What The Funk?

0:00 ESG ESG ESG

0:06 are you're saying that right as your sit here today and the spill happened over the weekend craft coast of California. So I mean, you know, that's, should we talk about that real quick? Because

0:17 I've only read some snippets from the news and what EFT tells me. But Tim, why don't you give a kind of a descriptor of what you know of what happened? Well, I mean, near as I could tell, the

0:28 offshore platform pipeline coming in ruptured perhaps because of a ship anchor perhaps for something else. I'm still trying to figure that out. But you know, roughly 3000 gallons is the higher 3000

0:42 barrels, sorry, is the high report for the amount of oil that got out. And you know, it's hit the beaches and you know, got a couple birds. And you know, has sparked a lot of debate, you know,

0:54 in California, you could expect. Hey, stop all oil and gas production period offshore on shore. Let's stop it all. So it's been kind of interesting. And I don't know what it's like. We'll get

1:03 to Karthik here in a bit. Yeah. It's like actually living in California here and about it. But our former guest, Mike Umbro, has been having a field day on LinkedIn talking about it. Yeah, I

1:12 was gonna reach out to him about it too because it's very much his wheelhouse, right? But no, Karthik, we got Karthik Bella Krishnan here. Karthik and I met a couple of months ago through old

1:23 friend Andrew Chan, friend and former guest on the podcast And Andrew was kind of aware that I've been on the hunt for companies who are doing real life ESG, reporting, integration, technology

1:38 from other industries. Like it's so new and oil and gas to me at least, Tim. You know, there's some companies out there that seem to be dabbling and then you've got data companies that are saying,

1:47 Here, this is all you need. But I'm personally curious how other industries like aerospace, right? Like Heavy Freight have dealt with ESG in the past 'cause I know that didn't just get invented

1:57 just sort of hit our radar a few years ago. So, introduce me to Karthik, met him and his team, San Francisco guys, have that level of experience. So, we're going to dive into what his company

2:08 actual does, but before all that, Karthik, why don't you give us kind of a brief introduction, tell us about your, you know, childhood, going to school, and then what led you to kind of the

2:18 ESG world, technology world today? Yeah, thanks, you know, for yourself. Thanks for having me. This is, you know, really kind of interesting, super timely And I think there's a lot of kind

2:29 of questions about what ESG even means, right? Like people are not unclear what the G stands for, what the S stands for, what the E stands for. And so it's one of those things where sort of the

2:38 eyes, you know, it's kind of in the eye of the holder, to some extent. And so there's really an opportunity to, you know, to kind of dive in and shape and understand how it actually affects

2:49 different industries in different ways So I grew up mostly in the Bay Area, but also on the east coast, moved out to Maryland when I was in, right before high school. So I went to high school in

3:00 Maryland and kind of missed California, so I came back, did my undergraduate degree at UC San Diego in aerospace engineering, and you know, decided that four years of an engineering degree wasn't

3:10 enough, that I was a glutton for punishment and so I decided to do a graduate degree. So I came back to the Bay Area and did a master's and PhD in AeroAstro at Stanford. So basically building

3:24 spacecraft to do physics experiments in space. So what are my favorite jokes? Sorry Jeremy, but when my favorite jokes was,

3:35 I was getting done with my degree plan and it was time to start thinking about jobs and one of the guys that I was going to school, I said, Hey, I want to stick around and go ahead and get another

3:44 year and a half and get an aerospace degree. And everyone's like, Why would you want to do that? This was the end of the Cold War and everybody's like, There's no jobs for that. And he goes, No,

3:52 no, no, just because if I'm at a party. and someone says, This isn't rocket science. I can step in and say, Well, I am a rocket scientist, and let me tell you about it. So you can't actually

4:05 wear the t-shirt that says, Ask me, I'm a rocket scientist. It's pretty funny when we get together with grad school friends, 'cause it's, you know, you'll have a bunch of rocket scientists can

4:14 like, How do you turn the grill on? Right,

4:19 I can totally picture that. No, just knowing my dad, who's a doctor, I guess, of psychology and professor Yeah, good luck getting him trying to change a light bulb, right? Right, all right.

4:29 And the rest of his friends come over, Yeah, right, yeah, grill, cook, meat, what? No, we don't know, too much time in books. But no, so Dr. K, so you finish up at Stanford, you know,

4:40 that was an option for me too. I just, you know, when a different route became a podcaster instead, so. Yeah, you were at a food truck outside of Stanford? Is that what you were gonna do? They

4:48 didn't actually let me on campus, but, you know, I was close by.

