the battery industry the way it was with these relatively small laptop lithium ion batteries, and did many of those important initial designs and how to put thousands of those together and how to build the power electronics to go with it, how to do the software to control the motors, so he was the CTO of Tesla during its really whole incredible trajectory. And a couple of years ago, he was increasingly excited, also some concern, but mostly excitement around how do you feed these Gigafactories with materials, and the opportunity to keep the materials in the system, to close that materials loop by recycling EVs back into new EVs. So it's not… Sure there is a big driver around the environment, protecting the environment, not having those things go to landfill. But more importantly, and I really think it's just as important or in his mind, more important, you can't continue to drive this massively important and successful success story of EVs and batteries generally, without closing that loop. If you keep drawing material from nature, from a mountain somewhere, and you're getting this very dirty material from the mountain filled with other things, and then you have to do metallurgy to get out what you need, right? The nickels and the lithiums. And even basic materials like aluminum and steel, you just hit a floor, right, in what you can do, you just can't do it cheaper, and with less footprint than a certain amount. Whereas if you're taking those materials from a used battery pack,  a used EV, there is really no floor to how well you can do. You can keep driving that cost and performance equation to ever, ever greater competitiveness compared to the old fossil modes. And so he saw as big of an opportunity to build the mirror image of the of the EV battery industry, which is feeding it with raw materials from the recycling aspect. And you can almost think of it as a battery company because the idea is not, when you say recycling, people have this image of a very dirty place that takes a little bit of material occasionally and sells it to someone else. And it's all very low tech, and not particularly appealing. That's really not the model, right? The model here is you have ageing or scrap material coming in today or ageing materials or discarded material coming in. And you have the direct inputs to the battery EV industry coming out. So it's really a partnership with the Gigafactories that are building the batteries in cars.

ML: Right. And I'd be very keen to get JB on this show. And in fact, there's probably a few shows on circularity and recycling and what happens at end of life. Because initially, I thought of battery recycling as being, you know, you grind them up, and you turn them back into raw materials. But of course, you can reuse or second life, the whole battery. You can use it in situ vehicle to grid, you can recycle modules, you can recycle cells, and only then do you have to grind them up or do something and extract the actual material. So it's going to be a huge part of this. And it's one that we absolutely have to figure out because, as you say, just extracting more and more minerals forever. And somehow, you know, somehow reducing the impact, it just feels impossible. So you know, we've got to get this thing to circularity by year x. Well, I don't know when that will be. But definitely, that's the route we got to be on.

IY: Yeah, I you know, 20 years ago, you mentioned new life, right? New leases on life for old battery packs are breaking them down by cell. 20 years ago, I was pretty excited about that. And we spent some years looking at that, trying to understand that better. And unfortunately, I don't think that's actually going to play a big role. I think the straightforward recycling will mostly make much of that tougher and tougher to justify.

ML: Okay, that's interesting. So yeah, definitely then be interested to, to dive into that. So I've had a slightly different trajectory on vehicle to grid which I initially thought was kind of ridiculous because you were doing so much damage to the battery on each cycle. How could earning a buck or two from the electricity possibly compensate. But of course battery lives has become so much longer and the costs have come down. So now maybe earning a buck or two and using your battery to do something. Of course the Ford F150 very much sold on the ability to you know, drive power tools and possibly even compensate during a power cut.

IY: Yeah, so I think yeah, I think you know, one thing is that there, for a transportation product, you need a real range. And the range is the value of that transportation of that car right starts to be useful when you hit those 200 plus mile ranges, right 300 plus kilometres. But most people really start to think of it as a no compromise around the, the 400. You know, 400 mile or 550, you know, that kind of in kilometre range starts to be something where people feel incredibly good, especially in in conjunction with rapid charging, because the number of scenarios where you are inconvenienced compared to be able to fill a tank in five minutes with gasoline or diesel, the number of those scenarios just starts to plummet to zero. And consumers have been willing to buy cars with these long ranges, even if they don't really need them. And so they carry just a large large battery pack compared to how they're used. So you can afford some additional uses of it without compromising the lifetime of the car. Now I wouldn't say, I don't think you're going to have cars like that used for doing daily swings of solar energy between noon and nighttime, because then you're much better off having a dedicated battery that's designed to do it. But if you want to use your car during a storm, which might be once every two years for two days, to fire up your home, then of course that has almost zero impact on the battery life, and is of great value to the homeowner just like being able to power your power tool is very little energy for the car but a great service for someone whose electric saw or drill is out of juice. So I think you're seeing kind of a hierarchy there were, there are some you know, it's just, it's very useful to have this big, big chunk of energy floating around in your garage that you can drive anywhere, but probably not to be used on a daily basis for vehicle to grid.

