Austin Vernon - Energy Superabundance, Starship Missiles, & Finding Alpha

Okay, today I have the pleasure of interviewing Austin Vernon, who writes about engineering, software, economics, investing on the internet, but not that much else is known about him. So Austin, do you want to give us a bit about your background? I know that the only thing the internet knows about you is this one little JPEG that you had to upload with your recent paper, but what about an identity reveal, or I guess a little bit of a background reveal, to the extent that you're willing to comfortable sharing? My degree is in chemical engineering and I'm kind of like a lifelong love of engineering.
And also things like Toyota production system and stuff like that. And I've worked as a chemical engineer, like in a large processing facility.
I've done a lot of petroleum engineering. Then now I taught myself how to write software.
Now I'm working on more research, early commercialization of CO2 electrolysis. Okay, yeah.
I'm really interested in talking about all those things. I guess the first question I have is Alex Berger, who is the co-CEO of Open Philanthropy.
He asked this question when I asked on Twitter what I should ask you. And he suggested I should ask you, why so shady? So you have, I mean, famously, you have kind of like an anonymous personality, pseudonymous thing you have on the Internet.
What's up with that? Yeah. Yeah.
When, you know, he, I think he posted a tweet that said, you know, like, I don't, I don't know who this guy is or like if he's credible at all, but you know, his stuff sure is interesting. That really made me laugh.
That was hilarious. Um, it just doesn't, doesn't seem necessary.
I think I'm fine with my, um, my ideas being well known and and communicating, but I have less desire to be personally famous. I wanted to start off with a sexy topic.
Let's talk about using Starship as a kinetic weapon. I thought that was one of the more amusing posts you wrote.
do you want to talk more about how this would be possible um well i think the main thing with starship is like it's you know you're taking a technology and you're making it about a hundred times cheaper for cargo and a thousand times cheaper for people so when things like that happen that drastically uh you're just like looking at huge changes. And it's really hard to anticipate what some of those can be when the change is that drastic.
So I think there's like a lot of moon based, Mars based stuff that, you know, doesn't really catch the regular public's eye. And I think they also have trouble imagining some of the like point to point travel that could be possible.
But as far as like, you know, you start talking about it like as a weapon. And I think that's, you know, it lets people know they should be paying attention to this technology.
And we certainly do not want to be second or third getting it. And we should make sure that we're going to be first yeah i think you mentioned this in the post but um so i as recently the 90s the cost of sending one kilogram to space was around 20 000 more recently spacex has brought it to 2000 and then there's like a lot of interesting questions you can ask when you ask what will be possible once we get it down to 200 per kilogram uh to send into orbit? Yeah, so one of them might be to manufacture these weapons that are not conventional ballistics.
But do you want to talk about why this might be an advancement over conventional ballistic weapons? Well, regular conventional ballistic weapons are extremely expensive. You know, this is more like a bomb truck, you know.
But it's even like usually we think of like b-52 as the bomb truck and this could be even you know cheaper than the b-52 delivering just like mass on target when you think about like how expensive it is to fly b-52 from like barksdale louisiana all the way across the world you can do it from south te Texas or Florida with the Starship and get more missions per day, and the fuel ends up being... When you go orbital, it takes a lot to get to orbit, but then once you're in orbit, your fuel consumption's pretty good.
So over long distances, it has a lot of advantage. That's why the point-to-point works for the longer distances.
There's really a sweet spot with these weapons where you want it to be pretty accurate, but you also want it to be cheap. You're seeing that problem with Russia right now, is they have some fancy parade-style weapons that are really expensive, like multi-billion dollar cruise missiles.
But they're missing that you know five thousand dollar guided artillery shell or like that you know like twenty thousand dollar jdm that you can just like pit massive or the you know the multiple launch rocket system guided rockets they're really like short on all those because i think they had just had like a limited amount of chips they could get from the u.s into and to Russia to make these advanced weapons. But yeah, so the kind of the Starship gives you just like a platform to deliver.
Like you could, you know, pit JDAMs in a shroud or you could just like, you know, have the iron unguided kinetic projectiles. And it just becomes impossible for, you know, a ship to launch missiles to intercept yours if you cost if your cost is so low you can just overwhelm them okay there are a few terms there that uh neither i nor the audience might know so what is uh what is jdm what is shroud and why are chips a bottleneck here uh like why can't it just be any microcontroller so jdm is joint direct attack Munition.
So what we did is we took all, like, our Vietnam surplus bombs, and we put this, like, little, like, fin kit on it, and it cost, like, $20,000, which is cheap for a weapon because it, you know, the actual bomb costs, like, I don't know, $3,000. And then it turns, you know, it into a guided weapon that before you were probably were probably lucky to get within 500 meters of target now you can get it in with like two meters so the number of missions you have to do with your planes and all that goes down by like orders of magnitude so it's absolutely like huge advantage in logistics and and just how much firepower you and put on a target.
And we didn't even have to make new bombs. We just put these kits on all our old bombs.
Let's see. Then the chips are a problem.
There's this organization called RUSI. I think they're in the UK.
But they've been tearing down all these Russian weapons they found in Ukraine, and they all have American chips in them. So technically, they're not supposed to be able to get these chips.
And Russia can't make a lot of its own chips, and especially not the specialized kinds you might want for guided weapons. So they've been somehow smuggling in chips from Americans to make their advanced weapons.
What is special about these? I would assume that they haven't like as far as i'm aware the trade of china is still going on right and we get a lot of our chips manufactured from taiwan or china so why can't they do the same it's the whole like integration like you know it's not just like a specific chip but like the the board it's like they're more like plcs where um where you're like why almost have like wired in programming and stuff like that and they come with like just like the to be able to do the guidance and all that stuff it all kind of has to work together I think that's the way I understand it I don't know maybe I don't have a really good answer for that one but they're hard to replicate is what matters. Oh, that's interesting.

Yeah, and I guess that has a lot of interesting downstream effects because, for example, India buys a lot of its weaponry from Russia, right?

So if Russia doesn't have access to these,

then other countries that buy from Russia won't have access to these either.

You had an interesting speculation in the post

where you suggested that you could just keep these kinetic weapons in orbit like a sort of Damocles really uh almost literally that sounds like a really uh scary and risky scenario where I don't know you can have orbital decay and you can have these kinetic weapons falling from the sky and destroying cities uh do you think this is what it will look like in or could look like in 10 to 20 years well yeah so the the advantage of having on orbit is you can hit targets faster so you know if you're launching the rocket from florida you're looking at like maybe 30 minutes to get get there so you know target moves in that time whereas if you're on orbit you can have them spaced out to where you're hitting you know within like a few minutes so that's the advantage there when you actually look at like the you can have them spaced out to where you're hitting, you know, within like a few minutes. Um, so that's the advantage there.
When you actually look at like the, you really have to have like a two stage system, I think for most, because, um, if you have like a really aerodynamic rod, that's going to give you good performance in the low atmosphere. It'll get going too fast and just like burn up before you get there.
you know tungsten's maybe the only thing that you could have that could go all the way through that's why i like the original concept use these big tungsten like rods the size of like a telephone pole but you know tungsten's pretty expensive and like just the rod concept it kind of limits to what you can do um if you just do the rods so a lot of these weapons will have like that's what i was talking about like with the shroud like something that actually slows you down in the upper atmosphere and then once you're to the velocity where you're not just going to melt then you open it up and let it go so if you actually had it you know fall from the sky some may make it to the ground but um a lot would burn up so the uh a lot of stuff that makes it to the ground is actually pretty light you know it's like stuff that can kind of like float and has a large surface area yeah so that's like the whole thing with starship like they're not starship but starlink all those satellites were meant to completely you know fall apart on the orbit i see like one of the implications of that is that these may be less powerful than we might fear because if um like if kinetic energy is mass times uh you know a velocity squared then you have to if there's an upper bound on the velocity and then the velocity is the component that grows um the kinetic energy faster then it suggests that you can upper bound the power these things will have you know what i mean yeah so so even the tungsten rod sometimes people like you know they're not good at physics or something so they don't like do the math um they think it's going to be like a nuclear weapon but it's really i think even the tungsten rod i might have put might have put it in there. I think if I'm remembering correctly, like 10 tons of TNT or something, it's like a big, a big bomb, but it's not, you know, it's not like a super weapon.

So that's what I think I said in the post.

It really has like, it's like advanced missiles where they're almost more defensive weapons.

So I can keep you from pitting your ship somewhere, you know, and like, yeah, I bombard your cities but i can't i can't take ground with it you know i can't even like police sea lanes with it really i'd still have to have regular ships you know if i had this air cover essentially to you know go like enforce the rules of the sea and board freighters and stuff like that yeah so i you you speculated in the post i think that you could have like potentially these uh you could like load this up with shrapnel and then it could like explode next to uh an incoming missile or an incoming aircraft um yeah could these get that accurate uh because that was surprising speculation to me uh yeah i think like for ships i think it's pretty you know like i was like watching videos of uh you know how fast a ship can turn and stuff because you'd want to like release your shrapnel you know if you're gonna like do an initial target on a ship to like try to kill their radars and stuff you'd want to do it above the ceiling of their missiles so it's like how much are they going to move between your release where you stop steering and and that And it's really, you know, it's like maybe like a thousand feet. So that's pretty simple.
You just like shrapnel the area. The aircraft you would be steering all the way in.
So it's maybe actually, I'd say it's doable, but it'd be pretty hard. Yeah.
And you'd actually maybe want to even go slower than you would with the ship attack you know you need like a specialized package to do the aircraft but you can see these aircraft on um like if you have enough synthetic aperture radar and stuff like that you can see them with satellites and then guide it in the whole way you could even like say load like heat seeking missiles into a package that you know stop you know unfurls right next to them and launch conventional missiles too probably and that's that'd be pretty hard to do some of this stuff but it's just like kind of you know the things you might be able to do if you put some effort into it yeah the reason i find this kind of speculation really interesting is because when you look at the uh modern weaponry that's in conflicts, it often seems like it just seems like directly descended from something you would have seen in World War II or something. It doesn't seem like if you think about like how much warfare changed between like 1900 and 1940, it's like, yeah, they're not even the same class of weapons anymore.
So it's interesting to think about possibilities like these where the entire category of weapons has changed. All right.
And that's because, you know, the same thing, like, you know, our physical technology hasn't changed that much. So it really has just made more sense to, like, put better electronics in the same tanks we have than to build it like

you're just not going to get we haven't learned enough about tanks to build like a new physical tank that's way better so we just keep upgrading our existing tanks with better electronics so they're they're much more powerful they're more accurate you know a lot of times they have longer range weapons they have better sensors so the tank looks the same but you know it may be as like several times more like killing power

whatever what have you

but you if you think about the stockpiles our own military has. I'm not well-educated on the topic, but I imagine that we don't have the newest of the new thing, right? Like we probably have maintained versions of decades old technology.

you know i mean we spend so much we've got relatively this kind of gets into like there's a lot of debate about like how ready our military is and for certain situations it's more ready than

others um i'd say in general, most people talking about it have the incentive to downplay our capabilities because they want more defense spending or just, there's lots of reasons. So I think we're probably more, more capable than, than what you might see from like, you know, some editorial in the Hill or whatever.
And I think just like us just sending a few weapons over to Ukraine and how successful they've been using them, I think shows a little bit of that. But there's so much uncertainty when it comes to fighting, especially when you're talking about like a naval engagement whether we just don't have that many ships in general you can have some bad luck so i think i think you know you always want to be a little bit wary you know don't want to get overconfident yeah and if um like if if the offensive tech we sent to ukraine is uh potentially better than the defensive tech tech, it's very possible that even a ballistic missile that China or Russia could launch could sink a battleship and then kill 2,000 or whatever soldiers that are on board.
Or I guess, I don't know, you think this opens up avenues for defensive tech as well? Yeah, I mean the the consensus is that um defensive technology has improved much more recently than offensive technology and there's so china this whole like strategy china has as they call um it's like area denial anti-access area denial a2ad um and so that's basically just like missiles have gotten better because the sensors on missiles have gotten better. So they can keep our ships from getting close to them.
But, you know, they can't really challenge us like in Hawaii or something. And it really goes both ways.
I think people forget that. So, yeah, it's like hard for us to get close to China.
But, you know, Taiwan has a lot of missiles with these new sensors as well.

So I think it's probably tougher for China to get close to Taiwan than most people would say.

Oh, interesting.

Yeah, can you talk more about that?

