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SPEAKER_04: Guy Raz, I just couldn't be more delighted to talk with you.
SPEAKER_06: So you grew up in Brooklyn, parents immigrants. Tell me a little bit about where you grew up and what they did.
SPEAKER_04: So my parents emigrated from Guyana 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, Bed-Stuy, which is where Notorious B.I.G. is from. And at the time in the early 80s, 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.
SPEAKER_06: You just turned on the oven in your kitchen, cracked it open and... You've got to remember to open up the window so the carbon monoxide can flow out of the
SPEAKER_04: apartment. So that's how we did it. Yeah.
SPEAKER_06: And that was just normal. That just seemed normal growing up.
SPEAKER_04: Yeah. There's like a furnace in the basement that was supposed to burn oil or gas and provide hot water heating through radiators and or vents, depending on what kind of building you're in. Right. But oil and gas can be super expensive and maintaining that furnace can be super expensive. And so the landlady was like, look, we're going to charge you guys like $25 a week for this one-bedroom apartment, but there's no heat. So all of the apartments are going to have to use the gas ovens in the kitchen for heat. And that's what we did. That's what our neighbors did. That's what my friends at school did. That's what we did.
SPEAKER_06: I know you went on to study history and political science at Duke, but what were you sort of interested in doing? Were you interested in politics? Is that the direction you thought you'd head into?
SPEAKER_04: I was really interested in trying to improve the lives of my family. We have this large immigrant family. I probably have 40 or 50 cousins. And I'd been given a lot of educational opportunity. 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 Danelle through. We got to send him to Wall Street so he can make some money and come back and pay for all of his younger cousins to go to college. 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. I got really interested in black civil rights and economic justice and came out of Duke extremely political and ended up becoming a community organizer.
SPEAKER_06: Working initially for President Obama's, then Senator Obama's presidential campaign, I think at first, right?
SPEAKER_04: Well, initially I was working with 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 senior staffer with the Obama for America campaign.
SPEAKER_06: 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?
SPEAKER_04: 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 was a pattern that I saw as we would head into low income and working communities to persuade them that Barack Obama was their guy and he was going to support their interests and they should turn out. There's this persistent pattern where there's just this tremendous waste of energy and neglected low and moderate income buildings that really reminded me of where I grew up. I remember walking around outside one day and it was 20 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.
SPEAKER_04: Yeah, they're heating this giant apartment building with their ovens. 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, 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.
SPEAKER_06: You went on to work for the US Department of Energy for a couple of years. Tell me a little bit about what you did during that time. This is sort of 2008 to 2011. Yeah, so remember there was a financial collapse.
SPEAKER_04: 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 2009 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 were like, great, you can work with these labor unions and energy companies. And the labor unions had $90 billion of pension funds that they wanted to co-invest in greening buildings with $6 billion that was provided from the federal government as part of the Recovery Act. Wow. And so the plan was we were going to create this new green buildings industry across America. We were going to retrain and rehire a million laid off construction workers to go building to building. And Secretary of Energy Chu had this vision of an 18-wheeler Mack truck filled with organic insulation. And it was just going to drive down the block and stop at every house and pump green organic insulation into every home, into every attic to save people money. And we were going to create a bunch of jobs. So that was the vision. And we were just going to have $100 billion to do this with. And 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, we were not able to pull that off.
SPEAKER_06: So what I'm curious about, 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 put in solar panels and things like that. Presumably while you're doing this, you're learning a lot about the inefficiency of buildings. Because when we think of like carbon emissions, we think of coal powered energy plants, right? But buildings, I know this. Buildings account for 15% of the world's CO2 emissions.
SPEAKER_04: 15% of the world's CO2 emissions, 30% of the United States CO2 emissions. Wow. And in New York City, where I am, buildings are 67%. 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.
SPEAKER_06: 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 stovetop, are all those the factors that add up to 30% of carbon emissions?
SPEAKER_04: 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 10,000 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 2022, 10,000 of them at least, use fossil fuels. And that's on site, right? So it's a pretty significant amount of greenhouse gas emissions.
SPEAKER_06: 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.
