The Big Interview: John Arnold

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Hello, it's Wednesday, May 6th, and the Strait of Hormuz is still closed. In fact, both the United States and Iran claim to control the strait, and energy traders around the world, not to mention policymakers and the general public. are trying to understand the situation. So today I want to welcome someone who's made billions of dollars understanding and monitoring situations a lot like this one. John Arnold has a good claim to be the best energy trader of all time.

He began his career when he was twenty one years old and working in natural gas trading at Enron. He later established Centaurus Advisors, LLC, a hedge fund specializing in energy in Houston. But since 2008, he and his wife, Laura, have led Arnold Ventures, which is one of the most interesting and I would say one of the most effective philanthropic organizations out there.

They work on criminal justice reform, lowering drug prices, renting in sports betting, and for our purposes, how to build more housing, transportation, and infrastructure in the United States, including how to build more electricity infrastructure. For that reason, they've been at the forefront of the permitting reform conversation. In fact, I'd say they'd help to drive it, in part because John is also a clean energy investor.

He's a co-founder and chairman of Grid United, which is building some of the most ambitious transmission projects in the United States. And he's an investor in the advanced geothermal company Fervo, which we talked about on a recent episode.

So many of the topics, in fact, that we work on or talk about at ShiftKey come down to topics that John Arnold thinks about every day. One goal of ShiftKey, in fact, I think, is to step back from the news cycle from time to time and have bigger conversations with guests like. And so today for the first episode in our new occasional big interview series.

I'm talking to John Arnold about how he reads the current moment in energy, about what he learned during his recent trip to China, where he went to EV factories, it was the first time he'd ever been to that country, and about what clean energy companies can and should learn from fossil fuels. I'm Robinson Meyer, the founding executive editor of Heatmap News, and it's all coming up on ShiftKey, Heatmaps podcast about decarbonization and the shift away from fossil fuels.

John Arnold, welcome to Shift's Key. Great to be here. So my colleague is reading Lloyd Blankflyin's memoir and found out in the memoir he confesses he still trades You're one of the great energy traders. Are you still trading on a day-to-day basis? I do not trade on a day to day basis. I still follow the markets on a day to day basis. become Every year a little bit more separated from what's actually going on and what I don't even know I don't know increases. I I will trade a few times.

Do you feel in like moments like this one or in I don't know March 2020, did you feel the pull to get more involved? If there's stuff happening I have to be there. Or was it like oh no there's too much. I can't possibly Oh, for sure. I think, you know, in moments of panic, I think is when the best opportunity Particularly for somebody who's not in the day-to-day of it. And so you really have to choose your spots about when that chaos comes in and the market might. That's the R.

Speaking of which, let's talk about the current How do you read this current moment in global energy, I would say in oil specifically, then we can get to natural and maybe crucially, is the way the oil market is behaving.

Record this. Should oil be higher? And is the movement of oil confusing you or Yeah, there was this man market chaos whenever I think there was the understanding that the straight was gonna be closed for some Brent shoot up to our hundred hundred and twenty dollar plus, at least, you know, intraday, and really had the whole panic because this is what the oil market has been fearing.

And you know, obviously in retrospect, you know, that move had gone too far. I think a few things happened. One was It's three weeks to get cargoes from the Middle East to either East Asia or to Europe. It took three weeks for the end user to really stop receiving new cargo. The market was already soft at the time, so that there was some kind of looseness in the market.

Commercial inventories were healthy and the steeply backwardated curve created a tremendous incentive for anybody with those inventories to try to sell them onto the market. Strategic reserves started getting sent out. There was a little bit of demand destruction. You had the administration was making all sorts of rhetorical claims that this would end soon or that there was a way to open up. So I think that that whole combination of things has been weighing on the market.

Saudis and others found ways to re reroute a number of the barrels. But now, you know, you're a little bit more than two months in to the straighting. And you still have this kind of 10 to 12 million barrels a day that's off market, and that's really starting to add up. And the commercial inventories are being worn down. The three weeks is up, so people are not receiving their cargoes that they And so I I've made this comment before, but each day that goes by.