Because every time I read about this, people are saying that if China wanted to,

they could knock out Taiwan's defenses in a short amount of time and take it over. Yes.
Can you talk about why that's not possible? Well, it might be, but I think it's a guess of the uncertainty thing. But Taiwan, you know, it has actually one of the largest defense budgets in the world.
And they've recently been upping it. I think they spend like, I don't know, 25 billion a year and they added like an extra five billion.
they've been buying a lot of anti-ship missiles a lot of air defense missiles stuff that like you know ukraine could only dream of i think ukraine's military budget was like 2 billion they have you know professional army they're gearing the and then the other thing is they're an island so you know like russia could just like roll over the land border into uk you know, I mean, almost there's just very few successful amphibious landings in history. Like some of the most recent ones were all, you know, the Americans and World War II in Korea.
So like the challenge there is just, you know, it's kind of on China to like execute perfectly and do that. And so if they like had perfect execution, then possibly.
But, you know, if like maybe their air defenses on their ships aren't quite as good as we think they could possibly be, then they could also end up with half their fleet underwater within, you know, 10 hours. Interesting.
And how has your view of Taiwan's defensive capabilities, like how has the Ukraine conflict updated? Your opinion of what might happen? I didn't really know much about it. And then, you know, I like started looking at like Wikipedia and stuff and like all this stuff they're doing.
And so, you know, Taiwan just has like a lot of modern platforms like F-16s with our anti-ship missiles. They actually have a lot of their own.
They have indigenous fighter bombers, indigenous anti-ship missiles because they're worried we might not always sell them to them. They've even recently gotten these long-range cruise missiles that could possibly target leadership in Beijing.
So I think that makes it uncomfortable for the Chinese leadership. If you attack you attack them you're gonna have to go live in a bunker um so there's lots of like you know but again there's i'm not like the full-time military analyst or something so there's a lot of uncertainty around around what i'm saying it's not it's not a given that china's just going to roll over them yeah that's comforting to hear let's let Let's talk about an area where I have a little bit of a point of contact.
I thought you were a blog post about software and the inability of it to increase productivity numbers. I thought that was super fascinating.
So before I ask you questions about it, do you want to lay out the thesis there? Yeah, so if there's one post I kind of felt like I caught lightning in a bottle on it, it was that one. It really, like, everything I wanted to put in it just, like, fit together perfectly, which is usually not the case.
But, yeah, I think the idea is the world's so complex, and we really underestimate that complexity. and if you're going to like digitize processes and automate them and stuff you have to capture

all that complexity basically at the bit level. And that's extremely difficult.
And then you also have diminishing returns where the easily automatable stuff goes first, and then it's increasing corner cases to get to the end. So you just have to write more and more code, basically.
And so that's why we don't see runaway productivity growth from software is because we're fighting all this increasing complexity. Yeah.
Have you heard of the waterbed theory of complexity, by the way? I don't think so's it's uh it's something that comes up in compiler design but the idea is that there's like a fixed amount of complexity um in a system and if you try to reduce it uh what you'll end up doing is just you'll end up migrating the complexity elsewhere right so i think an example that's used of this is is when they try to program languages that are not type-safe, something like Python,

you can say, oh, it's a less complex language.

But really, you've added complexity when, I don't know,

two different types of numbers are interacting, like a float and an int, right?

You've added complexity there that, I mean, as your program grows,

that complexity exponentially grows of all the things that could go wrong when you're making two things interact that are in a way that you were expecting not to.

So, yeah, the idea is you can just choose where to have your complexity, but you can't get rid of that complexity. Yeah, yeah, yeah.
I think there's like this,

there's kind of like an interesting thing when you start pairing it with management theory and like how it kind of starts tying into some of my other

posts is that for a long time, when you add up like all the factors, the most complex thing we're doing is, is, you know, high volume car manufacturing. And so we got a lot of innovations and organization from car manufacturers, like the assembly line.

Then you had Sloan at GM basically, basically you know creating the way the modern corporation is run then you have toyota production system but arguably now creating software is actually the most complex thing we do so there's like all these kind of like squishy concepts that underlie like Toriota production system that software has had to learn and like reimagine and adopt.

And, you know, you see that with like agile where we can't have long release times. We need to be like releasing every day, which is like, you know, we're limiting inventory there.
or, um, yeah, there's just, there's like a whole thing, especially that's showing up

in software that existed in car manufacturing, where you're talking about reducing communication. So like Jeff Bezos kind of like now famously said, you know, I want to reduce communication, which is counterintuitive to a lot of people.
this is like age old in car manufacturing where you have like toyota has these cards that

go between workstations and they tell you what to do. So people normally think of them as limiting inventory, but it also tells the worker exactly what they're supposed to be doing, at what pace, at what time.
And the assembly line is like that too. You just like know what to do because you're standing there and there's a part here and it needs to go on there.
Um, and it comes by at like the pace you're supposed to work at. And there's, it's like so extreme that there's this, I think it's a famous paper, but it's by like list Syverson and Levitt.
And they went to the car factory and like, you know, studied how like the defects propagated in cars and stuff. And once a car factory gets up and running like it doesn't matter if you what workers you put in there like if workers are sick or you get new workers like the defect rate is the same so like everything is just like all the knowledge is built into the manufacturing line and there's like these concepts around like idiot proofing and everything like that that um are very similar to like what you'll see.
You had uncle Bob on there. So uncle Bob, you know, says like only put one input into a function and stuff like that because you'll mix them up otherwise.
So it's kind of like this, the Japanese call it like poke. Okay.
And it's like you, you make it where you can't mess it up. And that's another way to like reduce communication and then software of course you have api so i'm really interested in this overall concept of like reducing communication and reducing how much cooperation and like and everything we need to run the economy right right they speaking of the toyota production system like one thing they do to reduce that defect rate is if there's a problem um all the workers in that chain are forced to go to the place where the defect or problem is and fix it uh before doing anything else and i guess the idea there is this will give them context to understand what the problem was how to make sure it doesn't happen again and and also prevent a buildup of inventory in a way that keeps making these defects happen,

or just keeps accumulating inventory before the place that can fix the defects is able to take care of them. Right, yeah, yeah, exactly.
Yeah. But, you know, I think one interesting thing about software and complexity is you I think you said a little bit earlier that software is a place where complexity is the highest in our world right now.
And one of the interesting things is, yes, that's true, but I guess software gives you the choice to interface with the complexity you want to interface with. And I guess that's just part of specialization in general.
But you could say, for example, a machine learning model is really complex. But ideally, you get to a place where that's the only kind of complexity you have to deal with.
You're not having to deal with the complexity of how is this program compiled? How are the libraries that I'm using? How are they built? You can fine-tune and work on the complexity you need to work on It's similar with like app development, right? I, uh, Bern Hobart has this blog post about Stripe as solid state. I forget the exact title of the blog post, but the basic idea is that Stripe hides all the complexity of the financial system.
It charges a higher fee, but you can just kind of treat it as an abstraction of a tithe you have to pay and it'll just take care of that entire process and you can focus on your comparative advantage yeah and it's it's really actually very similar in like car manufacturing and toyota production system if you really get into it it's it's very much the same conceptual framework well so there's like this whole idea like in toyota projection system everyone everyone works at the same pace which you kind of talked about but also like your content your work content is the same like there's there's there's no room for not standardizing like a way you're going to do things so everyone like gets together and they're like all right we're going to this certain part we're going to put it together this certain way at this little micro station and it's going to to be the same way every time. And that's part of like how they're, you know, reducing the defect rates.
And then if you, you know, like if your assembly is too long, like it's longer than what your like time allotment is to stay in touch with the rest of the process, then you just keep breaking it down into smaller pieces. And so, you know, each, each person only has to know like a very small part of it.
And even the, you know, even like the, the overall engineering team, you know, has all sorts of strategies like this too. There's all, they have all sorts of like tools to like help them break up all these processes into very like small parts parts and to make it all hold together.
It's still very, very hard, but it's kind of like a lot of the same ideas. You're taking away the complexity of making a $30,000 car or 30,000 part car where everyone's just focusing on their one little part and they don't care what someone else is doing.
Yeah, but the interesting thing also there is it seemed like you need one person who knows how everything fits together because from what I remember, one of the tenants of the Toyota production system was you need to have a global view. So I mean, in that book, was it the machine or the other one, the Toyota production system book?

But anyways, they were talking about examples where people would try to optimize for local efficiencies. I think they especially pointed to like Ford and GM for trying to do this, where they would try to make machines run all the time.
And locally, you could say that, oh, this machine or this process is super efficient. You know, it's always outputting stuff.
But it ignores how that added inventory or that process had a bad consequence for the whole system. And so it's interesting if you look at a company like Tesla that is able to do this really well.
The interesting thing is that Tesla is run like a monarchy. And this one guy has this total global view of how the entire process is supposed to run.
Where do you have these inefficiencies have some great examples of this in the blog post but yeah i think one of the examples that oh i think was it the toyota production system book but anyways this guy goes to this factory and the author and he asks um is this like an efficient factory and the guy's like yeah this is totally efficient there's nothing we can do adopting the toyota way to make this more efficient and so then he's like okay let me look and he finds that in one of the so they're like treating steel in some way but it's only it should only take a couple of seconds and the main process does only take a couple of seconds but some local manager decided that it would be more efficient to ship uh their parts out to get the get the next stage of the project uh process done somewhere else and so this is locally cheaper, but the result is that it takes weeks to get these parts shipped out and get them back. And so that means that the actual time that the parts spend getting processed is like 0.1% of the time, which makes the whole process, the whole super inefficient.
Right. So I don't know.
It seems like the implication is you need a very monarchical with like one person who has a total view in order to run such a system or am i getting that wrong um not necessarily i mean you do have to like make sure you're not um optimizing locally but i think it's the same you know you have that same constraint in software but i think a lot of times people are just like running over it because processing has been getting so much cheaper you know and i like people are expensive so like if you could save development time you know it just ends up you know the the trade-offs are different when you're talking about like the tyranny of like physical items and stuff like that it um you know you get the constraints get a little more severe but i think you have like the same the same overall you know you still have to fight local optimization but the level you have to is probably different with physical goods i was thinking about like the the smart grid situation from like a software perspective and um like there's this problem where like okay i'm putting my solar farm here and it's impacting somewhere far away and that's then like creating these like really high upgrade costs you know that cost two or three times more than my solar farm well you know the the obvious thing would be if you're doing software is like you're like going to break all these up into smaller sections and then you wouldn't be impacting each other and all that and you could work and focus on your own little thing. But the problem with that is if you're going to disconnect these areas of the grid, is that the equipment to do that is extremely expensive.
It's not like I'm just going to hit a new tab and open a new file and start writing a new function. And not only that, but you still have to actually coordinate how this equipment is going to operate.
So if you just let the grid flow as it does, everyone knows what's going to happen because they could just calculate the physics. So if you start adding in all these checkpoints where humans are doing stuff, then you have to actually interface with the humans, and the amount of things that can happen really starts going up and so it's actually a really bad idea to to try to card all this stuff off just because of like the reality of the physical laws and the equipment you need and everything like that all right interesting and then i think you think you have a similar sort of like Coasean argument in your software post about why a vertically integrating software is beneficial.
Do you want to explain that thesis? Yeah, and I think it's just like, you know, it actually gets to what we're talking about here where it allows you to avoid like the local optimization because, you know, a lot of times, right, you're trying to build like a software MVP and you're tying together a few services. They don't do quite what you need, so if you try to scale that, it would just break.
But if you're going to take a really complex process like car manufacturing or retail distribution like the home buying process or something, you really have to vertically integrate it to be able to create like a decent end-to-end experience, um, and avoid that, that, you know, local optimization. Um, and it, you know, it's just very hard otherwise because there's no, you just can't coordinate effectively.

If you have like 10 different vendors trying to do all the same thing, you end up in like just constant like vendor meetings where you're like trying to decide what the specs are or something instead of giving someone the authority or giving a team the authority to just go start building stuff. then if you look at these companies like they have to implement these decentralized somewhat

decentralized team the authority to just go start building stuff. And then if you look at these companies, like they have to implement these decentralized, somewhat decentralized processes when they get too complex, but at least they have like control over how they're interfacing with each other.
You know, like Walmart has the vendors control their own stock. You know, they don't like tell the vendor we need X parts.
It's just like, it's on you to make sure your shelf is stocked yeah yeah so i what was really interesting to me about this part of the post was i don't know i guess i had this vision of uh or i had heard of this vision of where software is heading where everybody will have a software as a service company and they'll all be interfacing with each other in some sort of cycle where they're all just calling each other's APIs. And, um, and that, like, yeah, but basically everybody and their mother would have a, a SaaS company.
Um, and it's, it's the implication here was from your argument was the, given the necessity of integrating all this complexity vertically in a coherent way, then the winners in software should end up being a few big companies, right? That compete with each other. But still, uh, I think that's especially true when you're like talking about like you're combining bits and atoms, um, you know, maybe less true for like pure software.
The physical, like the physical world is just so much more complex. And so the constraints it creates are pretty extreme, pretty extreme you know compared to like you could maybe get away with more of like everyone their mom having an api and like a pure pure software world right yeah yeah i guess you might think that in the other kind of world even in the physical world given that people really need to focus on their advantage, they would just try to outsource the software parts to these APIs.
But is there any scenario where the learning curve for people who are not in the firm can be fast enough that they can keep up with the complexity? Because, you know, there's huge gains from specialization and competition that go away if this is the world we're forced to live in.

