HIBT Lab! BlocPower: Donnel Baird

Hello and welcome to how I built this lab. I'm Guy Raz. Almost a third of all the carbon emissions released by Americans each year Come from buildings. Хомс, апартментс, офисис.

to keep them lit and heated or cooled. And this is a big problem. But there is a solution, which isn't as complicated as you might think. And the solution is to electrify our buildings, and making sure that that electricity comes from renewable sources like wind or solar or hydropower or even nuclear power. Most of our energy still comes from burning coal and gas, but advances in technology in recent years has made it possible within our grasp to decarbonize all of our buildings and to do it quickly. About eight years ago, Danelle Baird, an entrepreneur from Brooklyn, saw an opportunity to focus on decarbonizing buildings in low income neighborhoods.

neighborhoods like the one he grew up in. He founded a company called Block Power that converts any building into a carbon free building by electrifying it. So far, Black Power has converted more than 1200 buildings, and recently signed a deal with the city of Ithaca, New York to electrify and decarbonize every single building in the city. Dell Baird, welcome to the show. Guy Ross, I just couldn't be more delighted to talk with you. So you grew up.

In Brooklyn. Parents immigrants. Tell me a little bit about where you grew up and and what they did. So my parents emigrated from Guyana. Um, and my dad was an engineer and my mom was a teacher, and the country's economy was collapsing. And so they moved to the United States into a pretty tough neighborhood in Brooklyn.

uh Bedsty, which is where Notorious B. I G is from. And at the time in the early eighties most of the buildings didn't have working heating systems. So in the winter, we and all of our neighbors, when it got super cold outside, we would open up the windows and we would turn on the oven in the kitchen and open up the oven door. And use the oven to provide heat to all of our apartments all winter. You just turned on the the oven in your kitchen, cracked it open and you gotta remember to open up the window so the carbon monoxide can flow out of the apartment. So that's that's how we did it.

Yeah. And that was just normal. That just seemed normal growing up. Yeah. There's like a furnace in the basement that was supposed to like burn oil or gas and provide hot water heating through radiators and and or vents, depending on what kind of building you're in. Right. But You know, oil and gas can be super expensive and maintaining that furnace can be super expensive. And so

The landlady was like, Look, we're gonna charge you guys like twenty five dollars a week for this like one bedroom apartment. But there's no heat. So All the apartments are gonna have to use the gas ovens in the kitchen for heat. And like that's what we did. That's what our neighbors. That's what my friends at school did. That's what we did. I know you went on to study.

History and political science of Duke. But what what were you sort of interested in doing were you um were you interested in politics? Is that the direction you thought you'd head into? Um, I was really interested in trying to improve the lives of my family. You know, we have this large immigrant family. I probably have forty or fifty cousins and I'd been given a lot of educational opportunity.

Um, I ended up going to an elite private school for high school and then going to Duke for undergrad. And my giant family was like, All right, we got Donnell through. We gotta send him to Wall Street so he can make some money. And uh come back and pay for all of his uh younger cousins to go to college. Um, and so there was this kind of community uplift component to what was the expectation, but when I got to Duke, I learned about climate change. Um, I got really interested in black civil rights and economic justice.

And came out of Duke extremely political. And then ended up becoming a community organizer. Working uh initially for President Obama's than Senator Obama's presidential campaign, I think, at first, right? Well initially I was working with um the there's a small team of community organizers who had trained President Obama when he was a community organizer back in the south side of Chicago. And so I did that for three years and was supervised by the same people that had trained Barack Obama. And then when he announced that he was running for president in 2007,

I said goodbye to my girlfriend and friends in Brooklyn, packed up a car and drove down to South Carolina to become a a senior staffer with the uh Obama for America campaign. I mean you you grew up with not a whole lot of access to heating in your apartment. When you were doing that work

in South Carolina. Were you exposed to Anything like that during that time? Yeah, that was what was so interesting, guys. When I you know, I ended up going to like eight or nine states with the Obama presidential campaign. And there's a pattern that I saw as we would head into low income and work in communities to persuade them that Barack Obama was their guy and he was gonna support their interests and they should turn out.

There's this persistent pattern where there's there's just this tremendous waste of energy in neglected low and moderate income buildings that really reminded me of where I grew up. Um, I remember walking around outside one day And it was twenty degrees outside and I was looking at this giant apartment building with all the windows open and I was like ah That's just like my three story apartment building where I grew up. They're heating their houses with their oven. Yeah. They're eating this giant apartment building with their ovens.