4:52 So you finish up at Stanford, what, looks like, 10 years ago or so, and then what happens? Yeah, so it was actually quite interesting. I mean, I think aerospace has these super long timelines

5:03 to get anything done, right? It's a very conservative industry. And one of the things that actually happened for me was, I built a spacecraft with collaborating with NASA, delivered the payload,

5:13 and it was gonna be a few years before launch. And I was like, okay, well, I need the data to graduate. What do I do? And I was basically like, keep yourself busy, find something good. So I

5:23 actually took a leave of absence for a little bit And I'm entering a leave of absence, co-founder day concerned with products company called Coin. And so this was about a decade ago. We had one of

5:34 the first hardware pre-order campaigns. And at the time, the largest hardware pre-order campaign, nearly20 million of pre-orders. And this was basically for a electronics device, literally the

5:44 same size as a credit card. It's the same thickness, same dimensions for the battery and a button and a screen and a dynamic magnetic stripe. So essentially, you could load your cards on over

5:56 Bluetooth, instead of carrying, you know, stack wallet credit cards, you could carry just the coin. I think I saw some of these on Facebook. Were you guys running Facebook ads, or was that a

6:06 competitor? Like were there knockoffs? 'Cause I know what you're talking about, and it seemed cool, pre-order only, I didn't do it. This is, you're bringing me back now. Yeah, no, this, we

6:16 did a lot of Facebook ads. We did a lot of Instagram ads. This was sort of in the early days of this So a lot of the sort of content marketing, content strategy that's been reused a lot since then

6:30 for pre-workers, we actually ended up pioneering a lot of that. But what was really interesting is nobody had built a device like this before, right? And electronics are not 07 millimeters thick,

6:43 right? Like, the circuit board in most devices is 07 millimeters thick, then you have the solder and the chip is a lot thicker So I spent a lot of time basically deep diving into materials and

6:55 devices. Battery chemistry into the Wafer manufacturing process to get ships that were thinner than you know T I and other providers could normally make to get everything to yet to go in and really

7:06 gave me kind of a deep understanding of the complexities of supply chain right and it's very easy to say well you know we're going to put these restrictions on this industry that's making this

7:16 particular chemical because who uses it and they actually deep down here like while everyone uses it it's such a basic component of this particular kind of PCB material hits such an integral component

7:28 to this kind of solder where you're talking you're looking at you know the thirty thousand foot level you don't necessarily know how these things are producing the fact that I was really eye opening

7:36 for me where you know when you think about regulations legislation when you think about sort of corporate policy that the customers are putting in how that flows down into tier two tier three tier

7:48 four suppliers nobody actually knows what the effects are until you're the engineer sitting in the factory like this thing works but I can't use it because in this country, there's this thing, how

7:59 do I solve that? So kind of understanding there's not gonna affect. We got acquired by Fitbit. And so if you have a Fitbit and you had your credit cards, coin basically is the backend for all of

8:07 that. No. And at that point, I was like, you know what? Satellite launched, I did all the work for PhD. I should go and finish it up. So I went back to Stanford and a quarter, wrote the

8:19 thesis, defended, you know, I was like, it did make sense just to do it

8:25 And then I thought to myself, you know, I did a PhD in aerospace engineering. Maybe I should actually go into the aerospace industry and do something with this degree. Kind of makes sense, right?

8:34 So I went to Airbus. And Airbus at the time had just started what was called, or what's still called, acute, which is basically internal disruption for Airbus, right? So recognizing that

8:46 aerospace has a tendency to be very conservative, has a tendency to be very slow, If you're going to stick yourself in a metal tube. I want the plane test to move at someone safe, right? It's got

8:59 to work, right? But one of the issues that comes into play is RD and discovery needs to be a little bit freed from the constraints of the production process and from the production kind of assurance

9:15 look, right? So how do we go and build something really quickly and get to a point where we understand if this is going to work or not? And then we go through the process of making it possible to

9:25 certify and get into real aircraft. So a cube was basically start with the idea of let's get these technologies knowing that if they succeed, they're going to have to be certified, but really

9:36 accelerate progress. So one of the big things that you've probably seen in the aerospace industry is EV tools, right? Electric vertical takeoff and landing aircraft, right? So air taxis So air

9:47 taxis, so you've got Joby, you've got Wing, you've got. Archer, you've got a bunch of different players with

9:58 basically building electric helicopters essentially. Right? They look different because they're running on electric power, they've got distributed lift, they've got maybe tilt wing, they can go

10:08 further, they can go faster. But one of the really interesting things is this drops the operating costs, it's almost like going from Ferrari's to Civics. When you have a Civics, you're going to

