On Vinod’s “Black Swan Technologies” and such…

Vinod (from Khosla Ventures) wrote an interesting article in Foreign Policy. I am really liking the fact that he is out there making his views public, and writing thoughtful pieces for public consumption. I have become an avid follower of his twitter feed and would love to read what he is reading.

What matters isn’t just technology investment, but also the kind of technology investment. Near-term carbon reductions — such as switching from coal to natural gas, building wind turbines, or incrementally increasing residential energy efficiency — are nice, but they’re not enough. What we need are more efforts to speed up and expand the search for “black swan” technologies: innovations that disrupt our current trajectory and establish economically feasible means of reducing carbon, to build what I call our “economic carbon reduction capacity.” These advances are crucial for the simple reason that the clean technologies we have now are not enough — we are not yet at a point where we can simply “deploy” our way to a prosperous, ultra-low carbon future. Our current suite of policies makes the mistake of putting nearly all of our efforts into using the limited tools we have in our carbon-reduction toolbox today, when we should also be focusing on developing the better tools of tomorrow.

via Long Shots – By Vinod Khosla | Foreign Policy.

Whether one agrees or disagrees with his views on so-called “Black Swans”, one has to at least understand where he is coming from. I have recently met quite a few VCs and entrepreneurs who take issue with his views that we need to disrupt technology trajectories with truly innovative stuff to have a chance of turning back the clock on climate change. They think he has pie-in-the-sky ideas, and is trying in vain to force his learnings from a completely different sector (IT) to a sector that has very different needs and mechanisms of working. When I ask them for a more detailed reasoning, they tell me something to the effect of:

(a) very hard to build businesses around technologies that are too far from commercialization

(b) implementation investments (eg in energy efficiency deployment) will have short term rewards, financial and ecological

(c) this Black Swan approach makes no sense for a VC to invest in given long term engagements necessary

(d) hyping up next generation technologies takes money and momentum away from good, but non-sexy, work happening on the ground now

I think above points (and more) do have a lot of merit, and Vinod would likely agree to it as well, since he has several companies in his portfolio that are optimizing on local, short term maxima in the investment world while he continues to invest heavily in breakthrough technologies for some time in the future. What is often missed in the argument is understanding why clean energy investments are needed in the society in the first place? What is the ecological problem(s) that we are trying to solve, what magnitude of a reversal of our climate impact are we talking about, and what vision of the future are we painting in order to achieve that?

For example, I am a strong supporter of energy efficiency technology and service companies, but  I agree with Vinod that energy efficiency alone simply can’t take us to a goal of 350ppm CO2 in the air (if that is even possible now). There is a strong economic and ecologic reason to invest in energy efficiency technologies, but that can’t be it, in fact it better not be it. When I close my eyes and think of a clean future for the billions of people that barely have access to clean water or long distance transportation today, I am almost forced to think of a slew of technologies that haven’t even been invented yet that they would adopt: distributed generation of power from natural and waste resources, solar powered air conditioners, efficient recycling of waste heat, low cost energy storage, light weight, low carbon cars, on-site water and sanitation systems, climate adaptable architectures and vegetation systems etc…This likely implies inventions are needed around new materials, devices, systems, controls, and efficient/recycled utilization of earth abundant minerals and other resources. This might even mean reinventing major sectors, such as chemicals production processes, transportation, HVAC, vegetation etc. Imagine if each of us carried a wheel with an in-wheel motor and energy storage system that we could plug into any vehicle to make it our own transportation system on demand! I digress but you get the idea. Many of these are not looking for implementation/deployment dollars, but for disruptive technologies and innovations.

I hope the cleantech community will eventually find peace in a portfolio approach where short term implementation of existing technologies will be done to develop the cleantech entrepreneurship ecosystem further, and for systems and processes to evolve that would reward ecologically improved products and services, but where we would not lose our eye on the ball for the long term, and will continue to invest in technologies that would allow us to shift paradigms and side step prejudices built into the system. The cleantech investment industry is frustrated at a lack of exits, and every pundit (possibly including myself) is struggling to defend their theses, but hopefully this shall pass…and in the long term we will realize that basically we are all working towards the common goal of finding alternatives for an ever increasing human reliance on rapidly depleting natural resources.

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2 Responses to On Vinod’s “Black Swan Technologies” and such…

  1. Walter Frick says:

    Bilal,

    Great post. I’ve had similar thoughts but with respect to policy. The policy world has a tendency to get lost in some of the same debates, between a focus on disruptive technology (the so-called “technology first” crowd) and on deployment of existing tech.

    Missing from much of that conversation is the substantial policy overlap between the two goals. A carbon price or an RES creates a market for and aids the deployment of today’s cleantech, but it also raises expected returns on tomorrow’s tech.

    Economists are beginning to incorporate this into their models, and there’s both theoretical and empirical reasons to think it’s a real factor. And yet policy debates consistently neglect it.

    So I join you in hoping for peace in a portfolio approach, with the added hope that the climate policy community can find such a peace as well.

  2. […] the demand for implementation support for today's technology — see for instance Bilal Zuberi's excellent advertise the other day on this topic.  And after all, it's not like anyone argues that "throwing money at treating cancer […]

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