Zach Dell on Base Power, Energy Abundance & Building a Company for Life

So out of every single guest on the show so far, yours is the business that I understand the least. So let's use this conversation as an opportunity to fix that. Explain what you're working on and what you're mission and how you're doing it. Yeah, so the grid is something in the power system and electricity broadly is a topic that a lot of people don't understand and it's pretty common. I think that's because there's a ton of nuance to it. It's a very old system. It's highly regulated. So it's not something that is in natural, common zeitgeist. The truth is our business is very simple. We're in the business of making and delivering megawatts. And our megawatts are the most affordable and reliable megawatts in the world on the planet. At least that's our ambition. And our mission is to power human prosperity by driving energy abundance. And we look to a very simple correlation between consumption of energy per capita and GDP per capita. And the takeaway is that the more energy population is able to consume, the better their life gets. And so if you can make megawatts, gigawatts, terawatts, more affordable and reliable, it's the best way to make people's lives better. And that's a mission that we have all rallied around and gotten super passionate about. We think about things in terms of a mission, a vision, and a strategy. Right, so the mission is why are we all here? We're all here to fix the grid and deliver affordable, reliable power and promote human prosperity by driving energy abundance. Before we go further, why explain why the grid needs fixing? What's the problem with it now? It's not that it's broken, it's that it's too small. How could something as important as electricity and power not be something that we can scale? Like how do we get into this situation to begin with? I think because capitalism hasn't been able to work its magic on the industry because it's highly regulated. And the companies around it that have built it don't have an incentive to innovate. They're not, they're rate regulated and they get paid on CAPEX, not on R&D. Right, and so the amount of money that they spend on R&D as a percentage of their revenue is as low as any industry you'll ever find. Right, they're not engineering-led organizations, they're kind of project management and CAPEX-oriented organizations. And so there has not been a bunch of innovation and how can we scale our capacity to consume electricity? It's just like how do we go build as fast as we can and earn a return on that building? We just change that, right? We are an energy technology company that is R&D driven engineering-led technology focused. And we are going to build technology that allows us to scale our consumption of electricity, deliver more megawatts, better reliable and affordable, and help meet the moment of the inflection and electricity demand. Okay, so that's why you were talking, that's what I was saying. It was like, okay, so this is a huge surge and it will continue. We need more power and electricity because of everything going on with AI. Before that, was there any other inflection point or did the demand for electricity in the United States just kind of grow like linearly? Over the last 50 years, demand for electricity in the US has grown at basically the rate of inflation. So it has not really grown much. Okay, so this is a first, this is like a once-time, one-time history problem that's having right now. I think that there was underlying growth kind of coming or at least starting to come from the electrification of transportation and electrical vehicles. But that's played out less quickly than some might have thought. I think that will continue to play out as the cost goes down. And things like, you know, electric heat pumps, the electrification of heavy industry. We'll drive electricity demand, but the AI infrastructure build out has massively accelerated it. Can you explain like how big the demand is for electricity for AI? I mean, I don't even know, I hear about it, but I don't know. The way to think about it is like, over the last 20 years, electricity demand has grown at roughly a 2% compared to annual growth rate. And we think it will go to somewhere around the order of 10%, which is obviously a 5X, which on a base as large as energy is really, really big. Okay, so then go back to the mission. So we think about it in terms of, you know, the mission, the vision, and the strategy. Right, the mission is why you're here. We're here to promote human prosperity by driving energy abundance, which basically just means deliver affordable and reliable. The vision is, what does that even mean? Like, what does that actually look like? And what that looks like is the modern power company of the electric era, right? We think that there's a generational kind of paradigm shift happening in the energy industry. Where the last five decades of energy were defined by coal and then natural gas as the marginal megawatt. And the next five decades will be defined by solar batteries and software. And we are going to build that company that is oriented around that new paradigm. And then the strategy is how do we win? Like, what is our competitive approach? What is our formula for success? And I would describe that as developing and compounding cost advantage through vertical integration and technology. And the reason why that is a strategy is because energy electricity is a commodity. And the best commodity is the least expensive, most reliable commodity. And so we've oriented the entire business around the fundamentals of the industry, which is to develop a cost advantage. Use technology, use vertical integration, oriented all around the mission of steam and prosperity and energy abundance. And then, you know, in the last three years, something interesting has happened, which is a new consumer of electricity has showed up. And it's now the fastest growing and soon going to be the largest consumer of electricity in the world. And its name is AI. And so we're going to orient the company around that to serve that demand and meet that moment so that we can continue to expand our AI infrastructure. And accelerate all the incredible advances that will come as a result of this technology, which I think is the greatest technological breakthrough of our lifetime. So explain how you're reorientating the company around that. Well, it's less of a reorientation and more of a using all the technology that we're already building and planning to build to accelerate the build out of AI infrastructure by bringing the power to the computer and bringing the computer to the power. And what this means is accelerating the build out of decentralized data centers by deploying our megawatts around those data centers and offsetting that load so we can add headroom to the system so we can build more of it. And then taking that compute hardware and actually bringing it to this massive fleet of energy that we've developed to accelerate the deployment of it. Okay, so how do you generate more power than so there are really two distinct things to think about here. There's a generation and then there's transmission and distribution, right? So generation is where the new electrons come from, right? Solar, wind, gas, coal, geothermal, hydroelectric. There's tons of different ways to get fusion and fusion. There's a bunch of different ways to generate energy and then you have to move it, right? And poles and wires move energy through space and batteries move energy through time. The grid is a system by which the transmission and distribution happens and is built for the peak. So it's massively oversized, which means that you have a bunch of inefficiency and that it's not being used all the time. It's not being highly utilized and when you have a system that runs at low utilization, it makes the system very expensive. Batteries allow you to increase the utilization of that system because you can charge them when demand is really low and you can discharge them when demand is really high. And so you can take the curve of demand and you can flatten it. And therefore you can lower the total delivered cost because the capacity factor, as it's called in the industry, or the utilization has gone up. So with our current products that today focused on battery storage, we're not making more electricity. We're just using it more efficiently. Okay, would you add the cost down? So if I'm understanding, the optimization here is not you're not adding more lines and wires. You're actually just optimizing the existing system better through batteries. Exactly. We're taking, there's a map like think about in the middle of the day in Texas. Like right now it's hot as hell outside. It's hot as hell outside. The sun is high in the sky. And if you go to ERCOT.com and you go look at the prices, I bet you wholesale prices are really low. And that's because we have a ton of solar in the state. It's amazing, right? And so we're charging our batteries right now. Not, I can't tell you that for sure, but like we are most likely charging during the solar grant today, right? When the prices go down. And then when the sun goes down tonight and everyone goes home and they turn on their AC from work, prices are going to go up because demand is going up and supply is going down, right? So the sun is down, the solar is no longer producing. Prices go up, we discharge the batteries. So we didn't create new electricity, but we timeshift today. What was happening before? Our companies were doing nothing? Well, we were just using the system less efficiently. So we were curtailing solar, we still are curtailing solar. And there's a bunch of excess generation that's happening in the mobile day, where that's why prices go so low. Because we're generating more solar than we can use. But we can't timeshift that to be used when the sun goes down in the evenings. So that's why Europe says the batteries. And I've been obsessed with batteries in college. And batteries have been around, you know, for decades. And actually, you know, John would be good enough. The original PhD scientist who worked on the healthy battery chemistry. Polon, his name was good enough. Good enough. Good enough. And he rests in peace. He was a professor at the University of Texas, just on the street. Okay. So how does a kid get obsessed with battery cell? I mean, it's kind of a long story. We have time. Look, I mean, as you know, we talked about a bunch. When growing up, I was always obsessed with big, hard problems. And just trying to. And that was always what I. My understanding of capitalism and company building was just organizing people around the hardest problems. And the bigger the problem, the larger the economic outcome, the downstream of the solution. And I watched my dad do it. And I watched him, you know, totally inflect the PC industry. And now what he's doing with the AI infrastructure buildout and the server business. And that was always my strongest motivation. I mean, he was my hero and he's still my hero. And I always wanted to be like him. And there's, you know, there's no two ways about it. Like, I wanted to be an entrepreneur. I started my first company in eighth grade. And I started my second company in my sophomore year of high school. And I started my third company in my sophomore year of college. And basically none of them worked, that I was just learning stuff and just trying to get out there and solve problems. And in college, I