Before we begin, I'd like to share a few words from our sponsor, Arbonics. Thank you, Arbonics for sponsoring reversing climate change. You helped make this show possible. I'm so grateful to you and you deserve it. I don't like taking sponsorship from people whose companies I just don't believe I don't want to work with. And thankfully I don't have to because they're companies like Arbonics are willing to come and support reversing climate
change. If you don't know about them, they're doing amazing forestry projects in the Baltic states in Europe. Europe has over 14,000,000 hectares of underused land. A lot of its abandoned or low quality, not a lot is happening on it. It used to be forced, but it was cleared for farming as farming intensified. And then a lot of that farmland was later abandoned as the global food system move towards
lower cost producers. The land just wasn't worth tending, and certainly not tending in a way that we would respect as regenerative and carbon sequestering process. It was just underutilized, maybe unloved Bionics uses technology to help land owners even find this land, and once they do have it, how to restore it back into carbon removing biodiverse
forest. If you care about carbon being removed and you want to see Europe return to the forested continent that it once was, you should be looking at our bionics. Go talk to them. I had Lizette Lewick, their founder, on the podcast. The link is in the show notes if you'd like to listen to it. We talk about a lot of the tricky issues that surround durability and carbon removal and how does forestry fit in. It's a very thoughtful episode. I really like talking to her.
They made it really easy to pitch our bionics on doing some business together because I want to see their work be successful restoring biodiversity and making forestry, especially good forestry, profitable again. Man that is a game changer and so important if you can. Pull it off. Thank you again our bionics. The link to check out our bionics website is in the show notes.
You should listen to the show if you haven't heard it already that I do with Lizette. It will teach you quite a lot about how they think and what they're doing. And now we will feedback in to the rest of the show. Thank you for listening. Here it is. Hello and welcome to the Reversing Climate Change podcast. I'm Ross Kenyon, I'm a long time carbon removal and climate tech entrepreneur.
I'm going to introduce my guest. There haven't been that many exits in carbon removal and Jim Mcdermott's thumbprint rests upon several of them. Before I get into Jim's background, if I could just ask you please become a paid subscriber to the show. It's 5 bucks a month, gets you ad free listening. You can do it through Spotify. It's really convenient, there's bonus content and it helps make the show sustainable, which is very important.
I'm sure to you listening you want the show to continue. That's how you help. Thank you so much for doing so. If you can't afford to do that right now, but you still want to show your support a great rating. Five stars on Apple podcast as well as a review, very important. And also on Spotify, you can only do ratings there, but five star rating on Spotify, hugely helpful. Thank you. And in any case, let me tell you now a little bit more about Jim. There's so much to say about Jim.
We don't even talk about it on this show, but I remember seeing his company's commercials on TV all the time when I was a kid. He's the founder and CEO of stamps.com. Do you remember stamps.com? I have such a clear memory of the commercials airing on TV. That was Jim, very cool. And from there, he made his way into private equity and the energy business. And just going through his LinkedIn, his background is deep. He is involved in many companies.
He sits on the board of many companies that he invests in. He's seen some big deals. He's on the board of Carbon Engineering, which was sold to Occidental Petroleum, which we talked about in the episode. We refer to it as Oxy. He was also the founder, CEO and board member of 1.5, which also sold to Oxy. He founded Avnos, which is a big direct air capture company that also produces water.
Carbon Ridge. I don't know if you've been seeing what's happening with decarbonizing maritime vessels. So much of it takes place inside of his company, Rasheen Capital Management LLC Rachina invest in these companies, but it's also involved in identifying early talent and proofing out some of the ideas. And just it's almost like a little incubator, a little venture studio. It's higher touch than a lot of what you see elsewhere in
venture. We talked about what it's like to exit several companies in carbon removal and to be involved in those processes. There's not actually that many examples of companies that have exited. One of the other big deals just happened was Holocene also sold to Oxy. And if you're sensing a pattern here, the specific pattern is that Oxy is is buying direct air
capture companies. The other pattern is that oil and gas companies will likely be the exit route for at least some sets of companies within carbon removal. This is a trend to keep your eye on. It depends on how you view it too. This could be a really great thing because it allows the industry to run things in reverse. If you're skeptical of it, it's because they are greenwashing and you shouldn't trust them at all. I will leave it up to you to to make up your mind on that.
