ChatGPT & DALL-E generated panoramic image depicting a billionaire inside a lavish, transparent bubble, floating above a city landscape

Breakthrough Energy Venture’s odd investments, a mixture of sensible, venture-capital aligned start ups focused on climate action with a higher percentage that make no sense, have come under my scrutiny for years. Similarly, trying to figure out why the climate-aware billionaire oligarchs who founded it, including Bill Gates, Jeff Bezos, Richard Branson and others had managed to get the wrong end of the stick has been a focus. I’ve published on it regularly. As a result, Laurent Segalen and Gerard Reid over at Redefining Energy asked me to join them to discuss it. In a theme I’ve been pursuing, here’s a lightly edited transcript, along with podcast itself.

Intro: You’re listening to Redefining Energy. Your co-hosts from Berlin, Gerard Reed and from London, Laurent Segalen.

Laurent Segalen (LS): Today on Redefining energy, we’re gonna have a bit of fun. This is summertime, so we’re gonna make some friends. At least one friend. We’re going to talk about Bill Gates and his approach to energy.

Gerard Reid (GR): The reason we’re talking about this topic is because of Michael Barnard. And he wrote quite an interesting article on Breakthrough Energy Ventures and bad investment thesis. Therefore bad investments. And I thought, that’s good. I like this. I said, let’s bring Michael on to talk a little bit about, I suppose, about that topic. But also, more importantly, why does Bill Gates think like this? I think that’s, for me, the most important question.

LS: So, Michael, welcome to your show.

Michael Barnard (MB): Thank you guys for having me. It’s been fun being on a sibling channel, Redefining Energy – Tech, where I get to have really amazing, nerdy conversations. But sometimes I talk about stuff you guys care about too. Like money.

LS: Yeah.

GR: It’s just. Excuse the fact that both myself and Laurent have ADHS, you know. So we just we can’t hang on for that long, you know? No, it’s great to have you.

LS: But let’s be clear. We are not going to talk about Breakthrough Energy Venture this time. Although I’ve had a lot of things to say. Because there’s the good, there’s the bad, and there’s a lot of ugly stuff at Breakthrough Energy. Gerard, what’s thesis, please?

GR: What I wanted to talk to Michael about was, and I’ve been looking at it for many years, is the philosophy behind what Bill Gates is doing. And that comes down to a Czech professor living in Canada called Vaclav Smil. I actually have all his books here in my office. I really have enjoyed them. And for those who don’t know them, what this brilliant professor does. He’s really written about the history of energy. And his whole thesis is that big revolutions across the world come about when you have a new form of energy and related to that’s a big change in transport. That’s it. And I think that I go along with this is great, but there’s a lot that I don’t go along with. And I think that’s what I’d love to talk about. I’d love to hear your thoughts on Smil and all that type of stuff. So, sure.

MB: I get together with my buddies like Paul Martin and others in this space and get grumbling about our fellow Canadian Vaclav Smil and his outsized influence. We have a couple of things to say. One is deep respect for the stuff he gets right. His research and depth and breadth is great. He’s covered an amazing breadth of stuff. And I say that as someone who’s covered an amazing breadth of stuff. He’s broader than me. He’s broader and deeper than me, except for energy. He wasn’t deep enough. He wasn’t close enough. He didn’t do the analysis of specific types of things. He didn’t understand some of the fundamentals of the different forms of energy. He didn’t understand some of the thermodynamics, because that’s not his place.

As such, he made some basic errors, and it took him a long time to even admit that the primary energy fallacy existed, and he still never admitted that it’s a problem for his entire thesis about energy. It’s fascinating to me, and he’s now somewhat of a recluse. Last time I heard his name was when Goldman Sachs released its annual report. They had a forward by him. He submitted a very lengthy essay, which they condensed down. I was cited in some chapter or other of it as well, and I was just chatting with the people over there about it. Yeah, he was wrong about energy. And as a result, Bill Gates’ biases were confirmed. There’s a whole bunch of interesting cognitive biases going on in this bubble of billionaires.

