More good news this week: On January 20th, 2009, reality will re-enter the White House. As a Silicon Valley type, by reality I mean technology, science, you know, facts.  We’re happy to see a real scientist as our next Energy Secretary, for example.  Obama just appointed a Physics Nobel Prize winner, Steve Chu, to the post.  Before running the Lawrence Livermore Labs, as he does today, the gentleman used to be a Stanford University professor.  This is reassuring.
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But…
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In setting ‘energy independence’ as a goal, our President-elect might be raising expectations a tad high and setting himself (and his new appointee) for a fall, for disappointing the faithful.  Already, we hear discussions of reining consumption in and of reducing our dependence on Foreign Oil.  None of this is very new and causes us cynics to reach for our BS detectors and make sure their calibration has been recently checked and found up to the original factory standards.  Our cynicism is a friendly one, we like the new régime, we won’t flame the new administration in sharply worded Wall Street Journal editorials – with the possible exception of T.J. Rodgers, an occasionally irascible habitué of those pages – but we worry.
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Why?
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Because we’re greedy.  By ‘we’ I mean us one-track-minded VC.
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We didn’t wait for Oil to reach (briefly) $147 a barrel or for CO2 atmospheric concentration to rise to connect those concerns with money, the stuff we’re supposed to produce in large quantities.  We’re paranoids, also, we always worry that the current well will run dry, that Moore’s Law will reach the end of its life, that the Internet somehow will lose its allure, that Digital Convergence will one bleak day be revealed as no more than an empty markitecture con.  There are two consequences to our limited faith in our own tales: we suspect others’stories and we’re always on the prowl for the next mother lode, for another ‘paradigm shift’ (here, the detector pegs its needle).  In simpler words, we’re looking for the next type of goods and services combining high potential demand and insufficient supply today.  In the tension between the two lies our opportunity, the potential for big gains.
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You see where I’m going. Even if we assume, as many do, we’re shallow and beset by ADD, we’ve always known there is huge amounts of money in energy, look at Big Oil.  If only, shades of the Great Chinese Soft Drink Market fallacy here, we could displace a small fraction of current oil (or coal) consumption with New Energy from Silicon Valley, the result would dwarf Google, Microsoft, Intel or Oracle.  The average US consumer spends a few hundred dollars a year on IT (Information Technology) and many thousands on energy.  And we invest close to $30 billion a year in startups (the number reached $100 billion at the height of the Internet Bubble).
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We have all the money we need, this (new energies) is a high tech problem and the potential is beyond question.
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What are we waiting for?
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Going back to our new Energy Secretary, Steve Chu, he now must balance scientific facts with another type of reality, politics. A few days ago, when wading into a fashionable topic, electric cars, he was careful to say we needed a scientific breakthrough.  He was referring to batteries.  To get a real, practical everyday electric car, one with a material impact on the market, one that will reduce oil consumption, we need batteries that are about 1,000 times better than the ones we have today.  Here, ‘better’ means the product of cost, weight, volume, safety, durability, recyclability and charging speed.  The latter is often ignored: let’s say we get a battery that gets us a 400 miles real world range, like today’s cars.  Will real world consumers wait one or more hours to get a fresh charge, another 400 miles, when, with today’s cars, filling up takes 3 to 5 minutes?
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The hard reality is we have no idea, we don’t know where to turn to make such a battery. By comparison, Intel knows how to get from 65nm chips, then to 45nm and to 35nm (nanometers, one billionth of a meter, the term refers to the size of the basic building block of microprocessors and other IC, integrated circuits).  Intel knows that after 2-3 years and $3-4 billon, they’ll reach their next goal.  Conversely, for batteries, there is no such process, there is no Moore’s Law, the one that predicted IC would improve by a factor of two every 18 months.  Our cars still use the Planté lead-acid battery invented in 1859.
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Back to Steve Chu, what he means by ‘scientific breakthrough’ is ‘we have no idea’. Unlike the Intel engineers who only worry about how to implement a step in their roadmap, for batteries, we have no plan, we’re searching for one.  For at least 50 years, that’s how old the question of a practical electric car is, we’ve been looking in what is know as one of Science’s Last Frontiers, Electrochemistry.

About 10 years ago, I sat next to Steve Chu, recently ‘Nobelized’, at a dinner in the Stanford house of a noted chemistry professor.  I asked him about batteries.  ‘Ah…’ came back the answer, followed by a courteous attempt to wean me from any hope for a medium term breakthrough in battery technology.  A hard science problem with no known path to a solution.
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Back to us VC, the close relationship between Stanford and Silicon Valley is a tight and fruitful one. If a Stanford professor tells us the solution is still hidden in parts unknown of basic science, we know we should stay away from the problem, our money won’t solve it.
This is but one example of why you don’t see us invest much in New Energies.  You might want to think of us as follows: some of us are stupid all the time; all of us are stupid from time to time; but, as a group, we’re not permanently obtuse.  Statistically, our billions go to real, practical technologies.  Otherwise, we’d disappear.
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With this in mind, we’ll be watching how the Obama administration manages the difficult navigation between hopes for solutions to our energy problem and hard scientific realities.  For example: how will the Energy Czar handle the truth about nuclear energy producing 80% of the electricity in one of Old Europe’s countries?
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