So Jim has a lot of experience here. He has great advice for companies that are project developers within carbon removal who are facing turbulent times. Listen to Jim, I hope you enjoy. Thank you so much for your time and here is your show. I'm happy to have you here. You have the distinction of having two full exits in carbon removal, which is there anyone else that has that record?
Is there anyone else can that can rival your status in that way I. Don't know I we don't spend the time and time bringing it out, but I think it's fairly unusual. Well, I'll put you this way I don't no one's ever told me that they've sold 2 diseases in in paranoid. The guy's housing just had an exit, so Keaton has got got one under his belt. But I but I think, and I'm super excited for him, but I think at this point, yeah, too, is the is the the limit? Keaton's coming for you.
I think he's going to take you down, Jim. That's I, I look forward to that. I very much look forward to that. What's the process like of exiting a company in climate tech or carbon removal? It's fairly rare as we've mentioned, and I think everyone is looking forward to what their company statuses will be like in this new administration in the
future. Beyond it, what's it even like to set a company up for acquisition like that I. Don't think it's all that different from any company that you're building, you know, respecting the health planet or any business. It's fundamentally being able to position the company in a way that buyer believes that ultimately under there, you know, I mean, they're single Ledger ownership. Things are going to continue to
grow. And I think that probably the biggest difference is because climbing is emerging. There aren't as many sort of established cash flow stories as you as you likely see in other markets. So a big part of understanding and, and you know, when something acquires is kind of what's the cost of capital and what is that technology development side to look, you
know, from today forward. And it thinks you have to spend a lot of time really thinking about how you're going to drive down cost and how that's going to impact the overall growth of the business because there's still a lot of cost reductions required in these markets. So successful acquisitions usually are predicated on a lot of development to date, followed by a real credible story on how cost is going to get reduced
over time. With regard to Oxy, who bought 1.5 and Carbon Engineering at least partially from you and then also Holocene, what goes into an M&A emerges an acquisition strategy for an oil and gas major. How did they decide of all the companies in direct air capture that they want these particular ones? How does that process even work? I think only once you get to a certain level of success as an entrepreneur do you even base
that decision. So I think that the the way to successful oil and gas companies are are prosecuting is that they're first taking a very broad look at the landscape with respect to which technologies they think are most likely to work and which technologies are most likely to work in, in the regions and areas and climates in which they operate.
So if you're say a Canadian oil and gas company, you have a different set of criteria for where you might put a DAC plant in Camden because the operating environment is different than say if you're only in the Permian Basin. So I think what you see is the good companies are do a very judicious look at all of the available technologies and then
they usually select one. In case of Oxendenal, I think that they they've been clear and and Vicki has said that they believe in a liquid based Orbin approach. There are solid servants, there are monstration absorbents, there are electrochemical processes. So they make their own decision about which one they think is most likely to to operate well and within the context of their
operating envelope. Then I think once they make a platform acquisition on what you then see is a lot of focus on process flows and and breaking down those process flows to see where individual technologies can be purchased to increase the efficacy or the constant action across this point sheet. And frankly that's it. If you look at Coliseum, that's
very clear. It's when oxygen and then is it, they said, look, we have a liquid Sorby and branch and we're pursuing it. We're driving costs out of it. The, the, the technical approach that Halsey was, was utilizing.
I think I, I believe that Oxy believes that that will help drive down their total cost of of kind of caching and that's why they did it. So you see acquisitions first at platform level, then followed by tuck in and acquisitions that drive on particular pieces of their of their system level engineering. Does this surprise you that we haven't seen more acquisition deals at this stage of maturity
for carbon removal? No, actually I've, I believe that there will, but, but that said, I believe that there's going to be a huge wave of them coming and say late 262728. And that's because when you look at the progression, the the technology readiness or the TRL levels of the guys who actually have money, who are progressing through, most of them are going to be in a situation that around late 26, early 2728, they're going to have commercial level on products ready to go.