GR: So, Michael, maybe we can jump into them. I mean, for me, what I think the major one thing is wrong — and this is me coming with my economics brain, so you come with your scientific brain after this — for me, is his view is that energy transitions, by their nature, are very slow, and they can take up to 100 years. There’s no doubt when you look back in history, they did take 100 years. Whether it’s a coal revolution, it’s the beginning of the oil revolution, same thing. They took 100 years. I’m now looking and I’m going, he doesn’t understand technology because there is massive technology change. And if I just take the case of solar, we’ve never seen an energy technology come to market as quick as this technology. And there’s other ones, and that’s, for me, the big one.

I’d like to hear what you think, if you think I’m misreading this, or you think there’s one even bigger than that.

MB: So there are three major things in my analysis, and I published on this a few years ago, which, of course, Vaclav Smil undoubtedly never read and Bill Gates never read. The first one is the primary energy fallacy. He just didn’t realize that we didn’t need to replace all of the heat energy in coal, oil and gas. We needed to replace the useful work we got out of the heat energy, and that’s about a third on average. Then with efficiencies Saul Griffiths did the calculation and came up with 42% was the total energy required in the United States when he did work with the DOE last decade, basically saying that 100 quads of energy, they only need 42 quads if they’re going from renewables to electric energy services. So Smil missed that entirely, as many do. That’s just a complete fail of analysis.

That’s a big one. He’s off by a lot in terms of energy requirements when he discounts electrification. The second one, to your point, he doesn’t understand economies or manufacturing scale and modularity. He’s still thinking big. Gigawatts scale coal and nuclear plants, as opposed to manufactured components, put into an optimized global supply chain and constructed in parallel over an extended period of time. We’re now at the point where we can put a gigawatt offshore wind in ten months of construction. We’re putting in gigawatts of solar every day now, simply because of that manufacturability and that global supply chain, the standardization and then the parallelization of construction. It’s just much faster. The third thing is, he overstated our transition to a natural gas economy.

He’s asserting that we’re 40 years into a natural gas economy and only five or six years into a wind and solar economy. But the wind and solar economy started in the seventies, so he’s misstating when the wind and solar economy started and overstating the natural gas economy. As I look around the world, I don’t see his thesis being borne out in terms of actual stuff. Just look at Europe’s energy crisis. Natural gas demand has plummeted because wind and solar are fit for purpose, and there’s a whole bunch of other stuff that can be done around that. So he’s got several things that are wrong, and unfortunately he never corrected any of that stuff. And it confirms Bill Gates’ biases for nuclear.

I think there’s a really good thing to talk about in this, where we say, when were the biases formed and why did they persist? That’s a fundamental part of my analysis of the billionaires. What’s your take? Gerard? Laurent?

LS: I don’t know how that thoughts were put together, but what I can tell you is that there’s a lot of people who are taking advantage of, especially the primary energy fallacy, to just repeat ad nauseum, we’re not there. It barely scratched the surface and so on. And here we’re talking about one of my heroes, but now the guy needs a retirement. It’s Daniel Yergin. I was an absolute fan when he wrote The Prize, but when was that? 35 years ago. And now it’s all over. I mean, he’s going to that Ceraweek where all the oil executive oil themselves is like, everything’s going to be okay. Nothing’s going to change. Because of course, they are the producers. They want people to continue to buy their oil. The fossil fuel industry and those guys, they have fossilized in their head.

And worse, they say, oh, look, Bill Gates is saying the same thing as we do, we need oil and nuclear. And then a lot of minions, I don’t want to name names, but I’m regularly in fights with those guys on LinkedIn, people who I’m talking about.

GR: Michael, thank you very much for summarizing that. I mean, I couldn’t have done better. It was great. I think you ended up talking about nuclear, and I’m not going to blame Smil for nuclear and Bill Gates. I’m actually going to blame Dave Mackay, who was a UK physicist who passed away a few years ago, and he wrote a book called Sustainable Energy Without the Hot Air. I really enjoyed that book as well. There were definitely errors in it. But the major conclusion he had is, we can’t build an electricity system in and around renewable energy. That was really what he was saying, and there was no way around this. So as a result, what we need to do is focus on energy efficiency and nuclear. So I blame him rather than Smil.