Um and so there is an inefficiency in the energy system That I saw not only in Brooklyn, but in Cleveland and in Charlotte on the South Carolina Georgia border. And the Obama campaign that led me to believe that this was a persistent pattern of energy neglect or energy poverty that needed to be addressed. I didn't understand at the time that it was like a business or market opportunity, but I just saw it was like a pattern and I knew it was unhealthy, right? Because if you don't open up the windows, Um, you're breathing in carbon monoxide and nitrogen dioxide and stuff that's very unhealthy for you and your kids. And so I knew it was an energy problem as well as a public health problem.

for the U Energy. For a couple years. Tell me a little bit about what you did during that time. This is sort of 2008 to 2011. Yeah. So remember there's a financial collapse in um So I was a liaison between the US Department of Energy and a bunch of labor unions and energy utility companies and Wall Street banks around a particular part of the two thousand and nine recovery act. It was six and a half billion dollars with a B that was being invested in greening low income buildings, which of course was becoming my thing. And I was like, I want to do that. I want to go green low income buildings. And they're like, great, you can work with these labor unions and energy companies and

The labor unions had ninety billion dollars of pension funds that they wanted to co-invest in greening buildings with six billion dollars that was provided from the federal government as part of the recovery act. Wow. And so the plan was we were gonna create this new green buildings industry across America. We were gonna retrain and rehire a million laid off construction workers to, you know, go building to building. And Secretary of Energy Chu had this vision of like an eighteen wheeler Mac truck filled with organic insulation, and it was just gonna drive down the block and stop at every house and like pump green organic insulation uh. Into every home, into every attic to save people money. We were gonna create a bunch of jobs. So like that was the vision, and we were just gonna have a hundred billion dollars to do this with. Guys you might imagine we could not quite pull it off. But it was a really compelling vision. You get to create jobs, you get to reduce greenhouse gas emissions, you get to move off of foreign oil.

Greening Buildings is a pretty compelling policy goal with a lot of social and environmental and financial outcomes. And I worked on that for a few years. It didn't work out quite as well as we'd hoped. Like other things work, like They loaned half a billion dollars to Tesla. They invested a ton of money in rooftop solar. And those things worked really great. But the idea of going building to building to green all the buildings in America. uh we were not able to pull that off. So what I'm curious about, you're you're working on this federally financed project to help quote unquote green these buildings. which is to make them more energy efficient and maybe uh put in solar panels and things like that.

Presumably while you're doing this, you're learning a lot about The inefficiency. carbon emissions we think of uh you know coal powered energy plants, right? But buildings I didn't know this.

Buildings account for fifteen percent of the world's CO two emissions. 15% of the world's CO2 emissions, thirty percent of the United States CO2 emissions. Wow. And in New York City, where I am, buildings are sixty-seven percent. So if you look at New York City and San Francisco, you have massive amounts of CO2 and greenhouse gas that's being emitted by buildings. And so there just isn't a way to deal with climate change unless you green the buildings. And that comes from presumably the energy used by everybody in the building. So that when they plug stuff in or the lights or whatever, you know, but also other things like in a home I guess your washing machine, your dryer, your gas oven and stove top. Are all those the factors that add up to thirty percent of carbon emissions? That's right. There's all the appliances and all the electricity that we use in our buildings.

And so we burn oil and gas or coal in some places to produce electricity and send it through transmission lines to use the electricity in our homes. And then on site in our homes We burn gas to cook with. To produce hot water that we shower with. And we also burn oil and gas for heating. And so, for example, in New York City, there's ten thousand giant apartment buildings. that burn oil for hot water and for heat. Like a truck filled with oil pulls up once a week.

and runs this like tube into the basement. into the heating system and like pumps oil from the back of the truck into the basement and then you burn that oil to produce hot water year round. And that is how apartment buildings in twenty twenty two, ten thousand of them at least use fossil fuels. And that's on site. Right. Um so it's a pretty significant

amount of greenhouse gas emissions. So this is a huge problem. You are exposed to this problem and even these so called energy efficient buildings or these programs that you were part of to insulate homes better and to Make them more efficient and with efficient appliances. Even with those things, it's still a problem.

It's a huge problem. Why are we digging up dead dinosaurs? And burning them in our houses. This isn't ancient Mesopotamia. Like what are we doing? Yeah. Yeah.

And we literally are. We're th that's what oil is. It's just a compressed Plant and animal life from Millions of years ago. Yeah, there's a better way to do this, right? By the way, it's really dangerous. I mean There's the all the pollution that it produces that we breathe in. But you know, look, if you put a gas explosion alert in Google, as I do.