There's not a settlement that the strait is not open and the fair value of oil goes up. And you know, it's not gonna be a straight line up. It's gonna bounce around it, bounced up today, bounced down. Last Friday. But you are on this upward trend. And I think the problem gets harder with each passing day. And that's

not a uh controversial opinion. But but uh but I I do think it is it it just starts getting to be the real dilemma, especially with both sides thinking that they can play the waiting game, and neither side really has a good card to play as to what to do next. What's the most plausible endgame?'Cause I mean I you just observed that basically neither side I think feels like it's winning or losing. It's a real stalemate, but meanwhile the physical What maybe what are the scenarios?

Right it has to end with a negotiated settlement. I think it's easy to say, it's very, very difficult to imagine how that happens, especially how emboldened I think both sides. Notion of Iran's access to nuclear material that can be used to make a bomb is has been a stickler for the West for now decades.

And you've had many, many administrations saying that Iran cannot be allowed to get the And Yeah, so the the question is, how does this end in a better spot with respect to access to nuclear material than where did? especially with how emboldened that Iran feels today. And I think that is kind of difficult to imagine. And if I I had the answer to this I would maybe be on national security But it it's we're kind of in this spot where I think had one war game this out beforehand.

And there was some probability you get to this point, and you would probably say, like, let's just hope that we don't end up there, because there's no easy way out. I was talking to a few foreign policy people. One of them said something. You have to say the president has somewhat. Because when Russia invaded UK Brent went on.

on fears of a supply disruption. But then a supply disruption never really materialized to the same extent that it has today. Well today, obviously we're losing to There is a real supply disruption and Prices are like flirting with but you know, Brent in this case is flirting with one Do you think that the administration, the president, kind of deserves credit for managing prices, or is this all going to backfire? We don't see a supply response from, say, the US because

Yes and yes. Right. So I I think i he has done a good job of talking down the market. And you hear the Uh open the strait or we're gonna blow you to smithereens, open the strait or we're gonna blockade, open the st strait or we're gonna escort friendly ships through. There's the we're very close to a deal that gets talked about oftentimes these

statements get released on Sunday before markets open. And so in that sense, you know, I think those who are along the market live in fear of one bad headline and you lose ten dollars. And there's just an air gap in the market. And so I think that provides a level of fear and maybe the risk averse are less comfortable in trying to bid up supplies. That being said, the purpose of prices is to allocate Yeah, scarce reason.

And to the extent that we need higher prices in order to create more demand destruction, we're not getting it. And again, each day that goes on, the market gets even tighter and tighter physically. And those who had commercial inventories that they drew down or they bought'em back a month or two deferred in the financial 'Cause you could make a seven or ten, fifteen dollars f by just playing the curve. And you get to the point where, okay, now you want your barrel.

And so to some extent that gets met by the release of strategic reserves. out lows, barrels. But you do end up with, I think, keeping prices lower in the short term means higher in the medium. We're getting into kind of full on oil analysis territory, but like when would higher prices begin to But uh in this the back half of this year, the very Yeah, exactly. And I think that's what makes energy markets fascinating is that they're relatively inelastic. Supply and emission.

You have to raise gasoline prices to very high levels to get people to change their driving. You have to raise jet fuel prices to high levels to get that to start changing, you know, am I gonna go on that plane trip? And so demand destruction is limited and very inelastic, as well as the ability to bring new Plus the forward curve now is starting to give that real price.

But for you know the first four or six the curve was in steep backwardation and so a producer would be looking at it and say, you know, it's still WTI seventy dollars or below. for when I'm actually going to get that oil that I'm investing uh new capex in today. And so that wasn't that appealing even though the short end of the curve was

Stepping back, looking beyond oil, how are you thinking about the energy? And especially in its long term. Inflection point. The energy security implications of relying on seaborne oil. You know, there's a story about Chinese EV sales surging. Do you buy that story, or do you think there's more inertia? then we realize and things will snap back basically once There might be some change in stocks, but this is not the nineteen seventy

Right, and I think the challenge here is that energy system is enormous. It is long life to Yeah. And so if you just they think about what would it take to increase EV market share uh of cars on the road. It's an enormous amount of effort. The whole stock for the Even if you're selling 50% market share of EVs, you're still competing with all the autos on the road today. And I think that metaphor is broadly true across much of the energy.