SPEAKER_04: Why are we digging up dead dinosaurs and burning them in our houses? This isn't ancient Mesopotamia. Like what are we doing? It's 2022. Yeah.
SPEAKER_06: And we literally are. That's what oil is. It's just the compressed plant and animal life from millions of years ago. Yeah.
SPEAKER_04: And it's so great to do this, right? By the way, it's really dangerous. I mean, there's all the pollution that it produces that we breathe in. But look, if you put a gas explosion alert in Google, as I do, then every week or so, you're going to 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. All right.
SPEAKER_06: So you start to realize this and it's around 2012 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?
SPEAKER_04: I did, Guy. Apparently in my Columbia Business School application, I wrote up the argument for block power. And basically it was that there seemed 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 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 I'd be like, OK, 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, 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 get an MBA to at least learn enough about business. And so 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.
SPEAKER_06: Hm.
SPEAKER_06: 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 U.S. 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?
SPEAKER_04: 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-Stuy call me, and he goes, hey, you're working on greening buildings, right? I'm like, yeah. He's like, I'm spending $10,000 a month on my energy bill. And I'm like, what? Wow. So he had a 150-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 constantly filled seven days a week, and so the heating system and air conditioning system was always on, right? So he's spending $10,000 a month on his energy costs, and he goes, I only have $300,000 a year of revenue coming into the church, and $120,000 of that is going out on energy. So 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 was like a waste of all of the energy and the fossil fuel. It's 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 90 degrees when it's 20 degrees outside and doing that with gas ovens, and then all of the heat is floating 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.
SPEAKER_06: We're going to take a very short break. We'll be back with more from Danelle Baird of Blockpower in just a moment. Stay with us. You're listening to How I Built This Lab.
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SPEAKER_06: Welcome back to How I Built This Lab. I'm Guy Raz. My guest is Danelle Baird, founder of Blackpower. So you literally founded this company while you were in business school, right? Yes. And you launched it formally in 2014, but not as a nonprofit, as a for-profit business. Correct.
SPEAKER_04: I learned enough about business in business school to say, well, look, I mean, greening buildings in America is going to cost like $5 trillion. There's 125 million buildings in America. Literally, it'll cost $5 trillion. Literally, someone's going to have to put up $5 trillion. But there's a way to do it and make a financial return. So someone's going to make like $0.7 trillion by investing $5 trillion.
SPEAKER_04: So someone's going to make like huge fortunes, right? By investing in 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 going to make a lot of money if this all works out.
SPEAKER_06: 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 apartment buildings 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.
SPEAKER_04: 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.
SPEAKER_06: All right. So you've got 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 in 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?
SPEAKER_04: 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 70%. And so then the next question is like, okay, well, if it's using electricity, is that electricity sourced from 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 100% all electric equipment, you create the opportunity to fully remove fossil fuel consumption in that building. So that's what we do.
SPEAKER_06: Let's get granular for a moment. Let's just take a, let's say a 10 story apartment complex in Bed-Stuy. And it's an old building built in the late 60s, early 70s, 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?
SPEAKER_04: If it was a building in like downtown Cleveland, you could put enough solar on the roof. But because New York 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. 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 going to be far, far cleaner than it is right now and than it is in most places in the country. And so, so you can convert that building to that power source in Quebec, for example.
SPEAKER_04: Exactly. So that 10 story building may be 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.
SPEAKER_06: The building, you got to remove gas and oil, and then you focus on the source of that electricity. Is it going to be wind, solar, hydro, et cetera? Exactly.
SPEAKER_04: We electrify that building.
SPEAKER_06: So you got to get electrified first. Okay. So that's a first challenge. And then let's say you're talking about a 10 story building with, I don't know, seven or eight units per floor. Are you going into each unit and replacing the stovetops, putting in electric ovens and so on and so forth?
SPEAKER_04: Yes, sir. We're going into each unit. We're putting in all electric induction stoves that use electricity to cook on the stovetop and use electricity to bake. And then in certain kinds of projects, we're going to 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.
SPEAKER_06: Basically replacing an in-unit air conditioning that might be hanging out. Radiator or air conditioner. That's right. And the heat pump is electric powered and they're still relatively new in the US for sure. And they basically work by sucking out warm air in the summertime from the house and by pumping in warm air into the house in the winter.