Then every week or so you're gonna get an email about Some poor American family's home. Blowing up and exploding because The gas was leaking and someone lit a match or flipped on a light bulb. And so this is like an unsustainable, unhealthy

Unsafe. And super expensive way. To power buildings. And so we need to do something new. Alright, so you start to realize this. And it's around twenty twelve you decide to go to business school.

Did you have a fully formed idea in mind about what you thought you might want to do? I did, guy. I um Apparently in my Columbia Business School application. I wrote up the argument for block power. And basically it was that there seem to be all of these Challenges?

And opportunities in the green buildings industry that I was learning about while I was working with the Department of Energy and the Labor Unions. And I just couldn't figure out why We couldn't do a better job of like fixing the industry. And so I would ask this question around Well why can't Wall Street provide the capital to pay for us to green all the buildings? And the answer would be Well, Wall Street can provide all the capital. And then I'd be like, Okay, why can't we train more mechanical engineers to do a better job of

analyzing the buildings and figuring out what kinds of green equipment should go into buildings. And the answer would be like, well nothing's stopping us from doing that. There was just no one who was focused on it, who was willing to kind of invest, I guess, their whole life and make it their mission to solve this problem at scale. And for me Because I care about climate change. And because I care about creating jobs in low income communities like the one where I grew up. Um, green buildings just seemed like a really important mission. And it seemed like it could just

check a lot of boxes for me and be a life well lived. If I pursued figuring out how to solve the problem of greening buildings. And so in order to do that, I needed to to get an MBA to at least learn enough about business. And so um that was the school I applied to. And I did have an explicit mission of trying to figure out how to build a nonprofit. Called block power or something similar. Hm.

So people who have solar panels and all of these things that enable them to live in a less carbon polluting way tend to be Higher income people. You essentially said look.

There are Tens of millions of people. who live in low income buildings, not only in the US but around the world. And they should also have the opportunity to live in a green building. And that was from the get go, that would be your focus.

From the get go. That was my focus. I wanted to engage with the communities that I grew up in and grew up near and served. To green their buildings. I mean, when I was working with the Obama folks, I had one of my favorite pastors in Bed Sty call me and he goes, Hey, you're working on greening buildings, right? I'm like, Yeah. He's like

I'm spending ten thousand dollars a month on my energy bill and I'm like what? Wow. So he had a hundred and fifty year old formerly Catholic building and he had a school for neighborhood kids, like an elementary school, and then he had senior activities and lunches. So the church was like constantly filled seven days a week and so The heating system and air conditioning system was always on. Right?

So he's spending ten thousand dollars a month. on his energy costs and he goes, I only have three hundred thousand dollars a year of revenue coming into the church. And a hundred and twenty thousand dollars of that. is going out on energy. Well,

It's a massive pain point. for low income people, right? So The other part of it is like You know, when I was growing up in Brooklyn, man, there's like two kinds of waste. that I saw when I was growing up and when I was a community organizer, there's like a waste of all the energy and the fossil fuel gets just wasteful, right? When you look at it as someone who cares about climate or just someone who cares about efficiency. Like why are you heating a building to ninety degrees when it's twenty degrees outside?

and doing that with gas ovens and then all of the heat is float out the window. It's absurd. And then the other waste is the waste of human potential. When you walk around these neighborhoods and you see scores of unemployed young people. who have children that they need to provide for and they have talent and they have genius and they have dreams. But they don't have any opportunity. And it's like you can address both pieces of this waste by training those young people to go and green those buildings and just make everything much more efficient. And so that's what I wanted to do. We're gonna take a very short break. We'll be back with more from Danelle Baird of Block Power in just a moment.

Stay with us, you're listening to how I built this lab. Welcome back to how I built this lab. Guy Raz. My guest is Danelle Baird, founder of Black Power. So you literally founded this company while you were at business school, right? Yes. And you launched it formally in 2014, but not as a nonprofit, as a for-profit business.

correct. I learned enough about business in business school to say, well look, I mean greening buildings in America is gonna cost like five trillion dollars. There's a hundred and twenty five million buildings in America. Literally, it'll cost five trillion dollars. Literally someone's gonna have to put up five trillion dollars. But there's a way to do it and make a financial return. So someone's gonna make like Point seven trillion dollars by investing five trillion dollars. So someone's gonna make like huge fortunes, right? Well by investing and greening all the buildings. And like that's why we work with Goldman Sachs, right? It's not like I mean They are nice people, or at least the part of the bank that we work with are nice people. But they're gonna make a lot of money if this all works out. But you started this as a for profit business because you wanted to attract

capital and you wanted to show that there was a business model in basically converting Low income. into not just energy efficient, but carbon free buildings with solar panels and the idea was you could actually Do this and it can make money.

