America’s Electric Power Grid Is Broken. This Startup Is Trying to Fix It. (Zach Dell, co-founder & CEO of Base)

22:31Zach Dell:I wonder to what extent, you know, you had that experience with your with your parents, like were the challenges of of Dell and what your dad was going through sort of things that you were hearing about and seeing how he dealt with them? Have there been things that you've been able to draw from there or was it, you know, not necessarily the way things played out? Yeah, absolutely. My dad and I love talking shop. that like we have a lot of fun doing that talking about his business talking about my business and it's kind of our it's our it's our love language to use a funny funny term that i don't know is appropriate in this context no no i totally you know what i mean it's like we we both are passionate about building businesses and we're passionate about you know each other's interests and so it's a really fun way uh for us to you know get into the weeds with each other and help each other and push each other and learn about each other and that started when i was really young and i have vivid memories from, you know, early adolescence, you know, whether we're, you know, in the car or at the dinner table or, you know, walking around the house talking about what he's working on and what the business is doing.

23:34And, you know, explaining things to a seven-year-old is challenging.

23:37Zach Dell:And, you know, certainly a seven-year-old who likes to ask a lot of questions. And those are really fond memories that I have. And I'm super grateful for that. I think it would have been very easy for him to dismiss my questions or tell, you know, you don't understand this and you're too young. And of course, I'm sure there were things that, you know, he he, you know, summarized and didn't get into the nuances of for those reasons. But I was very lucky to be exposed to a lot of the things he was doing very early. And I was curious and I asked a lot of questions and very grateful for that. I mean, I imagine this is, you know, maybe this is the sign of someone who doesn't understand really how things work at that level.

24:13Zach Dell:But I I imagine actually in a purely pragmatic sense, he also probably got a lot of signal from you. Because if someone is, you know, there's a wonderful naivety to kids that they can sometimes cut through with a question that is actually really profound and forces you to distill something. And if you have to, you know, it's like the Richard Feynman heuristic of like, you know, you probably don't understand something until you can teach it to a seven year old, I would imagine. You'd have to ask him, but I imagine there's definitely some fruits to that. Yeah. Yeah. Fascinating. I think one of the things that we really should spend some time on is Justin, because it seems like he is such a core part of this company.

24:49Zach Dell:You've mentioned before that you met him when you were sort of doing diligence on Andurel. You know, it's probably too much to say it was a love at first sight moment. But how would you describe sort of the effect of that first meeting? You're absolutely right. There's no base without Justin. He is a true force of nature. I really don't think I've ever come across anyone like him. He is deeply technical, extremely operational, probably the highest ownership person I've ever worked with. And he's just an absolute execution machine. And I think when I first met him, I was struck mostly by his intelligence.

25:23He also just has incredibly high horsepower and his intention to detail his understanding of the systems and uh you know at thrive and in my previous role blackstone you know and just broadly like i met a lot of companies and i've met you know done a lot of these kinds of meetings where you ask people a lot of questions about the thing they're working on and he was in the top you know percentile of knowledge and subject matter expertise and understanding and i you know we also just hit it off right like at some point at some level you need to have a shared kind of rapport and a kind of worldview and, and, you know, perspective.

25:57And we certainly don't agree on everything. And we, you know, we definitely have many different approaches and I'd say our skill sets are very different, but I think in that first meeting and the subsequent days and weeks that followed that where we kind of stayed in touch and we're talking about different ideas and identified that he, yeah, extremely high horsepower, deeply operational and technical, very complimentary skill sets. And then frankly, high integrity. Like he's a good, he's a good human. And he, yeah, we have, you know, similar, similar values, similar worldviews. And I think if you're going to build something with someone, particularly if you're playing, you do it for a

26:33Zach Dell:number of decades, that stuff was really important. You said such an interesting and specific phrase that I'm like, this must mean something to you. When you say the highest ownership person you've ever met, like, how do you see that? Where does that show up? And is that something you're almost always looking for in some sense with people? Yeah, absolutely. When Justin tells you he's going to do something, he's going to do it. And he's going to do it in the way that he told you he would do it. And if he learned something along the way that changes how he thinks it should be done, he's going to communicate it to you in great detail and very, very promptly.

27:05And it leads to a very effective operator who gets shit done. And there are a few people who get shit done at the velocity and quality that he does. Frankly, I have never met anyone that can do it at the level that he can. And that has become a core part of our culture at the company. And I think he has made me a way better operator in that I have learned and pattern matched and tried to mimic disability that he has. And I think you would hear the same thing from the rest of our leadership team and many other other people at the company. And it's now actually, you know, it's such a big part of our culture that it's something that we explicitly screen for.

27:43And I'll give you an example of this. So when we're in an interview, we'll ask some version of, you know, of tell me about the hardest problem you've ever solved or tell me about what your core skill is or walk me through the problem that you saw that you're most proud of at your last role. And people will often answer with, well, you know, we did this and my team and, you know, I was a part of this group. And, you know, the kind of Justinism here is like, well, Mario, what was your contribution? What did you do? And it's like, well, I was a part of this. No, it's like, what piece did you own?