SPEAKER_04: 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 going to 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. So it's like an air conditioner that can go forwards and backwards to pump heat where it's needed.
SPEAKER_06: So they're just as effective as a gas powered air conditioner. Even if it's super hot outside, like 105 degrees, it can still bring in cool air, like really cool air.
SPEAKER_04: That's right. Whether it's 105 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 cool-
SPEAKER_06: No, no.
SPEAKER_04: They have refrigerants. One of the cool things that we're really excited about is they're actually using CO2 as a refrigerant. So now if you take a step back and you look at our climate challenge of like, oh my God, what's going to happen when we put 100 million air conditioning units in India and China as middle-class folks, like buy houses and build houses and want air conditioning to stay cool? Well, if CO2 is the refrigerant that we're going to be using, in effect, we're putting a price on carbon because we're using that CO2 as air conditioning. One of the things that I'm really excited about and really hopeful about is if Mitsubishi and DeCon 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 going to start to power buildings with CO2. And that's just going to be huge. So now you have this clear idea of what you wanted to do, and you've already done some
SPEAKER_06: of it at this point, but this is back in 2014, and you start to attract some investments.
SPEAKER_04: Attract is strong, guy. Strong.
SPEAKER_06: It took a while. It took a while. But today you've attracted, I think, over $60 million in investments. Let's kind of break this down. If you go to Goldman Sachs' headquarters and you say, I want to electrify this building, they're just going to write you a check. If you go to a, not even a low-income building, even 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. That's right. And buying an induction stove is not cheap. It's expensive. That's right. Heat pumps are not a huge expense compared to what already exists in the market, but just to do it, it's a lot. Yeah, you might spend $100,000 to electrify the average American's home.
SPEAKER_04: Right.
SPEAKER_06: That's right. So how do you do it in a building where residents are already struggling to pay their utility bills?
SPEAKER_04: 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 going to spend $100,000 to electrify a home. What we're going to do is calculate the size and the cost of the equipment that we're going to 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 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, demolish it, install the new equipment. All in, that's going to be $100,000, right? Yeah. When we electrify your home, we think we're going to save you 20, 40, 60% 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 currently in your home. So the question then becomes, how can we stretch out that $100,000 cost over seven years or 10 years or 15 years so that the cost of repaying that $100,000 project is less than the amount that you're saving by shifting from fossil fuels to clean energy?
SPEAKER_06: How do you make the case to the people in that building? Do you appeal to their sense of civic duty or their personal health or the long-term cost savings? How do you make the case that people in the building should go through the, you know, it's inconvenient period of getting things converted and swapped out and construction workers and then maybe some costs associated? What do you say?
SPEAKER_04: We say this project is going to be a pain in the butt. It's going to be a little bit of a hassle, but it's going to be worth it because we're going to save you money and we're going to make you money. So for example, the church pastor that I told you about in Brooklyn who was spending $10,000 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 2014 and figured out we could reduce his energy costs from $10,000 a month to like $7,000 a month. So we would immediately save him $36,000 a year and we thought that in order to generate that $36,000 a year savings that it would cost $25,000 of capital to pay a local construction firm to come in and reduce and, you know, reduce his energy waste and improve his energy equipment. So he doesn't have $25,000 laying around, right? So we're going to lend it to him and we're going to buy the equipment, pay the contractor, buy the contractor, complete the project and reduce his annual energy costs from $10,000 a month to $7,000 a month. And then we're going to charge him $1,000 a month for four years or five years or ten years or however long it takes to repay the $25,000 loan that we've provided. But to the pastor, he's still seeing $2,000 a month in savings even after he repays the $25,000 loan, right? He was paying $10,000, now he's paying $8,000 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 Z'ers 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. 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 going to be a hassle. We're going to make it as easy as possible, but we're going to save you money. Your building is going to be healthier and it's going to be more valuable. If you were going to sell this building, now it's a green building and it's going to be worth 10, 15% more than it otherwise would be.