And I believe a bunch of oil and gas and and frankly large manufacturing players are depriving and shut buying things. And so it's just that they're not quite there anymore. I'm wondering how many carbon removal companies might be able to make it that long. I think if they have big off takes that are able to be financed they'll be OK, but the buying environment by then could
be very different. I. I. Think that one of the major questions that every board and every CEO that's in the director of capture business is asking themselves right now is do I have enough money on my balance sheet today to get out to the 2627 time frame. And I, I will tell you, Ross, I have very high conviction that, you know, I think we were keeping track of somewhere north of 150 companies have been
funded in DAC. I think that the die off rate between here and 26 is probably 80 to 85%. I think a lot of companies are going under and that's, I mean, that's part of the natural venture capital cycle where a lot of things fail. It's, it's being really exacerbated, I think by a lot of, from the chilling effect right now in the US on, you know, from, from a political
level. I think a lot of people are looking at it and saying, OK, if this isn't working right now or I don't have ample capital to get myself through the next 24 months, maybe I'm just not going to get any more money. Which is I think for people who are focused on which technologies they care about, maybe a terrific buying opportunity for for folks on the long side of the equation. And on the other side, it may be a situation where stuff that was working is just not going to happen.
You know it's going to it's going to die in a month. Sounds like a lot of the die off rate is just a response to macroeconomic conditions that are beyond the control of these individual technology developers. They might have great technology, they might not have an off taken hand or or be able to survive and that puts them in
a very dependent position. It almost seems very unfair to be at the whims of such global world historical moments that maybe are responsible for your business success or failure. I feel like a lot of this is luck or timing in a way that people that are successful entrepreneurs sometimes highlight that luck played a big role in their success. And I think we're seeing that a little bit now here too. Without question. Without question.
I mean, I you're, I think it is so any static visit, this can be a fearful situation because you're trying to think and it's brand, you know you and create something that's never been done before. I think that there are, there will be plenty of people in this sector who in retrospect, you know, had great technology and just got treated unfairly because of the winds in their capital markets.
And then there will be some folks who survive and make it through with maybe not the best technology and ultimately get to an exit or becomes part of being a part of a larger entity. I think, you know, having been to business since the early in the 2000s, I watched this cycle in software where you know, over and over again, people with inferior technology solutions 1 because they either got themselves into a large, well capitalized company or the basically had better financial
backing. So again, I didn't think this is something that's discreet and we're focused on on climate. I think it's just the way the natural thing works and and good, but good entrepreneurs, I think recognize those cycles, prepare themselves for the ups and downs that invariably come. And so I think it's both luck that it's also skilled in the sense that one of my favorite churches is business early with
my dad's kids. Just because you're paranoid doesn't mean they're not out to get you and and you're running paranoid in climate about the fact that the capital palpation swings can be pretty severe. Is is the hallmark and a good entrepreneur. If they have to stay alive until, you know, second-half of 2026 for some of these deals or maybe even beyond that, I imagine they're going to be cutting costs, going into cockroach mode, just trying to
stay alive. And the old line for this is that companies don't get sold, they get bought, right? And I imagine it's going to be a buyer's market. If you expect 80 to 85% of companies to fold under themselves, that sounds like a buyer's market to me. I think it's a buyer's market me and here's why. Because there aren't that many energy companies to to buy. So, you know, look, let's say as a as a fun exercise, out of 150,
let's say 20% survive, right? So you got 30 companies that come out the other side, 2020 to 32 companies, right? Well, there's only, you know, I mean 50 or 20 major oil and gas companies slowly they're all going to want to own their own technology and they're all going to want to, you know, controller in Destiny, if you've got one of the better answers, I actually think all you really need is 2 people compete if there's act, if acquisition is sort of in the offing.
So I'm not totally sure that I think it might be a buyer's market if you don't, if you're not one of the winners. But I think if you're one of the winners, it feels a lot like a winner take most situation to me. For the folks who make it, make it out into the 2627 point frame. Do you have any advice for companies that might hear this podcast, be concerned with these predictions and want to set themselves up for future success for acquisition? Couple pieces of advice.
The first thing is right, we've seen this. We saw this a lot last year. There are times in markets where raising capital like that, definitions of successes don't move backward. There were a lot of companies that we saw last year that were like, well, I had a huge step up in the last round. I was doing a huge step up now. And the and then the answer I think to a lot of people is that you should take money to survive sometimes. And, and I think we're in an environment like that.
We're just, you know, doing a flat round. It's not a bad thing because it means you're going to be around and a lot of other people don't make it across the chasm. That's one and and two is I think define very carefully how you're, you're sort of chunking through your milestones and make sure that the milestone that you've, you know, defined yourself are ones that people outside your company care about,
right? Because we've seen over and over again situations where people sort of define metrics and and then they hit them and then they say, but no one cares. And they're like, well, that's because you didn't ask anyone. So I think it's if you're, if you're thinking about, oh, well, maybe this is ultimately going to end up in the hands of someone just sort of further up the fleet chain from me, then you then it accrues you to spend some time thinking about what's
their process? How did they think about things? And don't try to overlay your preconceived notions about what value is. Go listen to the buyers and you know and very concretely, large oil and gas companies operate on stage dates and you should it behooves you to go learn how they run their stage gate processes. Can you tell us a little bit more about how that works? I imagine that's a new term for many people listening.