ML: It's fascinating. And of course, it will also vary regionally because that emergency of a power cut for two days, that's not the same, you know, the risks are different. So that looks different, or the risk of it are different in Texas, different California. You know, in northern Europe, we have the big worry is extended periods with no wind, but we don't have monsoons or we don't have hurricanes. But then those are the big risks that you want to insure against in other parts of the world. And very often the debates that I seem to get sucked into are, you know, x will never work, because it can't cope with every edge case in every geography in the world. And of course, that's not how innovation happens. It bites off chunks of use cases that are big enough to work. Now, any discussion of cars and range and how much capacity you've got, that's going to bring me on to another of your portfolio companies, which is very high profile, QuantumScape. What's going on there.

IY: Yeah, so QuantumScape is something we… a company we started investing in more than 10 years ago. And it is one of the contenders on these next generation lithium ion batteries loosely called lithium metal, or alternatively solid state. Although the definitions of some of these terms vary. So you can you can use, you can use that to describe QuantumScape. You know, I think, not to not to launch into a primer on what the opportunity is there. But just very, very simply. Lithium-ion batteries, like any battery have a fuel on one side, most, usually lithium, and then when you in quotes, burn it or oxidise it you get the lithium oxide on the other side. But unlike a fire, you can recharge it by driving that lithium oxide back into lithium on the anode. And the tough part is that in order to keep the lithium as a fuel, up until now you've had to keep it in a sponge. And that sponge, technically called intercalation medium is a lot of money and a lot of space and weight in the battery. And so ideally, you would not want to get rid of that sponge and just keep pure fuel, pure lithium on the anode side of the battery. And that's been really challenging to do technically, in part because lithium is so reactive as a fuel that when you're charging it, it reacts with itself to form these very, these tree-like structures called dendrites. And those dendrites are at the molecular level really, really strong. And they will destroy your battery. They'll puncture through your separator and other parts of the battery and destroy it fairly quickly. So people have been, you know, you can make an incredibly high performance, solid state lithium battery, the problem is, it's not going to last more than a couple of charges, which is insufficient for any real application. And what QuantumScape seems to have cracked is the ability to do that. But just think about this, it's taken hundreds of millions of dollars over a decade, to get where they are. And as a public company, they disclose in great detail where they are and what work they still need to do. And like the CEO of says, they still have wood to chop between now and the 2024-2025 timeframes, where they'd like to build the first you know, high volume or higher volume factories to go make these batteries. But the potential for that is enormous because batteries are at the core of everything, we're talking about the core of electrification and transportation, the core of taming the grid with solar and wind, but also at the core of all of our mobile electronics and everything else. So significant improvements in battery are just magic for everything.

ML: Ion, the beauty of the audience for the Cleaning Up is that we will have some electric chemists who do nothing but look at battery, anode, cathode, etc, etc. in great detail. We also have a lot of people out of policy, advocacy, advocacy, regulation, civic society, they don't know much electrochemistry at all, in practical terms, if QuantumScape can deliver what it is aiming for, what are we talking about, you know what, what happens, what's the difference it makes to I don't know cars, or planes or whatever?

IY: Because you don't have to make the left side of the battery, you might approach half the costs and half the weight for the same amount of energy. And so for a transportation product, imagine it being again and also potentially smaller, right, maybe even half the size. So of course those are not metrics the company is promising and they make specific promises as a public company. But at a high level, that's the potential for lithium metal or so called solid state batteries to basically take out half of what you're making you don't need to make. And so you have those giant savings in weight, money and volume.