We thought that we could go into the poorest neighborhoods in America and build a business. Making those buildings greener, smarter, and healthier and make our investors a ton of money. That's what we thought. And that's what we've been trying to prove. The concept. And you know what you want to do.

Now help me understand what that is. Because this is not what the Obama administration was doing when you were trying to green buildings or make them more efficient. It wasn't about pumping better insulation to the building. You had a very different plan. Which was to take a building and to do what with it? We want to decarbonize the building. And how do you basically do that? There's a set of new hardware.

That allows us to make buildings all electric. In the same way that Tesla and Rivian can take an automobile and rip out the fossil fuel engine and replace it with an all-electric engine, we can now do the same thing with hardware in buildings. And so we can go into basically any building in America and rip out the existing fossil fuel equipment. that heats the building, heats the hot water for cooking and showering. We can rip all of that fossil fuel equipment out and replace it with equipment that only uses electricity. and actually reduces greenhouse gas emissions by as high as seventy percent. And so then the next question is like, Okay, well if it's using electricity, is that electricity sourced from like

Burning coal or gas? Well Sometimes, but you can also source that electricity from solar on the roof of that building or a solar farm or a wind farm or a hydroelectric project. And so by converting the building to a a hundred percent all electric equipment, you create the opportunity to fully remove fossil fuel consumption in that building. So that's that's what we do. Let's get granular for a moment. And let's just take a Let's say a ten story apartment complex in Bedsty. And it's an old building built in the late sixties, early seventies. Not super well insulated, not super efficient, but you want to convert that building

You can essentially Put enough solar panels on the roof of that building to power that building? Or would it require other sources of energy as well. If it was a building in like downtown Cleveland, you could put enough solar on the roof. But

Because New York is is so dense, the roofs in New York aren't big enough to like provide enough power to the tall buildings. What we do have in New York City is we get most of our electricity or will next year. From a hydroelectric project in Quebec. Oh. And so there's this giant dam in Quebec that spins a bunch of turbines. And produces clean electricity and sends that electricity down to New York City. And so the source of our electricity in New York is gonna be far, far cleaner. than it is right now and than it is in most places in the country. And so you can convert that building to that power source in Quebec, for example.

Exactly. So that ten story building, maybe burning oil or burning gas right now for heating and cooling and hot water and for cooking. So we rip out all of that fossil fuel equipment, replace it with all the electric we electrify everything in the building the fundamental core of this is it has to first be electrified. The building, you gotta remove gas and oil, and then you focus on the source of that electricity. Is it gonna be wind, solar Hydro Et cetera. Exactly. We electrify that building. So you gotta get electrified first. Okay, so that's a first challenge. And then

Let's say you talk about ten story building with I don't know. seven or eight units per floor. Are you going into each unit and replacing the stove tops, putting in electric ovens, and so on and so forth. Yes, sir. We're going into each unit.

We're putting in all electric induction. stoves that use electricity to cook on the stove top and use electricity To bake. And then in certain kinds of projects we're gonna put in a small modular air conditioner sized

heating and cooling system so that that apartment building can control its own comfort with a local in unit electric heat pump. Basically replacing An in unit. uh air conditioning that might be hanging. Radiator. That's right. And the heat pump is electric powered and there Still relatively new.

Uh in the US for sure. And they basically work by like sucking out warm air in the summertime from a house in By pumping in warm air into the house in the winter. Yeah, so it's a cool piece of technology. Even if it's cold outside, there's some amount of warm air that's embedded. in outdoor air, even if it's below freezing. And so they're gonna find that warm air and suck it into the system, run it across a refrigerant line and a compressor, and then

pump that condensed heat into your home. And then in the summer it reverses itself. and sucks in the warm air that's inside your apartment, runs it across the refrigerant line, and pumps it outside. Um so it's like an air conditioner that can go uh forwards and backwards to pump heat. And they're just as effective as a gas powered air conditioner, like even in in if it's super hot outside, like a hundred and five degrees it can still bring in cool air, like really cool air. That's right. Whether it's a hundred and five degrees or whether it's five degrees below zero, they are able to function. And it's not cooled by Freon or the same chemicals that No, no. There's they have refrigerants. Um one of the cool things that we're really excited about is they're actually using CO two as a refrigerant.

So now if you take a step back. Right, and you look at our climate challenge of like, Oh my God, what's gonna happen when we put a hundred million air conditioning units in India and China as middle class folks like buy houses and build houses and want air conditioning, right? To stay cool. Well If CO two is the refrigerant that we're gonna be using, in effect we're putting a price on carbon.