And think about the US generation fleet. And while the vast majority of new generation that came on last year were Solar and battery. You know, it's solar is still a relatively small percentage of the total US system, right? And so that stock versus flow thing you're not getting away from. And that being said, I think every country is going to value energy security in a increasing manner. What that actually means in practice is a little bit hard.

And as you said, this is a little bit more than a little bit. Long-term ramifications. This is not how the energy system is going to change in six months or even in a few years. We're talking about, you know. The decisions that get made today that start showing up in any material ways kind of in the five.

So you recently went to China for the first time. Lots of people go to China. Kind of eye opening experience. Were you expecting an eye opening experience? What did you expect and what did Yeah, I mean the reason I went and I had been kind of embarrassed that I hadn't been previously. I travel a lot, I go international a lot and just never had the strong desire or the need. I hadn't. But I was growing interested in China as it was starting to be at the technological edge.

on many things. And so if you think about just kind of the industrialization of China. went up from kind of low value to medium value. It was producing lower quality goods even ten years ago. Any type of good from China or mo most good In the West were deemed to be of inferior quality. And over the past 10 years, particularly over the past five years. Where China is now on the leading edge, bleeding edge of technology. And they're enormously cost.

And so you're starting to see both the world opened their eyes to the quality of many Chinese-made good. as well as the fact that they are often cheaper than one can produce domestic. And I I think this industrial policy challenge that many countries, including the US are very real. How do you compete with China on EVs given kind of the technological advancement they have today, their relatively inexpensive labor costs? automation in the factories, these very robust supply chains.

cheap cost of capital, willingness to subsidize or run at zero profit. Yeah. And I think that's true not only of the EV industry, but of many other industries going forward. And what's the right response from the web? That was an interesting question that I didn't couldn't I'm not sure I can answer that today either. So those were all the questions in your head when you went. Then what did you see? Were you surprised? I mean, were they even more advanced?

Were things even more advanced there than you expected, or did you feel like you were kind of adequately prepared by the discourse, but still? One of the Expecting was less automation. You should see more automation where you in places and industries where you have high labor. And China seems to be on the forefront of automation and the robotics.

So that was kind of a Right, especially if one of the goals, strategic goals of the country is that they've either been long term planning there to understand if you're just going to you know labor your way through this, you're going to be disrupted. but that China is willing to both invest in the robotics and automation as well as try to create jobs for its citizens, I think is very forward.

I was also trying to just understand where capital comes from. Well, where's the risk taking capital come from? And what are the incentives both kind of within the province level as well as from any private capital? Who is funding this AV industry that has massive overcapacity? Yeah. And it doesn't seem to be making any money. Clearly he's not making any money with the exception of maybe BYD.

And I think that's true of of other industries as well. So just trying to understand where's the capital coming from? Are there investment opportunities? Are there you know sourcing opportunities for the West? particularly on the uh electrostack that China is so strong in and that the West, particularly in the United States, is now has real shortages of any type Power equipment, the uh transformers and switch gears and all that. China has extra capacity there. And you know

Some sense we are in this race with China on AI. You need a lot of power in order to do that. supply chain of the power industry is very constrained in the United States right now. There is spare capacity in China. Should we be utilizing that as a country in order to try to beat them on the AI side? I've heard we kind of are at this point, whether we like to or not. quotient of where maybe the government or like companies are willing Creeping closer and closer.

Yeah, I I uh the best I could tell was that American policymakers were okay with Chinese equipment at the edge of the grid. They did not want it kind of on the back. Such that if yeah, it ever got turned off that the uh that the the downside was fair Where did you see automation in China? What Uh so went to the NIO Auto Factory. NEO's uh produces one of the higher end EVs, generally in the kind of fifty to a hundred thousand dollar range.

They've also been at the forefront of the uh replaceable battery. Different phrase from that, but one that you can pull into a charging station, it uh the machine removes the battery from the bottom of the vehicle. an already charged battery, so it's a three minute out process to get a f a fully charged battery. They had finished a new plant a couple years ago. car coming off the line.