And then I guess we have a lot of counterexamples.

I guess we have a lot of examples of what you're talking about. Like Apple is the biggest market cap in the world, right?

And famously, they're super vertically integrated.

And yeah, obviously, their thing is combining hardware and software.

But yeah, is there any world in which you can keep that kind of benefit, but have it be within multiple firms? This is like a post I've got on my list I want to write. The blockchain application, which excites me personally the most, is reimagining enterprise software.
because the things you're talking about, like hard typing and APIs,

it's just like basically built in to some of these protocols um so i think it just really has a lot of exciting implications for how much you can decentralize software development and you can but you know the thing is you can still do that within the firm so I think I think I mentioned this is like you know if the government's going to place like like all these like rules on the edge of the firm like it makes transactions with other firms expensive so if you know internal transactions can be cheaper because they're avoiding like the the government you know reporting and, reporting and taxes and all that kind of stuff. So I think you'd have to think about how these technologies can reduce transaction costs overall and decentralize that, but also what are the costs in between firms? Yeah.
It's really interesting if there are, if the costs are logistic, or if they're, if they're based on the knowledge that is housed, as you were talking about, you know, within within the factory or something. Because if it is just, you know, logistical and stuff, it's just like you had to report any outside transactions, then yeah, that does imply that a technology like blockchain could

help. But if it's just that, yeah, you need to be in the same office.
And if you're not, then you're going to have a hard time keeping up with what the new requirements for the API are. Then maybe it's that, yeah, maybe the inevitability is that you will have these big firms that are able to vertically integrate.
Yeah. Like for these big firms to survive, they have to be like somewhat decentralized within them.
So I think you have, you're going to the same place as just like, what, what does it like, you know, what's our, like, how are we viewing it? What's our perception? You know? So even if it's like a giant corporation, it's going to have like very independent business units, as opposed to, you know, something like, you know, a 1950s corporation. Yeah.
Byrne Hobart, by the way, has this really interesting post that you might enjoy reading while you're writing that post. It's like type safe communications, and it's about that Bezos thing, about his strict style for how to communicate and how little to communicate um there's many examples in uh amazon protocols where you have to the only way you can like put in this report is in this place you had to give a number you can't just say this is very likely to say like we'll be we project x percent increase or whatever so it has to be a percent or and you you know there's many other cases where there's they're strict about, what type definition you can have something have in written reports or something.
And it has kind of the same consequence that type strict languages have, which is that you can keep track of what the value is through the entire chain of the flow of control. So you've got to keep work content standardized.
guys. So we've been hinting at the co-sian uh the co-sian analysis for this i think we just talked about it indirectly but yeah for the people who might not know um the yeah so the co-s has this paper called the theory of firms and he's trying to explain why is the case that we have firms at all like why not just have everybody compete in the open market for employment? Like, why do we have jobs? Why not just have, you can just like hire a secretary by the day or something.
And the conclusion he comes to is that if you, by having a firm, you're reducing the transaction costs. So, you know, people will have the same knowledge about like what needs to get done.
You're obviously reducing the transaction cost of like the contracting labor, um, blah, blah, blah. And so the conclusion he comes to is the more of the transaction costs, uh, are reduced within people in a firm as compared to the transaction cost, uh, between different firms, the bigger firms will get.
Um, and yeah, so I, I guess you're, uh, that that's why the implication of your argument was that there should be bigger tech firms, right? Yes, definitely. Cause they can basically decrease the transaction costs faster within.
And then even at the limit, you know, if you have large, you know, large transaction costs outside the firm between other firms that are artificially imposed, then it will make firms bigger. And then, so what does the world look like in that scenario? So will we just be like these Japanese companies, these huge conglomerates who are just, you rise through the ranks from the age of 20 until you die? Is that what software will turn into? You know, it could be.
I mean, I think it will be lots of very large companies unless there's some kind of change in inter-firm transaction costs. And again, that could possibly come from blockchain-like technology, but you probably also need better regulation to make that cheaper.
and then you would have smaller firms. But again, in the end, it doesn't really matter.

You'd be working in your little unit of the big big bank of corp or whatever so it it may not i don't know what that would look like you know like as like a personal level but yeah yeah um okay so speaking of these japanese companies let's talk about car manufacturing and everything involved there. Yeah, so we kind of hinted at a few elements of the Toyota way and lean production earlier, but do you kind of want to give a brief overview of what that is so we can compare it to potentially other systems? you know i think like all these kind of like lean

toyota process like systems they they do have a lot of similarities. Mostly you want to even out your production so you're producing very consistently.
You want to break it into small steps. You want to limit the amount of inventory you have in your system so that there's, and when you do this, it makes it easy to see like how the process is running and limit defects.
And, and, you know, the ultimate is, you know, you're really trying to reduce defects because they're very expensive. That's maybe it's, it's, it's a little bit hard to summarize.
i think that's my best shot at it there quickly off the top of my head yeah i i the the the interesting thing about the toyota system so at least um when that the machine was released they talk about that book was released in the 90s um and they went to like the history of toyota and one of the interesting things they talked about was there there was a brief time where the the company ran, I think it was, was this after world war two? Uh, but anyways, uh, the, the, you know, the company ran into some, uh, troubles they needed to reduce. Um, they needed to lay off people to not go bankrupt.
They had much more debt on books than they had assets. And so, yeah, they, they, they wanted to lay off people, but, um, the, obviously the people were not happy about this so there were like violent protest about this and um in fact i think the u.s uh the u.s written constitution like gave strong protections to labor that um they hadn't had before so which which made it um which gave labor even a stronger hand here uh and so anyway so the toyota comes to this uh agreement with the unions that they'd be allowed to do this like one-time layoff to get the company on the right track.
But afterwards, they could never lay somebody off. And then so the, which would mean that like a person who works at Toyota, works there from the time they graduate college or high school till they die.
Right. And I don't know that like that's, that's, that's super intense in a culture.
I mean, in software where you have average tenure at a company is like one year, the difference is so much. And, uh, there's like so many potential benefits here, I guess a lot of drawbacks too, but one is obviously if, if you're talking in a timescale of 50 years rather than one year, the, um, the incentives are very more aligned between the company and the person.
Cause like any, any, anything you could do in like one year is not going to have a huge impact on your stock options, uh, in that, in that amount of time. But if you're planning on hope, if this company is your retirement plan, then you have a much stronger incentive to make sure that things at this company run well, uh, which means yeah, you're, you're probably optimizing for the company's long-term cash flow yourself.
And also, yeah, there's obviously benefits to having that knowledge build up in the firm from people who have been there for a long time. But yeah, that was an interesting difference.
One of the interesting differences, at least. I mean, I think there's like a diminishing returns to how long your tenure is going to be.

Like maybe one year is too short, but there's a certain extent to where, you know, if like you grow faster than your role at the company, then it's time to switch. And, you know, maybe that's like it's going to depend on the person, but maybe like five years is a good number.
And so if you're not getting promoted within the firm, then your human capital is being wasted because you could go somewhere else and have more responsibility and perform better for them. And another interesting thing about that story is almost all lean turnarounds, where we're going to implement something like Toyota Production System, they come with no layoff promises because, you know, if you're going to increase productivity, that's why everyone's like, oh gosh, I'm going to get laid off.
So instead you just, you have to increase output and take more market share what you do. It's a, it's, it's like, it's kind of like burning your bridges, right? So you, this is the only way you really, like the process really requires like complete buy-in because a lot of your ideas for how you're going to standardize work content come from your line workers um because that's what they're doing every day so you can't if you don't have their buy-in then it's going to fail so that's why it's really necessary to have those kind of clauses yeah yeah that that makes sense was it in your post or in the book where they talked about um no i think it was in your post where you said if if somebody makes their process more efficient and therefore they're getting like more work a lot of to them then obviously they're going to stop doing that right so um uh which means that i don't know do you have to give more downtime downtime to your best workers or something uh or the people who more creative in your company.
I was just going to say, like,'t know, do you have to give more downtime, downtime to your best workers or something? Uh,

or the people who are most creative in your company?

I was just going to say like, you know, if you're like a, you know,

a worker at a plant, then usually they have like small,

a lot of times like for that level employee,

like actually small rewards work pretty well. Like, um,

a lot of people used to like on drilling rigs used to like,

if you met certain targets, like give the guys like $100 Walmart gift cards. So sometimes like small to reward, you know, new ideas, stuff like that works.
But because the whole system has to row together, like if you just improve like one part of the process, it doesn't it may not help you. You know, you have to be like improving all the right process and stuff.
stuff so normally it's much more collaborative like there's some engineer that's looking at it and like all right this is our this is where we're struggling or we have our defects here and then you go get together with like you know that supervisor and the workers in that area and then you know you all figure out like what improvements could be together because usually the people already know like this is like you know you see a problem at the top and you're just now realizing it. And then you go talk to the people doing the work and they're like, oh yeah, I tried to tell you about that two weeks ago, man.
And then you figure out a better process from there. Based on your recommendation and Stephen Molina's recommendation, I recently read The Goal.
And after reading the book, I'm much more understanding of the value that consultants bring to companies potentially because before you could think, what is a 21-year-old who just graduated college? What do they know about manufacturing? Like, what are they going to tell this plant that they didn't already know? How could they possibly be adding value? And afterwards, it occurred to me that there's so many abstract concepts that are necessary to understand in order to, you know, like to be able to increase your throughput. And so now, now I guess I can see how like somebody who's generically smart, but doesn't have that much industry knowledge might be able to contribute to a plan.
Like what value consultants could be bringing? I think there's like, you know, this or young engineers. A lot of times you put young engineers just right in the thick of it.
Working in production or process right on the line where you're talking to the workers the most. And there's really two advantages.
There's several advantages to that. One, the engineer learns faster because they're like actually seeing the real process.
And the other is there's like easy opportunities for them to still have a positive impact on the business because there's just like $100 bills laying on the ground just from going up and talking to your workers and learning about stuff and figuring out problems they might be having and things like that that could that could help you lower costs i think i think there's a lot of consultants that you know i don't know how the industry goes but i would guess there's like you know i know accenture has like 600 000 employees or something like or maybe i don't know if that many but it's just a large number in a lot are doing more basic tasks and then you know the there are some people that are doing like the high more high level stuff there's probably a lot less yeah yeah there was a there was a quote from one of those books that said add to it uh we don't like consider you an engineer unless you need to wash your hands before you can have lunch um um yeah okay. So in your book about, oh, sorry, not your book.
In your blog post about the car manufacturing, you talk about Tesla. And you know what was really interesting is that in a footnote, I think you mentioned that you bought Tesla stocks in 2014, which also might be interesting to talk about again when we go to the market and alpha part.
But anyways, yeah, so, okay, so, and then you talk about Tesla using something called metal manufacturing. So if you want to, first of all, like, how did you know in 2014 that Tesla was headed here? And then, yeah, what is metal manufacturing and how does it differ from the Toyota production system? Yeah, so, yeah, I just, like, was goofing around and made that up.
Someone actually emailed me, and they were like, hey, like, what is this metal manufacturing? I want to learn more about this. And it's like, well, sorry, I just kind of, like, made that up.
They thought it sounded funny. But, yeah, I think it's really the idea that there's this guy, Deming.
Yeah, W. Edwards Deming.
And he, like, had a lot of, found a lot of the same ideas that Toyota ended up implementing. Toyota respected his ideas a lot.
And America never really, except for the software industry recently, never really got fully on board with this in manufacturing. and so this new and of course it's like software people that are you know coming and implementing this in manufacturing and it's like the

you board with this in manufacturing. And so this new, and of course it's like software people that are, you know, coming and implementing this in manufacturing.
And it's like the real American way of doing things. Cause when you look at like these manufacturing processes, like the best place to save money and optimize is like before you ever build the process or the plant it's, it's very early on.
And so I think if there's a criticism of Toyota, it's that they're optimizing too late and they're not creative enough in their production technology and stuff. They're very conservative.
And that's why they have hydrogen cars and not battery cars, even though they came out with the Prius, which was like the first, you know, large sales hybrid. So, yeah, I think this, this whole, like what Tesla's doing with really just making Deming's ideas our own and really just like Americanizing it with like, you know, like, oh, well, we want to cast this because that'd be easier.