Right, because we're using that CO two. as air conditioning. So I one of the things that I'm really excited about and really hopeful about is if Mitsubishi and Daycon and Fujitsu and the giant heat pump manufacturers are able to crack the code on CO2 refrigerant globally at scale, this is one of the most important things that can happen because then we're gonna start to power Buildings with C O two. And that's that's just gonna be huge. clear idea of what you wanted to do and you have already done some of it at this point. But this is back in twenty fourteen.

And you start to attract some investments. Yeah. Attract a strong guy. Strong. It took a while. It took a while. Um but today you've attracted I think over sixty million dollars in investments. Let's kinda break this down.

If you go, right? to Goldman Sachs's headquarters and you say, I want to electrify this building, they're just gonna write you a check. If you go to a you know not even a low income building. Even a you know a family that has some money, it is very expensive to do it now. Like for example, if you want to put solar panels on your home It's not cheap to do it.

And buying a an induction stove is not cheap. It's expensive. Heat pumps are not a huge expense compared to what already exists in the market. But just to to do it. It's a lot. Yeah, you might spend a hundred thousand dollars to electrify the average American's home. Right. That's right. So how do you do it? In a building where you know

residents are already struggling to pay their They're utility bills. Well, it took us about five years to figure this out, but what we've done is created a new financial product. where let's say we're gonna spend a hundred thousand dollars to electrify a home, what we're gonna do is calculate the size and the cost of the equipment. that we're gonna use to electrify the building, the cost of removing the fossil fuel equipment, the cost of that conversion, the labor costs, right? The cost of paying the the well trained certified contractor to come to your home and

physically remove the equipment, put it in the back of the pickup truck, drive it, you know, demolish it, install the new equipment, all in that's gonna be a hundred thousand dollars, right? Yeah. When we electrify your home, we think we're gonna save you twenty, forty, sixty percent on your annual energy bill. Because The modern all electric equipment that we're putting in is so much more efficient. than the wasteful, unhealthy fossil fuel equipment.

That's a currently in your home. So the question then becomes, how can we stretch out? that hundred thousand dollar cost over seven years or ten years or fifteen years. So that the cost of repay that hundred thousand dollar project Is less than the amount that you're saving

By shifting from fossil fuels to clean energy. How do you make the case? Two The people. in that building. Do you appeal to their sense of civic duty or their personal health?

or the long term cost savings, like how do you make the case that people in the building should go through the You know, it's inconvenient f period of getting things converted and swapped out and construction workers and then Maybe some costs associated. How do you what do you say? We say this project is gonna be a pain in the butt. It's gonna be a little bit of a hassle, but it's gonna be worth it. Because we're gonna save you money and we're gonna make you money.

So for example The church pastor that I told you about in Brooklyn who's spending ten thousand dollars a month. on his energy bill, on his oil bill, because he had a school and senior lunch and All these programs in his giant church that was so expensive to heat and cool. We went into that church in twenty fourteen and figured out

We could reduce his energy cost. From ten thousand dollars a month. to like seven thousand dollars a month. So we would immediately save him thirty six thousand dollars a year. And we thought that in order to generate that thirty six thousand dollar a year savings, that it would cost twenty five thousand dollars.

of capital to pay a local construction firm to come in. and reduce and improv you know, reduce his energy waste and improve his energy equipment. So he doesn't have twenty five thousand dollars lay around, right? Um so we're gonna lend it to him. And we're gonna buy the equipment, pay the contractor, supervise the contractor. complete the project and reduce his annual energy cost from ten thousand a month to seven thousand a month.

And then we're gonna charge him a thousand dollars a month. for four years or five years or ten years or however long it takes to repay the twenty five thousand dollar loan that we've provided. But to the pastor He's still seeing two thousand dollars a month in savings even after he repays. The twenty five thousand dollar loan.

Right. He was paying ten, now he's paying eight. And he's got a brand new, awesome clean energy system that he feels good about. He's preserving God's creation. The millennials and Gen Zers in the congregation are excited about it because he's, you know, he's taking care of the planet. Everyone is healthier because it's, you know, you're not burning oil in the basement and breathing it in while he's preaching. Yeah. Like everything's better, man. And so there's all these benefits that come from doing the project. And so our job is to explain to people, look, it's gonna be a hassle. We're gonna make it as easy as possible, but we're gonna save you money. Your building's gonna be healthier and it's gonna be more valuable. If you were gonna sell this building, now it's a green building and it's gonna be worth 10, 15%. More than it otherwise would be.

