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Tag: cleantech

What I've Changed My Mind on Over the 2010s

I’ve been reading a lot of year-end/decade-end reflections (as one does this time of year) — and while a part of me wanted to #humblebrag about how I got a 🏠/💍/đŸ‘¶ this decade 😇 — I thought it would be more interesting & profound to instead call out 10 worldviews & beliefs I had going into the 2010s that I no longer hold.

  1. Sales is an unimportant skill relative to hard work / being smart
    As a stereotypical “good Asian kid” đŸ€“, I was taught to focus on nailing the task. I still think that focus is important early in one’s life & career, but this decade has made me realize that everyone, whether they know it or not, has to sell — you sell to employers to hire you, academics/nonprofits sell to attract donors and grant funding, even institutional investors have to sell to their investors/limited partners. Its a skill at least as important (if not more so).
  2. Marriage is about finding your soul-mate and living happily ever after
    Having been married for slightly over half the decade, I’ve now come to believe that marriage is less about finding the perfect soul-mate (the “Hollywood version”) as it is about finding a life partner who you can actively choose to celebrate (despite and including their flaws, mistakes, and baggage). Its not that passionate love is unimportant, but its hard to rely on that alone to make a lifelong partnership work. I now believe that really boring-sounding things like how you make #adulting decisions and compatibility of communication style matter a lot more than things usually celebrated in fiction like the wedding planning, first dates, how nice your vacations together are, whether you can finish each other’s sentences, etc.
  3. Industrial policy doesn’t work
    I tend to be a big skeptic of big government policy — both because of unintended consequences and the risks of politicians picking winners. But, a decade of studying (and working with companies who operate in) East Asian economies and watching how subsidies and economies of scale have made Asia the heart of much of advanced manufacturing have forced me to reconsider. Its not that the negatives don’t happen (there are many examples of China screwing things up with heavy-handed policy) but its hard to seriously think about how the world works without recognizing the role that industrial policy played. For more on how land management and industrial policies impacted economic development in different Asian countries, check out Joe Studwell’s book How Asia Works
  4. Obesity & weight loss are simple — its just calories in & calories out
    From a pure physics perspective, weight gain is a “simple” thermodynamic equation of “calories in minus calories out”. But in working with companies focused on dealing with prediabetes/obesity, I’ve come to appreciate that this “logic” not only ignores the economic and social factors that make obesity a public health problem, it also overlooks that different kinds of foods drive different physiological responses. As an example that just begins to scratch the surface, one very well-controlled study (sadly, a rarity in the field) published in July showed that, even after controlling for exercise and calories, carbs, fat, fiber, and other nutrients present in a meal, diets consisting of processed foods resulted in greater weight-gain than a diet consisting of unprocessed foods
  5. Revering luminaries & leaders is a good thing
    Its very natural to be so compelled by an idea / movement that you find yourself idolizing the people spearheading it. The media feeds into this with popular memoirs & biographies and numerous articles about how you can think/be/act more like [Steve Jobs/Jeff Bezos/Warren Buffett/Barack Obama/etc]. But, over the past decade, I’ve come to feel that this sort of reverence leads to a pernicious laziness of thought. I can admire Steve Jobs for his brilliance in product design but do I want to copy his approach to management or his use of alternative medicine to treat his cancer or condoning how he treated his illegitimate daughter. I think its far better to appreciate an idea and the work of the key people behind it than to equate the piece of work with the person and get sucked in to that cult of personality.
  6. Startups are great place for everyone
    Call it being sucked into the Silicon valley ethos but for a long time I believed that startups were a great place for everyone to build a career: high speed path to learning & responsibility, ability to network with other folks, favorable venture funding, one of the only paths to getting stock in rapidly growing companies, low job seeking risk (since there’s an expectation that startups often fail or pivot). Several years spent working in VC and startups later, and, while I still agree with my list above, I’ve come to believe that startups are really not a great place for most people. The risk-reward is generally not great for all but the earliest of employees and the most successful of companies, and the “startups are great for learning” Kool-aid is oftentimes used to justify poor management and work practices. I still think its a great place for some (i.e. people who can tolerate more risk [b/c of personal wealth or a spouse with a stable high-paying job], who are knowingly optimizing for learning & responsibility, or who are true believers in a startup’s mission), but I frankly think most people don’t fit the bill.
  7. Microaggressions are just people being overly sensitive
    I’ve been blessed at having only rarely faced overt racism (telling me to go back to China 🙄 / or that I don’t belong in this country). It’s a product of both where I’ve spent most of my life (in urban areas on the coasts) and my career/socioeconomic status (its not great to be racist to a VC you’re trying to raise money from đŸ€‘). But, having spent some dedicated time outside of those coastal areas this past decade and speaking with minorities who’ve lived there, I’ve become exposed to and more aware of “microaggressions”, forms of non-overt prejudice that are generally perpetrated without ill intent: questions like ‘so where are you really from?’ or comments like ‘you speak English really well!’. I once believed people complaining about these were simply being overly sensitive, but I’ve since become an active convert to the idea that, while these are certainly nowhere near as awful as overt hate crimes / racism, they are their own form of systematic prejudice which can, over time, grate and eat away at your sense of self-worth.
  8. The Western model (liberal democracy, free markets, global institutions) will reign unchallenged as a model for prosperity
    I once believed that the Western model of (relatively) liberal democracy, (relatively) free markets, and US/Europe-led global institutions was the only model of prosperity that would reign falling the collapse of the Soviet Union. While I probably wouldn’t have gone as far as Fukuyama did in proclaiming “the end of history”, I believed that the world was going to see authoritarian regimes increasingly globalize and embrace Western institutions. What I did not expect was the simultaneous rise of different models of success by countries like China and Saudi Arabia (who, frighteningly, now serve as models for still other countries to embrace), as well as a lasting backlash within the Western countries themselves (i.e. the rise of Trump, Brexit, “anti-globalism”, etc). This has fractured traditional political divides (hence the soul-searching that both major parties are undergoing in the US and the UK) and the election of illiberal populists in places like Mexico, Brazil, and Europe.
  9. Strategy trumps execution
    As a cerebral guy who spent the first years of his career in the last part of the 2000s as a strategy consultant, it shouldn’t be a surprise that much of my focus was on formulating smart business strategy. But having spent much of this decade focused on startups as well as having seen large companies like Apple, Amazon, and Netflix brilliantly out-execute companies with better ‘strategic positioning’ (Nokia, Blackberry, Walmart, big media), I’ve come around to a different understanding of how the two balance each other.
  10. We need to invent radically new solutions to solve the climate crisis
    Its going to be hard to do this one justice in this limited space — especially since I net out here very differently from Bill Gates — but going into this decade, I never would have expected that the cost of new solar or wind energy facilities could be cheaper than the cost of operating an existing coal plant. I never thought that lithium batteries or LEDs would get as cheap or as good as they are today (with signs that this progress will continue) or that the hottest IPO of the year would be an alternative food technology company (Beyond Meat) which will play a key role in helping us mitigate food/animal-related emissions. Despite the challenges of being a cleantech investor for much of the decade, its been a surprising bright spot to see how much pure smart capital and market forces have pushed many of the technologies we need. I still think we will need new policies and a huge amount of political willpower — I’d also like to see more progress made on long-duration energy storage, carbon capture, and industrial — but whereas I once believed that we’d need radically new energy technologies to thwart the worst of climate change, I am now much more of an optimist here than I was when the decade started.