was working on a business to, and you know, business and air quotes is more of a science project. It was not really a good commercial idea to convert human waste into compressed methane or biogas, it could be used as a sort of low cost electricity in the rural world because I was obsessed with this idea of providing people with access to low cost power that didn't happen because it was obvious way to make their life better. And around that time, I was just, I was really kind of, you know, nerds night for a lack of a better phrase by solar. I thought solar was the coolest thing ever. And solar was great, but the problem with the sun is that it goes away unless you're in space. And so you need a mechanism by which you can use that energy that's produced when the sun is out. At times when the sun is not there and batteries are the answer. And battery technology, you know, most of the batteries in the early days, you know, you had a lot of different chemistries out there and you had iron air and you had solid state. And then you had this kind of NMC high nickel lithium ion chemistry, catch a lot of steam. And most of the EVs in the early EV build out were this high nickel NMC chemistry. And only in the last five years or so, this low nickel LFP chemistry, which is really better for stationary storage. It's safer, it's longer duration. It's hard to emerge. When I was in college, I was really excited about solar, really excited about batteries. In fact, I tried to put together a deal as a, you know, 21 year old college kid to go lease a piece of land on the big island of Hawaii, which has really low cost land and really high cost electricity. Build a solar array, actually, it was going to be EPC at the time by solar city. He was doing a lot of utility scale EPC. This is before they sold to Tesla. Yes, okay. And sign a power purchase agreement with Hawaii Electric, which is a 20 year PPA. And then go finance the whole project and, you know, 90% land of value and, you know, earn a 20% lower die of art. And I, you know, in college, so, you know, after I'm working on this project in India, I end up going into, to finance, you know, down the internet, basically, I was like, okay, this business isn't going to work. Before I start another company, I need to go learn about good businesses. And so I'm going to go to the place where I can find the smartest people that work the hardest and I'm just going to sit next to them and just work my butt off and try to get smarter. Basically, and build tools for my tool again. You knew no matter what you were going to be an entrepreneur. For sure. There was no question. I was never like, oh, I'm going to be a private equity partner at Blackstone. No, but you are one of the, you know, because we talk a bunch also, but you are one of the, up, all my founder friends that talk the most like PUP guys. (laughing) - You could take the kid out of Blackstone, but not the Blackstone out of the kid, I guess. I do love, I'm very quantitative, and I'm competitive, and I love markets and companies. And I think that's because I grew up studying companies and markets and, like any good, you know, young Jewish boy, I checked my subscription money and put it in the stock market and, you know, track companies and it's like, you know, still manage a PA that I have a lot of fun, you know, following companies. I just love studying businesses. What makes good businesses like you, you know, big fan of, you know, the Berkshire letters and, you know, the Amazon share hurdle letters and, you know, the constellation letters and would devour those things. And so it was more of, I'm so interested in finance and accounting and investing in capital allocation because it is a necessary skill to be a great CEO of a capital intensive business, right? And that was always why I've been interested in those things. And so, long story short, I'm in college, and I go, you know, in turn at Blackstone, I get the return offer, I'm back in college before going back to Blackstone. And I'm like, oh, I know how to use spreadsheets now, whatever. And so I build a model, a memo slides for this like solar project and I go to New York and I go get in touch with a bunch of, like, project finance teams at these big banks. And I go, pitch them on my, you know, $30 million loan that I want to go build the solar array in Hawaii. And they're all like, you know, I get some meetings and it's nice people take the meeting with this college kid. And I present my model and my memo and they're like, who's gonna run this project? Like, like, where's your team? I was like, I'm gonna, what are you talking about? I'm gonna just do it and I have everything figured out. And here's the memo. And they're like, you're gonna go be an analyst at Blackstone. Like, this isn't, and I got basically laughed out of the room by everybody. But I was dead serious. I was like, this is the math pencils. And I think that would have been a great investment and it would have worked. But like, it was very bullish on solar economics back then. And I show up at Blackstone and there's a bunch of people who are kind of poking around the battery industry. The supply chain, you know, we looked at carving out a lithium mine, which I spent a bunch of time on. The firm ended up buying a business that's now one of the largest utility scale battery developers in the country. And I got really excited about what was happening in the battery space. But there was this obvious issue with utility scale batteries. And when I say utility scale batteries, I mean, big shipping containers in a farm field somewhere. And you can probably think about what that looks like and you've seen pictures of that. And that's been a really good asset class over the last decade or two. And there's, you know, basically every big private equity firm has a utility scale battery platform, Apollo and KKR and Blackstone and Oak Tree and all these guy areas and Brookfield. Now these assets and they, you know, they're highly levered and they're a nice return. But they're fundamentally constrained really by two things. One is interconnection capacities. There's not enough places on the grid to go put these big shipping containers. And the second is transmission congestion. These big load pockets, like downtown Austin, downtown Houston, where you need the power. That's not where you can put the shipping container battery. Right. And so you have transmission congestion which shows up in pricing. And you're unable to get the power where you need it at the right time. And so that really showed me or kind of brought to light the insight around a distributed architecture. Deploying batteries, deploying to the actual house. Where the interconnection exists, where the load is. Got it, right? And so you don't have to worry about the transmission problem. You don't have to worry about the interconnection. That should really fucking interesting. I don't think I understood that before you just said that. So then I started studying the distributed battery world and the residential battery world. And I looked at every company in this space and you know, read the 10K's and the S1's and you know, talk to the analysts and you learn that, the public trade companies and all the companies in this space. They're all selling a high margin premium product. It's a $20,000 home battery or $20,000 home generator that they sell you outright. They make your gross margin on and they're done. And they're not actually building it like infrastructure. They're not utilizing it like infrastructure. And so it's a aha moment of like, oh, the distributed architecture is the answer. And all the companies that are around that problem, they're focused on the wrong business model. They're focused on high margin of front sales. And then I started getting really excited because I'm like, oh, my God, if you're going to take on an incumbent, my view is the best way to do it is to have a counter-position business model. Because if I showed up and said, I have, you know, the best home battery on the market, the best home generator on the market. And I miss sell it to you for 10% below the big guys. Your margin is my opportunity, right? Like these big guys are going to compete on price. They're going to, first they're going to copy my product, it was better. Then they're going to drop their price and they're going to run me out of business. But if I show up and say, I don't sell batteries, I sell electricity. And we're going to install this battery on your home when the goods up and running, we use it. As a result, you get cheap electricity, when the goods goes down, you use it. And because of our different business model, you pay one 20th or even one 40th of what you'd pay to earn it outright. Then I can win. And if you want to compete with me and you want any comments, you've got to completely change your business model, which, as you know, for a public company, is very hard, right? Because if you go to a Wall Street, you go to a Wall Street and you say, we've been making money this way for the last decade. And now we're going to make money in an entirely new way. Typically, Wall Street doesn't like that very much. So I got really excited about the setup of the distributed architecture, this kind of position business model. And then the opportunity to really put it in the universe and go after an opportunity that not only was the large in scale, but in importance and impact on the world, back to the point around human prosperity, energy abundance, energy consumption, per capita, GDP, per capita, and that correlation. - I want to tell you about the presenting sponsor of this podcast, RAMP. - I have been reading a lot about SpaceX lately. SpaceX is one of the most valuable businesses in the world. And one of the main themes in the history of SpaceX is constantly attacking and questioning your cost. RAMP helps many of the most innovative businesses in the world do exactly that. The median company running on RAMP cuts their expenses by 5% and one thing SpaceX has demonstrated is that a religious dedication to controlling costs can help actually increase revenue because you can pursue opportunities you couldn't otherwise. And we see that in the RAMP data too. 