10:18 have a lot more of them and when you have a lot more of them, what does that do to air traffic control? So I joined aircubed basically to figure out how do we take air traffic control out of the

10:28 1920s. There's been updates, don't get me wrong, but fundamentally it's still two people talking over the radio. They've got a lot more support systems that have been moving from writing things

10:39 down better radar, better monitoring systems, everything, but it's still two people talking How do you get from that to something where it's computers talking? and humans are much more strategic

10:54 so I started the program that's now called university and has held all to scope then and we started working a lot with regulators with transport officials with airlines with pretty much everyone in

11:04 the ecosystem to kind of understand how do you make this change because people have a tendency to think that it's purely technological right you build a great system and it's going to get adopted but

11:14 the reality is that this system has had north of a trillion dollars invested in it since it's inception right in terms of like the control towers only electronics and the control towers all the

11:25 training everything so you go to somebody who's invested north of two billion dollars and say tear it out and replace it with this thing you've got to have a really good reason for why what are the

11:35 costs what are the impacts and is is anything any worse things at worst there's no point doing bombing them imagine a just a thousand of these little planes moving around up I'm in houston moving

11:48 around Houston

11:51 they're not going along the freeway path necessarily. They're moving in different directions. And if can you imagine how I can't even imagine the two-way communication to get all these guys, Hey,

12:02 I'm going to fly from here to the Galleria going this way. No, you can't. You need to be at 3, 000 feet or 1, 000 feet. I can't imagine how that's going to be. It's a crazy, complicated

12:15 technical problem. But even if you solve it, you've got to get it deployed and adopted, and if you can't, it doesn't matter if you have these aircraft that can do these missions. And now you

12:24 think about drone delivery, right? I think Walgreens is now in certain areas, testing, delivering COVID tests by a drone.

12:33 The

12:35 reality is that

12:38 when we think about aerospace, it has to get digitized. When you think about industries in general, I mean, it's digital transformation, right? Same thing for aviation, same thing for anything

12:46 else. But one of the things it kept coming up.

12:50 over and over and over again. When I talked to regulators around the world, was the challenges that you're dealing with when it comes to the air traffic management system is 100 what we're dealing

13:01 with when it comes to ESG, when it comes to climate change, when it comes to any of these kinds of things. If you go to a trucking company and you tell them, we're gonna mandate that you buy

13:11 electric trucks. We're gonna mandate that you switch to hydrogen trucks. Sure. They're gonna come to you and say, well, look, I've got trucks today that bring boxes from point A to point B And

13:19 if I switch, I'm gonna spend a lot of time, I'm gonna spend a lot of money. And at the end of the day, what I'm gonna have, I'm gonna have trucks that bring boxes from point A to point B. Right,

13:28 so why should I switch? Is there an economic value? Probably, right, in terms of topics. Is there a

13:37 market competitiveness advantage? Potentially, right, if you have customers who have net zero mandates, it's gonna flow down to you. But purely from a operations perspective, Does it make sense

13:47 to go to the pain of. truck, you know, literally scrapping your old trucks, buying new trucks, overhauling your maintenance facilities, retraining everybody. The range is going to be different,

13:57 right? So changing everything to make that thing possible. And every time you look at, you know, it's this question of inertia, right? You have huge amount of inertia in these industries.

14:12 And they're getting mandates from their customers, from their, the governments that they're operating inside, you know, the jurisdiction of it, et cetera, to start changing. And it's like, how

14:22 do I change? What do I change? When do I change? And how do I make this change in a way that my business survives, right? And that's really the key. I'm sitting here thinking to the parallel to

14:34 the industry that we serve right now, as you're going through it, I'm like, wow, yeah, okay. I mean, all the same demands and reasonings and then how. And then the complication in oil and gas,

14:45 of course, is we've got wells distributed in such broad. Distances and pipelines existing pipelines and everything else it you know it I I see I see the I see the parallel into the oil gas base

14:60 easily Yeah it's just one of those things and it's very easy to build a white paper that says we're going to do this but the people who are writing whitepapers are not necessary the ones on the ground

15:11 for like you know what it's more complex than that right there is a reason that we do certain bright and and coming up with a plan kind of strategy is so critical to actually being able to execute

15:24 right if it's simply we're going to do this and there's no there's no kind of a top -down here's a roadmap here's a plan here's how we're going to do that nothing's going to do because the complexity

15:36 on the ground is so high that you simply can't actually start taking any kind of actions so I Want I want to jump a little bit deeper into that because I know You know, you've got such a wealth of