SPEAKER_06: So you guys are basically doing everything from soup to nuts, right? So if a building says, yeah, we want to work with Blockpower, you essentially handle the financing, you handle the contractors, the crews, the equipment, everything.
SPEAKER_04: 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.
SPEAKER_06: And also, I think you are also sourcing workers from communities where you're focused on too, right?
SPEAKER_04: So we have got a really cool project in New York with Mayor Eric Adams. We're hiring 1,500 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 them 20 to 40 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 1,500 of these workers. Guy, we had a whole street gang that was out dealing drugs a few months ago, and there's like 50 of them. 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 70 grand a year, 80 grand a year, and we don't have to run from the cops or run from the rival gangs, we will shut down the street gang. And so we set up a training specifically for them, and we shut down a whole street gang. 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 really inspiring for me after 10 years of work to be able to come full circle on that.
SPEAKER_06: 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 how about government subsidies and government grants? Could that be a source of your revenue?
SPEAKER_04: Absolutely. I mean, 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 going to be the first city in the whole world to be 100% electric. Wow. There's several cities across the United States where the mayor is just like, screw it, we're decarbonizing the city by the year 2030. And it's the law in that city. 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 buildings. So we're doing that in DC and in Georgia and in San Luis Obispo and Oakland, California, and lots of places across the country who are headed this way, who've already passed laws that they're going to be 100% green by the year 2030. Then we're really hopeful that that's going to be successful.
SPEAKER_06: We're going to take a quick break, but we'll be back in a moment with more from Danelle Baird of BlockPower. Stay with us. Thanks for listening to How I Built This Lab.
SPEAKER_03: With Audible, you can enjoy all your audio entertainment in one app. You can take your favorite stories with you wherever you go, even to bed. Drift into a peaceful slumber with the Audible Original Bedtime Stories series hosted by familiar voices like Emmy winner Brian Cox, Keke Palmer, Philippa Soo, and many more. As a member, you can choose one title a month to keep from the entire catalog, including the latest bestsellers and new releases. You'll also get full access to a growing selection of included audiobooks, Audible originals, and more. New members can try Audible free for 30 days. Visit audible.com slash wonderypod or text wonderypod to 500-500 to try Audible free for 30 days. Audible dot com slash wonderypod. Hey, it's Guy here.
SPEAKER_06: And while we're on a little break, I want to tell you about a recent episode of How I Built This Lab that we released. It's about the company TerraCycle and how they're working to make recycling and waste reduction more accessible. The founder, Tom Zaki, originally launched TerraCycle as a worm poop fertilizer company. He did this from his college dorm room. Basically, the worms would eat trash and then they would turn it into plant fertilizer. Now, his company has since pivoted from that and they recycle everything from shampoo bottles and makeup containers to snack wrappers and even cigarette butts. And in the episode, you'll hear Tom talk about his new initiative to develop packaging that is actually reusable in hopes of phasing out single-use products entirely and making recycling and TerraCycle obsolete. You can hear this episode by following How I Built This and scrolling back a little bit to the episode, Making Garbage Useful with Tom Zaki of TerraCycle or by searching TerraCycle, that's T-E-R-R-A-C-Y-C-L-E, wherever you listen to podcasts. Welcome back to How I Built This Lab. I'm Guy Raz. I'm talking with Danelle Baird. He's the founder of Blockpower. All right, $100 million that you've raised, incredibly impressive. I think you've done work on more than 1,200 buildings. You've got this partnership in Ithaca and growing partnerships. Do you have a sense of when you get to profitability? I mean, in your mind, is it 10 years from now or is it faster than that?
SPEAKER_04: 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 18 million in revenue last year. So you are already profitable.
SPEAKER_04: 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 we're all learning. Correct. Right. But on Wall Street, you do have to be profitable. 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 4%, 5%, 6%, 7% 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 go public and IPO, we will not be profitable. If I'm doing my job, we will be investing in R&D and expansion, just like Uber did, 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 will be the best thing for our company, and I think it will be the best thing for the planet. So the plan is to take it public. We got to go public. And again, why? We partner with conservative energy utility companies, with mayors, with congresspeople, 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 go on Google and see that you're publicly traded and you're stable and your financials are good. And if a mayor signs an agreement with us that five years from now all his voters are not going to kick him out of, or her out of office because we went bankrupt. Right? So they want that stability and transparency, and we're going to need to do that in the public markets. Absolutely.