Here’s to more worldview shifts in the coming decade!

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Tesla in Energy Market

One of the most fascinating things about the technology industry is how the lines between markets and competitors can shift all of a sudden. One day, Nokia is mainly thinking about competing with phone makers like RIM and Motorola on getting influence with carriers and upselling text messaging services / ring tones and, the next, they need to deal with players like Apple and Google, fostering a strong app ecosystem, creating intuitive user experiences, and building a brand that resonates with users.

One interesting case that has emerged in the past couple of days is the electric car company Tesla entering the Home and Industrial energy market. In much the same way that software let Apple and Google build operating systems that could double up as phones, the manufacturing prowess and battery technology which let Tesla take on the electric car market also gives them the ability to offer energy storage solutions for the utility market.

When I was a VC looking at energy storage opportunities, there was a fair amount of discussion in the industry about the future potential for electric cars connected to the grid to themselves to operate as energy storage / load balancing. I never expected this to amount to much for at least a decade — when the penetration of electric vehicles would be high enough to make sense for utilities to invest in this capability. Never would I have imagined the path to anything even remotely like this would be through an electric car company directly making and offering electric batteries to supply the market. While history will judge whether or not Tesla is successful at this (a lot of unanswered questions around the durability of their Li-ion batteries for utility purposes and how they will be serviced / maintained), you can’t fault Tesla for lack of boldness!

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Solyndra and the Role of VCs and Government in Cleantech

Because of the subject matter here, I’ll re-emphasize the disclaimer that you can read on my About page: The views expressed in this blog are mine and mine alone and do not necessarily reflect the views of my current (or past) employers, their employees, partners, clients, and portfolio companies.

Solyndra-logo

If you’ve been following either the cleantech world or politics, you’ll have heard about the recent collapse of Solyndra, the solar company the Obama administration touted as a shining example of cleantech innovation in America. Solyndra, like a few other “lucky” cleantech companies, received loan guarantees from the Department of Energy (like having Uncle Sam co-sign its loans), and is now embroiled in a political controversy over whether or not the administration acted improperly and whether or not the government should be involved in providing such support for cleantech companies.