ML: And that's really a game changer, I think if they can pull it off, because we already have some pretty good electric cars, but they're pretty expensive. So if you get if you can get twice the range and half the weight, half the cost particularly, that's going to be really quite something and of course it opens up a lot of options for electric aviation. Which brings me to another of your portfolio companies, which is Joby. VTOLs. Acronym klaxon on myself VTOL, vertical takeoff and landing. So tell us what Joby does.

IY: Sure, so having invested in Tesla, so many years ago, we were of course drawn to every other mode of transport: trucks and motorbikes and boats and looking at all that where was their opportunity. And aviation is tougher to do. And so we couldn't do that right away. So we invested in Joby maybe, it will soon be what, 8? 9? 10? years ago. But it didn't make sense to try to do that 15 or 20 years ago. And for the simple reason that for things on a road, the main use of energy in that battery pack is aerodynamics. But the aerodynamics is really just a function of the speed and the shape of the car, the weight doesn't factor for an aeroplane, it's also all aerodynamics, but the aerodynamics are drag-driven, which is, of course, it's a steep function of the speed, and the shape, but also the weight. And so the relatively very high weight of the battery pack compared to jet fuel for the same amount of energy is tougher to overcome for VTOL, for I should say, for electric aircraft. And so then you're drawn to saying fine, it's tougher. But where are the advantages of electrification so great, that you'll overcome that disadvantage to having the heavy battery pack on board. And if you do all the bottoms up math, you get to the conclusion that VTOL is that first low hanging fruit product you just can't do it with jet fuel for very fundamental reasons. But they look like amazing aircraft, amazing products if you're doing them with electric drive train. So it's a new mode of transportation. It doesn't exist. It's a fixed wing aircraft that can take off and land like a helicopter, but it's not a helicopter and it's not an airplane, right? It's a new thing. And you can only do it if you're doing it with electric drive train in practice. So what is the promise? Very, very quiet, shockingly quiet. That's the main, when you bring people to see these things fly, their first main impression is always I cannot believe how quiet this is. Very safe. You know, helicopters are really dangerous and really loud and obnoxious. Well, this is the opposite, right? It's very safe, will be very safe. And of course that needs to be demonstrated, but fundamentally should be very safe, very quiet. And, and of course, no emissions. And the costs that is surprisingly competitive, comparable, frankly, to the cost of driving an electric car over the same distance.

ML: And so what will be the first use cases? Where will it first be deployed? Are we talking about replacing helicopters on the sort of? There are a few places? I don't know, I'm thinking of Cannes to Monaco, or there's a few in in the Gulf or in Brazil, where there's helicopter routes, is that the sort of thing that you're looking at?

IY: Well, different companies are taking different <inaudible>, I think, you know, there's a lot of competitors to the one we funded. Of course, we think the one we funded is the best design and strongest team, it's certainly the largest, best funded company in the world working on electrifying aircraft. By the way, I should note, right, well in excess of even what the incumbents are doing. Sometimes people will say, how come you guys have achieved this kind of magic in these different areas over so many years? And one of the answers is we just spend the money. Like you can't do these incredibly hard things without getting the hundreds of engineers and other people together and funding it for a sustained way over many, many years. And big companies just don't do that anymore. So Joby, we think will win and succeed, in part because it's doing all the really difficult complicated things you need to do to get there. So different companies are testing different routes, Joby is looking at, wants this to be a real mode of transportation, think of it, possibly almost like primarily public transportation. And so they're looking at areas where you know, if you go talk to mayors around the city, around the world, they all have bottleneck areas where there's a lot of people going from one area to another area, and there's a road missing or a bridge missing or a tunnel missing. And they don't want to engage on a 10 or 20 year multibillion dollar piece of infrastructure. If only we could create an air bridge that did the same thing. So that's how I think you should think of the lowest hanging fruit for the  Jobys is areas where you're not going very far. But getting there today, because of traffic or a lack of public infrastructure is super, super challenging. And we can fix that.

ML: What sort of distance are we talking? Because when you say that what comes to mind is actually kind of cable cars, which number of places in the world have used those to get over without having to do huge amounts of tunnelling and building new bridges and going crazy, but we're talking about longer distances than that, no?