Uh and was also just surprised at you know going through there and touring it how much automation there was, how few employees.

Okay, so I'm also in the never been to China. And is one that I feel like we're gradually realizing is not true. I mean it's part of the picture, but it's a much there's a much wider Did you wind up thinking that that the consumers are different too, or that maybe the Chinese EV industry has Then the American. how much the US still has in dollar terms. But there's more consumers. And they all buy a version of the thing.

Then creates Did seeing some aspect of the economy make you realize how difficult or potentially solvable the change? I think what was striking was I I had a hard time identifying where the weakness. for Chinese industry, given that they have highly educated workforce, low cost That there is risk capital that's but then flows through to venture capital groups who are making roughly similar decisions with some constraints on where they can invest.

talk about the the size of the domestic market, the supply chains there, th they are close both in geography and you know culturally, you know, without having to do cross border To seeing that and then trying to understand how other countries compete on the electrostack going forward was very And I I walked away saying, I I'm not sure if China would be a good investment or not for somebody from the West. I'm not sure those companies are ever gonna make money.

But I would be very hesitant to invest much in uh manufacturing companies in the West that are competing. I I think the auto manufacturing industry is fascinating for a number of reasons, but most countries that have a domestic manufacturing industry. uh for autos view that as strategic. It's a lot of jobs. There is kind of this pride of making cars.

And so there's always been a a lot of export hurdles and kind of fences being built around countries of various heights. And America Has this decision to make of do we try to compete with Chinese cars globally or do we build this big wall around our country? You have to make it here with American And I think the risk is what you're seeing in Canada. So the Canadian and American car industries were kind of tied at this.

Since forever. And yeah, you saw a lot of car parts flow back and forth across borders. The assembly might be done in Canada, but it would use some combination of Canadian and American parts. American manufacturer You know, the United States is increasingly saying that we don't want that if cars to be assembled. And so then Canada's starting to question w what should its domestic uh manufacturing industry look like? And if America is not gonna

Would somebody else? And China's raising their hand saying, try us. And so there's a deal recently in the past, maybe where uh Canada started allowing a certain number of Chinese import that were essentially with terror And the way I read it, I think the way others read it was that China is testing the market. Is there demand for the product? Um and if so, then I think China is going to make a very significant investment in Canada and Canada is

again, protective of its jobs, its domestic industry. And if America's not a good partner for it, maybe China is. But it doesn't sound like you walked away I mean you kinda said this, but it doesn't sound like you walked away with like, okay, there's a clear way 'Cause it's more than just auto industry, right? Around electricity. edge that I think American Thank you. And I don't know, I would consider strategic, but it doesn't sound like you walked away with a Wow.

Correct. Yeah, I I think the challenge of industrial policy is that it can end up being zero sum. If one country starts doing it and then the next country says, well, if they're doing it, then I have to And you can end up in in a end state where there's very significant subsidies coming from. And nobody's necessarily better. And that seems to be where we're headed now.

Right. And the justification that we're having in America to this is well China's And this was part of the r rationale for WTO in trying to standardize what the trade rules were and what subsidies and supports a state could give to industry. And you know, to try to really minimize that has always been tough. There's many, many ways that a state can support an industry. But there's been fights about that and it was relatively stable. It may have been going up slowly.

But I I do think China now being a very already healthy competitor in a number of these areas that are deemed to be the future. Including things like drones and motors and magnets. that there is that question that's happening and I'm not sure what the answer is for the United States besides either we're gonna do this as well, we're gonna show supports for our industries that we deem strategic. And or that the world's going to build these new alliances with high walls around

And we have these trading alliances that get created. And there's a lot of trading within those alliances and very little that goes across. I think it's hard'cause it's we kind of knew industrial policy had this race to the bottom or zero sum aspect. But what's new is that it works. Yeah. What what's new is that China China seems to be doing it in a way that is working and out competing Western companies. It was easy for economists to say, oh, we shouldn't do this in

when it didn't seem to work because they could say, Oh, it's a race to the bottom and it doesn't work. Well, in that case, who wants to do it? But if China's doing it and it seems to be working, then suddenly we have real both create real negative dynamics in the global market, but also have like huge strategic implications for the US. Yeah, I think that's exactly what I think.