28:12What were you specifically responsible for? And what did you have to do to achieve that? And what were the challenges and what were the missteps? And, you know, can you go down to the atomic units of the thing? Do you really understand the first principles of why you did what you did? And oftentimes the answer is no. And just that pattern match or that kind of fact pattern of, you know, trying to pull out that, you know, how Justin-like are they has been a very high signal hiring mechanism for us because the people that match well to that, that have really high ownership and are able to articulate super precisely what they owned and why they did it.

28:47They perform super well. And those who speak in vague generalities and do a lot of hand-waving often don't get hired. And if we do end up hiring them, those people tend to struggle.

28:56Zach Dell:The way the story often gets told is that you guys meet each other at Andrew Hill, and then you start almost very naturally talking about business ideas and texting about them. I'm so curious, how did you make that transition? Because sharing business ideas is like one of the highest vulnerability things you can do, especially if you're trying to build something in sort of a venture backed context, because you're by definition looking for like very non-obvious things. And so it's very easy to, I don't know, start to psych yourself out and, you know, pick the sort of median best idea to share with this person or, you know, do all of these filtrations.

29:33Zach Dell:How did you build that trust so fast? I think it was gradual. And I think there was a little bit of that, right? Like when we first met, I wasn't like, hey, by the way, do you want to build a vertically integrated power company and, you know, go take on, you know, the big guys and this is how we're going to do it. And it was, you know, I had that thought that was, you know, not fully farmed. I had a kernel of that thought in the back of my head. And honestly, it was more so, you know, remember I was in an investment firm and the original conversations were like, Hey, what ideas do you have that I can help you develop?

30:01And then we'll all invest and help you start something. And I imagined, you know, he shared a bunch of things with me and I, and there was a trust building exercise where he would share an idea and I would do a bunch of work and I would come back with a spreadsheet and some thoughts. It was like, hey, here's what I think. And showing him like, I can help you run this stuff down. I can help answer some questions. Here's how I would think about it. And so we built trust, built trust, built trust. And then over time, I think started to share more. And then, you know, I kind of proposed this concept of, you know, doing to energy what SpaceX had done to aerospace and Andrew had done the defense and, you know, building around this paradigm shift of solar and storage in this vertically integrated way and focusing first on battery storage and why, you know, PackAssembly is an interesting part of the stack.

30:40And with him kind of iterated on that concept to get to where we are today. So it was definitely a iterative process. It didn't start with like, oh, here's all my cards. You know, do you want to be my partner? We definitely built Trust over a number of months and then over time decided that, you know, we wanted to work on this together.

30:56Zach Dell:I see. When you look back now, obviously this was, you know, base was the best idea that you guys thought you could come up with. And that's clearly proving to be a good bet. Were there other sort of good contenders? And then on the other side, what were the ones that you look back on and think, oh, gosh, that was truly ludicrous? And I say that thinking that those ones could end up in the future. Who knows? Maybe they'll be the ones that someone finds a way to turn into something magical. I imagine we tossed around a bunch of things. But when we both got started to pick up momentum around this modern power company, the electric era, this vertically integrated technology driven energy company built around this solar and storage paradigm shift.

31:36It was kind of obvious that that was the most interesting place to focus. And we didn't really dwell. There wasn't like a matrix of, okay, here are the five ideas or the three ideas and let's color code them based on feasibility. It was like, this is interesting. This is interesting. This is really interesting. Let's go spend all our time on this. So there wasn't really a list. It was, this was kind of idea number one, two, and three. And, you know, it's not like we have a list of, oh, here's the next three companies we're going to start. Like, I don't want to speak for him, but certainly for me, and I believe for him, too, you know, this hopefully will be our first and last company.

32:09And, you know, we think it can be really big and really important. And we think there's a lot to do that maybe doesn't meet the eye for everybody initially, but really gets us excited to build for many, many decades.

32:22Zach Dell:What was the transition like for you going from, hey, I'm an investor helping you think through ideas to, hey, actually, I think we should be doing this together? there? I had always had it in my head that I wanted to build a company. And so for me, that was, it was kind of a given. And I think Justin could sense that, that I wanted to be an entrepreneur and the investing thing was mostly like a curiosity and passion detour on my way to being an entrepreneur. And yeah, I think it was never really a question of that I was going to be, you know, sitting on the hardwood, sitting front row, but not, you know, dribbling the ball to go back to the earlier metaphor from day one, it was like we were going to be co-firmers.

33:05We're going to build this thing together.

33:06Zach Dell:We're going to be in the weeds together. So yeah, that never really crossed my mind. Our mutual friend, the wonderful Paki McCormick has written some great pieces about you and the company that you've built. One of them articulates how I think it's the third or fourth week of the business. You sort of lay out the vision for the company and the vision for base is not to go retail, not to be in Texas and to be focused on utility scale. You ended up reversing all three of those, which I think really speaks to, yeah, the openness and, you know, the learning to some of the things that you came across.