So you guys are basically doing everything from soup to nuts, right? So if a building says, Yeah, we want to work with black power. You essentially handle the financing. You handle the contractors, the crews The equipment, everything.

All of it. All of it. The engineering, the design, the architects, the contractors, the equipment. We call the manufacturer. We negotiate the warranties. We do all of it. On behalf of the customer. And also I think you are also sourcing Workers. from communities where you're focused on too, right?

One hundred percent. We have got a really cool project in New York with Mayor Eric Adams. We're hiring fifteen hundred people. from the low income communities where I grew up and where I was a community organizer in New York City. And we're training them on how to electrify buildings. And we're paying'em twenty to forty bucks an hour. And putting them to work to decarbonize buildings in New York City to install heat pumps and solar panels. And so we've got fifteen hundred of these workers. Guy, we had a whole street gang.

that was like out dealing drugs a few months ago. And there's like fifty of'em and they came to us and they said, Look We're willing to shut down the gang. If you guys are willing to train us and get us certified and get us jobs. Electrifying buildings where we can make seventy grand a year, eighty grand a year, and we don't have to run from the cops or run from the rival gangs, like we will shut down the street gang.

And so we set up a training specifically for them and and you know, we shut down a whole street crank. So we're really excited to be able to start addressing this like double waste, right? The waste of human potential in these communities alongside the waste of fossil fuel energy. It's it's really inspiring for me after 10 years of work to be able to come full circle on that. We're thrilled about it. I mean this is a for profit business. You must make a profit. You've got a lot of investors and that is ultimately what you will have to do. But um how about government subsidies in government. Grants, could that be a source of your revenue? Absolutely. I mean we we just want a contract from the city of Ithaca, New York, where Cornell University is located. Yeah.

And we have four years. to electrify every single building inside city limits. Every single one. It's gonna be the first city in the whole world to be one hundred percent electric. Wow. There's several cities across the United States where

The mayor. It's just like screw it, we're decarbonizing the city by the year twenty thirty. And it's the law in that city. Yeah. And so they need people to come in and partner with them to actually implement and deliver. And because we have a full suite of services, we do the engineering, we do the Design, we order the equipment, we finance it, we project manage everything, we measure and verify the avoided emissions. We're like a great partner for certain kinds of cities to help them figure out how to decarbonize their building. So we're doing that in DC and in Georgia and in San Luis Obispo and uh Oakland, California, and lots of places across the country who are headed this way, who've already passed laws.

that they're gonna be 100% green by the year 2030. Then we're really hopeful that that's gonna be successful. We're gonna take a quick break, but we'll be back in a moment with more from Denale Baird of Block Power. Stay with us, you're listening to how I built this lab. Welcome back to how I built this lab. I'm Guy Raz. I'm talking with Danelle Baird. He's the founder of Block Power. Alright,$100 million that you've raised. Incredibly impressive. I think you've done work on more than twelve hundred buildings. You've got this Partnership in Isika and growing partnerships. Do you have a sense of when you get to profitability? I mean, in your mind, is it

Ten years from now. Or is it faster than that? I think we were profitable last year. Oh wow. There was like a stray million dollars in there that I couldn't quite get my little grubby CEO hands on that they hid from me and so I think we like made a million I think we did like eighteen million in revenue last year. So you are already profitable. Yeah, but again, we have a mix of capital from Silicon Valley and Wall Street. And Silicon Valley you don't really have to be profitable, as as we're all learning. Correct, right. But on Wall Street, you do have to be profitable, right? And so the majority of the capital that we've raised is actually from Goldman and Microsoft. And we have to repay them. And so every dollar that we take in from them has to have a plan where we can give them four, five, six, seven percent.

Return. out of the profits that we generate. So again, our business model is to go in use digital models and software to figure out how to profitably upgrade an individual building. And to make an investment using Wall Street Capital in greening and electrifying that building and saving so much. on the energy bill that the building owner sees some savings and our lenders see some profit.

And if we play our cards right, so do we. And our Silicon Valley investors. Now Having said that over the next two to five years as we prepare to like go public in IPO, we will not be profitable if I'm doing my job. Like we will be investing in R and D and expansion. Just like Uber did, right? Or Airbnb or any other tech company, because we want to take the message of electrification.

To every corner of the country. And so our job is to make those investments so that we can grow rapidly. And I think that that'll be the best thing for our company. And I think it'll be the best thing for the planet. So the plan is to take it public. We gotta go public. And again. Why we partner with conservative energy utility companies. with mayors, with congress people.

with city council folks who are trying to decarbonize and electrify their city. They don't want to partner with a startup? They want to be able to like go on Google. and see that you're a publicly traded and you're stable in your financials. Are good.