And correct me if I’m wrong, I think what I conclude out of Smil is the conclusion that Gates got from Smil was that the technologies are not there for this transition. Because actually, probably even when Gates started looking at this, maybe a decade ago, yeah, solar wasn’t what it is today. Batteries wasn’t what it is. He has missed them, and he’s gone and focused on technologies which you can argue are not scalable. That’s, I think, the mistake that he’s made, and I find that’s interesting that Gates has made that mistake, given that he’s a technologist. Right?

I mean, whatever, he’s a technologist.

LS: At least he put money where his mouth was. So he has sunk an incredible amount looking for fusion or SMRs. But probably you’re more attuned on those subjects than me. Michael, we have to go back further.

MB: The story for nuclear is similar to the story for hydrogen, for energy in the late nineties, early two thousands. For people who are climate aware and environmentally aware, they were looking for technologies which could solve the problem. And the options were fairly limited at the time for road transportation. Batteries obviously weren’t fit for purpose at the time. It was a real leap of faith to say, we’re going to have an electric road, even cars, nevermind trucks. In 2000, similarly for nuclear, France and the United States had come out of pretty successful rollouts of nuclear programs. You squint, they don’t look too expensive. And so they needed something that could scale and they needed something that could work. Both of those things were met by nuclear and hydrogen. And so a bunch of people decided that was the answer.

This wind and solar stuff that had been around since the seventies and eighties clearly was just not serious stuff. It was easy to make those decisions around 2000 to 2005. And Gates founded Terrapower, his traveling wave nuclear reactor company, in 2006, around the same time that Musk put his money into Tesla. Just to compare and contrast. If you put all your money into those things, and you decided that those are the answers, then as time goes by, say, 2015, when breakthrough Energy Ventures was founded, by 2015, the answer was clearly that the data had changed. And if we go back to Keynes, well, the data has changed. I will change my mind. What do you do, sir? But unfortunately, people like Gates live in this virtual reality that looks a lot like our Earth, but excludes stuff which doesn’t confirm their biases.

They tend to have people and filters around them which give them more of what they want to know than what they don’t want to know. McKay and Smil were speaking to Bill Gates’s cognitive biases around energy, and he wasn’t receiving solid stuff that challenged his biases from the people around him. They weren’t saying, Bill, you were right 15 years ago, but it’s time to change your mind. It’s hard. I’ve spoken to people who are bounced off the bubble around Gates, and it really is. There’s a little court there. People are very jealous of their position in that court. They’re very well funded to do stuff that they enjoy, and it’s hard to get past that. I feel some regret for some of the people in that court, because they could have been doing better work.

But this is kind of the problem as we look at that. Breakthrough Energy Ventures was founded by six or seven billionaires, including Branson and people like that. And they were all pro nuclear people. They all wanted to solve the climate crisis. They all reached their position and opinion on technologies a decade, two decades earlier and weren’t being challenged on those biases, because that’s not the way their lives are set up. The stuff that enabled them to be extraordinary earlier in their careers by looking deeply into the business models, looking deeply for disruptive technologies, understanding the stuff, taking big bets on nascent technologies, and then being ruthless business people to create their billions and making mistakes, but solving them over time. They’re not doing that anymore.

If you look at Musk as an example, it’s another example of a poor climate aware billionaire oligarch. The Boring Company and Hyperloop were really stupid ideas. But he was post early Musk. In early Musk’s days, he just learned everything. If he would get into disrupting urban transit, he would read 400 page books and talk to global experts and form his opinion and have challenging conversations. He no longer does that. Now he has a whim. And then they buy tunnel boring machines and he starts a company. It’s a divorce from reality. And they no longer have people around them strong enough to challenge and correct them when they get wrong. So it’s fascinating to watch. And it’s deeply unfortunate because we have this hagiography of billionaires, of the successful multi billionaires who are so influential. They go to Davos and hobnob with world leaders, and people pay attention to them when their opinions are ten and 20 years out of date.