33:40Zach Dell:Which of those three felt like the hardest in your mind to turn on, to make the switch on? What happened was when we started looking at this problem, we said, OK, they these companies are not incentivized to invest dollars in R &D. They're incentivized to invest dollars in CapEx and build more infrastructure. And so let's go build the R &D function for the utilities. let's go develop hardware and software that we can sell them through different business models based on their regulatory construct and we can deploy our technology in that way through these utilities and what we realized was starting in that way was going to be too slow because utilities they want to see proof they want to see do you have thousands of customers does the product work how do we model it how should we value it and so that was the kind of reversal we did we said okay let's actually start with a gen taylor model in the deregulated parts of the market but if you look at the business today, that business, the utility partnerships business is a big part and a very fast growing part of the business.

34:37And I won't overshare here because my team will get mad, but in the coming months, we will announce a bunch of large partnerships in this part of the business. And this will be a massive part of the company where we are building power plants for utilities. We're doing it for investor owned utilities. We're doing it for municipal utilities. We're doing it at very large scale, very low cost and very, very high speed, very fast efficiency. So that original insight, like we are doing that today and it's a huge focus of ours, but we had to make the decision to not start there and sequence it differently.

35:09Yes, that totally makes sense.

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35:50Zach Dell:Okay, before we go deeper into base, maybe it would be useful for folks to sort of understand a little bit of the state of the grid, why it works the way that it does, and as a result, sort of why this is the solution you've come up with. Can you give folks maybe a pricey on the American grid and maybe particularly why Texas is so different? Yeah, let's see if I can do it quickly in a way that's coherent. So there's basically three grids in the U.S. So the Eastern interconnect, the Western interconnect, and then Texas. There are then kind of two layers to those grids. So there's the transmission grid, which runs at high voltages, and the distribution grid that runs at lower voltages.

36:30And Texas itself is an island. So it is not interconnected to the Eastern interconnect and the Western interconnect. And it is also largely deregulated. So pause, quick history lesson. the US power grid was largely or entirely regulated. And by that, I mean, geographically defined monopolies up until the 90s. And this made a lot of sense, because when you were building out the electrical infrastructure of the country, it wouldn't make sense to run, you know, seven different power lines through a neighborhood, right? You're going to say, okay, this city is going to build a grid here, this city is going to build a grid here.

37:06And that was how you had to build out the initial infrastructure. But what happened was, and the way these utilities work from a business model perspective is they invest dollars to build out this infrastructure and they take the amount of dollars they've invested and they divide it by the number of rate payers or customers that they have. And those are the rates that you pay. So they amortize the cost of the infrastructure over the amount of customers they have. And so to make sure that these utilities with monopolies were not over earning, the federal government put restrictions on what they could earn.

37:36So it's a return on equity cap on the dollars that they invest. They earn a regulated rate of return. And the only way for them to earn that return is to invest more capital in infrastructure. And so in the 90s, there was a push to deregulate the electric grid. And this happened in California, actually, to start and then in Texas. And what happened in California was Enron showed up and manipulated the market and as a result, bankrupted PG &E. So deregulation in California stopped, but Texas carried it on. And Texas took it actually the furthest and deregulated about 80 % of the state's electric grid.

38:09There are still pockets of Texas that are regulated. We sit in Austin Energy territory in Austin. We are a regulated utility area. So if you live in Austin City Limits, Austin Energy is your power company. If you live in San Antonio, most of San Antonio, it's CPS. Parts of San Antonio are served by Guadalupe Valley Electric, which is a customer of ours. Parts of outside of San Antonio are served by Bandera Electric, also a customer of ours. If you go up to Dallas, you have Farmers Electric, a base customer. You have another utility up there that we'll announce a partnership with soon. And you have this kind of patchwork of regulated municipal utilities and co-op utilities, but 80 % of the state is deregulated.

38:47When I say deregulated, that's really a misnomer. It's actually highly regulated. What it really means is competitive. The way the competition works is you have competition on the retail side of selling the power to the customer and you have competition on the generation side. So generating the power. You have companies that will sit on either side of that. So you have retail electric providers that all they do is they buy wholesale power and they sell to retail and they make a margin. And these are tech driven businesses that are trying to acquire customers and then sell wholesale power at retail, make a margin there.

39:15And they're pretty low margin businesses. And then on the generation side, you have wind farms, solar farms, glass plants, coal plants, and they're generating electricity and they're selling it to the retailers or they're selling it to other large buyers of power. You then have a hybrid, which are called gen tailors, public companies like NRG, Vistra, Constellation, that they do both. And this is a really interesting business model because they basically lean their retail book, which is a short position, against their generation book, which is a long position. So if you generate power and the price of power goes up, you're long power.

39:43If you sell power at a fixed price and the price of power goes up, you're short power, right? So these gen tailors have kind of hedged portfolios across their gen book and their retail book, and that's how they make money. If you take a step back and you look at the whole country, there's about a terawatt hour of electricity demand, but average usage on the grid is about 300 gigawatt hours. So two thirds of the grid are unutilized. And the way that this is described in the industry is called capacity factor. And that's a utilization concept. The reason why batteries are so useful and so interesting and so important is because they increase the utilization, they increase the capacity factor.