Stage gate is, is really just a process when you're doing a very large end of your project that basically you set up a series of milestones. And then when you get to that, that stage gate, you sit down as a group and you look at all of the various things like generally speaking, it's, it's commercial, technical, regulatory and financial. And, and you say, how do we reach the defined stage gate to
move beyond this? So like, you know, one of the stage gates that you offer now, it's just basically is it, you know, do you have a, a commercially viable price for, for what you're about to do, right? Second one often is you can, you, can you get it financed right? So oftentimes when you reach a stage gate and then oftentimes what happens is you with your stage gate is they start with USA, what's the pricing on the project? And the first gate gate is ±50%.
The second stage gate when we cost or -25% and the third one is ±10. And, and so when you move through stage gates and every corporation has their own stage gate process. So if you're thinking about how am I willing to fit into an acquirer's potential, you know, business reps us, educating yourself on state base is really important. With regard to. Flat and down rounds. Do you think entrepreneurs and founders should feel the amount of shame that they typically
feel around those events? I know it's good to stay alive, but often times it they don't get announced as loudly as maybe they should. Even just staying alive though, is a success, especially in a volatile, strange market that is still very undefined like ours is. Oh, yeah. No, I don't. I don't think that particularly hardware markets because so much of hardware can be driven and the cost of the hardware when they deliver in the hardware because, you know, supply chains
are global. There's a lot of, I mean, there's currency movements, there's tariffs, there's all sorts of things that can. That they're sort of exogenous to your activities that can make your life hard. So I think what we try to counsel everybody that that we work with is like, just be conservative in terms of how much money and how much time they think it's going to take. Because you can't really control.
Like, for instance, you can't control say that, you know, the Trump administration decides they're going to put 145 percent tariff on something. It's it's not within your control. What is it within your control is to anticipate that there might be a significant price increase while you're trying to build your first unit right now.
Can you can you pick 145? No, but you could make the assumption of hey, in a reasonable market or in, you know, low turbulent market and low volatility market, it's going to be $100 to build something and plan for it might be 125, right? But no, I, I don't Shane. Shane is a, is a is AI think I've certainly valueless emotion, which what involves clean tech, which is there are just so many moving parts that you just need to stay focused on. Like, you know, what can I
control? What can I not control? And how do I keep moving forward? One of the long running jokes as a founder is that you know when times are good you're bored and V CS backing and you will say we don't care about profitability, just grow as fast as you can and then exogenous forces will bear down upon you. Interest rates will change and they'll say cut expenses. It's all about profitability. Like how fast can you can you
make this work? And getting jolted around like that is a very common experience. It is out of your control and that you might try to be expanding as fast as possible, then get caught out and then almost get in trouble for doing so. I think it's really tough to be in a spot like that. I agreed. I mean, but that's, I mean, I agree that that happens. I don't agree that that's necessarily good board management for people acting the
way that they should. Because when you get into a climate investment and you know, talk about this in the past, one of the things that you really have to do is understand that you're involved in a very long time horizon gain. It means this is not, you know, I, I've taken 1,000,000 bucks and I get up a product I'm the Internet on AWS and I'm, you know, and it's up there running and something wants to acquire in 18 months. Like it's just not a thing.
And so when you invest in a client or however play, you need to have your head around maybe 7 to 10 years. And during the seven to 10 year period, it's almost a guarantee that there will be one of two cycles as you've described, right. And so the idea, well, all of a sudden everything is moving the other direction while you're trying to prosecute a, a sentence 10 year plan is not
realistic. And, and in so far as your board or your investors are sort of all of a sudden lighting up to that, that's as much on them as it is on the entrepreneur. Rasheen has an interesting business model. To me it seems like you have founded or Co founded several companies. It almost seems like you incubate talent and then you send off these, these young or not always so young entrepreneurs off on their own company journeys here. How do you think about this?
Why do you do it in this way? It strikes me as somewhat unusual. Maybe it's not, but why do business in this way? Three, well three reasons. Kirsten is Jet and I met have affairs. I always say, you know, that people used to ask what do you do? I say, well, I'm, I'm an entrepreneur and I'm an operator with money.