15:47 knowledge and understanding. Can you give sort of like a real life specific example? So ESG today is disparate, right? You've got emissions tracking over here. You've got emissions maybe from

15:58 transportation and health and safety and governance and all these things. When you come in and you say a roadmap, how do you kind of bring all of these things? Like, how do you prioritize what

16:07 matters? How do you bring these things together? And how do you sort of back into that? Yeah, so I think one of the key challenges really is that there's a tendency to want the perfect end-to-end

16:19 complete solution in, you know, 100 accuracy before taking that first step. And the reality is,

16:27 that's impossible, right? Like, if you're an aerospace company, right, where is your hydrogen aircraft today? It doesn't exist. It's being developed, right? I mean, friends over at Universal

16:37 Hydrogen, I think they've got a really great shot within the next five years of having the technology convert a lot of regional aircraft over to hydrogen. And that's a good opportunity for folks to

16:48 go and produce hydrogen to fuel the aircraft. But United Airlines today cannot buy a hydrogen airplane. They cannot buy an electric airplane. They're ordering aircraft under development. So for an

17:02 airline to come in and say, we're going to do exactly this thing. That's based on technology that is still an RD. It just doesn't make sense What's important is to say, here's the impact you want

17:14 to have over time, right? Knowing that there's going to be an error, right? Are you going to hit a 40 emissions reduction in 20 years or 21 years or 18 years? There's going to be a margin of

17:26 error. And that's okay. What's important is roughly being directionally accurate and saying, based on what we know about physics, we know what chemistry, based on what we know about the market

17:39 demands Because a lot of times, it's not about the physics of the chemistry, it's about. what the market is demanding you to do. Well, yeah. It's everything. You're own investors. I mean, if

17:48 you're a airline company, oh, by the way, yeah, we want you to go to hydrogen or to clean or whatever it is. And oh, by the way, you still need to be profitable. Yep. Yeah, through the whole

17:59 process. Yeah, yeah, yeah, yeah. There's a practicality, to give you a parallel, we've heard all the various operating companies say, Hey, we're gonna be net zero by this date Or, we're

18:12 gonna strive for a 50 reduction in emissions by this date. And meanwhile, some of them are just divesting of high emitting or high CO2 assets. And others, they're changing their mix. But what's

18:31 kind of hard, you make a new gas field discovery and you say, all right, we're gonna use that, the offset something somewhere else. And then we know that, so we're gonna reduce emissions by 50

18:42 percent. in this field from this date to this date, but they can't take into effect in 20 years, however, we're gonna have to bring on compression, or this field is gonna be uneconomic. So this

18:53 field is actually gonna increase in emissions in 20 years, but we'll reach our target in 10. So it gets very complex if you're not doing your planning well. I don't

19:04 know. No, that's exactly right, because if you have a plan, if you say here's the roadmap that we have to hit, then you can judge every single dollar of capital you spend against that plan,

19:13 right? You can say, is this going to get me closer into compliance plan or further away? And then if it's gonna get you further away, then you say, what am I gonna do to offset that? Whether

19:25 it's, you know, by shutting something else down earlier, by transitioning something earlier, what have you. But I think one of the key problems is analysis for analysis, right? It's this thing

19:35 of we need to solve every problem before we can take the first step. And the real answer is actually take the first step. right? You take the first step because that's going to get you into a mode

19:46 where to take that first step, you set up the basic infrastructure, then get to collect your data. You set up the, you know, reporting is kind of, kind of a pain, but you can set up, you know,

19:57 the infrastructure, do your reporting. You can set up what's needed to take that first step. And then it's like the nucleus around, which everything else grows. This is, this is so, this is

20:07 great stuff. And you know what reminds me of a little bit, one is a master data management. I was just talking to a CFO of a company that has about 6, 000 operated wells, 1, 000 non-op. They've

20:20 had sort of their core systems in place to track production accounting, you know, general ledger, land, GIS production, forecasting, they're mature in that regard. And they're in a little bit

20:33 of analysis paralysis mode with this master data management because they think they have to boil the ocean. They know I know it's not a good idea. but they feel like they have to do it because of

20:42 the request coming from the business around reporting, right? Well, if we do that, that means we need this system here, we need them like maybe just start with one area, right? Let's attack

20:53 your financials, right? And tie that together with your invoices and see if the data starts to line up, gain comfort and build it out from there. But a lot of master data management projects have

21:04 failed because I think the operator wants the Big Bang approach. And of course, if they're gonna give you money, you're gonna do it like that. But that's not the way to have an effective sort of

21:13 data management strategy. And I think what you're getting at is sort of the same thing. The CSG thing is a little bit intimidating. It's gonna get a lot more intimidating when you can't get money.