40:18So batteries are a generation technology. But you might hear that and say, well, what do you mean? Batteries will create electricity. Exactly. What they do is they time shift it. So they allow you to charge on low cost solar in the middle of the day, low cost wind in the middle of the night, and then discharge when power prices are high, thereby increasing capacity factor, increasing utilization and decreasing total system costs. So when you think about base and what we're here to do, we actually want to build a energy technology platform company oriented around solar and storage. But what that means is not just storage and retail electricity, but all four parts of the power stack, which we define as make, move, store, and sell.

40:59So you have to make electricity. You have to move it because it's not used where it's made. You have to store it because it's not used when it's made and you have to sell it. We've identified the storage and the retail electricity in a bundled offering as the best place to enter the market because we think it's a highly attractive consumer offering. We can offer affordable, reliable power to the customer. And if you're a homeowner in Texas or you're any buyer of power anywhere. What do you care about? You care about affordability and reliability. I want my bill to go down and I want my lights to stay on.

41:27And that's the way we've decided to enter the market. But over time, we see really interesting opportunities to develop products that move and make that can add value to the system and in turn, lower prices and increase reliability for customers. And that's really our North Star.

41:42Zach Dell:It's clear to me that you've thought about this a little bit. That was amazing. I feel honestly very grateful because, you know, in preparing for this podcast, I read a ton about all of these things and all of these different resources, but you just distilled it in such a way that I would at least have half a chance, I think, of not passing the Feynman test, but maybe at least getting a 50 % or something. So thank you for that. There's so many interesting threads there just to sort of frame it in people's minds. And I'm going to repeat a little bit of what you said. For the customer in a deregulated competitive market, the ultimate experience is picking between different vendors versus in a regulated market.

42:21Zach Dell:There's really just one, one, maybe a couple that you could pick from. And so, you know, it's a different end user experience, but there's all of these sort of repercussions further up the stack that you're mentioning. Yeah. I mean, the way to think about this is we build technology to lower costs and increase reliability. We just deliver that technology behind two different business models that's defined by the regulatory construct. So in the deregulated markets, we are a gen tailor, right? We have generation in the form of batteries, and then we sell retail electricity to homeowners and eventually business owners.

42:53And in the regulated markets, we're a technology vendor and we're just building power plants. We are, you know, megawatts as a service, right? We are developing supply for the utility to meet growing demand. And that's really all we're doing. So it's one technology stack brought to market through two business models that are defined by the regulatory contract.

43:12Zach Dell:This idea also that you said of, you know, batteries shifting power through time was something that I think Packy writes about it in his piece. And it's such a, in some sense, fundamental and simple observation, but it also is like quite profound when you think about how important many technologies in our lives are that do some version of that, whether you're storing grain in a grain silo or, you know, you're using money as a way to effectively store labor. So many of our core technologies have that sort of quality to them. How much did you think about, you know, the battery and that is like the right entry point in that lens?

43:53Zach Dell:Or is that something that sort of just become more profound to you, more interesting to you over time? Batteries are interesting. You know, they're kind of, they're an energy storage technology. And the problem that you're trying to solve is efficiency and utilization on the electricity grid. And the battery is just the most effective technology to do that. Clearly, there's a huge amount of complexity that you're having to wrangle as you build this business. But one of the other dynamics that I've heard you talk about quite a lot is just how much better so many other parts of our world have gotten while, you know, the way that we generate power has has really not.

44:26Zach Dell:What were you seeing when you started to untease this new puzzle such that it felt really primed for a kind of solution-like base? It's no secret that electricity is the fundamental input to human creation and technology evolution and productivity. And if you just kind of track human history and the evolution of how we generate and use power, every time that there's been some kind of breakthrough in terms of power availability or cost, GDP per capita goes up. So it's a really clear economic relationship. The problem, though, is that the industry has had no incentive to innovate in the last many decades, or I should say has had limited incentives to innovate.

45:14There are places like Texas that have become laboratories for innovation due to their competitive construct, but it has had less of a kind of competitive frontier than things like Internet, for example, or other kind of foundational technologies. And this is largely driven by the regulatory construct. And so when we look at the opportunity, we said this is a core technology for humanity. There has been very little innovation. there's a paradigm shift coming driven by breakthroughs in technology, notably the cost curve declines in solar and battery. And there needs to be a company that ushers in this new generation of technology with a vertically integrated technology driven approach.

45:57And that was really the emphasis for the company.

46:00Zach Dell:You know, we sort of have touched on pieces of this as part of your explanation on the grid, which was super valuable. But just to go even a layer deeper and a little more concrete. What is sort of the core product for folks today? And maybe you can also unpack a little bit more of that business model because it's not necessarily super obvious how that would work. Yeah, the core product is electricity. So you sign up with Base and we become your power company. We install a battery on your home that we use to support the grid when the grid's up and running and you get to back up your home when the grid goes down.