The economists will give a hundred reasons why the five-year plan should not work and should end up leading to terrible inefficiency. And tremendous. But China's five year plans in recent times have seemed to have been working pretty well. Yeah. And so America is moving a little bit more in that direction than China's moving towards Oregon. Exactly. To be continued.

Speaking, I guess, of the Electrostack. So you're involved with a number of companies around electricity, Fervo, Grid United. On the scale of it's a nuisance to it requires a How worried are you about? I think there's a limited number of technologies or solutions. Seemingly don't have any.

And you can think about the goals of the energy system and oftentimes you think about something and there's a trade-off, right? And you have trade-offs between affordability and reliability, or trade-offs between the environmental sustainability versus affordability or reliability. And there's a limited number that have really kind of no obvious Yeah, at least with respect to the goals of the energy.

I think about the goals as you know, a lot of people you know talk about the four of reliability, affordability, sustainability, and security. I would add, I think, good jobs. And I Scalability. So yeah, if you want to bring on a data center, can you provide power for And building out a more integrated grid helps on every one of those.

I think doing things like demand management also doesn't have obvious trade-offs for it. I think adding batteries to the grid, you know, is another one of those solutions without the trade-off. And those are the technologies I think I'm most excited about.

Uh again, because if we're in this fight about, you know, the trade-offs and yes, it's good here, but it has this trade-off, those things are hard to scale or they are very fragile as you change administrations and the prioritization of those goals. changes every four or eight years. But if you truly have solutions that are just a net positive, then I think they're much easier to scale, much more durable. Have you become convinced that like any one great

Urcot is kind of this interesting example. Everybody loves it to examine and analyze. It's very good on the scalability of the system, which is why or one of the reasons why so many data centers are now being built in Texas. That was not the case even a few years ago. They were going in many different but that you can add demand and add the corresponding generation relatively easily.

in Urcot and that you don't have these kind of very long time frames to for a grid interconnection, uh I think is is very positive. But what we're trying to do at Grid United is really go across Accident of history, we have these three grids in the United States. There's almost no connection across them. And the benefits of trade that you get. Increasing reliability and affordability just by making the system more efficient, more optimized. are very real.

So that's really good. The Arnold Foundation. Solve these things. Yeah. So you know it's really kind of a question of how do you get your permit? The certainty that you have once you've received your And you want a system where people have the ability and right to object, that those objections are heard in a timely manner, a decision is made, and the project's either greenlit And that certainty of how that process happens is very important to develop.

And then maybe even more important is once you have that. that you have real certainty that it's not gonna get tied up. Right, that judicial review period is set. And again, that the objections get heard, but after the decision's been made, that it's final and we're moving forward. And there's a saying that time is money. It is very true for development that the best way for an objector of a project to kill it is just Did you choose a show system? It currently works.

Allows for some types of projects this never-ending series of delays that happen. And so developers don't even And you see this not only with energy, you see this with any type of linear infrastructure. pipelines or highways or broadband. You see this in housing as well.

We have less housing because developers know in certain geographies Even though they should have their permit in three months, it's gonna take them three years, and the cost of capital makes the project go from a profitable one to a money loser, so they never even And so certainly today with the growth in demand and power, like we need to be able to build again.

And if it we're still on this trend of Harder and harder to build each project, which makes it longer to bring on and more expensive, then we're never going to meet the goals of the energy. It's this remarkable moment where I think almost everybody on the political spectrum recognizes. and recognizes the principles of energy permitting. And they're trying to write the fine print today. But I I I've never seen this issue have so much biological

Do you feel like we're gonna get a deal this year? Or give me the probability that you think there's a deal? Okay. Yeah, so if I go to the prediction markets, what am I gonna see? Uh Yeah, exactly. I haven't even looked to see if there's a calcet. Yeah, they're they're probably a I I do I am very optimistic and we do a lot of policy work at Arnold Ventures. I know how hard it is to pass laws, especially in this era of political discipline.