I'm not a venture capitalist. I, I actually, I come from the operating side and I firmly believe that operating and and good operating operators are the people who, who drive things. Money is not money is a, it's a true, but it's necessary but insufficient. So I think you start from the
operator side. And the second reason we do this is that in looking back at all of the investments we made at USRG, which is the first private equity firm at United, one of the things that emerged was in almost in every case where we've done really well, we've been involved very early. Sometimes we come up with the idea of ourselves, other times kind of, you know, founder to come in and we'd work with them
surely from inception. And and so looking back on on check on track record, it became apparent that we're better early stage people that we are late stage project guys. Now I I know how to do proper planes, but I realized in my 50s that I should focus on what I'm going to do, which is starting
voyage. And then and the third thing is that having built a publicly traded software company early in my career and having been in the energy business the rest of the time, the amount of attention and time that's required to be a hardware company or something that is in the, we'll call it the climbing space relative to a sound care company. It's just it's ordering magnitude more.
So you can't have like a spray and prey, which is thinking of put, you know, 150 investments out and then just start seeing the chain survive, which does work. In fact, Germany and start actually a lot of guys have done that. That does not work in hangar. And so her model is go in early, do a few things and then working very hard on them until they started to to really catch. So get give air under their ways or whatever an LV you want to
use. And then after that we, we tend to that back and don't play such an activist role. But it means that we can only do, you know, two or three things a year, but we really focus on it, which means I'm not running a $10 billion fund because I can't. My operating leverage is, you know, putting up 150 bets a year is not, it's just not. We have not found that it works. Does your experience lead you to think that the capital allocation model for climate tech and carbon removal is also
insufficient in some way? This maybe isn't purely idiosyncratic to you personally. Maybe it's a sign of a larger dysfunction or inappropriate application. Yeah. Actually in patch, it's really there's a perfect spegway one of the things that we have found at Rashidi and and I that I'm hoping that the world will come out. But at least my, my view on this is that there's probably a better capital model than A2 in 20 closed down 10 year fund for climate.
And and the reason that that's the case is that most investments take much longer than a typical software or life science. There may be maybe some life sciences for it, but they tend to be 7 to 10 years. Every really successful our company we've had has been at least seven years found in the making, which is a long, I mean, it's an example coming year in this started in 2009 and the exit was in 2021. Wow, right.
So then that's the biggest and and there were many years where David and the guys were and in fact, they were backed by Bill Gates, who really has no time to rise if you if you stop in Piccadanga and what what that allows him to do or people like
him, right. So the fundamental problem is that that the 2 and 20 structure requires you to turn the money so quickly that often times you exit when when the slope occurs still pretty steep or you end up trying to do things to make the slope of the curve, the value curve steep that are really sub optimal for the long term outcome of a company.
And so I think a much better model would be a formal or perpetual capital law where you basically take in capital and you invest it and you don't really have a time to arousal other than as long as the company's continuing to build and grow and, and for enterprise value, you just stay with it. Why did venture capital end up in the 10 year close fund model as the shelling point? Like surely there's there's other ways of doing things, but it's just the default for everyone. Why?
Yeah, I'll tell. You why so the history of venture capital is largely in the history of Silicon Valley, right? And venture capital is very, very good for a software model. And the reason is it's asset like, you know, you don't need a lot, you don't need a lot of capital assets to do what you're going to do. And, and it can be, so it can be very efficient with the mod and, and the marginal distribution cost of the next unit IS0 IEI put it on AWS on the Internet and I served it up.
And there's more, more likes, more, you know, CPMS, all the rest of that. So that model has been by and large where people make the most money over the last 25 years. So and and what does net capital like venture capital like large then in a large can and markets they're like category and they're like, you know, big demand, right. So when you look at energy or energy transition prime, it looks like it's all of those things. It's a really big end market, really critical.