46:31So you get all the benefits of home backup without the high upfront cost of a home generator or a traditional backup battery. And when the grid's up and running, we're using that battery and we're using the income we generate off that battery to provide you with low cost electricity. So the customer saves money on their monthly bill and has a backup power device for a fraction of the cost of other solutions.

46:50Zach Dell:And you're trading that energy during sort of periods of peak demand to sort of make that margin effectively, but keeping enough there so that if the customer needs it, they have it. Yeah, we're operating a power plant. So we are aggregating these distributed batteries as if they are one big battery. And we are participating in the wholesale power markets and doing grid operations, grid support with this distributed fleet. That is basically the way the system operates. You mentioned this. We reserve a portion of the batteries, 20 % of the batteries. And of course, our batteries are really big.

47:27They're like multiples of the size of a traditional home battery and our batteries are only getting bigger, but we reserve a portion of that for the homeowner. So they've guaranteed backup if an outage does occur. And then we also try to monitor state of charge and preserve as much backup protection for the customer if possible.

47:43Zach Dell:One of the aspects that I imagine folks maybe don't fully appreciate unless they've really gone down, you know, this rabbit hole themselves is clearly the hardware matters a lot, but also having like extremely performant, fast software to trade effectively is like extremely important. How have you thought about that? How have you like gotten your systems to a level so quickly where you're able to do that in the way that you need to, to make the business work? Yeah. I mean, I'll sound like a broken record, but I'll go back to the team. Our first hire is an engineer named Jared Green, who led the laser topology team at Starlink that was responsible for building the mesh that connects all the satellites in space.

48:22And our distributed systems problem on the battery side looks quite similar. We need a network of nodes that have varying reliability, uptime, telemetry to communicate really reliably and trade wholesale power. And that's a really hard problem. The interesting thing about satellites is you can't go back to them. And so you need them to be super resilient. Batteries you can go back to, but you prefer not to because it's expensive. And so it starts with Jared, frankly, and the team that he built in the early days and continues to build. That is a really world-class distributed system software engineering team that writes on-device software, on the firmware of the inverter, that's writing back-end cloud infrastructure to manage the systems in real time and is building software everywhere in between to make sure the system runs at really high uptime.

49:13Zach Dell:On the battery side, I imagine, you know, there's some amount of flexibility you also have to have as these things develop. You know, maybe the paradigm now is more lithium ion and then it maybe shifts to sodium ion at some point. How do you start to think about positioning for that and having enough flexibility and sort of being ahead of where maybe the puck is skating? Yeah. Part of the original thesis for the company was that we wanted to position ourselves to benefit from advances in cell chemistry. So we have worked hard to establish really strong relationships with all of the leading cell makers on the planet all over the world.

49:47And our plan is to work with those partners to buy and then deploy the most performant battery cells in the world based on how the how the science plays out. So we think there's some really interesting things happening in cell chemistry and a lot of interesting experiments being run across different different chemistries. Right now, our systems are lithium iron phosphate. We're certainly keeping an eye on other other chemistries that are being worked on and are relying on partners who specialize in this stuff and who invest billions and billions of CapEx annually and and working on the latest and greatest cell chemistry.

50:21So, yeah, we've kind of positioned ourselves to be a buyer of the improvements in battery cells over time.

50:26Zach Dell:So you can sort of allow yourself to take a relatively neutral position and wait for that to play out and take it from there, essentially. Exactly. We think that the improvements in cell efficiency, new chemistries will be a significant boon to our economics over time. You've been quite open about maybe your Gen 2 not playing out exactly as you wanted and sort of costing you a little bit of time, maybe six months, and that Justin actually maybe saw some issues with that before you did. What were the things that he saw that maybe it took him a little time to convince you on or for you to sort of see the light?

51:05Yeah, the credit actually goes to Dino, our head of hardware, who right when he joined us basically said, guys, this is a bad strategy. where he was coming from, really what he was saying was, let's get to where we're going faster. Like the plan was always to develop this in-house, to make our own solution, to control it, you know, control our destiny in this way. Why are we taking this intermediary step? And I think what Justin and I missed was it was a risk mistake. We wanted to hedge. We didn't say, oh, well, you know, we're not quite ready for that yet. We're not quite ready for this scale manufacturing.

51:36Let's do this JDM model where we design it and someone else makes it because what if X, Y, Z goes wrong. And we didn't realize we were actually carrying more risk in that scenario than we were by just going right, you know, relying on too many suppliers and, you know, having, you know, low ownership over the technology and troubleshooting and, you know, iterating as we got closer to production. And Dino helped us pick our heads up and see that we needed to get to where we're going faster.

52:01Zach Dell:Dino seems like he's been, you know, an important addition to this story, spent 13 or so years at Tesla on Powerwall, among other things, I'm sure. What have been maybe some of the other dividends of that addition? Has he changed how you think about the next phases of the business or other pieces of the company? Yeah. I mean, how much time do you have? The list is very long. Dino is an absolute professional. He's a truly world-class engineer, also a fantastic leader, communicator and question asker. He is ruthlessly truth seeking and doesn't put up with imprecise thinking. And that has taught me and our team a lot, I think, in the last couple of years.