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Apploven allows you to capture undivided attention. Apploven ads are full-screen video ads that are watched for an average of 35 seconds that is retention that blows other ad platforms out of the water. And you can launch on Apploven in minutes. You set the goal and Apploven achieves it. There's no complex setup, no expertise, needed, and Apploven scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results have scaled to hundreds of thousands of dollars of spend per day and increased their revenue by millions. So you want to get started quickly before all of your competitors are on Apploven. And you can do that by going to apploven.com. That's apploven.com. Back to the idea that you're not selling batteries, you're almost like leasing it, right? Like they cannot buy it from a unit if they wanted to. I was telling the crew before you got here. I was like, there's just some kind of weird parallel and I don't even know if this makes sense to Zach. But like, everybody's like, oh, you should do more episodes of founders on Howard Hughes. And I was like, I've done like one or two. And he's actually interesting. But like, if you read about like, I find his dad more interesting than Howard Hughes, right? Because his dad was selling a really advanced drill bit, right? In the second oil boom that was taking place largely in Texas and Oklahoma and everything else. Howard Hughes, I think senior, was one of the richest people alive. And his business model innovation was that you couldn't buy from him. You had to lease it. So he would service it like it would break, he'd have to sharpen everything else. But like, you literally were, especially he just had this rear-curring revenue coming in because you can't buy it for me. You can't just buy and take off and I never see you again. You have to pay me every month. And then that compound and you just wind up, you know, printing cash. And there was the cash from his dad's business that Howard Hughes used to do, you know, the movies and the planes and everything else. There's like a interesting parallel, so I think what you're doing. - The way that I thought about the business model and Justin and I, the way we thought about it from the beginning is it just starts with the customer and what they want, right? If I asked you, David, what would you like out of your power company? My guess is you'd say something like, oh, my bill will go down and I want to never lose electricity. Is there anything else you want out of your power company? No, no, right? And so how do we deliver that outcome for you? Well, if I sell you the battery, you're not a wholesale power market participant. You're not a qualified scheduling entity or a load scheduling entity and you don't have a hedging team and a trading desk and you're not thinking about commodity prices, right? And so you can't actually use that battery 99% of the time when the goods are running to your benefit. You can't use it to lower your power prices, right? It just sits there on your home and then when an owner happens awesome, you have backup that you pay 20 grand for and you probably feel like you've overpaid a little bit but like you're happy. By us owning the battery, we can use it the 99% of the time that the grid is up and running as a wholesale power market asset. And then we can leverage the value of that to lower your bill, to drop your price 'cause we're creating value. It's like, we have a box on your house that is going to generate money and we're gonna share the money with you in the form of a lower electricity bill. It's really that simple. So the asset ownership model is not because we're greedy or we really just want to own things. It's because it's a way to deliver the best product to the customer. Yeah, that's all the matter. - Yeah, in an industry where they don't really give a shit about the customer because they're an employment in most cases. - Yes, it's complicated. So first of all, there's regulated and deregulated states. - We were talking about this before, we started recording. This is really interesting. - So regulated and deregulated states in the US. And it's kind of a history lesson here, but if you look back over 50 years, electricity is one of the few industries in the US that did not get entirely deregulated. Shipping, airlines, telecom, trucking, electricity in the late 90s or 2000s, actually in California, deregulation started there. And basically in Iran manipulated the market and kind of busted the power market in California and deregulated deregulation like totally stopped. And Rick Perry and George Bush in Texas like carried the torch of deregulation and the Public Security Commission Texas pushed this kind of competitive market contract. Now, it's going to get even more complicated. In Texas, 80% of the market is deregulated. 20% of the market is still regulated. So Austin Energy is a municipal utility. So we sit here in Austin in our office that is served by Austin Energy. We cannot be the electricity provider to Austin Energy. Same thing in San Antonio, CPS is a municipal utility there. Same thing in Georgetown. Georgetown Electric is a municipal utility there. There's another category of utility called a co-op or cooperative. This is more in the rural areas, but now there's really big cooperatives like co-serve who's a customer of ours or a peternile selector co-op that's the largest co-op in the country, also in Texas. And these are, think of them as kind of nonprofits that operate for the benefit of the members. All the members, like the cooperative are owners of the cooperative. And their job is to lower rates. And so in Texas, you have 80% of the market. Houston, Dallas, North Austin, Encore Center Point, AEP territory that is deregulated competitive. You can sign up to be an energy retailer. You can sell power to anybody. You have the generators who operate the gas plants, the coal plants and the nuclear plants, and they sell power to a retail provider like us, directly to the consumer. And then you have the municipal utilities in Austin, San Antonio in Georgetown. You have the co-ops co-serve, Waterloo Bay Valley Electric Co-op, Farmers Electric, these are all customers of ours. And customers of yours. So we build battery fleets for the utilities that they use in the same way that we do. So for co-serve electric, for example, we have built them, or in the process of building them, a hundred megawatts, and seem to be expanded fleet of batteries that they use in the same way that we do in the deregulated markets. They charge the batteries in the price of power as low. They just discharge the batteries in the price of power as high. They make money in the spread. They share that spread with their members in the form of lower prices. And they're the ones installing your batteries, or do you still do the installation? We install the fleet for them. So we build them this fleet. So it's much like them going and saying, "I need a hundred megawatts of utility-scale battery." Instead of the big shipping container battery, we go put thousands of batteries on their service territory and we give them a piece of software, basepowercompany.com backslash co-serve. They can go in, they see their whole fleet, they can charge, discharge, they can schedule behavior off the fleet, and it's a wholesale power asset that they can use to lower prices. And then they get the reliability benefit for their homeowners. - Okay. - And so that was gonna be the next version. You're only installing right now batteries on individual homes, correct? - That's right. - Are you doing anything else besides that at the moment? - Today, or only focus on residential homes. - Okay. - Yeah. - Okay. - So back to the markets setup, in the early 2000s, you had this deregulation push, Texas really carried the torch. A couple other states in the Midwest, Ohio, and Illinois, in the Northeast, Pennsylvania, New Jersey, Connecticut, Massachusetts, parts of New York, but it's kind of complicated. All deregulated to an extent. Not all of them, and none of them really as far as Texas. Texas is kind of the most competitive in the deregulated. That's why we decided to start here. In relative to the deregulated markets, we compete with the retail energy providers, the gin tailors, visceral constellation, NRG, and then in the regulated markets, we are a vendor to the utilities, and we're a partner to them. And you're totally right. They don't have an incentive to innovate, and go build a factory and come up with new kinds of batteries and technology, 'cause that's not how they're set up to earn. They're rate-regulated. Explain why they don't have the incentive to do so. Yeah, so if you had a utility, that had a monopoly ownership over a service territory. For example, let's say PG&E has all of California, which is not exactly true. There's LADWP and Southern California, there's Soca Addison as well, but let's say PG&E for the illustrative example, has a monopoly over all of California, they can just raise rates indefinitely, and just like Jack Proffits, and that would be bad for consumers. And so instead, you have this concept of the rate base, where there's a public utility commission that kind of governs the utility, tells them what they can build and what they can't build, and then they earn a return that's regulated, and it's typically 9% unlevered, on the cat-bex they deploy. So they go to the regulator, and they file what's called a rate case, which is like, we need to build all this stuff to meet demand and to upgrade the system, and the regulator says, yes, you can build that, and then they go build it and they earn a return on it. And so there's no financial incentive for them to come with new technology. The only financial incentive is to go increase the size of the rate base, and go build more assets. And so we should all be and say, we are your technology partner, we are your outsourced R&D engine, we are going to bring to you better solutions, so you can scale your infrastructure without increasing rates for your rate pairs. And that's how we serve the regulatory utility. So today our business is really one technology stack, which we can talk in depth about, that is brought to market behind two business models, regulated and deregulated. The deregulated model, we're directly sell power to the homeowner, we install battery around their home, we own and operate it, we've been in the wholesale power market and the grid's open running, when the grid is down, the homeowner gets that matter. That would be your preferred, if you could snap your fingers, the entire country would be like that, correct? Would that be better for your business or no? Not necessarily. Why? We love the utility partnership model too, because it has really a large reach, and there are benefits to working with one counterparty to address the large service territory, and there are some synergies, for example, like you wouldn't want 10 different wires going to a home, right? That would be redundant, right? So it makes sense to have the poles and wires be regulated, and like I think there's a lot of nuance in energy markets, and so it's hard to say, the whole grid should be regulated, the whole grid should be deregulated, it's a very geographically defined problem, but the dereg business is direct to consumer retail power, and wholesale market participation of our technology. The reg business is we are a vendor to the utilities, we build in these battery fleets, and then we sign 10-year contracts with them, and they pay us for that flea over time. It's megawatts as a service. That's the business. Megawatts as a service. We build 100 megawatts, 500 megawatts, thousand megawatts or gigawatts, and they pay us for that. They use those megawatts, and we make money on them basically buying those megawatts from us over time. Okay, wait, you'd say something more about the ESA of these are 10-year contracts? Yeah, they're typically long duration contracts, where we build them a fleet of batteries, and they operate them for 10 years. Why is the long duration important? Well, they're highly capital intense, and for you or for them, for us, because we're building them. And so the long duration contract gives us certainty of cash flows which we can use to finance. I think I have a better understanding of your business now. Definitely for the non-regulated and the regulated. I want to talk about how you think about company building. You've been obsessed with entrepreneurship since you were a kid. You started your first company, you said in eighth grade, seventh grade, something like that. eighth grade, okay. Talk about my cousins who were in high school, they had a little more experience than me, but not much. Okay. I mean, I mean, I mean, I was a