Yeah, I know the the one thing I think and if almost every member of Congress understands is the need to There is Support from the administration, there is support from congressional leadership on both sides, there's support from the relevant committee heads. If we can't get this done, then we can't get any. Yeah. Yeah, so I I think on in election year it's very unusual for any big piece of bipartisan

Really the whole year. And so what we're really looking at is m most likely is that it would get passed after the election in the lame deck. And it's like you start working backwards from there. And we really need to have language that's agreed upon in the next forty-five years. It's hard to work over the summer. Congress scatters. Everybody scatters. Then you come back. There's a little bit of work time in September. And then everybody's focused on the elections.

The bill needs to get written today and then again in the next forty five days And there's a lot of work happening behind this. So again, sometimes it's hard to know exactly where it is, but everybody's saying the right things. There's been fits and stops. Particularly when the administration hit the pause on offshore wind. They've made some changes. They brought Senator White House back to the negotiating table, for instance.

Again, like everything I think is looking good, but Getting anything passed in DC these days might be a long shot. Arnold Foundation was involved in the methane sap project and um you know, methane's a interesting problem. I think natural gas would obviously be a much stronger position on in emissions terms if Of course then the administration can't be. rules that were set to begin regulating methods.

Why has methane proven so hard to tackle? Yeah, I I think it's a question of who And so that well that you know is 50 years old, that's kind of barely economic today, that's leaking a little bit as a standalone well, but in aggregate, the number of Very old wells or near end of life wells that are leaking. The title to those wells has changed hands many times. And so the current owner says, Why why am I responsible? Yeah.

And when I bought it, yeah, there weren't rules about that I had to pay for it. Otherwise I would have paid a very different price or wouldn't have bought it at all.

So I I think that's one. I think th the industry probably has some fear of if they lose one fight on this that kinda there'll be the slippery slope argument on regulation. And my argument to industry has been that if you want natural gas to be viewed as a clean fuel then it actually And that there's some low hanging fruit on trying to clean up the industry. And it would be good for you economically to make these investments. Now, that's true of the industry.

Again, you get down to okay, which company is actually paying for it. I've heard this theory that okay, the majors might be fine with that. They might say, Yeah, sure, we can deal with it, whatever. It's the independents who are going out and killing. And the majors don't mind that the independents are killing it, but they or that you know, the minors are killing it, but they would eat it if they had to. Do you like by this theory or if you were to Lift the lid on any of these kind of big oil.

I think a few things are true. Number one is that a newer well has lower leaks than an older well. Assuming the infrastructure is built, you know, at times whenever there's flaring But in general, once a well is operational and connected, then the newer it is, especially anything that's been put on the ground. system in you know this decade is a relatively you know low leak

and that the larger companies tend to be the ones that are doing the new drilling. They have the capital. And as wells age, the big companies sell them to the small. companies that have kind of lower cost of operations. And so there's that natural trajectory of life of a well. And so I I think there is some economic rationality. I think the large companies are more concerned about the

Uh I think they're more concerned about what's the long-term value and opportunity for the industry. Right. They have publicly traded stocks that that represent what the long-term value of the versus kind of being owned privately. people having a shorter term focus on the financial return. And I think you're probably right that the big guys are kind of happy to have the little guys have this fight so they don't have to be criticized publicly. I guess into the point we know the big guy's names.

Of the independents that would oppose this.

You began your career at Enron, obviously by the end of quite a diversified company, but doing conventional What should clean energy? The c conventional industry has It's mature, it has low cost of capital, it has the robust supply chains, they are capitalized right. Yeah. So they're able to do things, right? That uh that kind of newer industries not able to. Look the the oil and gas sector has become tremendously Efficient

Right. Scaling anything. So if it works, the oil and gas industry can go And I I guess uh back off and just say They th that's something that happens with time. Yeah. And so I I'm not sure that yeah, that the Clean energy industry can just say like we should be like the oil and gas industry. We just need to copy their ways because they don't have the tools.

Actually, yeah, exactly. You know, I think they'd love the bankability, they'd love the scale. Is there anything they might not think of that they I I think the political power that the oil and gas industry has And part of that is also time. If you've been donating to a party or to a candidate for three years, that's very different than if you've been donating for 30 years.