21:24 But no one knows where to start, right? And I think that's where I'm seeing a lot of people saying, I don't know. Or yeah, we talk about it. But I'm curious for companies that really take that

21:33 plunge. What does it look like? So what it looks like is, you know, there's a tendency for folks to think, well, the first thing you have to do is collect a bunch of data. The first thing you

21:43 have to do is digitize everything. We have to put sensors and everything. We have to create this data lake, then we can have a bunch of APIs that the data gets shoved into. And what we found is

21:53 that's super counterproductive because until you know what you're going to do with the data, what's the point? It's like trying to design a hammer without ever having seen a nail, right? Like,

22:06 yes, hammers are important, but you have to understand what is the problem you're trying to solve, right? Is it, you know, is it a spike that's going into a railroad? Is it like a little nail

22:15 for hanging a picture, you know, on your wall? Like, what are you trying to drive? Then you can design the hammer. And I think data is that same way where the companies that have the biggest gap

22:26 between where they're going to need to be in an industry roadmap and where they are today are also the companies that are, you know, the least digitally transformed, typically, right? And that's

22:36 not a fault of the companies necessarily. Now, these companies have at least complex operation, right? They're all over the place. They've been operating for decades. And it's one of these

22:44 things where do you rip out everything and put in something you just to capture data. And the answer is no. The answer is we can start with, basically stick your finger in the wind and see

22:56 approximately where this data would net out to if you were to go and spend a bunch of money collecting. Because then you can build out a model of your system And you can say, if I start to wiggle an

23:07 input here, which outputs wiggle? Do I care that those outputs wiggle? And let me go and just instrument the things that are going to be material if I get it wrong, right? Then you can take that

23:19 first step. And you can say, okay, because I've taken this first step as part of that step, that's when you start to instrument them, right? So instead of trying to instrument everything

23:27 backwards and trying to get, you know, terabytes of data every single day backwards, take a first step and then decide, what do I need to instrument, right? going in because otherwise you end up

23:40 amassing this huge amount of data and then it turns into this position of I've got all this data, did you account for all of it in doing your analysis? And that's where analysis paralysis comes in

23:50 because if you think about the kind of calculation that people are doing today with supercomputers 75 years ago before supercomputers, people were doing the same calculations and their calculations

24:02 were not that different Different frequency, different frequency, different error bar, but generally, you know, one year out, two years out, five years out, they were pretty accurate, right?

24:14 The supercomputer is useful. Like, don't get me wrong, when you're trying to optimize and you're trying to squeeze your margins and like improve your margins because of, you know, squeezing

24:22 economics, that becomes really important. But that first step of what am I going to instrument has to come before let me instrument everything and get stuck? So is that I mean, I guess from coming

24:34 to with actual your current gig, are you

24:40 consulting your clients on this, or is it, are you selling them a system? What's your approach to your current clients? Yeah, so we partner with experts in the field, right? So we're a software

24:56 company that basically builds tools that help build plans at a low resolution, and as data comes in, improve the resolution of those models to the point where you can go from being directionally

25:06 accurate to operationally accurate as you start to get against them, right? So take that first step, we get data, the models get better, et cetera. But we're not experts in every domain, right?

25:16 We're doing work in telecom. We're doing work, you know, in transportation. We're doing work in education. You know, there's a number of different sectors where the same challenges apply, but

25:30 we're not necessarily experts in everything to do with telecom, and we're definitely not experts in everything to do with oil and gas. But we're really about doing as empowering the experts in these

25:38 fields. to use the platform to build models with data that's readily available, basically a swag, right? And then improve that over time. So you can think of it essentially like your system of

25:54 record, right? This is where you make the strategic planning. This is where you flow things down through the organization. And this is, most importantly, where you track the outcomes of those

26:04 things. And you decide, is this worth deploying across the company, across the portfolio, or not. So as a former player of SimCity, I'm intrigued by your comment on your website. And I think

26:18 Jeremy even mentioned it, how SimCity inspires our approach. Is it a - Love it. Is it that kind of a - is it gamified in that way where you're actually just kind of dropping in a building here and

26:32 seeing how it changes things? Yeah, I mean, you can think about some city, but imagine if the models were real Imagine the models. an expert looked at them and made sure that they were relevant

26:42 to your business. Because one of the things that we've seen is that right now you have a bunch of different people who need to look at the same kind of outputs to make a decision, right? When it

26:54 comes to finance, when it comes to risk, when it comes to specifically what are we going to do, when it comes to reporting out to the community, when it comes to reporting to governments, etc.