We've got to have it. The problem with it is that it's largely infrastructure based. It involves changing infrastructure, involves hardware. And so when the idea to start to invest in that, it's starting to emerge all of the very large capital allocators, the calipers, the calipers others look to their most successful venture managers and said, could you like, I loved being Kleiner 5. I did really well. I was in benchmark, I killed it. So hey guys, we, we want some
energy exposure. And my managers being who they are, they were like, so you want to give me a bunch of money that I can go manage. And, and, and so they did that. And the problem with that was that many of the people who came into the first couple ways and continue to do this have a fundamental orientation towards software, which is anathema to how you prosecute a hardware business much as an infrastructure business. And so you got a lot of people
raising money. They've told their LP's that they, you know, something's going to happen. And the LP's have been acclimatized to the idea of short time frames because of software. So when they don't see it that in energy, they start to think, oh, well, maybe it isn't working. So what is the, what does the GP do? They kind of try to speed up the cycle and but you get a mismatch. You get a mismatch in in how the grades should really occur in versus what you know what's been
advertised. Have you had much success speaking with Co investors or potential Co investors and LP's and trying to reframe how they should be approaching climate investments? Like are you able to pull them out of that way of seeing things? In certain instances, yes. And what I would tell you is where you've seen a lot of people doing quite well and then within a lot of the listing in family office environments,
right. So it's a, it's a, you know, an intergenerational wealth, someone has made a lot of money doing something. And, and because their default position is that they're quite wealthy, they're willing to take longer time horizon views on on kind of what can be successful.
And, and so their view is, look, if, if I have like as an example, if I make an investment and it takes me 10 years, if the compound of any rate of return is, you know, 0 for a long time, but then it takes off and it goes to 25. And my, you know, from beginning to end is 15 or 20%. I'm happy to wait. The the problem with that model when you're dealing with pension fund is the pension fund is much in your return needs. They have retirees who need
money now. And so it's been a very tough market to convince the two will call it sort of a traditional L key base that this is a model that they should pursue. It's been much easier, I think for people who have relationships with family offices and some of these sort of longer dated intergenerational wealth managers. What I think would be incredibly interesting is if we could build a model whereby it was, it was available to the general public to do this sort of thing.
And, and I mean, my car was actually in a fair amount of time thinking about ideas like that. In a way, like an open-ended fund, like a mutual fund kind of approach, something else. Yeah. I think one of the one of the areas that that we've been investigating and thinking about is I'm going to give you just a
quick fun experiment. I gave a speech to Stanford in tours of high network conference in Stanford in 2019, where a bunch of very wealthy and they're called ultra high net worth families come from which each have a net worth of more than 30 million. And they said we'd like you to come up with some ideas to think about how to invest the crime. And, and what I came up with was the idea that most families spend between about 1 and 3 1/2% of their paying on net worth on
insurance. So they're insuring, you know, homes, cars, business interruption, you know, cash out, hurricanes, all sorts of things because they have a lot of assets and they're, and they're wanting to make sure that they have something bad happens. They can do that. So the idea that the thought exercise that we went through as we said, well, how many families are there globally at that point over just about 400,000 families globally that have a net worth in excess of 39.
And I said, well, how much capital would it take, equity capital would it take to build enough direct air capture plants to get from the 420 parts per million that we're up today down to 180? How many physical plants would that take? And then based on the learnings that I amassed from my time at Carbon Engineering and at 1.5
became up with that number. And then we said if all of those 400,000 families were effectively donate a percentage of their net worth on a manual basis for the next 30 years, because this is kind of 2020 to it's the 2050 target that you see people talk about a lot, What percentage of their net worth would they need to affect themselves, tax themselves? And it true that it's about 10 basis points and a basis point for because for you don't know is there's a hundred basis
points in every one percentage. So 10 basis points is effectively 110th of a percent. So if 110th of a percent of all net worth for the top 400,000 people globally was just you did it every year on December 31st and God I a tax deduction to do it, you'd have enough capital to build every direct air capture plant necessary to take us from 420 parts per million to 180. That's a model I think is interesting because it essentially says to people you insured it all sorts of things.
Isn't it worth some percentage of your net worth to ensure, again, I mean to future proof the climate so that all of this wealth that you want to hand out to future generations, it allows them to live in a world in which things aren't completely out of control. It's an insurance based argument and I I liked it. Have you socialized it much? Do people like it? Yeah, I actually have and I have 5 or 6 groups. I've done a lot of business
here. Sort of think of that and I, I think it's, I, I, I think it's also a prong up that potentially is, is, has a mass market reach. I mean, one of the ideas that I often think I, I learned not too long ago that Selena Gomez has 635,000,000 followers on the Internet. And I don't really know that Selena Gomez, well, when I saw her on, you know, whatever the thing something in the building with Steve Martin there and Martin Sharp.