little kid. I mean, I had a front row seat to one of the bias, but one of the greatest entrepreneurs of all time, still operating as one of the greatest entrepreneurs of all time. And the rate of learning, I mean, I just get to learn from him every day, and we're incredibly close, as you know. And, you know, we compare notes about, and we talk about his business, and we talk about our business, and we provide each other this year. back and we disagree and we argue and it's a ton of fun. So I've been studying the art of company building for as long as I can remember both in that context and also the investing roles. I mean, investing is really just trying to predict the future in the context of understanding what makes a great company and which ones are going to win that version of the future. And so it feels like, you know, it felt like to me the perfect training ground to become an entrepreneur. So you said earlier that your dad, Michael Dell, is your hero. He's one of my heroes too. I actually talked to him yesterday. And the funny thing about that is, I mean, he's got this such a friendly UI, but he's so competitive and so determined to win that there's just a, I don't even know how to just just position him between how friendly he is and just how fiercely competitive he is. Since you mentioned him, I want to bring up something you told me one time that you called the dad terminal. Can you say what the dad terminal is? Yeah, so you joke that I'm, you know, kind of a financially minded person and the Bloomberg terminal is obviously this like incredible technology that, you know, people in the financial industry used to ask questions and get information and think and analyze opportunities. And the dad terminal is my version of that where I call dad. And we have conversations about business topics and strategic objectives and challenges that I'm facing. And it's the most fun, it's the most fun thing ever because, you know, he has more context than anyone, but my mom probably on, on me and what's going on in my brain. And he's got a lot of context on the business because we talk all the time. And he scaled a vertically integrated capital and tens hardware company, consumer facing. There's a lot of similarities between our two businesses. And so I use it as an opportunity to learn from him and I like to think that every once and a while, you know, he gets a new perspective or I ask an interesting question. He loves to think for me. A lot of fun, like, when's the last time you presented him a situation that was new to him? I like to think it happens pretty often. You have to ask him, yeah. But it's fun. Maybe we challenge each other and push each other and it's, we spend basically no time like celebrating, you know, and basically all the time, financial problems. And you're right. He's totally competitive and incredibly focused, but he does it with a smile. And I try to do the same thing. And I think you talk to the team here like they would tell you that I'm pretty intense and pretty competitive and quite focused. But I do this smile and I try to have fun. And I take, you know, the job really seriously, but I don't take myself that seriously. You mentioned vertical integration a couple of times. Why is that so important? It's only important if you're playing a cost-focused game, right? Like, it's not vertical integration because it's fun or because it's cool. It's because we're trying to compete on cost. If vertical integration is a great strategy to win on cost, right? Electricity is the commodity, the best form of commodities, the cheapest one. And if you're going to deliver that, you got to vertically integrate. So that's why we vertically integrate. And you first started the company though. Like how do you go from this company that doesn't exist to, I'm going to create a new essentially power company that's vertically integrated? A lot of reading, writing, thinking, and deliberation with my co-founder, Justin and, you know, Jared, who's our first hire and Dana and Cole, and the early people that joined the company. I think we still do this this day. Like we do a lot of, you know, crawl walk run, a lot of iterating, a lot of testing and learning. And look, I think we started Justin and I with a belief that the energy industry was going to a paradigm shift, that battery storage was a really valuable technology in that paradigm shift. And that building a battery pack, you know, highly optimized battery pack assembly business in the US was going to be a really strong position to be in. And that's about why, why on that point? Because batteries had a lot of value. And there was a lot of margin being captured by the OEMs, basically. So why is it important to manufacture here though? To control the supply chain. It's less about, like, physically where it is being in this country or another country and the fact that coupling engineering and manufacturing and actually, like, making the thing where you design the thing and how in the engineers that make the thing and the engineers that design the thing, you have a lot of like, I did this episode on Elon how Elon works. I think it's the most downloaded episode of Founders Ever. You have, there's a lot of like, SpaceX culture or ideas that I hear from you and obviously Justin was there. Yeah. I mean Justin, Justin was there for kind of the formative years of his career, obviously end role as well. Jared, I first hired was there for the formative years of his career, same with Cole Jones who's hired number four. We've got a lot of SpaceX people here. It's a company that I deeply admire. I've gotten to know Brett Johnson, the CFO there, really admire him and Glenn and of course Elon is, you know, the greatest technologist of all time. And I think the culture inside of SpaceX and the operational cadence and the way they're kind of a ability to focus on the critical path and unblock things in their path to get to their goals that are all oriented around their mission. It's super inspiring. We've tried to replicate. And they're really hard to compete against the office face. I think it was here last year or like maybe six months ago and you're like, yeah, that building over there. We almost had a lease and then Elon came in and swooped it, swooped it up. They did. Yeah. It was a bummer, but you can only look forward, not backwards. So we've found a new spot, it's going to be better actually. We're going to build a campus with manufacturing, engineering, everything in one place. Is this the one out by the airport? Yeah. So talking more about this. Yeah. So business is growing and we've got to expand our manufacturing footprint. And of course, like the headcount during the last time you were here, I think we were just in the first floor. Now we're on all three floors. Yeah, we'll soon fill up the whole thing. Dude, the growth is crazy. So I was reading through all of your company, like monthly reports. Yeah. You're just like, okay, we're doing like 1.3 a day or six a day and then I skipped like I went to the end and just like, and we have tens of thousands of these things everywhere. It's pretty impressive. Yeah. It's just like, you know, maniacal focus, relentless execution, and try to get, you know, a little bit better every day every week of a month and you can get a lot done. But yeah, business is growing a ton and we've got to expand our manufacturing footprint, our headcounts growing. And we feel really strongly about in-person work, having everyone in the same place, you know, one team, one dream, one culture. It's not like, oh, the factory people and the office people, it's like one company. And we've launched together. And so having everyone co-located is really important. Yeah. And your desk is right here. Yeah. Yeah. Like in just the same as anybody else's. Yeah, of course. There's a lot. Again, like, I am fascinated by the way Elon runs his companies and then he is, what I feel is like a very simple idea is, but they all work together. Obviously he's doing complex shit, but it's not like rock science. Private offices are lame. Yeah. I want to be in the thick of it. I want to be with everyone. I want to overhear stuff. I want people to overhear me. I want people to feel like they can come to my desk and ask me questions. And it's just, it's just better. It's more fun. I love the team. I like being with them. There's no reason to hide away in a private office. And also, I don't deserve special treatment. On the team, just like the interns on the team, just like the person who started a week goes on the team, just like the third hire is on the team and we're all on the same G together. We eat the same food. We have the same desk. We use the same tools. And I just think that's the right way to operate. And so, yeah, this new facility is going to be amazing when I have everything co-located in it. And look, I mean, go around rock. And I think you've been, you see the Dell facility, I mean, for a long time, everyone was there. And of course, now the company is at Global Scale and they've got offices all over the place. But I've seen, I've seen that work really well for other companies and I think it'll work well for us. Okay. So, to talk about more of the structure, you don't separate design, engineering and manufacturing. It's all in one location. Right. Okay. And that's taking place right now across the street. Yeah. So, I mean, you could walk for two minutes that way and you'll hit base factory one and you'll see, there's like a little driveway here and you'll see engineers walking back and forth all along. And most of them have scooters and golf carts and things like that and that's where the product is made. This is where the project is designed. And so, it's a walk or a golf cart or a scoot to get back and forth. And just having the ability to go design a part, walk over to the factory, see how the part is being assembled, figure out the failure mode and fix it and iterate quickly with people that you see every single day. It's just a massive accelerant and pace of execution. It's funny to me because I've read a ton about the rubber bearings, the industrial revolution. And I feel like there was a good, I don't know, 50, 70 year chunk in American history. We kind of forgot these things. But the way you're describing is exactly what Ford used to do. It's what Kari did. It's like what all of industry in the United States before has moved out used to do. And it's like, we kind of lost that knowledge. And now it's like coming back. It's like, yeah, guys, it's exactly what they used to do when we used to do it that way, too. Totally. A lot of the Elon companies, Tesla and SpaceX, but also, you know, Andrew, we have these companies to thank for training a whole cohort of engineers on how to build hardware products, how to scale manufacturing, how to ramp a supply chain. And we didn't like, I'm glad you brought that up. I was thinking that there was like, could you imagine the deficit that America would have if Elon didn't exist in this domain? Software we were crushing, but this like, there's one guy. It's the most incredible contribution. I think anyone has ever made to humanity is not just the company that he's built, but the engineers that he's trained that have gone on to build other great companies. It's, like I said, he's the greatest technologist of all time in my opinion. It's been a massive advantage being able to hire people that he's trained that have, we know, worked with him that have learned from him. They bring their