IY: yeah, I mean, I would say longer than a cable car for sure. Because you do have, you do have to get people in, in the aircraft out of the aircraft it has the land and take off. And so those are all, you know, costly in terms of time and energy. And, and therefore money. And so you want to go a little further. But, you know, think of those awful commutes where, in the middle of the night, you might be able to drive it and half an hour or 45 minutes or even 20. But in reality, it's a three hour, you know, horrible traffic jam. That's the ideal case for a Joby.

ML: So it's kind of 20 miles, 30 miles, 40 miles, 15 miles, those sorts of distances.

IY: Yeah. And you'll, I mean, there will be a whole range, right? And we'll see I can't tell you today, of course, what the what the biggest volumes will be ultimately. But those are very easy applications for Jobys.

ML: But now, when you talk about this is a new thing. It's not it's not a helicopter, it's not a fixed wing. So new things take an enormous amount of time to get through aviation certification. I mean, we're talking decades, multiple decades, are we not?

IY: No, definitely not. No, no. Again, public company in this case, so there's, they make precise statements that are written in plain English, right? And so I encourage you to go there for those who want the precise answers but Joby and a number of competitors are deep into the certification process for the aircraft and those flight worthiness certificates is really all that's between us and real passengers getting into those aircraft and paying for it and so it's…

ML: Ion, have they named a year for the passengers getting into the aircraft, paying passengers in aircraft, which is a huge milestone of course?

IY: Yeah, there's definitely some precise statements, and it's a couple years out, not decades. But again, the exact statements. I don't want to quote from memory because I might be off by a year and I'll get in trouble. But it's, it's very soon.

ML: Now there's another of your portfolio companies in the energy space, which is kind of moves completely to the other end of the technology spectrum, at least apparently, that's how it appears to me. Now, you might tell me that's not the case. But Erthos is not. I mean, the ones we've talked about are very, very high tech QuantumScape, Joby. I mean, this is really cutting edge stuff, lots of engineers doing really, really, really clever things. Erthos is putting solar panels on the ground, and therefore saving a whole bunch of money. But is that is that much technology in Erthos?

IY: Well, you know, I think we share a lot of things, Michael, and I think one of them I'm pretty sure we share is that we've been waking up for many years, at least 10, 20, 30 years, thinking about how can I help fix this climate problem? And so that's, that's, that's kind of a starting point for a lot of my investment activity. I'm a big lover of new technology. And sometimes the nerdier, more complicated it is, the more I like it. But I'm equally driven by how do we actually do things that can scale fast enough, impact things fast enough that they actually make a difference, right? The storytelling is one thing, but in practice, we need to get here and we need to get there fast. And so I'm no less excited about Erthos. Because yeah, it's lower tech. And for those who don't know what it is, it's the very, very bold, it sounds almost kind of dumb, realisation that we should no longer be installing solar modules on metal frames and tracking systems, we should instead lay them directly onto the ground, the earth, that's why it's called Erthos, right? Because we're just laying modules on the earth. And it seems, and that goes against good solar construction practices of the last decades. And so it feels like that must be the wrong answer. But when you do the math, and these are, you know, really, really qualified, very experienced, people who have built many of the largest solar plants in the world, who started Erthos that we had, by the way, backed in their prior company and backed in the prior company before that. They figured out that a number of long-standing trends have crossed, and this was actually going to drive the next wave of solar plants to being even cheaper and higher performing. And so it's counterintuitive, but the math is very real. And what attracts me, makes me so excited about it. In fact, I've said, and I'm going to write something soon, that says that. It may ultimately be the highest impact thing we've done in a very, very long time. Because solar is already our big hope for climate change, right, for power generation. It's growing faster than wind and faster than anything else. And the cost curve is better than anything. So wind is already playing and will played a major major role going forward. I mean, solar, I said, If I said wind I think I misspoke. And so if we can accelerate and improve solar. That's really an extraordinary impact. And we think Erthos can drive between 10% to 20% improvement in the cost of producing solar energy from a solar plant and can do that, without Gigafactories. Erthos’ main task is to change minds to get people to be open minded about the data. Because they've just spent decades building it a different way. So there's not a lot of big levers that are technology driven, that don't go through a multi multi, gazillion dollar industrialization, reindustrialization plan. And Erthos takes a lot of hardware out of the system. It doesn't add something that you have to manufacture into it.