52:47And he's really forced us to get specific with where we are going and how we are going to get there. He also has attracted an incredible team of people that have frankly followed him from companies he's been at prior and allowed us to really accelerate our work. So our head of manufacturing. Andy Ross worked very closely with him at Tesla. You can go look him up and poke around his LinkedIn. The guy has a lot of experience building manufacturing lines for similar products. So more than anything, Dino's clarity of thought, ability to communicate, very precise thinking, focus on the mission has been a huge, huge benefit to the company.

53:21Zach Dell:You've used the analogy before that the Tesla Powerwall is sort of more like the Lamborghini in your mind and base with its sort of unit is trying to be more of the Corolla, more sort of a mass market brand. It's clear to me that the company is also evolving so fast that things are changing every day. Is that still sort of a framing that you like for the product? Yeah, I think it's more about the fact that we are building infrastructure for the grid and we're not building high-end consumer devices that are sold with this premium product balance at high gross margins for wealthy people. We're building great infrastructure to serve everybody and ultimately lower costs and increase reliability.

54:05And that's the North Star in everything we do. And when we roll out future products, they will be in service of the same mission, affordable and reliable electricity for all.

54:14Zach Dell:It's clear that, you know, partially I'm sure because of Justin's background that Anduril is a company that you guys take inspiration from and maybe take some ideas from in a productive sense. One of them that that seems clear to me is that you've invested a lot in what one might refer to as like soft power and sort of making beautiful videos, sort of like getting people excited about the work that you're doing, you know, creating a newspaper sort of campaign, amazingly clever sort of billboards. These are not things that are usually very fun when another power generating company does them, if they would.

54:56Zach Dell:Why is that important to what you're doing? And how have you thought about some of that side of things? Our team takes a lot of inspiration from the idea that nobody loves their power company. And there's never really been a beloved brand in energy. And we have the opportunity to build the first one. And we take that super seriously. And we think of it as a huge opportunity. So we want to communicate to the world that we are a new kind of power company that is extremely member obsessed. And we think the way that we show up in the world and communicate our message, our mission, our vision, our strategy really matters in that regard.

55:36So we want to be America's power company. We want to be a symbol for the entrepreneurial spirit, the ambition, the drive of this country, and the great things we can do when we come together to solve hard problems with technology to make the world better. And that's just really the ethos of the company is this technology-driven business that is by the people for the people. And it comes back to our team. We've got an incredible group of people led by Cole Jones, our head of growth, who are really passionate about good design, good communications, good marketing, clear messaging. And we're a consumer-facing business.

56:13So the way that we show up to consumers and communicate to them really matters. And we've invested heavily in building America's first beloved energy brand. And, you know, for us, we think we're in the top of the first inning. It's, you know, we're just getting started in what we need to do to build that first beloved energy brand in America. But it seems like we're off to a good start.

56:36Zach Dell:It seems to me that certainly no beloved energy brands that I can think of, but it strikes me that there might not even be a beloved brand around any commodity. And so that makes me wonder if there's something fundamental about that category that is difficult to get people historically excited about. Have you thought about that? Yeah, I don't know that I agree. I mean, if you consider groceries a commodity, I mean, I think Costco is a beloved brand that we look up to. I think you could say the same about Southwest Airlines. Airplane flights are kind of commoditized and Southwest has been able to build a beloved brand there.

57:12you know, specific to Texas, H-E-B is extremely beloved in the grocery industry. So I think that there is a way to build loyalty and brand recognition and, you know, this beloved kind of dynamic around commodity businesses where the product quality is really high, prices are really low. And, you know, that's the best version of a commodity, right? This is the cheapest version. And so we are building the business with a cost structure advantage in mind as our North Star.

57:47Zach Dell:You mentioned Costco, you know, in particular there. What is it that you think they've done so well on creating that beloved brand? I mean, clearly the pricing is a big part of that, but are there certain cues that you take, I don't know, perhaps from their culture or the way that they have managed their own growth that you're particularly excited by or particularly interested in? I mean, I think the most important thing is just the alignment around the business model. Like it's enabled by the business model. Like they have a cost structure advantage, but all the way to the way that they set up the store in the warehouse and the way that they run their business is designed to give them a cost advantage, which allows them to have market being prices, which allows them to position as the mass market grocery store and the value.

58:36You know, when you go to Costco, you don't necessarily think I'm getting cheap stuff. You think I'm getting really good value.

58:42Zach Dell:Yes. And that I think we really like. Maybe to sort of enter our last inning here, I'd love to return to some of the pieces around culture and talent, because it does feel like that is really a key part of this whole story. I read somewhere that you hired the sort of first 50 people yourself, which doesn't always happen at a startup. Now that you've done that, I'm sure many, many more times, I'm curious how your pattern recognition has changed or your interviewing process. What are you looking for now that maybe you didn't know to look for them? Well, I'll just say, I mean, I led the hiring for the first 50 people, but the founding team and the leadership team and the core team was deeply, deeply involved.