Well, we can't because we don't have an alloy. Well, we'll invent the alloy.
You know, I love it. It's great.
And mostly I just like Tesla because they do such, like, I agree with their like engineering principles and stuff like that. And so I didn't know that their company would come to be so valuable.
It's just like I was just always reading their stock reports and stuff. I'm like, well, I at least need to buy some stock so that, um, so that I, you know, have a justification for spending all this time reading their 10 K's and stuff.
I want to get a little bit, uh, more in detail in the, the exact difference here. So, so, so lean production, I guess is, yeah, they're able to produce their cars without defects without defects and without, you know, matching demand or whatever.
And then so but what is it about their system that prevents them from making the kinds of innovations that Tesla is able to make? It's just it's just too too incremental. It's like it's it's so hard to get these processes working.
So the you change things like it's it becomes very very difficult to like change the whole system so one of the one of the advantages tesla has is well if you're making electric cars like you have just a lot less parts so that makes it easier and then also they're like you know once you start like doing the really hard work of basically like digitizing you know like it's not like you know they don't have speed limit dials you start just removing parts from this from the thing and you can actually then start increasing your rate of change even faster and it makes it hard to get behind you know if you have these like old dinosaur processes but some i think there's someone there's like a YouTube channel called the limiting factor. And he actually went into like the, the detailed like numbers on what it costs for Tesla to do their giga casting, which saves like tons of parts and deletes like, you know, zillions of thousands of robots from their process.
And if you already have like an existing stamping line and all that, where you're just changing the dyes based on your model, then like, it doesn't make sense to switch to the casting. But if you're building new factories like Tesla is, well, then it makes sense to do the casting and you can build new factories very cheaply and comparatively and much easier.
So there's a little bit of like, you know, they have lots of, they just have lots of like technical debt, I guess you could say in a software sense. Yeah, that's super interesting.
The analogy is actually quite, it's like Microsoft has probably tens of thousands of software engineers who are just basically servicing its technical debt and making sure that the old system is run properly. Whereas a new company like Tesla doesn't have to deal with that.
The thing that's super, uh, um, interesting about Tesla is like, it's what is Tesla's market cap is like way over a trillion. Right.
And then Toyota's is like a 300 billion and Tesla is such a new company. It's like the fact that you have this Toyota, which is like legendary for its production capacity and it's a production system rather.
And you'd like this this this is like company that's like less than two decades old this like worth many times more is it's it's kind of funny yeah i would i would say that in that measure i don't like market cap you need to use enterprise value and the when you start these companies old car companies have so much debt that if you look at enterprise value the uh it's not so jarring Like literally, I can't remember what GM's worth, like $40 billion or something, and then they have like $120 billion in debt. So their enterprise value is like five times more than their market cap.
What is enterprise value? Enterprise value is basically like what is the value of the actual company before you have any claims on it? It's the market cap plus your debt. Simple, the most simple.
But basically, if you're the equity holder and the company gets sold, you have to pay the debt first. So you only get the value of what's left over after the debt.
So that's why market cap when tesla has very little debt and a lot of market cap and then these other guys have a lot of debt with less market cap it skews the the comparison yeah and then uh i mean one of the interesting things it's similar to your post on software um is that yeah it seems like one of the interesting themes across your work is automating processes often leads to decreased eventual throughput because you're probably adding capacity in a place that you're just adding excess capacity and you're also making the money making part of your operation less efficient by having to interface with this automated part. And it sounds like there's a similar story there with car manufacturing right yeah i think i think if we tie it back into like what we were talking about earlier automation promotes local optimization and premature optimization so a lot of times it's better to figure out like you know instead of like automating a process to make a really hard part, you know, you should just figure out how to make that part easy to make.
And then after you do that, then it may not even make sense to automate it anymore or, you know, get rid of it altogether. Then you just delete all those robots.
Yeah, yeah, it's interesting. Okay, so let's talk about your, let's talk about your, the project that you're working on right now, the CO2 electrolysis.
Do you want to explain what this is and what your current approach is? What is going on here? Yeah, so I think just overall, like, electrofuels right now are, like, super underrated because you're about to get, hopefully, some very cheap like solar or you know it could be maybe some wind possibly even if we get really lucky some nuclear geothermal and it will make sense to make like liquid fuels or natural gas or something just from electricity and air essentially um so there's there's many there's like a whole spectrum of of ways to do this so um co2 electrolysis is one of those and what you know it's basically you take water electricity and co2 um and and a catalyst and then you make more complex molecules like carbon dioxide or formic acid or ethylene or ethanol or methane or methane those are all options um but it's important to point out that right now i think if you added up all the co2 electrolyzers in the world that they you know you'd be measuring their output in day. And of course, like the products I just mentioned, we make millions of tons per day of.
So there's like a massive scale up if it's going to have a wider impact. And so there's some debate.
I think the debate for the whole electrofuels sector is how much are you going to do in the electrolyzer? So one company that I really like their approach that is different than mine is Terraform Industries, and they want to make methane, which is the main constituent of natural gas. But they're just making hydrogen in their electrolyzer, and then they capture the CO2 and then put it into a methanation reaction.
So everything they're doing is already world scale, basically. We've had hydrogen electrolyzers power fertilizer plants with that, provide them with the hydrogen they need.
Methanation happens in all ammonia plants and several other examples. It's well-known, very old.
Methanhanation is like hydrogen co2 combine and make water um and methane yeah so their approach is like the more conservative but if you add if you do more in the electrolyzer like i'm going to make the methane actually in the electrolyzer instead of adding this other process you could potentially have a much simpler process that has less capex and scales downward better like you don't need traditional chemical engineering like heavily favor scaling so with the more like terraform processes you know they're playing as like absolutely ginormous factories you know these these can take a long time to build so like one of the things they're doing is, you know, they're having to fight like the complexity that creeps into chemical engineering every step of the way. Because if they don't, they'll end up with a plant that takes 10 years to build and that's not their goal.
You know, like it takes 10 years to build a new refinery because they're so complex. So yeah, so that's like kind where i am i'm like more on the speculative edge um and it's not clear yet which products will be favorable for which approaches okay yeah and you're building this out of your garage correct yeah yeah so that's where like the electrolyzers everything with electric chemistry is like a flat plate instead of a vessel.
So it scales down. So like I could have a pretty good idea of what my, you know, like 100 square centimeter electrolyzer is going to do if I make it quite a bit bigger.
You know, I have to worry about like, you know, how my flow might interact in the larger one and, you know, make sure the mixing is good. But it's pretty straightforward because you're just like making your flat plate a larger area whereas the uh you know the scale is different than scaling a traditional chemical process i'm curious what how cheap energy has to get before this is um this is uh efficient and i if you're turning it into methane or something like that presumably for fuel is the entire process uh energy positive or uh like how cheap would energy electricity need to get before that's the case uh so yeah so the different products and different methods so different crossovers so like terraform industries they're shooting for like ten dollars dollars a kilowatt a megawatt hour for electricity um but again their process is it's simpler a little less efficient than a lot of the other like products are a little like also have like better premiums like just worth more per ton than methane so your crossover happens somewhere in between 10 and $20 a megawatt hour which is i mean that's pretty right now solar it's maybe like 25 maybe it's a little higher because panel prices have gone up in the last year but you know i think the expectation is they'll come back down and so getting down to like 15 where you start having crossovers for some of these products like ethanol or ethylene or methanol um yeah it's not it's not science fiction yeah i think uh in texas where i live the um that's where it's at right the cost of energy is like 20 or something uh dollars per megawatt hour well not this summer but uh recently a lot of times in in texas the uh the wholesale prices are around like 25 to 30.
Gotcha um okay so a lot of the actual details you said about how this works went over my head so what is a what is a flat plate i guess before you answer that question can you just generally describe the approach like what what is uh what is it what you're doing to for to convert co2 into these other compounds well yeah like yeah, like so just I mean, it literally just like looks like a, you know, an electrolyzer. You're like you have two sides, an anode and a cathode.
And they're just smushed together like this because the electrical resistance, if you put them far apart, it makes it uses up a lot of energy. So you smush them together as close as you can.

And then you're basically just like trading electrons back and forth.

On one side, you're turning CO2 into a more complex molecule.

And on the other side, you're taking apart water.

And so when you take apart the water,

it kind of like balances out the equation,

balances out your electrons and everything like that. I probably need to work on that elevator pitch there, huh? I guess the basic idea is you need to put power in to convert CO2 into these other compounds.
The inputs are electricity, water, and CO2, and the output is usually oxygen in whatever chemical you you're trying to create is along with some side reactions and then these are these chemicals you mentioned i think uh ethanol methane formic acid are are these all just uh fuels or are they uh what are the other uses for them uh so the idea a lot of people are taking like a hybrid approach with carbon monoxide so this would be like 12 12 co would be, they'd raise a lot of money to do this, have like a hundred employees or something. You can take that carbon monoxide and make hydrogen.
And then you have to send gas to make liquid fuels. So like they want to make all sorts of chemicals, but one of the main volume ones would be like jet fuel.
Let's see. Formic acid is like a, it's like the small, it it's the little the small fry of all these it is um like a additive and a lot of things like uh preserving hay for animals stuff like that um then ethanol you know there's people that want to like there's like this company that makes ethylene, which goes into plastics.

It makes polyethylene which is the most produced plastic or you can burn it like in your car although i think ethanol is a terrible vehicle fuel um but then you can also just make ethylene straight in the electrolyzer also so there's kind of like a there's many paths so you know which path wins is is kind of like an interesting race to see yeah the um the the the ability to produce jet fuel is really interesting because in your energy super abundance paper you talk about um you know like you would think that even if even if we can electrify everything in solar and when it super cheap, that's not going to have an impact on the prices to go to space, for example. But I don't know if a process like this is possible, then it's like some way to, I guess in financial terms, a good thing like add liquidity and then like turn basically this cheap solar and wind into jet fuel through this indirect process so that like the price to send stuff to to space or to uh i guess just you know have like cheap plane flights and whatever all of that goes down as well it basically sets like a a price ceiling on the price of oil you know and whatever whatever you can produce this for is like the ceiling now um which is like uh maybe the the way i think about it.
Yeah. Do you want to talk a little bit

about like how your background

led into this project?

This is your full-time thing, right?

So I don't know if I'm right about that,

but where did you get this idea

and like how long have you been pursuing it

and what's the progress and so on?

You know, I've always loved chemical engineering

and I love working at the big processing plant

because it's like a kid in a candy store.

If I had extra time, I'd just walk around and look at the plant. That is so cool.
The plant where I worked at, their uptime was 99.7%. If you want to change anything or do anything new, it terrified everyone.
because they're like and you know that's how they like earn their bonuses was like

run the plant you know 100% uptime all the time um so that that just wasn't a good fit for me and also like you know so I thought I always wanted like my own chemical plant but you know it's like billions of dollars to build plants so that it is like a pretty big step. So I think this new technology of like, you know, there's like a window where you might be able to build like smaller plants, you know, until it optimizes to be, you know, hard to enter again.
Oh, and then why will it become hard to enter again? What will happen? Well, if someone figures out how to build a really cheap electrolyzer and they just keep it as intellectual property, then it would be hard to rediscover that and compete with them. And so how long have you been working on this? Not quite a year.
But yeah, I actually got this idea to work on it from writing my blog. So when I wrote the, uh, heating fuel post, I didn't really know much about, there's another company in the space Prometheus fuels.
I'm like, Oh, this is an interesting idea. And then I got talking to, um, a guy named Brian Helgman and, uh, he's like, you should, you should do this, but not like what Prometheus is doing.
And so then I started looking into it and I liked it. So I've been working on it since.
Yeah, it's interesting because if energy does become as cheap as you suspect it might, and if this process works, then yeah, this is like a trillion dollar company probably, right? If you're going to get the patents and everything. Yeah, I mean, maybe.
With chemical plants, there's like a certain limitation where like your physical limitations like you know like there's only so many places that can have a good like are good places for chemical plants um you start getting hit by like transportation all that so like you know you can't you can't just like produce all the chemical for the entire world in texas and like transport it it it wouldn't work so that you're talking about like a full globe spanning thing and then at that point you know if you're like building factories all over the world someone's going to you know like figure out what your intellectual property is and all that so you would have to like keep keep innovating you know to stay ahead of the competitors and i think that would limit your you know ultimately it's a commodity so you're making commodities so you don't have the same kind of defensibility that um you know other sectors do i see yeah yeah okay there's not like network effects i guess yeah so so yeah so not only like if you try to you know so like what you know what i was talking about this is not quite consistent maybe with what i just said about like harder to enter so you but i think like what happens is like the scale starts increasing as you go on so there's certain even though like this is easier to scale down there's certain elements that are are very much hard to scale. And then the organization as well.
But you only need a few competitors to... Basically, you'll end up with early on a few competitors that continue to grow against each other and limit the margins.
And it'd be hard to be the fifth 30 years down the line. What is the state of this project right now? So are you guys planning on starting a company? And yeah, like what are the, what are the milestones you guys are shooting for? Right now it is just me, but you know, I have like a family of engineers.
We're all engineers. So it's kind of like, you know, loosely supported right now, but by other people in my family as well.
They're participating some. But yeah, basically I just have to get, I've already done a lot of the theoretical design work at a very cursory level to make sure it makes sense and the cost will be reasonable and stuff.
So then I, now it's like working on the electrolyzer to basically meet the targets you need for like reliability and product concentration and, um, energy costs. And also then just like, is it manufacturable? Because right now a lot of electrolyzers, like they use in the, in the labs, like they're literally smaller than a postage stamp and they're very difficult to make.
Okay, I see. And had you started working on this before or after you had quit your job? Oh yeah, after.
I quit my job like five years ago or something. I was doing like software stuff in between.
Oh yeah? What did you work on? I worked on on several products i have one that's like a data service that is um so like oil and gas data service that's somewhat successful um has cut paying customers but it's still relatively small okay okay uh uh i see and then uh yeah so it seems like your blog is pretty recent right like you started about i started that about a year ago what what what what encouraged you to do that well let's see i was curious about um like cryptography in general but specifically for blockchains and so i uh like you know i wanted to be able to read the the bitcoin white paper and understand some of this like ipfs so i figured the best way to do it was, and I thought, you know,

people talk about like, oh yeah, you should write blah, blah, blah.