LS: To Gates’ credit, he was very instrumental in pushing for the IRA in the US, although it’s a bit self-serving because a lot of his company got a lot of subsidies along the way. That’s a paradox. Are they a force for good or not? Certainly influence. They are huge in terms of money. Even with all the money in the world, I can tell you, Bill Gates, if you listen, the nuclear industry can bankrupt you. They can outspend everything you have. So don’t go into nuclear. If you want to give something to your children.

GR: Let’s change the theme slightly, guys. Let’s assume Bill Gates manages to listen to this podcast. So what do we tell them? I’ll give you my one point. I’ll just say one point. The future of this energy transition is all about standardization and scaling. I don’t care what it is. If I look at transformers across the world, they’re all customized. This is ridiculous. They need to be standardized. Everything’s standardized. And if you look at three technologies that have scaled most in our energy space, they’re wind turbines, they’re solar panels, they’re batteries. And they are all standardized and scaled. So that’s for me. The message to him is focus on stuff that you can standardize and scale quickly if you want to make a difference. So to climb it and to move this energy transition, that’s my one. What’s yours, Michael?

MB: I would lean into that and understand manufacturing physical things. Gates is brilliant, but his big successes were software things, which is an industry I’m intimately familiar with. It’s very different than manufacturing hardware things. He wasn’t a person who built laptops and cell phones. He was a person who built software. So understand the differences, because that’s fundamental to understanding wind and solar’s dominance and batteries’ dominance. The second thing I’d say is, take a moment, ask yourself why it is you have this confirmation bias which is preventing you from leaning heavily into wind, solar, and batteries when they’re so obviously winning. Ask yourself why the system you’ve set up around you over the past 20 to 25 years is not enabling you to have the success you had in software and disease prevention.

And to be clear, I overlap with Gates and disease prevention. I helped build the world’s most sophisticated communicable disease management solution here in Canada after SARS, one that was used here and in the Middle east during COVID. I get how transformative the Bill and Melissa Gates Foundation’s efforts and global disease eradication are. That’s because they started, in both cases with reality, not bias. And so, Bill, go back to fundamentals. Figure out why you’re losing in this domain, because you can win.

GR: Excellent.

LS: Okay, so big guys like to read, so I suggest you read Professor Bent Flyvbjerg, How Big Things Get Done. I suggest you follow brilliant young people like Nat Bullard, like Dave Jones. There are like tons of them with fresh ideas, fresh data, and we’ll do the episode on Breakthrough. And I can tell you they’ve done 100 deals in ten years, which is a lot for a VC fund. It’s a lot. I know. It’s like one a month, and I don’t know if it’s the Mass effect. They are really great stuff in his portfolio. There’s a lot of crap as well, but that’s probably for another episode. Gentlemen.

GR: Excellent, my friends. This was good.

MB: Okay. Gerard has had his fulfilling moment. He wanted to say this for a while. I can tell.

LS: No, no, we’re out of the system. We won’t be invited at Ceraweek, that’s for sure.

GR: I’m looking forward to the other one, because that quote, to be clear, Gates is still highly resistant to this is great. We’ll start the next one with this. This is great, guys. This is a good introduction. Very good.

MB: I’m just going to say there are signs of life. Liebreich keeps getting invited to major hydrogen insider events to keynote, and he’s definitely not singing from their song sheet. So I suspect some of these bubbles of confirmation bias and tribalism are breaking down. They’re looking for answers to why they’re not winning, and so the answers are out there.

LS: Okay, guys, great talking to you. Not sure we’re going to be invited at the next Ceraweek, although you never know.

GR: Course we’re going to be invited. Well, I will anyway.

MB: I think if Liebreich gets invited to hydrogen insider conferences, we should be invited to nuclear and big oil conferences. Yippee.

Outro: Thank you for listening to Redefining Energy. Don’t forget to rate the show and subscribe on Apple Podcast, Spotify, or the platform of your choice.