59:27I think this is a really important point. Every leader at the company has got to be bought into talent acquisition. It is the most important thing at the company, particularly in the early days, but even in the later stages of the company, I mean, we're still early being, not even three years old, but having buy-in, and we talked about buy-in earlier, having deep buy-in from the other leaders of the company, willing to invest time and care into the hiring process was a huge advantage and continues to be a huge advantage for us. What do we look for today that we didn't look for then. I mean, one interesting thing that comes to mind is we are very scared of not appropriately capitalizing on the AI tools that are being released what feels like every hour.

1:00:20And, you know, we have, I think I have very healthy amount of paranoia internally, largely led by Justin, which I really appreciate around, hey guys, if we do not adopt these tools faster and better than anyone, someone is going to show up and eat our lunch and they're going to use these tools to do it. And, you know, three years ago, two and a half years ago, when we were interviewing the early team, we weren't like screening them on how well they leverage AI tools. Like, you know, people just pull up ChatsgyBT and used it every once in a while. And it was kind of good and, you know, miss some stuff.

1:00:49And the world has totally changed. Like everyone's workflows are deeply dependent, or at least some of them are deeply dependent on these tools. And if you can't demonstrate like a clear handle over them, that's going to be challenging for a lot of roles, not every role, but a lot of roles. So that's new. But I think there's more that stayed the same than anything, which is really high ownership. I mean, serious, serious ambition, a desire to be in a pressure cooker, frankly, and be surrounded by some of the best people you've ever worked with push to do the best work of your career a strong mission orientation and when i tell people it's like hey this is going to be the hardest job you've ever had and so if you don't really give a crap about our mission it's just not going to be fun for you yeah and then you know that that's not going to work out for for anybody and then buy-in right the the this idea that like you're going to join a team of people and you know it's all about the sum of the parts and uh you know pick up a shovel and dig and it's not like you know we don't play hero ball here.

1:01:46It's not about one person. We're all members of a team that are all doing the best we can to solve hard problems with each other. And it's all in service of the mission.

1:01:55Zach Dell:It's really interesting to me that you mentioned the use of these AI models. It feels like clearly it's been on a lot of people's minds for the past couple of years, but I've sensed a real shift even in the past six months talking to some of the more highly effective CEOs that I you know get to know where people are spending so much time themselves even as the ceo in these models playing with cloud code building things figuring out which part of their business maybe someone hasn't realized can actually be fully automated and just sort of one-shotting it how much are you finding it affects your day-to-day workflows where have you found the most leverage for yourself out of it yeah this reminds me of the meme going around that i love where people are like oh have you tried cloud code it's incredible people are like yeah what are you using it for like oh it's changing everything it's like yeah but what are you actually using it for no that's unbelievable don't ask me i laugh about that a little bit uh so you know oh we're using you for everything no um look i i think that it it is compressing cycle times right is allowing us to get smarter on things faster and in a company where we are like you know aggressively truth-seeking and very socratic and always trying to you know get to the answer really quickly and you know get shit done like the anything that compresses cycle times is incredibly valuable.

1:03:11So that's, that's what it's being used for largely. And then I think we are trying to build tooling internally to make our systems more efficient and automate away, you know, manual work. It's really simple stuff. It's, you know, the same stuff that all these AI roll-up platforms are doing at the, you know, accounting firms and the, you know, the HOA managers that they're rolling up. Like we're doing a lot of the same stuff in retail energy operations, customer management on the sales side, on the marketing side. So we're building automations, but we're also just compressing cycle times of learning with regards to new products, new opportunities, that kind of stuff.

1:03:45Zach Dell:How have you found you're most effective at generating new ideas for the business, sort of protecting your own, I don't know, mental climate such that you can be generative? I have to dedicate time for it specifically, which I typically do at night when I get home when I'm away from the office, you know, 9 p.m. And I do in an analog way. So I literally use a notebook that, you know, goes with me everywhere. And I draw ideas throughout the day. And then at night I sit at home, not in front of a computer, not looking at my phone. And I try to think about what is the most important thing for me to focus on.

1:04:24Oftentimes it is very obvious. There is one thing I need to figure out. And I just have to, I'm a person who has to write clearly to think clearly. I think if you talk to my, any of my colleagues from Blackstone and Thrive or Bass, they would all tell you that, you know, they're kind of sick of reading my writing because I'm always just, I'm writing a lot. And you go back to the PACI article and the memo, the monthly updates that I still write. That is just my way of thinking clearly. And so I do a lot of that, you know, through a notebook in an analog way. And then, you know, I have a separate notebook actually at home.

1:04:52That's like an idea notebook. And sometimes I'll bring it into the office and I'll pull things out of it. And I have to compartmentalize because when I'm in the office, it's, you know, a lot of meanings, a lot of collaboration, a lot of reactive. And, you know, I try to in early morning, I'm a really early morning guy. And so early mornings are good. But those are more for, you know, focus blocks of work, things I just need to get done. The evenings are for idea generation and getting creative. And those are some of the, you know, my favorite hours of the day.