SPEAKER_06: Presumably there are other companies out 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.
SPEAKER_00: Yeah.
SPEAKER_04: 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, what did it cost? 100 grand? 200 grand? Yeah, something like that. Yeah. It was expensive, right? Like most Americans can't afford that. And then as you're successful, you're selling out for those things, you invest, you buy more machines, and then now you do the sedan. Then you get the Model 3. Yeah. Right? And so now you're charging people like 75K and then you keep investing and then you bring the cost down to 30K. Same thing with the Apple iPhone, right? We've flipped that on its head and said, we're going to start with the lowest income people first. And that allows us to be mass market first. And so that has been a 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 going to care about climate policies and maybe we can get something passed. And that's what this is all about.
SPEAKER_06: You know, I spoke to a founder of a carbon capture company on the show a couple of weeks ago and he said to me, carbon capture is going to be one of the biggest commodity markets in the world in 50 years. Yeah.
SPEAKER_04: It's going to be like bigger than gold and oil. That's correct.
SPEAKER_06: 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 the United States, right? Like, this is not a problem that a couple of Silicon Valley VCs or, you know, or some billionaire philanthropists can solve. This must be solved at scale and it can only be solved with huge, massive federal government incentives and dollars, right? Correct.
SPEAKER_04: And so what does it look like to do that? Right. 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 going to be incentivized through this wartime production act to be manufactured in America at low cost. We're not going to have to ship them overseas, right? And so the cost of these things are going to 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 them 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 got to 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 replicate solutions across the country. You know, 20 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.
SPEAKER_06: Yeah. Danelle, I want to ask you a sort of 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 is often the case. Who and how will they make the most money off of this future green revolution?
SPEAKER_04: 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've got to come in 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? And with this archetype of a founder who, from what we're being told, is like a 19 year
SPEAKER_04: old Caucasian male who drops out of Stanford or Harvard, 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 $500 million to Tesla and Elon Musk. There's like a ton, there's like $40 billion of loans that are being made to green energy companies using taxpayer dollars, which the companies will need to repay. Then there's Wall Street. And so our partners at Goldman Sachs, for example, they have allocated $700 billion 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 that's traditional capitalism and innovation in America and Silicon Valley-style technology investing, and that's how it's going to 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 BlockPower does well, we want our local rabbis and pastors and high school teachers or whatever who invested $25 or $500 or whatever they had to buy some of our stock early on, we want them to make money alongside Goldman and our venture capitalist investors. So we filed with the SEC to create that. So that's one part. But that's not just a moral or ethical thing to do. We need more and more Americans to look in the mirror and say, if 50% of Americans are alarmed about the climate crisis, what can we do about it? So yes, we can complain and call our senators and our posts 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 a movement of Americans across multiple parts of society that is broader than just a thin partnership with venture capitalists and Wall Street. 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 entrepreneurs and 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.
SPEAKER_06: We know this has to happen, right? Yes. Because we need to decarbonize. We must. And 30% 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 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 going to take a while. You're saying with this, 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.
SPEAKER_04: We can do this in the next 10 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 talked to young evangelical Christians who were 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 is going to 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.
SPEAKER_06: Danelle Baird, thanks so much for joining us. Guy Raz, I just couldn't be more delighted to talk with you.
SPEAKER_06: 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 howiboughtthis and mine is at guyraaz. And on Instagram, I'm at guy.raaz. If you want to contact the team, our email address is hivt at id.wunderi.com. This episode was produced by Carla Estevez with editing by John Isabella. Our music was composed by Ramtin Arablui. Our audio engineer was Neil Rauch. Our production team at How I Built This includes Alex Chung, Chris Messini, Elaine Coates, JC Howard, Liz Metzger, Josh Lash, Sam Paulson, Katherine Seifer, and Kerry Thompson. Neva Grant is our supervising editor. Beth Donovan is our executive producer. I'm Guy Raz, and you've been listening to How I Built This.
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