ML: Right, it's been interesting working, I now no longer have any executive role at BloombergNEF. But I used to, as you know, and I used to try and push the teams, generally one of my jobs was to push the team to be confident about cost reductions when they couldn't list the exact thing that was going to happen, you know, if they knew that it was going to go to bifacial solar, they were very good at working out how much it would cost and how much it would yield. But over the horizon, I'm completely convinced that costs keep coming down even when we can't list the drivers. And I always used to say to them somebody will figure out a way to just hack a piece out of the system. Maybe we don't need controls. Maybe we don't need wires, maybe we don't of course, I missed the one that Erthos is planning to make maybe we don't need racking at all.

IY: It really. So you do need a new thing, which is you need some simple robots. Because of course one of the one of the instant reactions it’s on the ground.

ML: Yeah, right, you have to clean them and you have to weed them, presumably you have to manage water.

IY: Yeah, weeding turns out to be mostly not an issue. Because another correct intuition is that, well, these things might get pretty hot. And you don't want that, by the way, you don't want modules getting hot, because the way the semiconductor material works, it doesn't produce as much electricity, the hotter it gets. And one of the key insights these guys had is that air cooling gets worse and worse as you get closer and closer to the ground. But then it's not nearly as bad when you get in contact with the ground because the ground acts like a big heat reservoir and absorbs a lot of that heat. And in absorbing the heat it prevents weed growth. So you get a natural herbicide, which is heat when you put them on the ground. So in most geographies, most kinds of soil types, you don't have to worry to hard about the weeds.

ML: Now I want to just speed up because it just in the interest of time, I don't want to run out I want to do I want to talk about two other things. One is, I'm really interested in your Helion Energy, which is your fusion investment. And then there's a group of companies I want to come back to, which are around electrochemistry. And they're around hydrogen electrolysis, they're around iron, producing iron, reducing iron using electrolysis. And as you've got a number that are kind of electrochemistry and basic chemistry, which order you want to do that? Do you want to take that group first, and then we'll finish on on the fusion.

IY: Yeah, okay. So let's start with that electric catalysis or electrochemistry.

ML: So you've got ElectraSteel, Electric Hydrogen, and Twelve. Twelve is carbon dioxide electrolysis.

IY: Yes. So in all cases, it's the same idea, right? So why do we use fossil fuels? Well, because nature has taken very simple, very abundant molecules and kept them for us in their so called reduced state underground. Reduced as in not oxidised. So when we burn stuff, we oxidise it with oxygen and it's no longer reactive, it's no longer able to make chemistry and/or provide energy. Now, those molecules are very abundant on the surface of the planet in their oxidised, simple form. So again, the only thing we're getting from the fossil business, from the fossil fuels is that nature has kept them in that reduced state underground for us for millions of years. And so we can take any of those molecules and make them back into their active, reduced state through renewable energy, right? And so if we talk about the hydrogen economy, that's what we're doing. We're taking oxidised hydrogen, which is water, and we're making that back into hydrogen. In the same way, we can take oxidised carbon, which is CO2, and we can make it back into carbon. That's what Twelve does. In their case, they go from CO2 to a partially oxidised state, which is CO, carbon monoxide, which is useful for chemistry, and as an input into fuels and many other things. And the third one, you mentioned, ElectraSteel takes the oxidised form of iron, which is iron oxide, typically a FO3, that is iron ore. And, again, drives that back into iron. So these are all some of the biggest, most fundamental things that we're getting from fossil fuels. And instead, you know, a black box, you stick wind power or solar energy on one end, you take that very simple molecule, air, or water, or dirt, and you get the thing you want out of it without having to go through fossil fuel.

ML: Right. And so the way I've described this in sort of very, very big picture occasionally is that we're going from thermal chemistry to electrochemistry. And we're gonna do that right across all sorts of processes. But is there an end point where we move to photochemistry? So instead of hitting it with a particular voltage and hoping and expecting something to happen, that we actually go in and we hit it with a specific excitation from a photon? I mean, is that if we come back and look at your portfolio in 10 years, will there be 3,4,5,6 photo chemistry businesses?