And so the oil and gas industry just has a lot more political power than than the clean energy side does. I think there's larger policy teams, larger budgets for it, the understanding that collectively the everybody has to participate in those packs and in the uh trade organizations that I don't think you're seeing today. Your work has been really bi studiously bipartisan. I think there was a a phase in the clean energy industry as recently.

Was that a mistake? Should it embrace the kind of more Catholic position of the oil and gas industry, or is it not able It's it's hard because again, like the longer an industry's been there, the more ingrained in the fabric of any community. Yeah. And so you still see some democratic states like New Mexico or Colorado that have oil and gas in And because the representatives in those states have to represent their communities, they end up having to get support, or they do get.

Just because again, just like the number of jobs that are there, the political organization that that they have in those states, the number of companies. And so this takes time. It's like developing and becoming more and more of the fabric. And so the irony is that a lot of the wind producing states, a lot of the solar states are red.

They just haven't been around long enough to really have ingrained themselves into the fabric and into the political institutions in that state. So I I think this is just more of a time.

Last question. So you're a big booster of Houston and I would say that Houston When people visit Houston, What should they do? Or where should they go to see not in a tourism sense, but if they're interested truly in what has made The Manil Center is kind of this amazing museum that I think captures Houston's spirit, and that the De Manils were kind of the

part of the Schlaberger founding family that during World War Two moved from France to Houston. And so it's this it it envelops the Cosmopolitan nature of Houston that Houston draws from the entire world, often because of the industry we have here. the energy nature of it and then the cultural assets. Chamber of Commerce likes to talk about we have the second most number of live theaters.

After New York. The museums we have, it's not New York, it's not maybe LA, but it's right there after those two. the theater the it's one of maybe four or five cities in the US with a grand opera. Uh and so you know it has that cultural component as well as like this gritty part of being an industrial city, right? We build Yeah. Come here for scale. And we like growth. There's a number of communities today that Fight growth.

Right. They don't want to change. Houston does. Texas does. Right. It's a it's a state, it's an area that we want to grow. No politician could take office saying we want to pause. That would that person would never get a And so kind of across the political spectrum, it's maybe how do you grow? But Houston wants more people, it wants more diversity, it wants more growth, more industry.

And that's what's made kind of th this community better. It's what's why people have come here in the first place. And that's what we want to give to the next generation. Well, there's so much more to talk about, but I'm going to respect your time and leave it there. John Arnold, thank you so much for joining us on ShipKey. Baby here.

And that will do it for us this week. Thank you so much for listening. If you had thoughts, comments, some burning question that I should ask John Arnold the next time I speak to him, you can always reach me at shiftkey at heatmap.news. Remember to stick around after the show. We have a special interview with our new sponsor, Salesforce, which I'm so excited about.

Until then, ShiftKey is a production of Heatmap News. Our editors are Gillian Koopman and Nika Loricella. Multimedia Editing and Audio Engineering is by Jacob Lamber and Nick Woodbury. Our music is by Adam Cromelau. Thanks so much for listening. We'll see you next time.

Hi, my name is Mike Munsell and I'm the Vice President of Parliament. with HeatMap. For the past couple of episodes, I've been talking with Sonia Norman at Salesforce about sustainability and AI. Today we're digging into climate tech, who Salesforce is investing in and the technologies they think will shape a more resilient future.

So in our last conversation, I know we begun talking about investments and water, but I'd love to just dive deeper into the topic of sustainability and investments. What defines an impact investment at Salesforce? We're so thrilled at Salesforce have resources we can invest across education, nature, sustainability, and now AI readiness.

One of the most incredible things that we feel like we can do is to support what we call early stage ecopreneurs. So these are innovators focused on solving sustainability challenges. They're innovators also that oftentimes lack access to traditional sources of capital. You know, maybe they're not gonna appeal to traditional VC

because of the expected ROI, but are critical technologies for our collective future. To date, Salesforce is given over$34 million in the space of nature and sustainability philanthropy. We also have a Salesforce accelerator where we dedicate our technology and our employee resources to help nonprofits scale, just incredible mission-driven nonprofits that operate around the world.