And you know, if a mayor signs an agreement with us that five years from now all his voters aren't gonna kick him out of or her out of office because we went bankrupt, right? So they want that stability and transparency. And we're gonna need to do that in the public markets. Absolutely. Presumably there are other companies out there there I know there are other companies out there that are doing similar things to what you're doing, but your

Let's say brand, right? your competitive advantage is you already have built. the connections particularly in low income communities where there's a huge potential to electrify tens, hundreds of thousands of houses and homes and buildings. Yeah.

I think in Silicon Valley, and this is why we had such a hard time raising capital initially You know, look at Tesla, like they come out with the roadster first, and it's like I don't know, would it cost a hundred grand, two hundred grand? Yeah, something like that. Yeah. It was expensive, right? Like most Americans can't afford that. And then

As you're successful, you sell enough of those things, you invest, you buy more machines. And then now you do the sedant. Right. And so now you're charging people like seventy five K, and then you keep investing and then you bring the cost down to thirty K. Same thing with the Apple iPhone, right? We flip that on its head. And said we're gonna start with the lowest income people first.

And that allows us to be mass market first. And so that has been Uh Painful journey, but now that we've seen a little bit of success, yeah, we do have a competitive advantage and that we can expand to be mass market before other kinds of companies that have really been focused on more affluent customers. So that's right. And look, more importantly, I think that allows us to build a political coalition. of people who can access our technologies.

And who, you know, it's a broader range of people who are gonna care about climate policies and maybe we can get something passed. And that's that's what this is all about. You know, I spoke to a founder of a carbon capture company on the show a couple weeks ago. And he said to me, Carbon capture is gonna be the one of the biggest commodity markets in the world in fifty years. Yeah, it's gonna be like Bigger than gold and oil. That's that's correct.

It's hard for us to wrap our head around that right now. And you're basically saying the same thing. What you're doing This electrification. And the market. opportunity is so huge, but we just can't entirely see it yet. you know, politically there's still huge challenges to overcome in in the United States, right? Like

This is not a problem that A couple of Silicon Valley VCs or you know, or some billionaire philanthropist can solve. This must be solved at scale and it can only be solved. With

a huge, massive federal government. incentives and and dollars. Right. Correct. And so what does it look like to do that, right? And so Yes, like it is important to have federal

Incentives. And we have some of those in the bipartisan infrastructure bill that was passed. Now what's interesting. The president used the Defense Production Act, which puts us on like wartime footing to Produce. All electric appliances. Yes.

And so heat pumps and electric ovens are now Gonna be incentivized through this wartime production act to be manufactured in America at low cost. We're not gonna have to ship them overseas, right? And so the costs on these things are gonna drop dramatically if this plan works. And over the next two and a half years, the Biden Harris team will put a lot of capital out. to finance companies and green infrastructure projects across America. And then what needs to happen, guy, is those projects We need like half of'em to be successful.

And then they need to share their data. on their engineering, their construction, their design They need to like open source and share that data globally. So that Silicon Valley and Wall Street can duplicate and scale. those projects. And so

With our project in Ithaca, for example. We are signing up nine other cities across America to race Ithaca to electrify. All of the buildings. And I think we gotta make it interesting and competitive.

for local folks, right? Like what are the ways that we can collaborate in a scenario where we have robust federal investment and how do we get this done even if that federal investment tapers off and then you know there's other countries around the world right like You know, India, they don't have robust government investment across the continent of India to get this done. And so we've got to demonstrate and explore and then share data, and that data will allow capital markets to scale and replications. Акрос та карі. You know.

Twenty years ago, I didn't think that everyone would have an iPhone. or an Android, but billions of people across the world now do. And so we need that kind of solution at scale. And I think it's possible and you know, I wouldn't be working on it otherwise. I'd go find something else to do. Donnell, I wanna ask you a sort of a an unsavory question, because we've talked about this beautiful incredible idea and concept and business that you've built.

But of course humans, many humans can be motivated by greed. And generating wealth. And certainly in a capitalist system that that's often the case. Who and how? Will they make the most money? off of this.

Future. Green. Revolution. Who and how? And then I would say a third question is who should Make the most money off of it, right?

So I think that innovation in America from as far as I can tell is funded by Silicon Valley venture capitalists. They are making a ton of money. They've invested in Uber and Airbnb and all these incredible companies that have done really, really well and they've made a ton of money. And so now folks who normally invest in other kinds of investments like fidelity.