27:03 And right now it's basically we're shuttling Excel files back and forth. The Excel files grow Someone is like, This file is too big. I'm going to take copy and paste this one sheet out to another

27:12 sheet. The things get out of sync. What we really are about is how do you take somebody who has a million things on their mind and very quickly make it easy for them to understand? Here's the plan.

27:26 Right? And have underneath it the models, the data, the workflow, everything that can be inspected. So syncedity is sort of the top of the layer where instead of having to read Idiot page PDF to

27:41 understand what is the plan what are we doing literally within ten minutes look at the map click around get up to speed breakers one of the things that games do really well is they're good at

27:53 communicating a huge volume of information any amount of time it takes you to react great like the if you think about it like playing any game the amount of volume the information that like you watch

28:05 a game for ten seconds imagine that as like a PDF of jokes just think about how many pages you'd have to written so games are really good at doing that and so this problem is so complex and there so

28:19 it's so broad that getting that information in front of the user in a way that's motivated where they can say you know what I understand this this is something that can work or this is only a camp

28:30 work but instead of spending an entire week to understand it get that time down so then they can spend the time going into the details of the things that are actually relevant to the business and they

28:41 can discard the things

28:44 that aren't. This is great. And yeah, I really wanna get into why, in your opinion, and just in general, why from a financial standpoint, should oil and gas operators start caring about

28:60 ESG right now? 'Cause you're actually one of the people that brought it to my radar that like, hey man, this is happening quicker than you think. And we've seen this in other industries and it's

29:08 not just talk, it's actually becoming real. So talk to me about, I guess, the risks and risk mitigation that oil and gas companies should probably take over the next 12, 18, 24 months. Yeah,

29:21 you know, cost of capital is a big one. And this is both a characteristic. So when you think about,

29:26 you know, your cost of capital, whether it's debt or equity,

29:30 the reality is that that's really a function of risk over the lifetime of that financial transaction, So if you're issuing a bond, if you're selling shares, whatever it is, there's going to be a

29:42 certain cost rate.

29:45 What the buyer is doing is trying to understand what is your business going to look like over that lifetime? Are you a growing business or not, number one? What is the risk that your operations are

29:58 going to get shut down, that a permit is going to get pulled, that your customers are going to move away, et cetera? And so the more likely those things are to happen, the higher this cost gets.

30:09 So if you are supplying to companies that have a net zero mandate, and they're saying, we're going to be net zero by 2030, for example. That's very good. So I think companies that say they're

30:20 going to be net zero by 2030 are going to have a hard time. But let's just say that you're supplying the company that does that. You're now at risk, because that company's going to say, wait a

30:30 minute, I'm purchasing this product

30:37 which is making it hard for me to be my mandates. How am I going to counter that? Do I buy carbon credits? Which increases my own costs? Do I switch to a different fuel source? Maybe I switch to

30:49 hydrogen, maybe I switch to electric? Do I just shut down that business line, right? All of these things then become ramifications back to that supplier, right? So if you're producing diesel,

30:59 the buyer, the diesel, if they end their contracts, that's a risk on the financial viability of the organization, right? So that's what's coming into cost of capital. And more and more investors

31:13 are starting to see this because they're recognizing that 50 of global GDP today is covered by some sort of net zero mandate, right? 50 of global GDP, which is nuts. Now, some of this is

31:24 government, most of it is private, right? It's Fortune 1000 companies saying that we're gonna be net zero by 2030, 2040, 2050, if you're a tier one supplier tier four supplier tier six apply

31:38 whatever it is at some point that customer that has made that mandate is going to hold you accountable for those emissions they're either going to make you build a price of the credits into the

31:48 product they're going to make you go to a process that is not polluting or they are going to switch entitled right to the question then becomes how do you remain relevant as this is happening Saturday

32:00 I call it the carrot even though it feels like a stick because it's one of those things that is it's collaborative or you can work with your suppliers understand what are they looking at instead how

32:09 can you provide that as a product how do you shift your processes right you might be able to actually hit their roadmaps by you know inspecting for methane leaks for example right by improving the

32:19 efficiencies of your own drilling operations rights there may be ways to do this if you can understand and work with the clients to understand what it what are they rode applicant the stick really is

32:30 regulators in the U s the ethics right now The SEC is not an environmental regulator. They actually don't really care about environmentally what a company is committing to or not. But here's the

32:43 thing. When a company says that they have a net zero mandate, when a company says that they have an ESG plan, or they make some sort of a statement, investors look at that and they say, you know

32:53 what, this company is taking risks into account. They're less risky. So I'm gonna give them a lower cost of capital. And the SEC cares about that They care about the fact that you said you were

33:04 going to do something, that the investors believed was gonna reduce your risk. And so the SEC's gonna hold you accountable to that, right? It's sort of like saying, hey, we have a contract to

33:14 sell into this massive market. Well, if you didn't have a contract to sell but the massive market SEC's is gonna come after you because guess what, that's wrong, right? So now these customers

33:26 that have said we're gonna be net zero by 2050 and here's our roadmap, suddenly they're in a position they actually have to hit those.