1:05:21Zach Dell:Hmm. Yeah, it's amazing to me how important some of those analog tools are for that kind of work. Like I noticed that pattern with a lot of people, certainly with myself, where if you're going to come up with with something fresh, the more you can step away from some of the thinking machines that we've created, the better it gets often. you can uh augment with them so one interesting thing is like my handwriting sucks and i had to improve it for this but you know i'll i'll just like write like crazy in my notebook right and you know sometimes the next morning i'll take the ideas and i'll you know bring them to the office or i'll write an email or whatever and sometimes they just kind of get lost and so now what i've started doing is i'll just like when i'm done i'll just snap a photo and i'll like send it to nllm i'll say hey like summarize this and send it to my inbox or summarize this and you know give me something that I can just send to someone.

1:06:12And it's that extra step. It's back to this compressing cycle times versus me looking at it, going line by line, typing it up. I just snap a photo. And it's like, I don't have to think about it. And so you still get the benefit of the analog, no screen, no distraction, just like your brain and a piece of paper. But then you can still get the cycle time compression of the tool, which is very valuable.

1:06:30Zach Dell:I always like to wrap up with a few sort of more thought experiment questions for you. If you had unlimited resources and no operational constraints, what's an experiment you would like to run? I don't know. I think I'm running my dream experiment right now. And it's hard for me to, people ask me, they're like, oh, well, you know, if you could start another business, you know, what's the big idea? Like, this is my big idea. Like, I believe that we are in the midst of a paradigm shift in the energy industry. And there is a generational technology company to be built in its wake. And that is kind of all I think about.

1:07:08So there's like some interesting energy experiments. You know, I think there are some people who are working on, you know, can you put solar in space and maybe down to Earth? And, you know, that stuff's interesting. I don't know that that's going to work. I think the lasers are probably pretty lossy. Maybe they can solve that. But I'm running the experiment of my dreams right now. So I don't know that I have

1:07:28Zach Dell:much for you there no i i i think that totally makes sense i almost imagine there might be a million experiments that would help you run this experiment better like you know how can i get the the you know do a run of a thousand different types of talent and figure out which ones are are the best or whatever that might be um if you uh had to pick a custom from a different culture or a different era that we should adopt more widely today? Is there something that comes to mind? I think writing. I think, you know, this analog, you know, with a notebook, you know, forcing yourself to put pen to paper on good ideas and new things.

1:08:11I mean, people, you know, used to write letters constantly and write thought in a journal constantly. And this has been a big unlock for me, both analog and digital, obviously, you know, typing is just faster words per minute. And so that's more effective. But I think, you know, getting good at writing, getting really good at communicating your thoughts in a concise way has been a big unlock for me. And I think that's something that people should do more of.

1:08:36Zach Dell:Final question. If you were given the chance to give everyone on Earth a book to read and know that they would understand it, what would you want to give them? If you haven't figured out or, you know, talk to people I work with, I'm a big optimist. I love I love technology. I love our country. I'm I'm incredibly grateful for the life that I have and being born. I think this is the greatest time ever to be born. and I often you know I think in life you come across people who are they're negative they're they're they look at the world and they say this place sucks and you know this is and and there's good reason for that in certain pockets but uh I read a book in college uh I think it was in college or maybe just after called Factfulness by Hans Rosling and basically what the book does is it kind of takes you from a vibes-based worldview to a data-based worldview and it unravels cognitive biases that we have around the way the world works using data.

1:09:35And I'm a psychology nerd. I studied psychology in college. So I think I'm particularly primed to like a book like this, no pun intended. But it is extremely motivating because it basically says, hey, we are living in the greatest period ever in human history, and it's only getting better. and it was very inspiring for me. And what I took from it was, I gotta pick up a shovel and dig. I need to be part of this improvement. And that's been very inspiring.

1:10:05Zach Dell:Oh, I can't keep my promise and say that's the last question because you said you're such a psychology nerd. I'm now curious if there are other books that you particularly love in that lens because that's certainly an area that I like to read it. I think in kind of buckets of authors, and I think Robert Green is a particularly interesting one. I mean, some of his perspectives and methods maybe are not exactly like what I would do or how I would apply some of these concepts, but he is one of the more compelling writers when it comes to understanding human psychology. And I've had a lot of fun reading his books.

1:10:43Again, I don't agree with all of his methods, but I think his writing is very valuable. And if people are interested in psychology, I'd point you to basically all of Robert Green's writings or most of them, I could say.

1:10:54Zach Dell:Yeah, agreed. They're very well observed. There are things that you can see throughout history and think, gosh, that that might terrify me or that, you know, wouldn't be how I would do it. But it's an interesting observation. Amazing. Well, Zach, thank you so much for spending this time with me. I really appreciate it and I really enjoyed it. Thank you for having me. It was a lot of fun. That's it. Thank you for listening to this episode of The Generalist Podcast. Please subscribe on Apple Podcasts, Spotify, or your preferred podcast app. Ratings and reviews help others discover these discussions, so if you enjoyed the conversation, I'd be grateful if you could take a moment to leave one.

1:11:30Zach Dell:For all past episodes and more, visit us at thegeneralist.substack.com. See you next time as we continue to explore the future.