IY: I don't think so.

ML: Okay, that's fascinating. So where's the floor in that argument?

IY: I don't think so. I mean, you know, the world is electrifying and electric systems tend to win. And look, that's a broad statement. And maybe if we talked for a couple hours, we could develop a more granular version of it, but you know, electricity, electrons, we know how to store, move. We know how to create membranes that use them, we know how to, you know, filter them, I mean, all the machinery of dealing with electrons is extraordinarily developed, easy to control, tends to be robust, tends to be very efficient. Now, the photonic world is interesting in its own right. And there's areas that may de-electrify, as you know, in computation. We have been electrifying. I mean, it's always been an electric device, right? The semiconductor devices are all electrically driven, except for telecom networks, which have been really photonic with fibres and other things. So computation, there has always been the possibility. And it's tantalising now, as it has been in many times to do the actual computations photonically, things like that. But largely stated the world is electrifying for really deep physics/engineering reasons, materials reasons. And I don't see the possibility. Yet again, you never know what we see coming out of university tomorrow, right. But I don't see the possibility of what you're saying happening for those, for driving water, and air and iron ore back into constituent parts. I think that will stay electric.

ML: Although you do have you said you do have one photonic investment. But that's Xanadu. That's a quantum computing business. So let's come on to then the Helion Energy, your fusion play, the brief version? I think we all know why fusion would be attractive. Why Helion? And any thoughts on how long it might take to really kind of impact the world's energy system?

IY: Yeah, well, the fact that you know, so much venture capital is going to fusion is pretty amazing in its own right. And it's, and I wouldn't discount it. I think. I think we're as realistic of course, our jobs is to discover things and be at the leading edge of what is possible. But we're, we're pretty sanguine, also about how hard it is to make things work. And the fact that even if you're really long term, you know, 10 years is a long time. And we don't easily enter into problems that require 10 or more years to solve, right. But to get to at least the first real place where people say, well, this is a real business, because it's no longer compatible with venture capital. And so we along with many others have decided to fund a couple of startups in fusion. Helion is the one that we funded a couple years ago. And it's looking really, really exciting. You know, I grew up in physics, I thought, when I was 20, that I'd go do my PhD in plasma physics to work on fusion, I ended up doing astronomy, cosmology instead. But these are not new problems, as you know. And there are giant science experiments, like the ITER and Cadarache that have where, you know, tens of billions have been invested. And they are genuinely making progress. And they're good thing in my view, but they're not realistic approaches to making energy. What I think people missed is that there was some approaches that seemed crazy 30 years ago, that have crept up on us as being not so crazy anymore because of the compounding of technology and other sectors. And so for instance, and this is not the case for Helion, but one of those technologies has been higher temperature superconducting materials, which can make higher temperature superconducting magnets. So that's been an area of excitement. In the case of Helion its power electronics, so just like there was Moore's Law in computation, there was an even more impressive Moore's Law and the ability of chips to control giant amounts of power and do so very, very precisely and at low cost. Things that go into locomotives, right, things that go into Jobys and Helion doesn't try to do any new physics, it's a pretty brute force approach to fusion, it's just whacks that fuel with enough energy that it ignites it just like, I mean, we know fusion works. It's not like humanity hasn't harnessed fusion, but we've only harnessed the destructive kind, right, the fusion bomb and we explode it by exploding a fissile bomb around it. So obviously, that's not what's going to make electricity for us in a practical sense, but Helion in the end has a little bit of kinship with that and that we're not trying to create this perfect stable reaction that you see at the sun that lasts for billions of years, right? And which Cadarache is trying to do for an hour at a time. And when they get to a minute, right, it's everyone cheers and says, oh, we're getting there, we're getting there. So what Helion is doing is really just trying to keep a transient going for, you know, milliseconds. So we whack it with a magnetic field. To make a powerful enough, precise enough magnetic field, you need a giant, very precise electric current. And to do that you need a roomful of power electronics. So most of the R&D that's being spent that's making Helion possible is not being spent at Helion, it's being spent in the power electronics industry.