33:35 Metrics because the finishing parallel when it comes to just reserves statements absolutely all in all the gas we you know every all every publicly traded company has to sell the SCC hey these are our

33:48 reserves they're in our annual report and yes you see holds them accountable the same rates are I Promise I promise will produce this given these conditions and while I I've never actually made their

33:59 Peril I really appreciate you doing that that the SCC is as part of the stick there's a reporting requirement if you say your mean at fifty people have the public has invested in your company because

34:10 of that and if you don't hit that if you don't make that promise you know that your stock is going to be hit and you know we're Gonna come after you wow Yeah Yeah and it's one of these things right

34:22 where when you think about green bonds Winnie TX and they're oversubscribed by a factor of four regular bonds are a subscriber factor of like twenty per cent frightened So What that means is that

34:36 investors are going more and more towards opportunities, which build themselves as ESG-positive, climate-positive, et cetera, which it's a feedback that the SEC is like, there's more attention

34:48 going, so I'm going to pay more attention, because the SEC is paying more attention, the investors go into it harder, and it's just this reinforcing cycle, and that's just getting kicked off.

34:56 And so I think what's really interesting in our discussions with large investors is that they're actively going through and starting with tagging their portfolio, but really over the next couple of

35:09 years, starting to understand at a really detailed level, which companies expose my portfolio to ESG risk, and which ones don't, right? And it's not just about reporting, right? It's not just

35:20 about here's this long PDF, where I cut and paste some values from an Excel spreadsheet and no one's going to read that, right? Like someone has paid to read it, but it's really hard to make

35:30 decisions off of that What they really care about is, you know, They know that you can't cut the emissions to zero today, for example. But what is your roadmap to get there? How are you, as a

35:41 business, going to be viable over the next 30 years? What are you going to do over the next 30 years to get there? And oh, by the way, we also understand that, for example, there's going to be

35:51 a huge demand for plastics in medical devices, so there's going to have to be production of all of these components, all these chemicals that go into all these things that actually, at the end of

36:01 the day, don't result in emissions. All right, so how do we keep those things alive while transitioning to other part of the economy? So it's an incredibly complex problem. This is one piece to

36:13 the analysis paralysis, right? As people see the scope of the problem, they're like, Oh, my God, I need to solve this whole thing at once. And it's like, exactly. Let's decompose. Let's take

36:21 the first step. Let's get you in this mindset. And let's get moving. Wow, it's fascinating stuff. I love it. I love it. I mean, you know, because Karthik, this is your world, right? You're

36:33 an expert. I think you did a pretty good job of breaking it down to the layman like Tim and myself on this call. And I think, you know, you talked about 30 years, five years, like I think the

36:43 panic will set in a lot sooner in oil and gas just because it's so, you know, carbon intensive and it's also so capital intensive. So with that combination, it's like the perfect storm to be like,

36:56 how clean is this operator and are they going to get our money? When money is already kind of shied away from this industry, right? Despite it. At a positive, yeah, go ahead. It's just

37:07 politically, it's an easy target. It makes it, you know, when you don't hit those targets, you, there's a whole 'nother element to it.

37:16 Yeah, I think, I think that the public perception is really quite important, right? Is that as people switch over to products in their day-to-day lives that, you know, require less gas, right?

37:30 Care a little bit less about whether the gas station on the corner survives ray so what does that gas station me to do right how do you how do they transition maybe you're buying less mechanic

37:39 services cause he is is is he has fewer moving parts so there's this there's this thing where when you're part of someone's day to day life they're going to view you differently than if they've

37:50 transitioned away so how do you remain relevant as a company how to reinvent as a company where you can provide like it it's about adaptation right it's about understanding that the world and twenty

38:01 one hundred is going to look very different from the world in twenty twenty one right and there's a roadmap to get there hotties are taking the steps today so that you know the legacy of the business

38:11 remains even if the business looks quite different because a lot of the companies today hundred years ago they were doing different things brethren so like it's reinvention as is normal it has to have