But I've, I've often thought to myself, what if all of these people who have all this social attention were to say to their audience, what if you guys all, I mean, just give you a sensitive, again, if you have $100 million worth of net worth, I'm talking about 100 grand a year. That's nothing. It's, it's literally, it's like people for coal going to be $100 million and you're growing it at 10% a year, you've made it 10 million bucks and you divide
that by 365 days a year. Just the market movements are like an order of magnitude larger than what I mean. It's just, it's literally around the error. But what if Selena Gomez got on our platform and said I'm going to commit 10 basis points of my network, then I'd invite you as all of my followers to participate. And I've also done that calculation, which is the median net worth in the United States is about $125,000.
If you and there's about 40% surveyed people in our country say that they're deeply concerned about comment and would make a financial decision based on that idea. See, that's like, you know, 100 million, 100 million people, 100 million people and $125,000 * 10 basis points. It's like it's about $2.3 billion per year. So if you were to do that, you'd be the largest climate fund. Like by any measure you would dwarf what Bill Gates and the guys at Break Your Energy Adventures are doing.
Dwarf. So the idea is this. Could you could you create something where the retail small retail participation rolled up into a larger and the and then directed at at a perpetual climate problems is a is an interesting idea. It is an interesting idea. It's also intriguing to me that you have highlighted DAC in this. Granted you are a very long time direct air capture person, but. Why are you?
Obsessed with direct air capture of all the different pathways now, Seems like you're still thinking about direct air capture. You're still very much engrossed in it. Why DAC? One simple reason if we were to magically turn off all carbon emissions tomorrow. Then again, I'm not going to do some megatons. I'll do it in parts per million because I think most people know about 410 parts per million. I like that way too, personally. Yeah, it's.
Otherwise it gets a little arcane in the math because it's volumetric. There is, but assuming that, that's about 3 PPM per year if we were to turn that off from the wrong morning. So 0, which is where most of the capital has been invested the last 25 years. Win solar on Bizol rest you still are by any measure 140 PPM too high. So really, and if you want to do 3 / 140, rough math is 97% of the carbon that's causing the problem is already out there. So it's a legacy problem.
So we need to go back and pull out the carbon that is the legacy of 150 years. And even if we were to eliminate all the new private emissions, the inertia like the physical inertia that's embedded in that, in that 97% is going to make the problems that we're having today and that are accelerating continue for some indeterminate me depending on who you read, I think it's probably 100 years. So we have to be in direct aircraft business, not to say that there shouldn't be any
other things. But we have to be in direct air capture business or or or we're not going to get the, we're going to see the benefit that we're all together. Relative to enhanced weathering or or some of the other things that are happening in carbon removal, you're still so focused on direct air capture. It sounds like that isn't a criticism either. I'm sure you have good reasons, I just want to hear more of them. I think it's, I thought I believe in enhanced weathering.
I mean I believe in all of it. I'm very much in the all of the about it, but I still believe that as a matter of efficiency directed capture plants are you could, you know 100 acres, you can take 1,000,000 tons out per annum. I, I challenge you to make that equation work at any scale of that nature without, without land use, water use, there's a whole bunch of other things. I, I think it's a pretty this
way. We spent 100 years using mechanical and chemical engineering to get ourselves into the problem that we currently have. I believe that the way back out is with chemical and mechanical engineering. I believe that nature will do that will fix the problem, but not in a time frame that will be acceptable to most people. But if you, if you, you say I have 1000 years to fix the problem, just let the trees
drop, it's fine. But if you're worried about 50 to 100 years, you need a chemical and the chemical solution and DAC is the best. I, I, well, as a parenthetic thing, I follow very closely with David Keith and the guys in geoengineering and, you know, aerosol, tractoric aerosol
injections. I, I very much believe that that probably will be used and, and I think of that as the Tylenol of climate change, which is we're probably going to have to take some Tylenol to keep the fever down, but we're going to have to continue to use director capture and other mechanisms to reduce the CO2 overtime and and maybe to bring it all the way back to
where we're starting. And I think that the financial mechanism to make that latter piece work is much closer to a perpetual capital model than it is a 2 and 20 closed 10 year fund. Can you explain more what a perpetual capital model is? I think that's probably also a new term. Yeah, a perpetual capital model is, is pretty simple and it's the way that like a like a family, right, which are intergenerational family.