best practices here. And then to be fair, we adapt them, right? Like we do things in a very base way. We have all kinds of things like glace case and, you know, the turtles and the dashboards and, you know, our North stars. Let's go into this. And all these things. Let's go into this. Let's go into this. They're quarter our culture. They just kind of bubbled up out of the way that our team operates and the way that we sell problems. And many of them are inspired by companies like SpaceX and Tesla, but a lot of them are kind of organic to us. Okay. So explain some of these things to me. So look, I think we, from the earliest days, and you can go back and look at some of the artifacts and writing of this, I've been very focused on a small number of important goals that are very clear and understandable by the whole company. We've been accountable to those goals, like we write updates every month, unlike what do we do? What do we not do? What are we going to do next month? And we do that. You know, I've written one of these monthly updates now. for the last three and a half years. Every single month, never miss the month, don't plan to. It's a huge cathartic for me to sit down and kind of write the whole thing. And I think it's an asset for the company to have this kind of account of, okay, what happened, what's gonna happen next month? They're a recruiting tool, they're a great fundraising tool. So from the beginning, we started the company with a memo, right? I think you've read it, it's 10 pages. Top to bottom, like, what is base power? Why does it exist? What is the problem that we're solving? How are we gonna do it? Where did you get the idea to write that initial memo? I'm just the kind of person that has to write clearly to think clearly. I've always been a writer, I loved writing, I love reading much like you. And I think maybe some of the memo culture stuff comes from finance and investing and getting your ideas on paper. But I just can't think clearly if I don't write clearly. And so I needed the memo for myself. And so you come in here, you carry this little notebook with you too. I still have my notebooks. I have like two notebooks. I have the red notebook, which is like, you know, in the business and I have my black notebook, which is like on the business and the red notebook I'm carrying around in the office and meetings and the black notebook is, you know, for at home and I'm trying to strategize and explain what they're in and on. So I think it's a concept of working in the business or working on the business, right? And working in the business is I'm blocking and tackling and solving problems that are blocking us today. And I'm, you know, trying to figure out personal problems and product problems and, you know, acute issues that are near term. And then working on the business is thinking six months out, 12 months out and kind of strategic war gaming and chess playing. I would love to read that notebook. By the way, it might be private. If you don't want to, there's some good stuff in there. - Okay. - There's also all kinds of that stuff in there. (laughing) - I know, that's great. - I try to segment out my day with very specific, like, okay, when I'm in the office, I'm largely almost always exclusively working in the business. And then, you know, I leave the office basically at 9 PM every night. If it were up to me, I'd say longer, but I have a wife who I love and I want to spend time with before she goes to bed. So I leave at 9, I go hang out with her until she goes to bed and then, you know, 10 to 11 or, you know, 9 to 10 with her roughly and she goes to bed. And then I open up the black notebook and I sit in my phone's in another room, like, appears in another room. And I just focus on strategy and what's most important. And, you know, what are we not thinking about? And, you know, sometimes there's very specific things I need to do, which is like, I need to go write, you know, an outline of a memo or of, you know, a big thing that's happening in actually a week that I have to figure out, like a big problem. And sometimes I just sit and I have no idea what I'm gonna write about and I just stare at a page until something pops into my head. And that process has yielded some of the best ideas that have come. And I think by, like, deliberately allocating time in the day towards working on the business versus in the business, it helps you and, like, actually physically having a different notebook that was like a different color. And I open the black notebook and I'm like, it's time to get creative. Like, that, and I'm not in the office. I'm like, at home, it's after hours. And that just has really, really helped me that segmentation of, you know, when to work in the business? I want to work on the business. Do you think there's something special about it being analog that you're actually writing with pen to paper? - For sure, I've tried to move to computer and all the good ideas go ahead. I mean, not entirely, right? And like, what happens is, now I wake up pretty early in the mornings and, you know, six to eight a.m. is kind of my most productive time. But that, I'm in the morning. I'm kind of like doing the work that I assigned myself a night before. So I'm like, okay, I gotta solve this, I solve that. And then I open the computer and that's all in the computer. And then I'm like, actually executing. But there's like this special, you know, 30 to 60 minutes in the evening with a pen and a paper and no distractions. I can't get a notification. I can't get a call. Like, I'm just focused. And I really enjoy that. And I'm sure some people have the, have the capacity to focus, you know, using digital tools. But like, the analog is really clarifying and focusing for me. - Deal is how the best founders turn the world into their talent pool. I've been studying how history's greatest founders operate for a decade. And one thing they all have in common is they understand that recruiting and hiring, the very best talent is your most important priority. A, players recognize other A players, which is why top companies like Ramp, Shopify, 11 Labs, Uber, and DoorDash all use Deal. Many of the top founders I know have personally invested in Deal after using their product. And what they discovered is that Deal is the best company in the world at building infrastructure for global hiring. Deal will help your business higher, pay and manage any worker anywhere in the world so you can retain the best talent anywhere and spend the rest of your time focusing on what you do best, delivering value to your customers. The founder of 11 Labs has a great description of the value Deal can give your company. He said, we built 11 Labs to break down language and communication barriers with Deal enabling us to hire and support exceptional talent anywhere. We can accelerate our innovation and bring more voices, stories, and ideas to every corner of the world. Deal is trusted by over 40,000 businesses. Learn how they can help your business today by going to Deal.com/Cenra, that is Deal.com/Cenra. Okay, so go back to this idea of North Star. This is a handful of simple ideas that you're getting the entire company to focus on. How do you describe this? Three things that we must accomplish this year to stay on path towards our mission. So it's become the largest distributed battery fleet in the world. The fastest growing battery fleet in the world. Land the batteries at the lowest land of cost because it costes everything in a commodity business. And what does Land mean? It gets the batteries on the grid on a per kilowatt hour basis, cheaply to anyone. And how do you affect the price of that? How do you actually do that? Do you have any other materials of the hardware, the installation cost, the customer acquisition cost, all the overhead and the operations that get the battery there? Okay. So it's fastest growing battery fleet, lowest cost megawatts, basically, and then financial sustainability, which is basically profitability of unit economics, right? Those are the three things. And those are the three North Star's. And if you walk in the office in the middle of the office by the stairs, there's a poster, beautiful, well designed by our design team on purpose. But it only has the three North Stars. And that same poster is in the middle of the factory. And everyone walks by every single day. And at the beginning of the year, I sat on the email to the team and I said, look, these are our three North Stars. If we get these three things done, these three things done this year, we're gonna be on track towards our mission. And so people know, okay, if we wanna achieve this mission, these are the three things we have to get done. And then there are goals that come downstream of the North Stars that are kind of specific things that we have to accomplish to hit the North Star. And so everything we're doing internally is focused on those North Stars. So we have these very specific North Stars. We have these monthly updates that organize the team. And then we're just minutely focused on blocking whatever is on critical path towards achieving those North Stars was keep us in track for that mission. So I mentioned the Turtles. So the Turtles is this device that we use. And there's devices, right? There's like tools. Turtles, the tools, the metrics and dashboards are a tool. We'll talk about both of them. And the updates are a tool like the writing and the kind of organizing thoughts. So the Turtles is a literal physical turtle. Now there's actually a couple of them that goes on the desk of the person that is on critical path. That turtle can only be moved when critical path is resolved. So with turtle comes a thing called a hot potato. And a hot potato is like a squad basically that spins up around a problem. So we have a problem in the business. There's a part of the supply chain that there's a part that we can't get at volume. And so there's a turtle on the desk of the head of the supply chain. And there's a team of people that are all working on solving that problem. And there's a meeting every single day. And there's an email that goes out every week to the entire company to [email protected]. That was a hot potato update. And it's like, hey, this is the constraint in the business right now. This is what we're doing to resolve the constraint. These are the next steps to get the thing resolved. And then when the hot potato resolve is an email that goes out and says, hot potato resolve is done. And then those people go back to their normal course of business. And it's not like they're in a meeting every single day forever. They're in a meeting until the job gets done, right? And the turtle physically, and it's like a funny silly thing. It's like, now there's like a plus turtle, there's a ceramic turtle, there's like all kinds of turtles are on the office. And there's like a little version of this. We really need to unblock. And it's this concept of like, take your work really seriously. But don't get yourself that seriously. We have freaking turtle stuff animals all over the place and little inside jokes like this. But they're really motivating for people. And people take pride in having the turtle. Because it's like, it's my job now to unblock the business and to move the business forward. So we'll talk about, you know, that's the tool, right? You know, every company uses metrics and dashboards. But I think we do it in a really thoughtful way. So if you walk around the office, what do you have? It