38:25 it has to happen

38:27 so Yeah I mean it is fashion really We'd probably do this a long time you know we never actually got to defining what he and the S and the GR mean cause they they I mean we all remember at least I

38:38 remember my early career we start out with H S and E H S always the thing and yet and now on the gas was health safety and environment and it's obviously some of the same letters are still there but

38:49 it it has morphed a little bit hasn't it it has so it's CSD as an environmental social and governance right and recognizing number one that the governance of the organization matters right because

39:03 when you when you have a set of viewpoints managing the company that understands not just the operations not just the market but the broader ecosystem you can make better decisions about what the

39:15 company should be doing it's about social because you're starting to understand what is the impact that this company it's product it's operation they're having on the broader environment positive or

39:25 negative right and environmental as well right What are we doing in terms of emissions in terms of an oil spill and etc but I think the really important thing is that these are all intertwined they're

39:36 all linked together right if you look at Southeast Asia by the amount of energy that is being consumed in Southeast Asia in various African countries and South American countries is skyrocketing right

39:51 because these individuals they want running water at home water is heavy it takes a lot of energy to pump water they want the power on for more than two hours a day how do you generate that power they

40:02 want to be able to get to work right so you Gotta run buses you got to run trains you have cars and mopeds auto rachel and all these things that social progress right that social and sort of leveling

40:16 requires and has an environmental impact so everything is intertwined right so when you go out to build a bus network right there's an environmental component right what is the impact of this busing

40:26 this bus System is going to have an environment based on the fuel type that we pick based on you know the lanes that we built what is a social impact in terms of mobility in terms of income in terms

40:36 of health and the quality of life and how do we govern that system in a way that we build a network to actually be used right so everything is super intertwined and and it's it's really a much more

40:50 holistic way of looking at it not from the perspective of oh you know this thing is going to improve my quarterly results but doing this is going to lead to a much more long -term sustainable business

41:02 not a sustainability from a environmental perspective but sustainability financial prospect right that by creating a company that can last that can sell to more markets they can sell into growing

41:14 markets that's how you build a business

41:18 or one final question then we can wrap this thing up what what does the upstream oil and gas industry look like in five or ten years like Clearly this is something you guys have to think about in

41:28 other industries and now as you expand further into oil and gas. What are oil and gas companies going to be that go out and drill and produce and transport oil?

41:40 It's a tough question, right? I mean, I think part of it is understanding, first off you understand downstream, right? Because that becomes understanding what products are producing and what

41:53 you're doing, right? I think part of it is what do you do with that land, right? So in certain cases, you might be like, you know, these wells, we just can't keep using, right? So do you

42:03 repurpose them for something else, right? Do you

42:06 go and invest in carbon capture? Me, right? So you take that same power, you take that same land, and now you're building towers that are pulling CO2 out of the atmosphere. That's a total

42:15 reinvention, by the way, right? That's saying we're going from one to the other. But I think the important thing to recognize is it's very difficult to start by saying we're going to do x. It has

42:25 to be - Looking at the supply chain and being like the supply chain is going to man as it still didn't require these products for these industries right so here's what our demand is and look like

42:36 here's the end product have to look like here's what our production looks like and what we can continue to support to produce those things and here's where in ten fifteen twenty years we can no longer

42:47 support so what do we do with those I think that's that's How I would think about upgrades it's complex because every company is different every company is producing a different product with a

42:57 different mechanism so there is no Blanket Solution I think that's one key takeaway when it comes to history is that there is no one size fits all they just can't be so anyone who says you know we can

43:12 clear is the solution now you know that a clickbait article this is one thing it's wrong wow Yeah and continue to make money along the way Yeah

43:25 All right, Karthi, it's been great having you on. I really love having these kinds of conversations. I think it'd be great for our listeners as well, just even the last five minutes talking about

43:34 ESG. But it's completely fascinating, love it. Yeah, Tim, yeah, thank you so much. And Tim, you know, we talked about a panel. I think it'd be interesting to bring people from different

43:45 sects, right? Somebody from the tech side, somebody from Silicon Valley,

43:51 somebody from a small operator, somebody from a big operator I think we could bring some unique perspectives together 'cause this topic is the kind of way. No, there's gonna be a whole new industry

44:03 that's gonna come about just on ESG in general. So yeah, it's here to stay. Fascinating. So Karthik, tell people where can they find you, your company, anything more people if they wanna search

44:18 you out? Yeah, so our homepage is at actualhqcom. I C T O L H You are come and die you cannot reach me by email this letter K had actually to come or you can get in touch with a with a German that

44:31 we go from there you can fi be wrong you know like so much garlic fries regimen that he appreciate