So he simply says, as I make province, I, I simply just continuously roll them back into the vehicle to make more and more and more and more and fasteners. So let's say, you know, I'm the patriarch of a family and I buy a building Freddy. Well, when the debt pays down on that building and I have lots of free cash flow. If I have a perpetual view on real estate, I just buy another building. And, and I never and I never
saw. And if you look at how like as an example, some of the biggest real estate empires in the world have been built, is that the family just, you know, when interest rates go down, they refinance the building, they buy another building and they just keep building forever. I believe that that's the model that will have to be used for director capture assets and other carbon removal assets and the technologies that go into them.
Because we have to look at this as if this is 100 year problem and we need to have 100 year or longer time horizon in terms of how we allocate capital and how we measure progress. That as long as we're making progress and still relatable and moving the ball forward, then effectively there's no distribution, we're just going to grow forever, right?
And that if you look at the way that if you want to think of, I think of carbon assets as a form of national wealth or of global wealth, if we want to build the global wealth all counted the Maple, we need to view it as if it's not just a one and done thing, which is, you know, campers puts in their money and take it off and then they go allocate it something else. If you say no, everybody who's invested in this is simply saying, I'm going to keep my capital in this lane forever,
right? And that's why a smaller amount is important because you would never say to someone who's reasonable, hey, give me 10% in net worth and I'm going to put it in something you can never take out because you might need the money. But if you get large enough group of people with a small enough commitment, that equals a large number. And then once that number is into that mode, it compounds and grows in perpetuity.
And, and that, in my opinion, is how we're going to generate enough carbon wealth, cover mule wealth to just, you know, I, I see a world when I'm logged on where there's thousands of carbon assets removing carbon in all forms that they're owned effectively for the public good in, in, in, in perpetual trust. And by the way, they're example in this Ross, I mean, you have families in England and people set up perpetual trust for the
benefit of the fame. I'm just saying let's port that model for each or being favored like the the family that is every night. Like the whole world. Interesting. Well, I hope that works. It would certainly be better than the pressures that one faces. 11 takes venture dollars. I have a question about the future of DAC. One of the old bites I used to hear a lot about. I hear less about it these days.
I wonder if it's been settled, and maybe I missed it, but do you suspect that the future of direct air capture is distributed or centralized? Centralized. Centralized. I sort of figured you probably went that way, the oil and gas. Big is beautiful, big is beautiful now. Now I will say I think that the construction of those centralized plants is margin manufactured, not stable. So small is beautiful in terms of the building blocks, but the actual configuration of the
plants largely as much better. And and that should it's like basic unit economics because if I can centralized all of that collection in a single spot, the shared services, whatever they are, the electricity, the water, all the rest of that are are better distributed across now 200 than say 20. But the manufacturing will be much and in that respect small will be beautiful. What? Do you think will happen in the fight between electrochemistry
liquid and solid sorbents? What broad pathways here do you think are going to be the big winners? I think OK, so I I seek to leave have been been with the Charmies. I think they all of them have their limitations. I think some of the limitations are are greater, greater limitations than others. I believe in liquid survey, but I believe that one of the great rate limiters will be how water is consumed and air produced or
used in in process. So I think one of the great, great limiters the potentially of liquid challenges is the amount of consumption of water. People are working on that often definitely working on that. I think solid servants are interesting but require a considerable Nike heat. People are working on that. I'm talking my own book here. I, I very much believe in moisture sling.
We're investors in, you know, very early investors in a company called Avnos that basically produces water as a byproduct of its direct air capture or consumption. And I think that there are limited places where
electrochemistry will work. I will tell you that we having built what is invested in creating is now the they're the first or second largest D set of company membrane company in the world have real questions about ocean based stuff, not because of the electric chemistry, but because of the amount of physical water that needs to be moved. Again, the electric empty works for sure. So that's a long way to the answer, but I think all of them work. All of them have distinct
limitations. I think water and electricity consumption are the two big ones. They're probably the the no problematic. So I think it's probably like Harvin and Winster. Sonyer, if you put it down and I had those would be mine too. Those are my 2 bets, yeah. We'll see if someone was listening and they work at a family office or they're part of a family that has intergenerational wealth in this way. Do you want them to get in touch with you? Are you ready for them to knock on? Your door?
Absolutely. Jim dot McDermott at rasheen.com, Jin dot MCDERNOTT at RUSHEN. Yeah, I'm, I'm very interested in those types of conversations that people want to have them. Thank you for being here, Jim. I love being able to ask all these questions of you. You held your own. Thanks for teaching me all of those things. Thanks a bunch for having me Ross. I really appreciate it.