One is Good 360, and they're disaster NGO, and they route disaster recovery donations three times faster with Agent Force, and time is always of the essence when you're in the disaster space. And then there's an organization called RAIR, and they're rolling out regenerative agriculture coaching to deliver real-time localized guidance to smallholder farmers in their native language.

So automating logistics in the case of good three sixty and then real time information sharing and translation with rare. The final thing that we do in the investment space is to invest in ecopreneurs through our Salesforce Ventures Impact Fund. So I know Panel AI is a great example of that impact fund and we're excited for them to speak at our recent heat map house at SF Climate Week. What made Panel AI's wildfire detection a compelling investment for you? Thank you.

When we look at investments through the Salesforce Ventures Impact Fund, we're looking for that magical overlap. of financial ROI, you know, business that can scale and actually meet the moment from a business model and execution perspective, but also impact ROI. And Pano AI is just a phenomenal startup. They are focused on climate disaster resilience and using AI to detect wildfires.

more quickly. And if you think about wildfire specifically, what PANO does is they identify using computer vision and other technologies wildfire smoke when a fire's just beginning. Through doing that, they can quickly deploy responders and then the fire ideally is reduced in size or never scales to a true disaster. And some of the impact of that is preserving things like utility lines. So

Imagine that after a fire, not having anyone lose power. Also preserving assets like buildings, you know, agricultural land, forests. This early detection is really, really critical for both the humans involved and the environmental assets. They've had impact already at scale. They're monitoring fifty million acres across the US, Canada, and Australia.

And Pano AI is often the first known alert when there is the beginning of a fire. So really, really exciting to see that their technology is working and I hope to see them scale across more countries and regions soon. If we have any ecopreneurs as Salesforce calls them listening in, what advice would you have, particularly as it pertains to fundraising and getting in front of Salesforce? What makes it compelling investment?

For our impact fund specifically, we focus on software and we focus on environmental sustainability focused ecopreneurs. And again, like I mentioned, the number one thing we'll want to know is that you have a strong business and a great team. really understanding the team's vision for how they're gonna meet a market need, how they're differentiated, and what their approach is to scale.

And I guess even within software, what are the areas or technologies that Salesforce is most excited about or most interested in right now? A lot of our recent investments that the team has made has been at the intersection of data centers, energy and AI. Emerald AI is one, base power, Crusoe AI. SalesFirst uses a mix of venture funding, grants, and accelerators. How do you decide which funding tool to use for which type of company?

It really comes down to the recipient organization and where they are in their journey and what they actually need to scale. The Salesforce Ventures Impact Fund is return seeking. We've been talking about that. It's focused on early stage for-profit enterprise software companies. We're looking for innovators who have that super strong business model and vision for how they're going to bring financial returns and social and environmental change as well.

With philanthropic grants, those are impact seeking, right? We're not looking for a return beyond the impact and change we want to see in the community. And they're a really important lever that we have to support nonprofits who are doing really critical work on the ground, whether that sustainability nonprofits, educational nonprofit schools, nature-based solution organizations. And in the education space through our Salesforce Foundation, we primarily fund two things.

education at the middle school level and AI readiness because what we're hearing from students and teachers is that young people want to see a thread between what they're learning in the classroom and the work that they'll ultimately do once they leave school. So they want that career-connected learning. In the sustainability space, we primarily look at nature-based solutions, clean energy technology, and ecopreneurs. The last program is our Agents for Impact Accelerator.

It's really modeled after Salesforce's integrated one one model, which is where Salesforce took one percent of our equity, one percent of our employee time, and one percent of our technology for social good. And so we do that same one one for nonprofits. We give them resources, unrestricted grants. We give them access to our technology stack for free, Agent Force, Slack, Tableau, other Salesforce offerings that support their AI use case.

And then maybe most importantly, we support them with Salesforce Pro Bono volunteers. So these are folks like prompt engineers, data architects, people who can help them understand how to actually conceive of their youth scales and build out their tech stack so that they can strengthen how they reach their constituents and scale their missions. Well, thank you so much for taking the time to chat on the podcast. It's been my pleasure, thank you so much.