So I do like, oh, I'll create an IPFS blog.

I did that and learned a lot.

And, you know,

it was not the most reliable blog when I was like running it on my own

droplet and everything.

So thankfully I like migrated to a service that has much more uptime than in my own

server. Yeah.
So then like, you know, I wrote several, like I wrote, you know,

posts to basically to learn about it.

I wrote posts about like hash functions and private key cryptography.

So then I could understand like the white papers and like actually, you know, what they were doing with the math and everything and the cryptography. And eventually, like, you know, I had this blog, so it's kind of like how Spacesuit will travel, how blog will write.
So my first non-crypto topic was on like building a, how to build a cheaper house or, you know, like it's difficult to reduce like home construction costs and that kind of like you know like made it on hacker news and all that it's like oh maybe actually people want to read this stuff so so i've just kind of been writing since then in my spare time i i don't know if i if um uh i actually interned for protocol labs which is a place that built ipfs uh um oh yeah, yeah? And, yeah, so I got a chance to learn a lot about it. And, yeah, like trying to learn about how Filecoin exactly works, that part was the – that threw me into a world for a while.
But, yeah, it's really interesting. I actually had a blog on IPFS.
I mean, it was kind of just a toy thing, not the one I actually actually ended up writing on. But yeah, it's kind of interesting.
The thing is, though, obviously, like at the moment being, it's like nobody else is going to seed it for you. So you have to you got to use like a centralized service anyways, like Pinata.
But it is a fun exercise. Yeah, I was just like running it off a droplet and on DigitalOcean.
And that, you know, if you use the, like, direct content hash,

it works pretty well, even if you're, like, linking through your ENS name.

But the problem is, of course, like, when I was first doing this,

like, the fees on Ethereum were so high that I didn't want to change that link

all the time.

So I tried to use the pinning feature with, like, IPNS and, and like going through because, you know, Cloudflare does the eth.link and then they look up your, you know, whatever your IPNS name is and then they try to go find it. So the part that was breaking for me was like Cloudflare couldn't always find my server using IPNS.
But if you switch to, so I still have It's... It's still on IPFS.
But if you... Like the service I'm using called Fleek, they basically go directly to the content hash.
But on DNS, it's cheap to change. You can change it in one minute.
So if Ethereum fees got lower, I might switch back to that but um you know i don't want to like eventually and i think it will be but you know what if it's like one cent transactions then it would be no big deal to just change the the content hash every time you update your website what is the reason for uh having it on ethereum just just for fun it is inconvenient i guess if your content hash is changing every time you update the website so you gotta keep re-updating the actual um where people can find the site or use something uh some other service to take care of it i mean yeah if transactions are cheap then you just have like you know it'd be all you can automate it all and then just cost you a little bit of money each time it'd be fine but you know it was like 50 so i'm not gonna like pay 50 to post a blog post yeah yeah and then you find that typo it's like oh gosh okay yeah so let's talk about your you have a paper that you recently released with um eli dorado on energy superpundance and you have a lots and lots of interesting um speculation in there for what might be possible if energy gets a lot cheaper. I think we should just jump into it.
So on the big picture, as I'm sure it were, per capita energy use since the 1970s has not gone up. Before that, there's this thing called the Henry Adams curve where per capita energy use would increase 2% a year.
And then after 1970, that was no longer the case. Ironically enough, right after the Department of Energy was created.
But nonetheless, we've still had economic growth since the 1970s. I mean, it's been slower, but even though per capita energy hasn't increased, per capita GDP has increased.
So I think in the paper's abstract or the introduction, you talk about why increasing energy use is necessary for increasing economic growth. But doesn't that pattern suggest that you can still have decent economic growth without having to use energy? Or have we just not come across the constraints yet? I mean, you just have diminishing returns.
There's physical limits to how efficient things could be. And as you get closer to that efficiency limit, it's harder and harder and takes more and more effort.
So there's some diminishing returns there where if you can just like, like, so a perfect example we were just talking about is oil is quite expensive and natural gas is expensive too. While oil is easy to transport, you know, you can produce it anywhere in the world and get it anywhere else pretty cheaply.
Natural gas is extremely expensive to transport. But it's very useful fuel for also making fertilizer or anything else.
So if you just have, like, you know, independent energy, because not everyone has natural gas or the economic capability to extract natural gas using traditional processes. So if you can just build these natural gas factories where you're just using sunshine and water and air, then all of a sudden everyone has access to natural gas, even if you don't have any, you weren't blessed weren't blessed with easily obtainable natural gas reserves.
And I think that's, there's really this whole story about like the tyranny of geography here when it comes to energy is there are some countries that have like extreme electricity use per capita, but it's like Iceland and Norway where they have like crazy amounts of hydropower and then people build aluminum plants there and stuff like that

but you know then you have places like in africa where they have no coal very little gas um

you know they're just like energy starved you know their transportation system sucks so you can't transport coal in um the hydropower is there's only so much of it may not be close to where their cities are. So if you start adding solar to the mix for them, in some of these other technologies, it could really be an incredible increase in energy availability for them.
They aren't even meeting the... I think we talked about that in the paper.
We're looking at doubling rich world use, but it would be more like 10x for you know if you live in africa yeah yeah and then so i wonder if that's the case then if energy becomes that abundant then does the bottleneck in terms of what our civilization needs will just be the resources that are used to that that are the backbone of the things the energy is doing so i don't know like the actual resources that are necessary to build the factories and the raw

raw materials or to what extent can even that be i would argue the ultimate limit is like

oh it's really human capital um and what more abundant energy does is it allows you to redeploy

human capital away from trying to figure out how to use scarce energy sources into just like, you know, you can waste some of it now. Or like, here's like an example I love about trucking.
So I love trucks. Not as big a fan of freight trains, but freight trains are like extremely efficient.
Like literally they get like, you know, they're like, I can't remember. It's like 10 times more efficient than a truck or something like they use just very little fuel.
Um, but if you're going to like, you know, the train doesn't come by all the time and like, like, they may not hold to the schedule. You have to aggregate your product with the other stuff or your raw materials, and it adds a lot of cost to your production.
Like, you know, Toyota production system runs on trucks, not trains. And for the reason is the truck is just, like, extremely flexible.
Like, it comes when you need it. It goes when you need it.
And even then, you know, people you know people still complain about truck drivers but like not showing up when you want them but um so when you have cheaper energy you know like this electrification automation of trucking you are going to shift a huge amount of goods from trains to trucks and it's going to just have like huge knock-on effects all across the

economy it's more specialization you know you can go there's a lot of products that you know you're

just limited on your suppliers because the transportation is expensive um it reduces

working capital because a lot of times you're it takes longer on trains similar stuff like

smaller ships more air freight like one thing that shocked me is Eli was telling me about like

Thank you. it takes longer on trains.
Similar stuff like smaller ships, more air freight. One thing that shocked me is Eli was telling me about how the elasticity of demand for air freight is just insane.
You decrease the cost a little bit, demand goes to the roof. I'm pretty sure there'll be some kind of you always think, oh, we can't do this with batteries and then someone comes up with like a more clever idea so you know even if you have like a 500 mile range limit for your freight plane you know the freight doesn't care if you have to stop like every 500 miles to refuel or recharge and you can go over land on almost all these routes like you You could go up through Japan and the Aleutian Islands, or you could go overland on almost all these routes.
Like, you know, you could go up through like Japan and the Aleutian Islands, or you could go overland from China to Europe, charge just wherever's convenient. And, you know, if that electric plane has half the operating cost of the jet plane, like the amount of freight you're moving on airplanes will go way up and it'll go down, you know, on ships.
And then everyone will be better off because like right now, if you're a shipping company, you have like real working capital problems because your stuff sits on boat for like a month and you've got to finance that and do all this stuff. And then, you know, what, what if things change in the meantime, you know, like, Oh, I i don't really want that product anymore so the air freight is just like an absolute economic just like booster so if you can make that cheaper it's it's really exciting but it uses way more energy so an analogy that just occurred to me is like you could imagine um, confitational power, if Moore's law had stopped in 2005, we would still have a lot of interesting applications using, uh, compute and the effects of the computer would still have permeated society.
But obviously a lot of things that are like possible today with computers would just, um, like they just wouldn't have been tried or been possible in that kind of world okay i mean all your engineers would be uh you know working on optimization instead of building new products yeah i think um i think in uh jay store hall's new book on we're not putting you at this point but his book on where's my flying car one of the points he makes is that gdp growth has been probably overstated because a lot of what counts as gdp growth has just been increasing the efficiency of existing machines to make them use less energy which doesn't but you still doesn't uh result in like more total resources or goods or services being produced but yeah instead of like making the laundry machine more efficient you can just like create a new kind of machine that may need to use more energy. Yeah, okay, that's interesting.
Okay, and then for this vision to come to pass, do you need energy to – is it just enough that energy becomes super cheap? Or do you need advances in the ability to store that energy as well, right? So if, I don't know, lithium batteries are the bottleneck't matter if you can, uh, get energy super cheap, if you can't like put them in, uh, you know, appliances or cars or planes or whatever. I think, I think the important thing to think about here is that our, our current energy is so expensive, especially electricity.
It's quite, it's quite with like our energy resources, which are basically third role. It's quite difficult to make electricity comparatively.
And so what we use electricity for is stuff we really want to use electricity for. So it's hard to imagine that we're not going to turn our air conditioner off.
We're going to run it. And so we're willing to pay a lot of money for that electricity to run our air conditioner.
Whereas if you look at really closely at a lot of the use cases that use tons of extra energy, they're much more flexible in how they use the energy. And there's not a whole lot of storage involved.
If you're looking at growing crops or making methane for rocket fuel rocket or making chemicals like you can design these processes to run when the energy is available um and and so the batteries are really

going to be for keeping your air conditioner on where you're willing to pay a lot of money

so i don't really see the batteries and storage as a limit okay uh so i i guess i didn't uh i guess i didn't like if you have something like um like air freight right if if that's the thing we're concerned about like wouldn't you need some way to store that electricity for air freight or maybe you can just convert it to jet fuel is that what you're saying yeah i was thinking more like grid storage like grid storage, but yeah, like in the, in the transportation, I mean, transportation is going to dominate battery demand. It's going to be like, like grid storage was like tiny in comparison.
But I think there's, there's like, you're basically getting to the point where we're making batteries out of dirt because that's, that's how you scale it. So, you know, if you're making batteries out of like carbon and iron and phosphate you know you're just there's like it's just how many battery factories you want to build you know and there's plenty of lithium it's just you have to build the lithium mines i don't really see any hard limits there eventually once you build all the factories then then you're pretty much ready to go and then so i is is the point you're making with the alternative batteries that um even if they're less um even if they're like worse than lithium batteries they'll we'll have just so much energy that it doesn't matter like even if we lose a lot of it that's fine we'll just use whatever we can take or are you saying that they can we'll produce batteries with other chemistries that are as good as lithium batteries or better you know right now the shortage is really nickel so um like in the very short term lithium is kind of starting to become a shortage but it just there's plenty of lithium it won't be so like the lithium iron phosphate or like whatever what there's like a huge amount of substitution into right now because it's avoiding nickel um and it's not quite as good as some of the nickel chemistries, but for a lot of applications, like it just doesn't matter.
A lot of cars and everything like that. And you're going to have, you know, like the aircraft and stuff playing, paying the premium for the high energy density batteries.
And eventually there are technologies that, you know, they just use less and less materials because they're just better batteries, like some of these concepts around solid state.

I'm not sure if those will come to fruition and if they'll be really that much better when they do come.

But I think there's lots of opportunities for substitution down the line.

What is solid state, by the way?