looks like a best buy. There's TVs popping out everywhere. And every TV has metrics that matter to the company on those TVs. Good ones in green, battle ones in red. And we joke that every team at the company, as you noted, we all sit in kind of bullpen seating, open floor plan. Every team of the company has TVs that literally hang over their head with the metrics that matter to that team. And so you show up every day and you know things are good or things are bad, right? Because the TVs are telling you so, right? And those metrics are really focused and specific. And if they're not high signal, the leaders of the company, their job and everyone at the company, their job is to point that on to, hey, that's a bad dashboard. Like that dashboard isn't telling you something useful. That's guiding us towards the wrong thing, right? And so if you measure something that's not useful, you're gonna end up going off in directions that are not actually moving you forward. And so the metrics have to be super specific. They have to be oriented towards the north stars and they have to be very visible and readable. And that's been a powerful tool to get everyone focused on the right things and then on board quickly. Because if you just join the company and you don't know about the north stars and you're just only about them for the first time and you're not, you're like still kind of wrapping your head around, you know, our mission, vision, and strategy, these metrics that point you to very specific things for your team really help you get focused quickly. And then over the time of your time in the company, you get steeped in our mission, our vision, our strategy. And I've told you about, you know, there's a presentation I give every quarter called "Engine of Success" which I'm actually giving tomorrow, I'm really excited for it, which explains our formula for winning, right? It's like, how do we win? It's our super top secret, you know, like, this is our formula for success. This is how we beat the competition. And it's a lecture effectively that I give to the whole company and it's really designed for the new cohort of people that joined in that quarter. Because I want everyone from the interns to the most senior people to understand, like, how are we going to do this thing? That's the plan, right? I think a lot of companies, when you join them at our scale, 500 people are going really fast. They're like, "Hey, here's your desk, here's your computer, you're working on this very small part of the thing, like, good luck and do a good job." I really care, Justin and I really care that the leadership team here, we all really care about everyone understanding why we're here, what we're after and how we're going to do it. Because we want people to come up with all kinds of good ideas on things that are not necessarily directly in their scope because we want to hear them, good ideas can come from everywhere. And then you have more context on the specific thing that you're working on and how it impacts the product business. And so we teach these things and it's really my job, and I'm kind of like a coach and a teacher to the company in a lot of ways, it's a big part of my job. It's like writing these monthly updates, giving these quarterly presentations, really clearly explaining these North Stars, making them the right North Stars, putting them on a poster, making sure all the metrics are right, guiding us in the right direction, that working on the business, so that people working in the business, which I also worked in the business every day, and I love doing that, can make sure they're working on the right things. Yeah, for you to describe your role, you view your role as like a player coach, you say more about that. Yeah. So I think the coach side is the working on the business, and also there's a personal element to writing a company, which is, man, we are grinding, like it is hard, like this group hustles. I think you've seen that working with the team, meeting the team, and I mean, it is busy here at 9 PM, it is busy here on Saturdays, and it's stressful. And so there's a lot of helping the team, and the people, the humans do the best work of their career, and that's a lot of the coach side, and working with them, and trying to, you know, I studied psychology in college, which definitely doesn't make me an expert, but like, you know, I've read all kinds of behavioral psychology books, and it's the topic that I really enjoy learning about, and I love helping people become the best version of themselves. And then of course, guiding the company towards the right North Stars, the right metrics, the right quarterly goals, focusing on the right things, that's really the coach side, and the player side is, I also want to be a world-class IC, and there are things that I can do day-to-day in the business to unblock the company, to help go put points on the board, you know, to use a sports analogy, I'm a big basketball player, like, when the game's on the line, and the team needs a bucket, they can give me the ball, and I can go score, right? And I can also guard the best player on the opposing team, and I also know if I'm double teamed, who to pass it to, right? And it's like, you got to be able to drop the play and help, you know, motivate your teammate when he misses a big shot, and also if your team needs a bucket, like, you got to go get a bucket. I interrupted you earlier, you were saying some insights you drew about entrepreneurship from starting out and investing, what are we going to say about that? I mean, I think investing, maybe this is just my perspective of it, is the art of studying good businesses. What makes a good business, and what makes a bad business, and how do you predict which ones are going to be good, and which ones are going to be bad? I'm quite competitive and quantitative, and I'm interested in things like accounting, and capital allocation, and capital market shopping, and how many of the robberbearance, like, started out accounting, you know, like, rock feller, you have to be steeped in it to understand what makes a business tech, and what makes a healthy business, and not a healthy business. And so, and there's a lot of, also, the study of people, too, back to the psychology point, and, you know, I think this is one of the things that makes Josh, our mutual friend, and who I used to work for at Thrive, world class at his job, is he's just an incredible identifier of talent, and he's really good at understanding, like, who's going to be good to yell and not, and what's a good leadership team and not. And so, my interest in and passion for investing was largely driven by, this is a place where I can pick up a lot of skills to become a great entrepreneur. I can learn accounting, and I can learn capital allocation, I can learn what makes great leadership teams, and I still love thinking about businesses, and thinking about investing primarily as it means to the end of learning how to be a great entrepreneur. Like, the companies I want to invest in are the ones run by entrepreneurs that I want to emulate, and I want to learn from. Tell me some of the entrepreneurs you want to emulate, that's interesting. I mean, my dad's at the top of the list, but I really admire Patrick Collison, and John as well, but the Collison brothers, I think the way that they've run that business is really impressive. The culture that they've built, the pace of execution, and the way that they've continued to kind of evolve the company over time as it's gotten bigger, obviously they started serving startups now. They're serving enterprises. They're doing a lot of interesting things with kind of emerging technologies like stablecoins. I really admire Eric and Kreme at Rampton, who obviously are close friends of yours as well, and the way that they have built an incredible talent magnet in a category that on the surface is maybe not all that sexy, and then they've turned that category into something really sexy. They've built an incredible suite of products and tools for companies that are incredibly useful in an area where you wouldn't have otherwise thought that that was possible or at least I wouldn't have, and then there's great operators, they're incredibly customer-obsessed, they're really focused on the product, and they want to drive outcomes for their customers kind of back to the point of like you care about affordability, reliability, they care about saving you time and money. That's all they care about, right, and that's why they're able to differentiate in that space, and so those are two different companies that you think that's awesome. A company like Rampton could build a great brand, and you know what many people consider like an unsexy category. I feel that you base is actually, it's the only brand like in power that I can even think of. We talk about building the first beloved brand in energy all the time, and you think about just consumer products, like I think there's another thing like studying businesses being an investor and the value of that in the path to being an entrepreneur, I think that brands are one of the most underrated modes in business, right, Coca-Cola and Nike, you know, these brands are so, it's hard to put a dollar amount on how valuable they are. You read zero to one, I assume, of course, I think I've just read it for the fourth time. I just did another episode of Founders on it, and you know, he was talking about all the ways to build creative monopoly, and in that book, the funny thing, he's like, well, brands won, he goes, I just don't understand it, to your point. It's so valuable, and there really aren't any beloved brands in energy, which makes the opportunity even bigger because it's kind of positioned, it's unique, right, and so if you're able to do a thing that no one has ever done in your space, you stand out, right, and so being able to build a beloved brand in this category has become a huge advantage for us. Are there any other entrepreneurs that you, like, emulate or you study? I mean, obviously you mentioned Elon a few times. Yeah, I mean, Elon is obviously one of the greatest of all time, and I think I've more so learned from the people that I've worked with that have come from his companies in the way that they operate than Elon himself. What did you learn from the people that worked for Tim? Probably this maniacal focus on critical path and resolving constraints, and I've also learned a lot of this from Antonio Grasses, who's on my board and has worked very closely with Elon for decades. The first year or two of working with Antonio, basically every conversation I have with him, it's still to this day, this is, you know, the main focus of all of our conversations. Every conversation was the same. Hey, Antonio, how's it going? Get out of you. What's up? You know, Zach, what's your constraint? Like, what's the constraint in the business? And I answer the question, and that's all we can talk about. What's the constraint? Like, if we agree on the mission, division, and the strategy, okay, we're good there, what's constraining us to get to that? Let's just focus all our time and energy on that. And that kind of flows into all of the little things in process and kind of how people operate that show up kind of in the day-to-day with the metrics and the dashboards and the hot potatoes and the turtles, like all that is is just trying to get to what is constraining our business and how do we resolve those constraints that are on the critical