They're like, Oh, we gotta come in uh and and start investing in venture capital as well. And so To the extent that The climate crisis can be solved. by the traditional Silicon Valley suite of solutions.

Meaning chiefly software. Right? Yeah. And with this archetype of a founder who From what we're being told, it's like a nineteen year old Caucasian male who drops out of Stanford or Harvard, you know, like Steve Jobs, like Zuckerberg, like Bill Gates. Silicon Valley is looking to finance that kind of archetypal founder and company to solve

The climate crisis. So that's one piece of it. The second piece of it is the federal government is investing billions and billions of dollars. The Biden Harris administration is providing lots of capital to small businesses and companies, just like the Obama administration loaned five hundred million dollars to Tesla and Elon Musk. There's like a ton, there's like forty billion dollars of loans that are being made to green energy companies using taxpayer dollars. Which

you know, the companies will need to repay. Yeah. Then there's Wall Street. And so our partners at Goldman Sachs, for example, they have allocated seven hundred billion dollars to invest In addressing the climate crisis, and I think that number's only going up. So there's trillions of dollars of capital from Wall Street and Silicon Valley and the government to invest. And they will choose a set of entrepreneurs and companies who they hope will grow and scale and expand and make a ton of money. while solving the climate crisis.

But I think there's a bigger question around Who should and you know, that's traditional capitalism and innovation in America and Silicon Valley style technology investing, and like that's how it's gonna go if left unchallenged. I think that there's another better path, though. We actually believe in a lot of crowdfunding. For example.

We've filed with the SEC. To raise. capital also from ordinary Americans. If block power does well. We want like our local rabbis and pastors and high school teachers or whatever who invested twenty five dollars or five hundred dollars or whatever they had to buy some of our stock early on. We want them to make money alongside Goldman and and our venture capitalist investors. So we filed with the SEC to create that. So that's one part.

But that's not just like a moral or ethical thing to do, right? Like we need more and more Americans to look in the mirror and say, If fifty percent of Americans are alarmed about the climate crisis What can we do about it? Right. So yes, we can complain and call our senators and or post on Twitter or whatever. And we can go out and buy an electric vehicle. That's great. And we can decarbonize our homes. But we need like a movement. of Americans across multiple parts of society.

that it's broader than just like a thin you know, partnership with venture capitalists and Wall Street. Like we need regular working and middle class Americans to embrace the opportunity of climate change to make money. And so in our view, it wouldn't just be the entrepreneurial and the the Silicon Valley tech companies and investors and Wall Street folks who would make money off of this, but all of us would co invest in climate companies

as investors as well as customers. And I think if we could achieve that then we would also be building the broad based political coalition that is needed to pass climate change legislation. We know This has to happen.

Right. Because we we need to decarbonize. We must and thirty percent in the US coming from buildings. So most of us, our carbon footprint for most of us on an individual basis is basically our home and our cars, right? That's right. And uh and so we can really have a huge impact on this. And it seems like There's some things that are really hard. Like if we only sold electric cars for the entire fleet to be electric. It's it's gonna take a while.

You're saying with this is it can happen much faster, actually. But primarily about converting the source of energy Into a building. Essentially electrifying a building. And it can happen Pretty quick. We can do this in the next ten years. I think that

If we mobilize a generation of young people who are focused on this problem. Across the political aisle, right? Like I've talked to young evangelical Christians who are very concerned about preserving God's creation in the face of catastrophic climate change, like How do we come together as a generation and say, this is a solvable problem. We have all the hardware we need. Wall Street's gonna give us all the capital we need. We have all the machine learning and digital twin technology that we need to figure this out. We have everything we need to go do this, right? And like we can do it. It's a doable thing. Thanks so much for joining us.

Guy Ross, I just couldn't be more delighted to talk with you. Hey, thanks so much for listening to how I built this lab. Please do follow us on your podcast app so you always have the latest episode downloaded. If you want to follow us on Twitter, our account is at HowI Built This, and mine is at GuyRoz, and on Instagram, I'm at guy.Roz. If you want to contact the team, our email address is H I V T at ID.wondery.com. This episode was produced by Carla Esteves with editing by John Isabella. Our music was composed by Ramteen Arab Lui.

Our audio engineer was Neil Rouch. Our production team at How I Built This includes Alex Chung, Chris Massini, Elaine Coates, JC Howard, Liz Metzger, Josh Lash, Sam Paulson, Catherine Seifer, Carrie Thompson. Niva Grant is our supervising editor. Beth Donovan is our executive producer. I'm Guy Raz, and you've been listening.

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