Given my vantage point from the venture capital space evaluating cleantech companies, I thought I would weigh in with a few thoughts:

  • The failure of one solar company is hardly a reason to doubt cleantech as an enterprise. In every entrepreneurial industry where lots of bold, unproven ideas are being tested, you will see high failure rates. And, therein lies one of the beauties of a market economy – what the famous economist Joseph Schumpeter called “creative destruction.” That a large solar company like Solyndra failed is not a failing of the industry – if anything it’s a good thing. It means that one unproven idea/business model (Solyndra’s) was pushed out in favor of something better (in this case, more advanced crystalline silicon technologies and new thin film solar technologies) which means the employees/customers of Solyndra can now move on to more productive pastures (possibly another cleantech company which has a better shot at success).
  • The failure of Solyndra is hardly a reason to doubt the importance of government support for the cleantech industry. I believe that a strong “cleantech” industry is a good thing for the world and for the United States. Its good for the world in that it represents new, more efficient methods of harnessing, moving, and using energy and is a non-political (and, so, less controversial to implement) approach to addressing the problems of man-made climate change. Its good for the United States in that it represents a major new driver of market demand that the US is particularly well-suited to addressing because of its leadership in technology & innovation at a time when the US is struggling with job loss/economic decline/competition abroad. Or, to put it in a more economic way, what makes cleantech a worthy sector for government support is its strategic importance in the future growth of the global economy (potentially like a new semiconductor/software industry which drove much of the technology sector over the past two decades), the likelihood that the private sector will underinvest due to not correctly valuing the positive externalities (social good), and the fact that

  • Private sector investors cannot do it all when it comes to supporting cleantech. One of the criticisms I’ve heard following the Solyndra debacle is that the government should not leave the support of industries like cleantech to the private sector. While I’m sympathetic to that argument, my experience in the venture investing world is that many private investors are not well equipped to providing all the levels of support that the industry would need. Private investors, for instance, are very bad at (and tend to shy away from) providing basic sciences R&D support – that’s research which is not directly linked to the bottom line (and so is outside of what a private company is good at managing) and, in fact, should be conducted by academics who collaborate openly across the research community. Venture capital investors are also not that well-suited to supporting cleantech pilots/deployments – those checks are very large and difficult to finance. These are two large examples of areas where private investors are unlikely to be able to provide all the support that the industry will need to advance and areas where there is a strong role for the government to play.
  • With all that said, I think there are far better ways for the government to go about supporting its domestic cleantech industry. Knowing a certain industry is strategic and difficult for the private sector to support completely is one thing – effectively supporting it is another. In this case, I have major qualms about how the Department of Energy is choosing to spend its time. The loan guarantee program not only puts taxpayer dollars at risk directly, it also picks winners and losers– something that industrial policy should try very hard not to do. Anytime you have the ability to pick winners and losers, you will create situations where the selection of winners and losers could be motivated by cronyism/favoritism. It also exposes the government to a very real criticism: shouldn’t a private sector investor like a venture capitalist do the picking? Its one thing when these are small prize grants for projects – its another when its large sums of taxpayer dollars at risk. Better, in my humble opinion, to find other ways to support the industry like:
    • Sponsoring basic R&D to help the industry with the research it needs to break past the next hurdles
    • Facilitating more dialogue between research and industry: the government is in a unique position to encourage more collaboration between researchers, between industry, between researchers AND industry, and across borders. Helping to set up more “meetings of the minds” is a great, relatively low-cost way of helping push an industry forward.
    • Issuing H1B visas for smart immigrants who want to stay and create/work for the next cleantech startup: I remain flabbergasted that there are countless intelligent individuals who want to do research/work/start companies in the US that we don’t let in.
    • Subsidizing cleantech project/manufacturing line finance: It may be possible for the government to use tax law or direct subsidies to help companies lower their effective interest payments on financing pilot line/project buildouts. Obviously, doing this would be difficult as we would want to avoid supporting the financing of companies which could fail, but it strikes me that this would be easier to “get right” than putting large swaths of taxpayer money at risk in loan guarantees.
    • Taxing carbon/water/pollution:  If there’s one thing the government can do to drive research and demand for “green products” is to issue a tax which makes the consequences of inefficiency obvious. Economists call this a Pigovian tax and the idea is that there is no better way to get people to save energy/water and embrace cleaner energy than by making them. (Note: for those of you worried about higher taxes, the tax can be balanced out by tax cuts/rebates so as to not raise the total tax burden on the US, only shift that burden towards things like pollution/excess energy consumption)

    This is not a complete list (nor is it intended to be one), but its definitely a set of options which are supportive of the cleantech industry, avoid the pitfall of picking winners and losers in a situation where the market should be doing that, and, except for the last, should not be super-controversial to implement.

Sadly, despite the abundance of interesting ideas and the steady pace of innovation/business model innovation, Solyndra seems to have turned investors and the public more sour towards solar and cleantech more broadly. Hopefully, we get past this rough patch soon and find a way to more effectively channel the government’s energies and funds to bolstering the cleantech industry in its quest for clean energy and greater efficiency.

(Image credit)

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