ML: Fascinating and interesting. So I was meant to do a PhD in neutron diagnostics, but very much around at the time, that kind of fission side of things and, and then I decided that fission was probably going to go into a 30 year hibernation, and that was one of my better predictions as I came out of university. But when might Helion produce a commercial design? Because fusion, there's the old joke, and I don't even want to repeat it about, you know, it's how long <inaudible>. But I look at all the money flowing. And I think it's a good thing. I'm very excited about it. I'm trying, it's not my pension, a lot of it is only my taxpaying money, but the way I look at it is, most of these companies, we've got about 10 more years, even if things go well, to really prove out what they're doing. And that it can produce power in a controllable way and the quality that's that works, and then in a format and figure out how to get it into and into the electrical grid, and so on. And then there's about 10 years more to design a commercial reactor or commercial plant. And then 10, more years after that to get to 1% of the world's electricity. So to me, it is still a 30 year journey. And now I may well be wrong. I don't know what.

IY: Of course, you're wrong. You're always wrong. Sorry, I didn't mean to interrupt. I was just trying to be funny by saying you're gonna be wrong on that one. Chances are you will be wrong.

ML: Let's put a bet on it. 1% of global electricity from fusion: 30 years? Before 30 years? Or after?

IY: Before. Yeah. 30 years is both a very long time and a very short time, of course. And so if we were talking about five years, you know, we would… all bets are off about whether there's anything, but I think 30. You know, we this is the old thing, right? We underestimate long term compounding and we overestimate our ability to do things short term. So I think 30 years is long enough that you'll lose.

ML: So but which piece of my, remember, I'm dividing into three, it's kind of almost like basic science, commercial design and rollout. So which bit is going to go faster than I'm thinking?

IY: So for many of the designs, I think you would be correct, even a number of designs that have been funded in the last year or two by venture capital and are quite hopeful, high profile, because there's, they're trying to do something really hard and show that it's possible to make their device work. And then they have giant, giant tasks beyond that. So one of the beauties that we liked, and we think is therefore compatible, more compatible with venture capital at Helion, is that it is almost entirely a pure electromagnetic machine. So if a tokamak type design, for instance, works, well, you end up proving that you can make that reaction work. Then you like you said, you have to design a machine that can do that. But you also have to figure out how to take that neutron flux and thermalize it and do so safely and then at a scale that you can drive a steam turbine and then you have um, whatever. It's complicated, right? And it's going to take a lot of engineering design work, beyond just proving that the core machine can sustain, in theory, a fusion burn. What's amazing about these aneutronic type devices that Helion represents, is that you are staying in the electromagnetic domain, so you whack your fuel with this collapsing, really powerful electric electromagnetic field. That's, you're not using a bomb to implode it, you're using a collapsing electromagnetic field. And we picked, they picked a reaction that creates charged particles on the out so that energy goes right back into that field. So the power electronics see a pulse that goes one way and then comes back at them. And if the machine is working the return pulse is bigger than what you put in. So once the machine is working, you're kind of done. There is no, okay, how do we figure out how to get energy out of this and thermalize. And, you know, we're going to make stuff radioactive all the time. And then we have to do it at a certain scale to drive a steam turbine, all that kind of super heavy engineering side goes away. And you also don't need scale.. The scale is much less of a driver than in machines that really suffer these boundary, surface boundary problems like you have in a tokamak.

ML: I've got it the correct description of this thing. It's like a, it's like a fusion diesel engine. Yes, because the diesel engine doesn't have any of the content, just you compress it, and then it pushes back harder than you compressed it. And that's it. And that's how the energy comes out. Fabulous.

IY: It's, I hate to tell you this, Michael, but it is literally an analogy that's on their website. So you were not the first to think of it. But yes, it is.

ML: And there’s me thinking I was an original thinker.

IY: Well, no, no, you are original. But you did what took others months, you did in five seconds. So you are really original. Yes.

ML: Ion, that brings us to the end of the sort of fly-by of some of the companies in your portfolio. We’re also out of time, but we’re kind of not done yet.  We also need to talk  about the impact of venture capital on emissions and innovation in general. And some of the complexities of trying account for all of that in the financial system. But rather than going into that today, what we're going to do is bring you back for another episode during season seven, so you have some time to prepare as well. And then we'll talk about those aspects of your work at Capricorn.