Right now, all our batteries, lithium I like they charge and discharge through the lithium ion going back and forth between the cathode and the anode and it travels through a liquid and and the liquid is an electrolyte which means ions can travel through it. So solid electrolytes are a little more challenging, kind of hard.
That's why we don't have them. So you get rid of the liquid and it's just like the ion has to travel through a solid instead.
And the promise is like it could be like a much higher energy density and theoretically cheaper too, just because it's like weightless and stuff stuff but there's like all sorts of problems around like they degrade faster or you know batteries have like six different areas that you have to hit the requirements and if you miss one then it's no good so they're kind of hard to improve in that sense um yeah so i guess if the energy super abundance is going to come from solar and wind, obviously these are intermittent sources of energy. In that case, you would need there to be like progress in the battery storage, right? That's contingent on that, right? Yeah, I think that's what I mean.
Like a lot of the extra energy uses that we talk about don't really require many batteries, if any batteries at all. I mean, like the transportation, yes, you have like batteries in there.
But if you're going to like have abundant like nuclear electricity or abundant geothermal electricity, like you still have to build all those electric vehicles, you still need the batteries for that. So like the extra batteries that solar and wind require over like geothermal, I think it ended up being pretty minimal.
Maybe the way to think about it is, you know, if you can have solar a farm that's going to give you $10 a megawatt hour electricity, you know, you just have to figure out how to utilize that. And if you do, then you'll be very rich, you know, and you'll beat the guy who's paying 40 a megawatt hour from the from the more expensive traditional generators yeah yeah but before we get into um which sources of energy are most promising let's just talk about some of the other applications of an energy superb abundance so um yes i was talking a bit about travel, but one thing that might be concerning with like air travel, at least for passengers is if the bottleneck, uh, step there is like TSA and other regulations, um, uh, to what extent will reducing the travel time, um, or, or, you know, like, yeah, increasing flight speed or, uh, number of flights to what extent will that have, have, uh, an impact on how time you had to spend in an airport or in transit well so right now if you think about um you know like airbus they have this like super jumbo thing um i can't remember what that plane this number was but like none of the airlines really like loved it because it's it's too big it's too too hard to get everyone loaded and unloaded.

And you really just hit diseconomies of scale. So the electric planes are likely to be just tiny in comparison, like 10 passengers.
So it's easier to load and unload and you're going to fly

out of smaller airports. So you won't be going to this giant regional airport that just has all the

parking problems and all the security. You be driving to like your neighborhood general aviation airport where there's like a small line to get through and a lot of these small aircraft under certain situations even avoid some of the screening requirements because they're just not as dangerous you know if you only have if you have a small plane there's only so much damage you can do with it i did not know that that's i gotta start booking planes from the small airports or something to avoid the tsa it's it's very nascent but there's like some business models that are like coming down from like the netjet style to like a little more commercial so it's like kind of like i think that they're trying to like hit a price point that's similar to first class but you get you get to avoid all the all the airport craziness.
So I think, and I think I like, I'm just kind of a believer in like if that existed, people would get angry enough that they would loosen up a lot of the rules. It seems like impossible to change those rules now, but I think like the average person, it just costs them like no time because most people don't even fly very much.
So yeah. Yeah.
Do you want to talk about what your vision for what a city could look like if energy got a lot cheaper? I mean, in the paper, you're you have all kinds of interesting projections about drones and electric deliveries and just the entire congestion of the 3D space. And I guess with tunnels as well the what what does the city look like with energy super abundance basically like disaggregate the car to a certain extent where you're using you know not like inner city car trips or less because cheap flying is going to be cheaper and it's going to be more convenient to like have the bots deliver your stuff and you know the the tunnels i love the tunnels because you know I don't like taking people's land so you with tunnels you can run you know new roads and everything without imminent domaining and taking people's land away from them when they don't want to lose their land and I think like it's in that process is so people it makes people so angry when you take their land that it's very expensive to eminent domain people because they will fight you, you know, until like literally the sheriff has to show up and haul them away.
So if you can go around that with tunnels using existing right away, it just makes that like societal cost of doing some of this stuff significantly less expensive. And then it's the engineering challenge.
And I think there's really an opportunity now there. Boring Company is the famous, but recently I think there was a Hacker News, another company that wants to do tunnels for electricity.
And they have like this plasma boring machine concept. I mean, it's pretty, it seems pretty crazy right now, but it's just one of those solutions that you're going to reduce the coordination costs across the whole economy and improve property rights.
And so people should really try to build it. You mentioned one of these machines in your blog post on tunneling, and it was the SpaceX one.
I forgot the name of it. But yeah, it's like this insane thing.
It's proof rock. Yeah, exactly.
Yeah, yeah. It's pretty big, but apparently it's all electric, which is kind of insane.
And yeah, it can just do it in one. How is it getting the material out like you're you just if you're just doing the tunneling in one step the problem that like most the tunneling is in soft soil and it just it's really kind of like it's it's kind of like difficult to drill through soft soil because of the materials handling so like when you first start drilling an oil well through this stuff like you actually have to limit your drilling speed and you don't even have to put any weight on the bit.
Like just the pumping fluid around basically like jets out the fluid. So that's kind of what you're doing with the boring machine and the soft soil stuff.
So managing the spoils, which is like, you know, like they have like muck carts a lot of times. I think maybe it's basic trying to do a conveyor belt, but you can also just make it a full liquid and pump it out.

Like in the oil field, you know, we carry our cuttings in mud and we pump it. But yeah, and then they have the other big challenge is they have to keep the walls from caving in on them.
So that's like, there's like a, like current boring machines and soft soil spend enormous amount of time, um, erecting these tunnel supports that keep it from collapsing in themselves. So it's kind of counterintuitive.
It's actually dramatically faster to bore and hard rock than is soft soil. Cause you, cause the soft soil, you spend so much time, like nonproductive time or in the hard rock you're just like blowing and going interesting um yeah okay and then so to get back to the to the cities um the you mentioned something in the paper yeah mercedes constant which is the amount of like people's but wasn't it that the amount of time people spend in transport per day um is the same so if you just increase the amount of uh increase the speed in which they can move with vtols or other kinds of things then they can they have a wider surface area in which they can explore right yeah so yeah i don't know if like physically the cities will look that much different but like their effective economic size will be much larger because, you know, you could, you could live in, you know, like Cedar Rapids and, you know, commute to Minneapolis with some of these technologies.
So your, your city in Cedar Rapids still looks the same, but, you know, like you, you can, you know, you don't have to work there. If you have a better job in minneapolis you could commute there you know three times a week or whatever it is five days a week yeah yeah it's super interesting yeah but does that imply by the way that if the um if the commute time stays the same and like people just get more spread out if energy becomes cheaper then neighborhoods and cities kind of become this unwalkable mess out of like a jane jacobs nightmare if the conglomeration goes away i think i think it's actually the opposite you know like if you have tunnels and if you have um you know some like these alternative methods to cars then you use cars less um and i think like in in many cities you know they never made sense for cars anyway because they were built before cars.
So in New York City, you're never going to move everyone around on a car unless you build tunnels you could then. But even then, I think there's other technologies there that make a lot of sense.
And I think people like walkable. So even though I live in a city that's that requires a car like some of the hottest neighborhoods are like walkable neighborhoods where like the neighborhood is walkable itself and then you just like drive your car to wherever else you need but it's like the the car is like hidden within the neighborhood uh okay so interesting I guess maybe we'll see more um segregation than not in the not in the racial sense or anything but uh in the sense that people will prefer to live in like these walkable neighborhoods but they don't have any problem to like commuting to work using a vtl or something so then you would have what you'd end up seeing is like these walkable neighborhoods and then like industrial zones that are like way far away distance wise but not that far away time wise right and it's the same for like if you want to live in a small town that's just happens to be you know now would be too far to commute to a city but you could in the future yeah yeah more choice i see um so what is holding back a vtol's vtol by the way is vertical takeoff and landing this is what uh the reason you need to go to the airport is because you need like a large landing pad to take off and land.
The hope is that if you could just like vertically take off, then you would be able to like lift off from your roof or something. Obviously, we've had prototypes of this kind of stuff since like the 30s.
What like why don't we have these widely available is the energy the constraint or is it something

else well i think in the past you know theoretically liquid fuels are dense enough

but they're they're too complex too expensive um because when you're turning heat energy into

mechanical energy it's just like a lot of weight and complexity comes with that like some of these

uh old concepts you know you have like all these engines and all that and so if you electrify them

Thank you. It's just like a lot of weight and complexity comes with that.
Like some of these old concepts, you know, you have like all these engines and all that. And so if you electrify them, it really changes the game.
And so just now we have, because it's not just batteries, it's the motors, it's the inverters are now getting dense enough and small enough to make sense. But it takes time to get this stuff through FAA, you know, for better or worse.
So, you know, it's like the technology hasn't been good enough, long enough to get stuff through FAA. And there is some limitations, I think, right now.
A lot of people wouldn't use batteries. Like, the batteries are just on the edge of good enough.
Like, you know, you're going to have, a 50-mile VTOL, not like a couple hundred-mile VTOL.

But eventually, like my dream VTOL application is like a nuclear-powered quadcopter that carries like a container.

So you can take the container like directly from, you know,

the factory in Vietnam or wherever,

directly to the people who are using it or the warehouse like in in arkansas or whatever yeah yeah that would be interesting i mean theoretically you could have like these drones that are carrying like these huge payloads um weight wise yeah but you wouldn't you wouldn't necessarily want a large payload you just want like the whatever the customer wants you know you want to size your your vehicle to deliver that payload that's the most efficient oh i see right because you don't need to it doesn't need to be like a shipping container or like a shipping vessel where you just have it be okay i see okay um yeah yeah interesting uh and then what does this mean for computing so if energy gets a lot cheaper um i i guess bitcoin mining becomes well it doesn't necessarily become more profitable because other people's energy is cheaper too but what are the other consequences is spinning up an aws server just become trivial now and then building a deep learning model costs like nothing in terms of gpu time uh what would impact this on computing yeah i mean i think the limitation would probably still be just like chips for a while until you figure out a better production process for that i think it'd be a while before it's like becomes energy i think you know like smartphones really worry about energy so there could be some interesting things with um smartphones if you have like a a very power dense like beta voltage battery it's like a nuclear battery something like that where you where you don't have to worry about like running down your battery um but outside of outside of smartphones i'm not sure that energy is like the limit for a lot of this computing and one of the interesting things that you speculate about at the end of the paper is about a potential carbon shortage and i think in a email to tyler cowan that he published on his blog uh he um you you said like by the end of the century we'll have a carbon shortage uh because because i presumably because the process you talked about earlier the thing you're working on right uh if if you can take co2 out of the atmosphere all right so what is the probability that this ends up happening uh like do you think it's like more than 50 percent by the end of the century or or is it just speculation i think it's extremely high that happens and it's it's harder to put the timeline on it by the end of the of the century, it might be a little... I think I ran some numbers in there, and if you 10x current plastic production and you're just putting it landfilling at all, I think it was a little over 100 years.
You're assuming the rest of your carbon output is zero in that scenario but it's probably pretty hard to do it like in a hundred and like by the end of the century without a lot of growth but it's kind of the exponential thing can get you where you know like i think all the you know some large number of the carbon emissions have happened in the last 20 years like and it was very small before like 1950 so you know you could kind of like get surprised at the back half the last 10 years you know it goes crazy it makes it hard to predict yeah yeah by the way so in uh will mccaswell's new book on long-term is one of the things he speculates about is if society collapses and we need to restart one of the things we'll need is coal or some other sort of like dense, easy to use fuel.

