This is the second half of the article that I published last week. I covered The Future is Hardware and If It Doesn’t Scale, It Doesn’t Matter in the first installment. I’ll wrap up with The Brains are Draining and The Climate Is In Crisis this week.
The Brains Are Draining
In the mid-2010’s I spoke on novel technologies at a refiner’s conference in Bahrain. It was a small-ish executives conference with folks from US oil majors as well as many from OPEC in attendance. The major sessions discussed the changes in the industry due to the rise in EV adoption and fuels for maritime shipping, given the sulfur decreases pledged in IMO 2020.
Standard topics for a refiner’s conference.
But a third session, on the aging workforce, and the inability for the oil majors to recruit and retain talent was really interesting. They showed histograms, binned by age, of their engineering workforce over the past 30-40 years. And it was clear that the workforce was aging-out and not being refreshed with new talent. They discussed how this was bad for business, bad for new technology adoption (think, digitalization), and how it was an existential crisis for the industry.
Being someone who wants to see the world progress beyond fossil fuels, I didn’t see too much of a problem with it at the time, and chalked it up as an interesting data point. But as someone who has hired a lot of talented individuals over the past decade, I have thought back on that conference more than I’d like to admit.
Startups are always on the lookout for great employees with an established track record of success. In the chemicals industry, being able to poach a new hire from Dow or Shell is a huge accomplishment for a hiring manager. The startup acquires an influx of pre-trained talent, who has already been assessed and vetted by some of the best. The hiring manager gets a pat on the back and a chit that may have some redemption value at some point.
But those folks don’t exist in large numbers any longer. Due to the brain drain in the fossil fuel industry, startups can no longer rely on that steady source of pre-trained talent. The people that came in through oil majors were typically the first to point out that there existed a better way to do a certain step in the process – which required less technical risk than the current plan. They knew the vendors already. In some cases, they had already started-up similar equipment. I learned so much from those folks in my early years as an engineer.
It is imperative that newer companies train their workforces more than they ever have in the past. This new class of materials processes contain different hazards than have been typical in the past. Solids handling is becoming the norm, rather than the exception. The pace of the work has increased, and the consequences of rushing a process into production are growing by the day.
In the software industry, nearly everyone knows how to check code into git and handle version control. In hard tech, almost no one comes in with an understanding of document control or management of change. They’re both similar problem/solution pairs, but computer science departments teach this, while engineering departments do not. Newer hard tech companies can go years without instituting lock-out-tag-out (LOTO) procedures and ensuring fire code compliance. This problem is only going to get worse.
As a second point, many of these hard technology startups take a long time to bear fruit. Seven-to-ten years is not unheard of for a company to find product market fit and start making commercial traction. Of those that make initial traction, few of those companies still exist today. A great article called 3000 Raw Ideas = 1 Commercial Success! postulates that even when a product launches in the hard tech space (read, a multi-$100MM investment), it has a ~40% chance of failure. It's the Power Law in action.
This industry is full of difficult problems, and fantastic people that devote their lives to solve them. After one or two cycles with these hard tech startups, many folks leave the startup world, if not the entire industry, whether they were successful or not. The work is hard and the successes are few.
Contrast this with traditional tech. After co-founding Twitter, Ev Williams went on to found Medium and Jack Dorsey founded Square. I can only think of a handful of examples of serial success in hard tech, and most of them rhyme with Elon Musk. You get fewer at-bats in hard tech, and talent retention at the top due to burnout is a huge issue.
The Climate Is In Crisis
In California, we now have a “fire season”. Every year from August through October, we make sure our air filters are taken down out of the attic and we end up canceling too many school functions, soccer games, and weekend plans due to poor air quality. Ten years ago, few people knew that a number over 100 on the AQI scale was bad for our health, or that a number over 300 would change the color of the sky. Now AQI shows up in our weather apps.
2023 was the warmest year on record, with average yearly temperatures reaching 1.5°C over pre-industrial levels for the first time during a 12-month period. The climate crisis is not something in the future – it’s happening right now. I won’t belabor this point, and I’m not going to attempt to convert anyone who refuses to believe the science behind it. But it’s necessary to mention the facts on the ground.
The problem with a changing climate is not relegated only to electricity production and chemicals & materials manufacture. A good explanation of the challenges ahead shows up in BEV’s 2023 edition of the State of the Transition. Based on their optics, 100% of CO2 emissions fall into one of the following five categories:
Electricity Production
Manufacturing
Agriculture
Transportation
Buildings
The document, aside from being an advertisement for BEV investments, is worth the read. At minimum it should calibrate you toward where the big issues exist. The standout for me, is that agriculture accounts for nearly as much emissions as manufacturing. With food security (read, crop yield) becoming more of a problem due to climate change, agriculture is where we’ll have to fight on multiple fronts, if we want to win.
One really encouraging bit, which I did not see coming, is that there are many in the traditional tech sector that are now starting to get behind renewable energy initiatives. After the initial VC green energy bust that happened in 2008-2010, many investors retreated back to the safety of software, pharma, and medical devices. But with data centers consuming as much energy as a small city, and AI training costs demanding more and more compute time, many investors are now looking at ways to decrease energy costs.
Fossil fuels cannot be driven much lower in price, because the industry is so mature. We know what the floor for fossil fuels looks like. But renewables can offer a pathway to lowering energy costs by 10x over today’s current prices. There will necessarily have to be breakthroughs, and nuclear power needs to be on the table as an option. But we can get there.
Even though it’s painful to watch glaciers recede and more powerful storms rake the land, I see the tipping point up ahead. We are a fairly reactionary species. And the point of action is starting to come into view.
It’s an exciting time.
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