path on the way towards our mission? There's a weird idea here. I've said it a few times on the other podcast about it to say it here. It's like, I'm obsessed with things that last for a very long time. And so I looked at it, it's like, okay, what human-made things last long is. It's like, well, countries last longer than companies. Like, companies can last a long time, but countries last longer than countries will last longer than countries. And it's just like, well, is there anything human-made that lasts longer than religions? And I actually think there's like a lot companies can learn by studying religion. And just a few of these ideas were just like, well, first, you mentioned earlier, like, whether it's an intern or the CEO, I want everybody to have a shared base of knowledge. Religions do this excellent. They usually, it's a book. We all agree on it. We all own it. We don't like, we read it one week, and we meet together next week, it's like, no, we're done with that book. No, we go back to that book over and over and over again. We have the same conversation over and over again. We find places to gather with like-minded people, just people that believe the same things we do in regular intervals. Look, even if they believed in different things, religions have like these parallels or these similarities that I think companies should use. So I love this idea, this is what pops my mind when you're talking about, hey, I'm on the phone with this guy all the time, over two years, and it's just the same conversation over and over again. Explain why that's valuable, though. Because it's focusing and it just forces you, it's kind of the uncomfortable thing. It's like, we don't want to talk about like all these fun strategic things and all these bets we can make. It's like, what is constraining us towards our mission? Let's just focus on that. It's incredibly clarifying and it's uncomfortable at first, but over time it becomes very comfortable because- Wait, why would it be uncomfortable at first? Because the natural tendency is to talk about all the different things that are going on and all the different opportunities available to you. And the hard thing is to focus and just focus on the most important thing that is the constraint in between you and your goal. It's kind of like a cope, if you will, to talk about the other stuff. It's like, oh, yes, there's this constraint, but there's all this other stuff going on. It's like, no, no, focus on the constraint. I think my co-founder Justin is very, very good at this. Justin and I every Sunday, you know, are going to wander on Sundays and we have these kind of strategy conversations on Sundays and we don't ever talk about what's going well. Like, you know, we've got a lot of work to do, but I think could largely say the last three years, because I'm like reasonably well, you would never know it by tuning in to the conversations that Justin and I have on Sundays, because there's no benefit to that. Like that's in the past. We're only looking forward. What problems can we solve? What things are we worried about? What constraints can we believe? That is really The only thing that matters and all the other stuff is kind of just noise. Yeah, Munger and Buffett have a great line on this, so tell me the bad news because the good news takes care of itself. Exactly. Is there anything else that you think is beneficial to these conversations? Like how many times, when you're talking to a board member or your co-founder, how many times are you, is it just helpful for to organize your thoughts with somebody else? Like you know, Charlie Munger has this thing called the Rangitang theory. Have you ever heard of this? No. He says that an intelligent person could sit down and kind of a one-sided conversation with a Rangitang for, you know, 30 minutes, whatever case it is, right? Get up, leave. Rangitang obviously says nothing. And the person that had that one-sided conversation actually benefits. Just being able to organize your thoughts out loud. This is the notebook. Okay. This is the notebook, right? This is the monthly updates. This is like, right clearly to think clearly. It's like, and my team, you know, when I have a good idea, like, I write it down first, and I put it in front of them. Like, hey, I wrote this thing. What do you think? And I'm like, oh, I just screwed this. I just screwed that. It's amazing, right? And it's like, that's why every night I sit down with this notebook, and I stared it. And I kind of forced myself to write stuff, because it just allows you to gather your thoughts. And then, you know, I chew things over with Justin. I chew things over with Jared, with Dana, with Cole, with Dino, with Zena, with my dad, with me, with Antonio, with, you know, other friends that, you know, like Zach, and, you know, other people who are, you know, around the business have a lot of context, have a little bit of context, have expertise on the topic. And I think writing, I mean, how many times have you gotten just like a document from me? It's like, what do you think about this, right? Like, that's just my way of, of communicating ideas, and, and that is how I get my thoughts out of, of my head is, is to write. I came across this other thing, the other day, it's called, like, rubber duck programming, where, a program where we'd sit there, they'd have like, kind of like your turtle thing. It's like, the rubber duck is sitting here. It's like, and I'm explaining the code I wrote, and why I did it this way to the rubber duck, and just hearing me put, it's like, saying it out loud, it's like, Claire, very helpful for clarifying thoughts. I just saw a time, because obviously my other podcast is a solo podcast, and I'll sit down to record, and I'll be thinking, oh, I understand why this guy did this or what happened here. And then I hear myself talking, like, I don't actually understand this. I have to fucking sit with it for a little bit longer. Like, it's, it's fascinating how, how helpful, just having, like, even a, a, a, a, a soundboard that doesn't speak back is for your thoughts. And we were talking about the count table on our investors, and, you know, you know, most of, of all of my, my major investors, and this is, I mean, I'm constantly sending them things that I'd write and calling them in early hours and morning and, you know, late hours at the evening. I'm just trying to brainstorm and just kind of chew on things with them and, and it's, it's incredible. What do you think is the most helpful out of any of your investors? I mean, honestly, our mutual friends, Zach, we can't say his last name, who is not even one of our major investors, but it's just like a, you know, very close personal friend and, and, and is a based investor is one of the best business strategists I've ever met. I think probably the, the best investor of our generation, one of the best company builders are. Consider yourself an investor. Uh, I'm seeing him later on today, but I, I gotta tell you a story about this. And so, yeah, go ahead. Yeah. A friend of mine is having an issue. He's got two companies. He couldn't figure out. Should I sell one? Should I focus on another? And I had my own opinions on this. Obviously, fuck it. Focus on one thing. Um, and I just arranged for them to sit down. Very predictable. Exactly. Exactly. And I arranged to sit for them to sit down 10 minutes later. It took all 10 minutes of our mutual friend identifying exactly what's wrong. And then the guy I connected with text, he's like, he got to the heart of his shoe like right away. I said, yeah, that's why he's so fucking good. He just is a brilliant business strategist and an operator and has seen a lot and he listens really well. I think he's very patient and thoughtful and he's been incredibly helpful. My dad is near the top of the list. Well, we talked about this. We were on the phone yesterday because I was supposed to see him last night and I was like, dude, I gotta get some sleep. None of the conversations with him is going to be five minutes. If you're his friend, it's going to be like three hours and it's going to be incredible and you're not going to be able to sleep. I was like, I got to get a five next day. I'll see you tomorrow. Totally. Yeah. And so I'm very lucky to have a lot of people like Josh who I worked with for a couple of years and is obviously a major based investor. Brad Gershner is a great thou partner and is someone I call all the time with crazy ideas and leaf fix holes. You know, his firm addition is our largest investor, Antonio and his partner, John Shulkin, are super helpful in this regard. But if you had to only pick one, I mean, it's my dad. It's the truth. There you go. Yeah. Okay. Well, he knows me better than anyone. He's known me longer than anyone to my twin sister, technically. I was talking to him yesterday and one thing that we said or just like, like, I, one thing I respect about you is like, you're just, you're a fuse of praise and admiration for him. You know, it was really cool. I was like, listen, Zach thinks that he loves you and go, Zach doesn't know what love is until he has his, he holds his first child in his hands and your dad laughs. He's like, it's absolutely right. Like the way you feel about him, I promise you, it's a thing. Love flows down the generations of the community. Like he feels that way a thousand times more about you and you'll understand you're all fucking appreciate me more. Hopefully you, maybe later on tonight, you start working on the baby, but whenever that happens, like nine months and one day from now, when you're like, fuck David, it was right about this. And then you're going to appreciate your dad even more, which is going to create what to blow your mind. I'm looking forward to that for you. I, I'm so excited to have kids. I'm one of four and I have an incredibly close relationship with both of my parents and my mom. I mean, if you think my dad is competitive, my mom is on a whole other level. I mean, she is a picture in your dad's office. Your mom's a beast, like an athlete, like a, she's an incredible athlete, she's a world class endurance athlete. She's a crazy ship for your birthdays, whereas like every birthday, she's like, I'm going to ride like a hundred miles plus your age or something. She, every year, would ride a hundred miles plus, plus our age for all four kids. Not because we asked her to, but because she wanted a challenge and she wanted to kind of commemorate the, the birth given, if you will. And she's just an intense person with an unbelievable amount of love and affection and care and amazing mom and amazing wife to him. And I think, you know, he, he constantly talks about how, you know, she used to seek it up in and it's really true and she's the, she is the engine of the family and the, the kind of cornerstone. We are definitely a matriarchal family that kind of revolves around her in the best way. I'm just so lucky to, to call her my mom and, and to get to learn from her and I continue to be inspired by her every day. And she's, she's a force of nature. I'm going to switch gears real fast because I saw a factory tour of ears. What is this cube? Can you explain like the evolution? I saw the, I went through all your company updates and I saw the evolution of what you guys were installing, how you were making batteries, the lessons that you were learning. And now this is kind of like the next generation, your latest product, you can explain, like, all the learnings I went into