And the problem is we've been burning up easily accessible coal, like coal in places where you just like dig up and find it. And so one of the things he's concerned about is like making sure we leave some easy acts, easily accessible coal silos around so that in case, you know you know society collapses we can restart and use these to power up our like a second industrial revolution i wonder if you could use a process like this um with carbon sequestration to actually just build up these kinds of reserves um i don't know if like a long-termist or somebody's like really interested in making sure have that kind of resource.
They could just use this process to... Is that possible? Actually, there's a company called Charm Industrial.
They're basically doing that because they take trees and they do a process called fast pyrolysis. It's where you burn biomass without oxygen in an oxyc environment.
And it makes this bio oil. And then they're injecting the bio oil down into wells and selling carbon credits.
So it's already happening, you could say. Oh, wow.
And that is easy to burn and stuff? Yeah, if you just want to burn it for heat, it's okay's hard to refine this was like a there are a lot of people that tried to do bio oil as an alternative for petroleum like 20 years ago like clean tech 1.0 and they they all failed so it makes me laugh that like they're reimagining the process to sell what are right now very expensive carbon credits but you could do something similar there's actually you could do something similar just to make straight carbon and stuff if you wanted to okay i see the the thing that i find interesting about this is often in the case of um global problems people will early on identify that a thing is going to be a problem but it often ends being the case that they get the direction of the problem opposite. Like if you think about population, right? In the 70s, people were like correct that global population was going to be a problem.
The thing is, it seems like now the problem is going to be that the population might decline too fast, right? Now that it's going to grow exponentially. and i think this is like another example of this kind of thing where co2 is going to be a problem either way it just like it's i'm not sure if it's going to be a problem we'll overproduce it or we'll have shortages yeah i mean if you if you just think out like the the large scale if you're going to be like kardash whatever scale civilization civilization or you're using like immense amounts of energy like that's going to have um you know side effects and you're going to have to figure out how to manage that one way or the other and i mean one of those is eventually earth may just be like a nature preserve and we all live in space or something but yeah yeah okay let's talk about nuclear um it seems like it seems like you're much uh less optimistic about nuclear than you are about solar and wind did you want to do do you want to explain why that's the case yeah well especially solar more than so than wind wind i think it's limiting because it's transmission problems and again you know like you're if you want to build out huge amounts of wind, like some of these zero carbon plans call for, you're going to have to take a lot of people's land to build transmission lines and stuff.
And again, it really pisses people off, and they fight hard, and it becomes expensive. And it's not like the wind easy to cite, like, cause you pay people, you'll actually see like they never put above ground power lines on the people's land where they put the wind turbines.
They're always underground. So at least they get to the county right away.
But like when you get these giant transmission lines, like, you know, grain belt or something, like they almost inevitably have to go across a lot of people's lands and you can't just stuff them all in county and state right away. It's because they're the pylons are so big.
Sorry. What is a pylon? The pylon is like what holds the wire up the tall tower.
So yeah. So solar is like, it's much more flexible where it can go.
And I think the solar getting cheaper, the obstacles are just like pretty simple. It's like, well, gosh, gosh, it's expensive to build with racking.
Why don't we just lay the panels on the ground? Or like, gosh, this glass we're encasing with is getting expensive. And we don't need it to last 80 years or 50 years.
We can just put some plastic on it instead. Or we've gotten the actual photovoltaic cells so cheap.
And all the other labor and stuff is getting more expensive. Why don't we just add another layer and make more energy? So those are kind of like your solar solutions to get down to like $10 the megawatt hour, and they're pretty straightforward.
Whereas nuclear is like, well, the light water reactor can't go there. Like, let's instead cool our reactor with sodium, which, you know, catches fire when it explodes when it reacts with water and catches fire when it reacts with air.
Or there's, you know, you could cool it with lead, liquid lead. That's an option.
Helium, which, you know, leaks a lot. Or you could do molten salts that, like, corrode everything.
We don't really have anything that. And so I think when you start looking at like, you know, this is for large reactors.
So I think those solutions for very large reactors are pretty hard. It's pretty difficult.
And there's a lot of reasons why. Why do we make these weird choices? Well, there are a lot of stuff just reacts poorly, you know poorly when you expose it to neutrons and stuff.
So they each have their own features that make them possibly good candidates. So that's really where, and I actually think regulation is actually kind of like a, it's oversold a little bit.
And I think actually to the extent that if people were internally consistent, then they would see NRC as a regulatory success story because, yeah, the kind of background on this is my wife's mom and stepfather are nuclear engineers that have like worked, you know, from at all levels of nuclear power industry. So I get to ask them, you ask them the general questions and learn a lot about it, which is nice.
It's very helpful for learning about it. But back in the 80s, the nuclear power industry was in real trouble because their competitors in coal and natural gas got deregulated.
Most of the cost of coal is the rail getting there, and the rail industry got deregulated, and then the natural gas industry got deregulated. So the cost of their alternatives was falling, and they had the cost of, you know, they had to build more safety into their plants because of all these, you know, it wasn't just Three Mile Island.
It was like Browns Ferry. It was Rancho Heco.
All these things that could have been really scary. And to a certain extent, we got a little bit lucky that we didn't have a worse disaster.
You know, they were just like relatively limited accidents at their sites.

So what the, like, there was actually a time where nuclear power plants were selling for

less than what their fuel was worth they had on in their plant, like around there. So what the industry did and what NRC did is they moved to probabilistic risk assessment, which is like, you know, usually the gold standard.
Like people are really happy that we use probabilistic risk assessment, which is usually the gold standard. People are really happy that we use probabilistic risk assessment for commercial crew with NASA and SpaceX, and they want FDA to use more probability, more expected value.
And what this allowed was basically you're rolling up some of the rules and moving into the risk assessment. So around 1980, nuclear power plants only ran about 60% of the time.
They weren't very reliable. They had all sorts of unplanned outages, stuff like that.
And the safest mode of operation is just running as designed. So the more consistent nuclear power is, the safer it is.
So the probabilistic risk assessment allows you to do repairs while you're running, which was kind of like discouraged before. So it'll be like if your main cooling pump is leaking before, you'd be like, oh, gosh, I hope we can make it.
And then eventually it just fails and you shut down the reactor. And now it's like, all right, well, we have backups.
The safest thing to do is actually repair it now while the plant's still running and then get it repaired and put it back online. And so not only like to give you the idea of like the safety standards that NRC has, I think for like the plant taking damage is like one time in 10,000 reactor years.
And then for a large release is one in 100,000 reactor years. And there's 93 operating reactors that, you know, less than 93 sites.
So like we should only see like three-mile island under the current standards once every 100 years or so in a large release like a Fukushima-type situation once every 1,000 years. But they have just in a few years in the 1970s, the industry had three or four of these damage events, at least least i don't know how many like officially count but probably at least three so the safety is like gone incredible and now the operating operating capacity is up to like over 90 so the plants are just extremely reliable and it lowers their cost because their costs are so fixed um and like yeah like can you compare it to like a country like France? They've had a lot of reliability problems with their nuclear fleet in the last couple of years.
Like this year, you know, their capacity factor, I think I saw, might barely be over 60%. They have, you know, we have like 90 gigawatts of nuclear.
They have 60 gigawatts. So that's like makes a huge difference for Europe that those plants aren't running full out and it's really you see a lot of charts about like if germany didn't shut down its reactors what would the you know energy balance be but you don't see as many like if the french could run their reactors like american reactors what would the energy balance be um so i think there's i can go on about like how that integrates into new plants if you want about that.
Yeah, I do. Yeah.
Cause the, the, the line I've always heard on this for my bubble is like, oh, they haven't approved a new plant. The NRC has not approved a new thing since a new plant since it was created.
I guess they just approved the design for the new small modular reactors, which I guess I would love to hear your opinion on as well. But, but yeah, yeah.'m very curious to hear this perspective.
Well, okay. So think about it.
In the 1980s, you had new sources of fuel. You had new competitors.
You also, by the end of a decade, you increased the amount your nuclear power plants ran by a lot. So a lot of these new power plants that people were thinking about building were at existing sites, like an extra reactor at Watts bar or whatever.
And well, you, you know, you basically just got like a buy two, get one free by running your plant better. So you don't really need them as much.
So all those contributed to like just not making sense to build new nuclear power plants because the existing fleet ran better and more competitors and electricity demand slowed down. So I think there's like a, you know, is it hard to get through NRC approval? Like, yes, that last one, the mini reactor you're talking about took like, I don't know, 10 years or something.
But, you know, when you think about like a probabilistic risk assessment, like, you know, no one ever says like, well, gosh, NRC's current standards of a large release, which would basically happen one every thousand years, we're not arguing over that. We're just talking past each other, I guess, instead.
So to me, that's pretty reasonable risk level. like you know if you're like 10 times your reactors, and that means like almost certainly you'd have a Fukushima within your lifetime if you go with NRC standards.
But it actually turns out that it's pretty cheap to like do way better. You know, a lot of the reason why the plants weren't built may not necessarily been because of regulation, but because like, you know market conditions changed you know you had more competitors and the coal with the gas being deregulated and then you also had you know increased production from the existing nuclear plants so if you're going to build an extra nuclear plant and or an extra reactor at an existing site then you know you might not have needed to anymore because you got so much more production out of your existing plants.
And just stuff like they shorten the fueling time, just a lot of all-around improvements paired with electricity demand flattening that really made new plants not economic or not necessary. And, you know, really, when we think about the probabilistic risk assessment, it just takes a lot of engineering time to get it through.
Like if you look at how hard it was for SpaceX to get Falcon 9 and Dragon through NASA's loss of crew risk calculations, you know, it took years, took hundreds of millions of dollars. So it's kind of funny that, like, people see that as a success, and especially when the stakes were only, like, a few lives for people that volunteered for danger.
And then you have, like, a nuclear power plant where we're going through the same probabilistic risk assessment, and, you know, it could impact many more people's lives. And, you know, it's like, Oh, it's not, you know, that's not good enough.
So, I mean, I think, I think it would make more sense to argue about, you know, if the, the risk factor, you know, should we, how much risk should we take like with the actual numbers as opposed to just like, Oh, I'm mad that we're not building nuclear power plants um and actually it becomes just like very inexpensive to actually to improve the risk probabilities because the old plants that we're running now they have like active safety systems which means you have to maintain them and they have to So like, if you want to like move the control rods back into the reactor, well, there's like a mechanism and a motor that does that, that can fail so that, you know, when you're calculating your risk, you have to calculate, oh gosh, what if this motor fails or what if my control fails or what if I don't have a properly trained operator to do it? And it's the same for the cooling systems. But this new generation of plants, they have passive safety systems where like natural convection can cool the reactor in an emergency or the rods are more like dead man switch where, you know, if something happens, they just drop in from gravity.
And so the new power plants like this one that just got approved or the one they're building down in Georgia, you know, can be orders of magnitude safer than the than the running plants. And it's not really like a huge cost increase.
You're just changing how you. You do these things, and in fact, like if you look at.
All these like all the literature for them, they're actually supposed to be less complex and easier to build. But, you're talking about a project that is so complicated it takes thousands of workers years and years to build working every day and it's like if you're going to go through and do the engineering in great detail to prove that your plan is safe under the probabilistic risk assessment it's going to take hundreds of thousands of hours of engineering time i I mean, it's going to take a long time.
And that's why you see, I mean, investors are willing to pay that at this point. It's just like, you know, after you build it because of, you know, the rank and cycle and all that, is it going to generate economic power? And, you know, it's not necessarily going to, I think, I think one way to think about this is my father-in-law, he always says when people ask him about why we're not doing more nuclear, he says, well, you've got to think about the politics first and the economics second.
Those are the important ones. People are submitting designs and wanting to build plants that are big enough to impact lots of people's lives, even if that risk is very low.
You know, some people still are bothered by that. But also they're selling an easily substitutable commodity in most cases.
And so I think a lot of times on the political side, if you can substitute nuclear power, people will, even if it's coal or whatever. People don't really care that much about the emissions.

They just care about their electricity turning on. And I think you see the opinion change very fast when nuclear power is no longer a substitute.
All of a sudden, Germany is like, well, we can turn our reactors back on, or Japan, same way. They've had these reactors off for years, but now that there's an energy crunch, they're like, well, let's turn them back on.
so I think

the future for nuclear power

which would be a better future, is you create products that impact less people's lives or have the potential to impact less people's lives and also are not substitutable. And I think that means small reactors.
Like if you have a battery that can power your phone or you have like a little battery out in your garage that can power your house. The real, you know, these are hard to make.
There's a lot of problems, especially on power density. Like, you know, the nuclear is very energy dense, but not necessarily power dense.
So you have to do a lot of work on that to get there. But one of the most exciting examples of recent nuclear technology is these people at some national labs and NASA got together and created this crusty reactor.
It's like only one kilowatt, so it's small. I think the thing weighs like 400 kilograms.
It fits in the room. They got the whole project done in a couple of years for like less than $20 million.
And and it worked great it's very safe just because partly because it's so small but it has almost no moving parts like the whole thing is you know it has like a sterling engine on top and that's like the only moving part so it's really um you know and there's several startups now that are working on improving that technology and commercializing it so that's the kind of like nuclear stuff that you know why i talk about small nuclear micro nuclear is really exciting to me because it has so much potential and when you start putting nuclear in that small form factor there's no other energy source that can compete with it on energy density so you can do things you could never do before where it's like selling to the grid in a large power plant is like, well, I can do that lots of ways. And if you think, think through this lens, then you see like the entire nuclear debate is, you know, the nuclear proponents trying to claim that nuclear is not substitutable and that we should pay more except the except the risk or or whatever and maybe we should but it makes it hard to promote that technology if you can have a phone that you never tried to charge like people would love that they'd be like i don't care it's nuclear i just have a phone that you know never goes dead i guess the question is to what extent are those um is the lengthy and expensive process necessary for the probabilistic risk assessment if there's like a way you could just have the process not be more streamlined and have the same uh be as effective in evaluating the the harm and then i guess another thing is if we haven't seen it's like zero people or like very few people have like directly died from nuclear, right? So is it just that we've gotten lucky or like you're saying that could have been like way more and we're just in a lucky timeline? I guess I'll go backwards a little bit here on answering those questions.
So more so than I think what people are responding to is just because like Fukushima didn't have, you know, airborne radiation, that was very dangerous, but people still got removed from their home, you know, and there's a lot of costs associated with that. And, you know, it's hard for me to believe that if we had a similar thing in the U.S.
that there wouldn't be, you know, some type of mandatory evacuations that were really unpleasant. And if you could get your power from coal or natural gas without that risk, I mean, a lot of people would make that tradeoff.
And I think the other thing with Fukushima is, as I understand it, they were able, because it was on the ocean with fast currents, they were able to use a lot of seawater to keep the reactor from getting too out of control but they were just like dumping um you know a lot of the it's like radioactive stuff into the ocean but it was dispersing quickly it wasn't a big deal so you know if you're on like a freshwater reservoir like most nuclear most u.s power plants are like your risk equation might have been different there i don't know enough about it to know if that really matters but i think the main thing is because the precautionary principle people are still going to get removed from their homes and people don't like that um let's see i'm making it fat i mean you can always streamline processes but the thing is is people are submitting designs that are extremely complex.