and why it looks the way it does. Yeah. The core. So it's called the basic core. It's called the basic core. It's okay. It looks like a cube. All right. My bad. And it is our custom built battery. And it is the output of the last three years of learning how to install, operate, and manage tens of thousands of distributed home batteries. It's completely designed by us from the ground up. It's manufactured over there across the street, a supply chain that we entirely control and manage. And it's purpose built for the use case. It's lower-landed cost bill and materials. It installs much faster. It switches over much cleaner. It has more power output, more energy duration, and it's really designed to be a great resource. And it is the embodiment of our strategy, we talked about mission vision strategy, strategy of compounding cost of energy, vertical integration and technology. This is the vertical integration and technology coming to life. And so now our business goes from good economics, installing off-the-shelf hardware to incredible economics with this vertically integrated cost structure. And that product that we can scale at an order of magnitude greater than the previous product, is we were tapping out our existing supplier. We were buying all their stuff, and they couldn't make batteries. I mean, we're sold out through November, and it's August, right? So we cannot meet the demand with the supply chain that is just today. We have to do it ourselves, right? And so we're building factory one. We're building factory two. We're bringing on module lines and a vertical line as fast as we can to meet the demand. The only way to do that is with vertical integration. And the base core is the embodiment of that strategy. And why, though, because when you rely on suppliers, you're kind of at the whim of their execution. And when you do it yourself, you control it. You control your own execution, and you can kind of rise to the occasion to meet the demand. And you can invest the CAPEX to, you have the conviction, if I go to the supplier and I say, we're going to be the fastest growing energy company of all time, three years ago. If I said, we're going to be the fastest growing energy company of all time, we're going to install tens of thousands of batteries in the next three years, and then hundreds of thousands of batteries of the next five years. And we need you to go to about hundreds of millions of CAPEX to build a manufacturing capacity to meet our demand. They're not going to do it. They're going to be like, get out of here, kid. What are you talking about? Like, send me the PO and then we'll talk. And so we got to do it ourselves. We have to put up the CAPEX. We have to build the execution capabilities and expertise to actually go do that stuff. And then when you do it, you have a better cost rupture because that OEM that you were buying from no longer collects a margin, that's your margin to keep. And you have more control over the scalability. And you can go make those kinds of forward investments to bet on future growth. How deep can you take this vertical integration? When you were just speaking, again, I had this like, you noticed there are conversations like, I'm not really thinking about Zach and base. I'm thinking about like, oh, this reminds me of Henry Ford took vertical integration way further than you could even think that somebody's manufacturing cars. At the point, he bought his own railroad because he was annoyed at, he couldn't get his raw materials like fast enough. So he's like, I can actually run a railroad better than you guys and I will prove it. You wind up running it, optimizing it, and then he sold it for like a $30 million profit too. So how far can you take this? So there's a lot to say here. I mean, we could take it. We could go buy lithium-ion and start refining lithium and make our own cells and all the way down to mining. Sure, you could, right? I mean, call Travis. Call Travis. But we could do that, but I think it's how far do we want to take in and win, right? And over time, you know, there's kind of like diminishing, but not to zero, maybe plateauing or asymptoting returns to a certain level of vertical integration. And then once you reach a certain scale, it makes sense to vertically integrate further and then further and then further. And based on our current set scale, we like the position of final assembly test and pack. We design everything. The fabrication is largely done by third parties, our suppliers. We get all the parts, we stick everything together, and we test it with packet, and then we go and install it on it and operate it. Over time, we could reach a scale where you get economies of scale and you get benefits basically that outweigh the cost of making the sell, refining, lifting a mining, lifting a gas station. That has to excite you, though. Oh, yeah, I was going to say. That's the way you are. Of course, but this is a multi-decade 50 year journey that we're on. And in year three, it doesn't make sense for me to spend any of my energy and brain power thinking about making sales, right? In year 30, it almost certainly will. Okay, but you think you're going to get to year 30, and I don't mean that the company is not going to be successful. Oh, I love your fucking competitive nature. Of course, no. What I mean about this, there's something, there's no other word that I have for this. It's just fucking perverted in the entrepreneurship ecosystem. I hate that there's even an entrepreneurship like industrial complex. It's like, that's run largely by investors, which I fucking can't stand, which is start scale sell. And I'm like, no, like, what the hell are you going to do? Like you're, I have to say, you should be deaf. So I've had two founders on recently where we talked about this, like, you know, Scott Wu. Yeah. Like, he's, they're throwing billions at this kid, billions, and he's saying no so far, and I hope he holds on. But his whole thing, and I think he will, because he's already rich. And I believe he's super, super competitive. And then I just had Torson real, who's the founder of Helsing, who has, it's not out yet, but he's just like, he's, I think, started the conversation because his whole thing is like, Europe needs its own way to defend itself. This is not a fucking business. This is a mission. He goes, we're not selling this for any amount of money. What's your opinion on this? Look, you said it. It's, what are you solving for? Are you solving for the mission? Are you solving for a paycheck? I think you could probably guess based on where I come from, that I'm not solving for a paycheck, right? And the way I talk about the business and the way we act and the way the business is run, we're here to achieve a mission. That mission is kind of never ending, right? Human prosperity, energy abundance, affordable, reliable power, whenever, like, well, we did it, like, we did the affordable, reliable power thing, like, what's next, right? Like that will, that is a mission that will live on forever, probably out, out live, the company outlive me, hopefully the company outlive me and then, and then the mission will go on forever and eventually, you know, either, either, you know, the, something will take out the earth that will kill the company, right, but like, this company's going to last to the end of the universe. Um, and so your dad has a great line about this when he was fighting car icon and I want you to start another company. It's like, I'll care about this company after I'm dead. Well, you asked me, like, what would it require for your dad to stop working on Dell? And I told you you'd have to kill, right? And so the, the, it's about the mission. It's about, like, I get to, it's the honor of a lifetime of a fucking lifetime, blessing of a lifetime to get to come, wake up every day and get to work on this mission with this group of people and come into this building and, you know, when I'm not here, I'm like wanting to be here, right, and I'm, I'm wanting to think about it and like, I'm, you know, I'm constantly obsessing over moving this mission forward and that'll never change. And your point on a vertical integration, like, you're three, you're 30, you're 50, like, the problems ahead of us or the opportunities that we can go after that will move us closer to that mission will change, right? They'll look more capital intense, they'll look like, you know, vertical integration or, you know, going, going deep, going wide, like, that'll all change, but it's all about the mission and all these will be. And the reason why, you know, we're focused on other things right now, other than making cells and refining lithium and, and mounting lithium, it's because there's a bunch of other opportunities across the stack that we want to go chase that are all aligned with the mission. At a very high level, energy is four things, make, move, store, and sell, right? You have to make it, generation, you have to move it, transmission and distribution. So you have to generate electricity, you have to move it to where it's made, store battery storage. You have to store it because it's not always used when it's made, right? You have to move it because it's not used where it's made because it's not used when it's made and then you have to sell it. Make move, store, and sell, generation, transmission, distribution, storage, and retail energy. And all the things around, you know, the software and all things around selling energy. We started with store and sell because we thought that was the best place in terms of scale and return on capital to enter the market. So we have ambitions across make, move, store, and sell because if we are oriented around the mission, which is affordable and reliable electricity, and electricity is four things. If you want to have the biggest impact on mission, you got to do all four things, right? So rather than deeply vertically integrated in your three on store, I'd rather go build great solutions to drive down costs and drive up reliability in the industry in make, move, store, and sell and then over time as opportunities present themselves to get better at make, move, store, and sell, we'll do that whether that means refining and mining with them or not. And then there's this new kind of interesting angle where we take that stack that we developed and make, move, store, and sell stack and we pointed at the largest and fastest growing energy consumer in the world, which is AI, which we, we talk about the beginning of the conversation. Okay. So this is your last company. Absolutely. Okay. Since you're going to be doing this for the rest of your life, I'm going to be doing what I'm doing for the rest of my life. I'd love if you come on every like six months, whenever you want, we'll have more conversations and then over time of the next few decades, we'll have like an ongoing live history of base. I love that. I mean, I love every conversation with you. You always pushed me to think bigger, push harder, really analyze why I'm doing things, draw comparisons to other entrepreneurs throughout history and I always learned something in our conversation. So I'd love that. Thanks for making the time, man. Appreciate it. Awesome. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review and make sure you listen to my other podcast founders for almost a decade. I have obsessively read over 400 biographies of history's greatest entrepreneurs searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through founders.