So whether your design is ultra safe or not safe at all, to do all the engineering to prove that costs about the same either way. So that's part of why these new plants are so much safer than the NRC standards.
It's just not that hard to make them that much safer. and a lot of your licensing is going to be,

you're going to spend the same engineering resources, no matter what, based on your plant complexity. So the, you know, that's like the difference why Krusty was able to go through so fast, you know, they went is, you know, their thing is very simple.
They don't have very many moving parts. Like there's only so many things that can go wrong with it.
it and so that i think that's what's exciting to me about these other startups is they have the potential to get through faster with less money and then there's real markets in like remote power space military where people are willing to pay the premium for these initial models okay i see um okay so you're so you're not bearish on nuclear or the future given the new designs with passive uh uh passive cooling and stuff like that it was more like the old designs that you're pessimistic about is that correct yeah i mean like if you look at like the what the cost of electricity is going to be from that you know if they ever build the reactors that just got proven or it's quite expensive. I think usually it's around $40, $50 a megawatt hour best case, but more likely it could be up to $80 a megawatt hour.
They're not building it in deregulated power markets because you lose money. But there are there are places where it could make sense you know some places like in europe have very expensive electricity and japan and singapore and there's a lot of other places that are yeah yeah so there could be some markets in there but you know that technology then still has to compete with those places building solar panels or or you know all these other technologies that you could do.
And, you know, then there's the whole argument, oh, well, nuclear can do this and that. But, you know, I think the people building the reactors clearly don't want to build them in deregulated power markets because it's not economic.
You know, that's why I'm excited about the small because there's alternative markets other than selling this substitutable commodity that's very cheap. Well, what is, uh, have you talked to Eli about this or what is his opinion? Yeah.
So Eli finds out about these like new startups that fit this bill and sends me the information on because he knows, he knows I'm excited about it. So I think, I think he's also, you know, he also like, of course, you know, specialty is, like, governmental affairs.
So there's still, I'm sure there's still lots of opportunity to improve the process at NRC. Like, recently, INPO, which is, like, the industry group, that's very much, like, a German-style industry group.
It's very powerful. You know, their goal with NRC was, like, reduce the nuclear rules by, like, one-third.
and And then you also have NRC writing new standards for like Gen 4 reactors that's supposed to be done in a couple of years, but Congress instructed them to do it. So there's lots of opportunity to try to improve the process, but it's very complex.
Like I'll give one example, the Browns Ferry accident. The main thing that came out of that was you can't have control cables for safety systems on redundant safety systems on the same cable tray because

that cable tray catches on fire.

You lose both systems.

So it's very,

very expensive to run extra cable trays and all this cable separation.

And like,

that's actually one of the problems that's like delaying Vogel and Georgia right now is they had like 500 issues of sharing the same like safety system sharing the same cable tray so they have to like you know build all new cable trays and clean out the mess of the stuff they already built and redo it super expensive so NRC is like tried they tried a pilot program where they did like a performance-based safety on you know as opposed to like just the strict cable separation rule and like i think um oconey was one of the power plants that tried it ended up being more expensive than just the simple rule so the uh you know the reality is often very complex and i think you when you have these complex plants, it's just hard to do. So it can always be improved.
But I think the small could end up greatly outcompeting the large because they have less complexity. Yeah, you had a small section in that piece about fusion where you were especially pessimistic about fusion.
What is your take on fusion oh no it's kind of the same thing i'm not pessimistic about fusion i'm pessimistic about fusion technologies that heat up water to make steam and run it through a steam turbine because they're not efficient it's just so expensive to do the like literally like just pitting in like the steam turbine and the condenser and all that kind of stuff you need for that basically makes you uncompetitive on at most on most deregular power markets yeah so i mean there's startups who have uh plans to do direct energy conversion i don't know how feasible those plans are but yeah like presumably you think those are in those cases you you think fusion and, uh, could have a big future.

Yeah. Yeah.
I, I, again, I like, I don't know too much about the same as you. I don't know too much about their specific technology, but if you're pursuing a direct conversion technology, it's just, you're, you actually have a chance of success.
I think a lot of people I've talked to in the fusion space, they're like, well, I can make, you know,

electricity for $50 a megawatt hour. And because I'm fusion,

people should pay me $50. And it's like, well,

not everyone may want to pay you $50.

Yeah. Yeah.
I mean, um,

it might involve an initial period of like large subsidy that we had to give

electric, um, uh, electric vehicles and even solar. I like,

we had to give huge subsidies to solar in the beginning when we were at the beginning of the learning curve. So that might be necessary though.
Yeah. I mean, I, I really disagree with like the subsidy solar's had actually.
And, and I think it just like, if you actually look at the numbers, it proves the point. Like the people say like, Oh, because Germany did the feed in tariffs that like made solar cheap.
So if you had a country that's one percent of the population they spent like a tiny portion of their gdp and that was enough to scale the technology well you should just let some other fool do that you know reap the benefits so i would be supportive of of taking away most of the subsidies for energy in general just to make sure i just that argument you're saying that like it's unlikely that the small subsidies that germany gave were enough to actually make the difference it was a i'm just saying if you if they were if it took such a small amount of subsidy to do it like someone will be foolish enough to do that you know in this case it was germany they spent a lot of money doing that that was you know they're not reaping the benefit from yeah it's not compatible with their environment so um and their climate i mean yeah so i mean we benefited from them doing that we didn't have to you know we still do spend some subsidies on solar and i think they're very like poorly designed so i would be better just to get rid of them but but but the thing with fusion if you're just heating up heating up water to, is that technology, there's no learning curve anymore for steam engines, basically. Because, you know, that technology is so mature.
I mean, now, so that's why some people are looking at, like, supercritical CO2 cycles is because, well, maybe this could be a little cheaper than doing steam turbines. That's some possibility there.
And there's some other technologies that maybe someday you have like thermoelectric generators and stuff like that. But I think the direct conversion technologies have just a massive advantage, not only in initial costs, but in ongoing operating costs.
Okay, okay. There's one more topic I really want to talk about, which was...
Yeah yeah you have this interesting post on where you can actually expect to find alpha uh given that at least public markets are efficient i do you want to like explain the basic thesis of that post before i ask you specific questions about it yeah if i was gonna like done that post down like i love fama's original paper where he lays out this efficient market hypothesis thesis and you know he's like there's multiple types of information and so the first is you know if you just have like pricing data for stocks or whatever securities like you can be the smartest person in the world and you're not going to make any money doing that because it's just like random but the if you start incorporating more information like what's in 10ks and all that like if you just like random. But the, you know, if you start incorporating more information, like what's in 10 K's and all that, like if you're like super, super smart, you might be able to make a little bit of money there.
And, you know, we see that with people like Renaissance Technologies and you can debate about, you know, Warren Buffett and all that. But then there's the third category, which is like the strong type information.

And it's basically you have legally acquired private information and the, you know, you

can make money that way and be significantly less smart.

So if you, if you want to like just take Fama's paper and like, how do I make money?

It's like, okay, well, I should find legal ways to acquire this information.

And then I don't have to be a super genius to make money on it.

Yeah, what I thought was really interesting in your post was you had this point about how one of the ways you can actually earn excess returns is through labor, right?

Like Buffett in the early years, at least, would go into these factories or companies and like interrogate every single piece of operations and whatever and i thought that was an interesting twist on picardy's thesis so i don't know if you've um seen his stuff but he has this claim that well not only does capital earn more than uh the gains to capital are higher than the gains to labor but the more more capital you have, the higher returns you can earn. Like, I guess Harvard has access to hedge funds that may be able to earn like excess returns.
I thought yours was like an interesting. Basically, if you take this view, it's basically the inversion of Piketty because like over time, as Buffett has gotten wealthier, his returns have gone uh, it's harder to like invest the marginal dollar more effectively.
And as you said, with the medallion fund, yeah, they, they don't, they, they no longer accept outside money. And, uh, and then the, the interesting thing about labor is like the reason that Buffett was able to earn those excess returns at the beginning was because of the labor he put in.
Right. So the interesting thing is like capital is just fungible with with other capital so capital doesn't enjoy as high returns as like really good labor really smart labor which is like the opposite of the pickety thesis and i think there was actually a paper i think it i think it was on marginal revolution a couple years back so i'm pulling from my memory here so i could be missing a little bit but basically, it studied all these businesses and what happened to the business after a founder unexpectedly died.

And it looks like these are capital returns, as many people would see them.

But then the earnings just dropped like a rock because they lost some irreplaceable human capital and you know they didn't spend any time training on because they died unexpectedly right which also has an interesting implication for ceo pay which suggests that actually like okay in the marxist sense what is uh pay it's like your pay is what it costs to replace you right um and if it if the if steve jobs are so irreplaceable that you know if he goes away like earnings are going to drop like a rock and like uh rock and the stock price are going to drop like a rock actually that means that he should get paid like if that's how expensive it is to replace him he may be like irreplaceable right so it's actually worth whatever like dozens of millions of dollars you're paying him yeah yeah i'm generally a proponent for letting the market decide that yeah yeah okay and then another way you said suggested that maybe uh firms could earn excess returns is like by developing unique brand right so like y combinator is probably able to earn excess returns to a normal uh venture capitalist because of their unique brand yeah i thought that was really. Do you want to talk more about that? I think it's just like a lot of this intangible capital and labor are complements for regular capital.
And I think you can see it too. If you build a brand around that you're a good investor, you can raise money from other people and charge the you know, more so than if you're just like a no-name.
I think there's lots of examples of that where building a brand or building relationships is extremely valuable and can, just like specific knowledge, can juice your returns. I mean, it's like a type of specific knowledge.
Well, you mean it's specific knowledge well i mean to build a brand like y combinator you have to like understand what tech founders want so they they you know use that knowledge to create you know a place that's great to do go to your startup yeah yeah yeah interesting um is the market for blogging efficient so now there's actually a financial rewards to blogging as you know the effective ideas block rise there's other kinds of grants like this you know recently opened philanthropy a contest of you suggested cause era they have like you know there's many prizes where like if you're good it seems like if you're pretty really good at blogging, you could like earn six figures, it seems given like the regularity and size of these prizes.

Yeah. So is this a market that we should expect to be efficient?

I think it would be hard to measure, like given my own experience, like I'm blogging for free, but the benefits I've gotten from learning about what I'm blogging about and then like a few connections I made that then helped me like with what I'm my projects I'm working on you know like there's like huge returns could and it could be you know like my project successful like could be just like almost immeasurable so yeah I would guess it's very hard to measure and probably inefficient that more people could blog because it's hard to predict the returns to what your blogging might have. But I guess if you're going to do these blog prizes, I don't know if the blog prize, you know, because the blog prizes are about specific topics.
I don't know if that, how much that helps the efficiency there. Yeah.
Yeah. Let's take that part of it out.
let's just talk about the factor you mentioned which which is that you can, this is a regular thing you hear from people who write online, which is that the gains they get are huge. And that's also the case in my case.
And so it's kind of interesting. I guess efficient markets doesn't like, just because the stock market is efficient doesn't mean that everybody will put their money into the stock market, right? That's not the implication.
So it's very possible that you have irrational actors who are not like invested in or like writing.

But then the question is, given that you write something that's high quality, will it get noticed by the market? Like will it get the attention and broadcasting that it deserves? And in my experience, actually, like I guess this was the case you mentioned that some of your first posts ended up on Hacker News, right? So in that sense, that market was efficient. But yeah, it seems to me that when somebody finds a good blogger, they, it's not hard for their initial post or like at least their subsequent post as they get better to gain an audience.
Yeah, I do think, I do think that, you know, I don't know what the, what the counterfactual is. You know, we don't know about the people that didn't be you know didn't have posts go to hacker news so like it could

have easily been i mean i think that what the alternative for me is i just would have blogged

way less you know if if one of those early posts hadn't hadn't gotten more attention so yeah it's

hard to know what the counterfactual is how many people have just like abandoned blogs that did

like three posts and they would have written one more maybe it would have it would have been better

Thank you. so yeah it's hard to know what the counterfactual is how many people have just like abandoned blogs that did like three posts and they would have written one more maybe it would have it would have been better yeah yeah okay awesome this has been a lot of fun thank you so much for uh i think we're two hours over at this point so thank you so much for your time all right thank you i don't know if you have any other, other final thoughts or any other subjects that we should hit on or.

No, you know, I think we covered everything.

Okay, cool.

Cool.

Awesome.

And then just people can find you at Austin Vernon dot.

Dot site.

Okay.

Austin Vernon dot site.

And then your Twitter is.

I think it's Vernon three Austin.

Okay.

And it'll also be on the show description, but yeah.

Oh yeah.

Yeah. Thanks very much for coming on,

man.

This is a lot of fun.

All right.

Thank you.