Russ: This is the BusinessMakers Show, heard here and online at theBusinessMakers.com, and it's guest time on the show; and I have a repeat guest from exactly two years ago now, because with me is Josh Wolfe, Co-Founder and Managing Partner of Lux Capital. Josh, welcome back to the BusinessMakers Show.

Josh: Russ, great to be here.

Russ: As many of my listeners know, you are one of my favorite guests, but for those that haven't heard it before, tell about Lux Capital.

Josh: Lux is a venture fund. We either start companies from scratch in areas that we're passionate about or we find passionate entrepreneurs and put our capital with them. We're a bit unique because the venture fund itself has three strategic holding companies. So we own a business with Forbes where we write about these aspiring entrepreneurs and the ones that actually exist. We have a research business called Lux Research and we have a public policy group that goes down to Hill and tries to influence and educate the policy makers.

Russ: Public policy seems awfully important these days, boy I'll tell ya.

Josh: It is.

Russ: I also remember that with your background and your education, number one, your mom played a big role in who you are.

Josh: Great memory, that's it. She was an educator. She actually taught Special Ed, so I was fortunate not to be in that camp. But she really taught me the importance of life-long learning, which I think for anybody is one of the critical keys to success.

Russ: And I also remember that you sort of had this, I think, decision point where you were really into the Science and Medicine. Got involved in HIV cures, but at some point decided that you could more positively affect the world by making decisions of investments in other technologies.

Josh: So this was a totally selfish, altruistic decision right. So the idea was, rather than be or try to be the Nobel Prize-winning scientist, find all those Nobel Prize-winning scientists, and I actually have a portfolio of projects. And for me that's particularly well suited to my disposition because I sort of have a little bit of ADD and I like to do lots of different projects. So the ability to actually allocate capital to those people and give attention and shine the financial spotlight on them, I think was gonna be more rewarding than me slaving away at a bench.

Russ: Well focusing on lots of different things sort of comes through loud and clear when you talk about what Lux Capital looks at these days. Why don't you share a few of those categories with our listeners.

Josh: Well I would say broadly it's three sectors. It is energy materials, it's biotech and life sciences, and it's traditional tech and semiconductors; and when you drill down into each one of those sectors, then end markets for the end products or the end themes that we're going after range from components for electric vehicles, solutions using hi-tech chemistry for the back end of nuclear, which means solving the waste problem. Nanoparticles that can go in and help cure or detect cancer. Sixty gigahertz semi connector chips that allow you to transmit wireless video between your cable box and your TV, so you can cut all those dreadful wires. You know, and the list goes on and on. But those are some of the core innovations that we're bringing to market.

Russ: My goodness. On a typical week do you just jump from one of those to the other, to the other, to the other?

Josh: I really think as Warren Buffett says, "He tap dances to work," and I think me and my partners have the best job in the world. We get to deal with the smartest people in the world and we help to bring their dreams to commercial reality, and every day it's something new. So yes, I might be on a board one day talking about nanotech and cancer, and then two or three days later it's nuclear waste; and then another two days later it's looking at nonvolatile memory in the middle of the country. So yes, it's very rewarding, intellectually and financially.

Russ: Okay. Well now you've already mentioned electric vehicles and nuclear. I remember two years ago precisely, you said, "Look, the solution of a huge part of our energy challenge is nuclear energy and electric vehicles." It's refreshing to see that you stayed loyal to that.

Josh: So that was a thesis two years ago and then we actually put our money where our mouth was. So on the electric vehicle side, it's sort of like if history doesn't repeat, it rhymes. And I would have been woe to predict back in the 1980s, making the analogy between electric vehicles and personal computers, whether I should be buying or you would be buying a Packard Bell computer or a Dell or an Amiga or Commodore 64. I would have had no idea.

Russ: Right.

Josh: But if I would have bet on Intel, Seagate, Micron, the chips inside, I would have done pretty well.

Russ: Okay.

Josh: So, fast forward to today. I have no idea whether you would buy an electric car, and if you would, whether you would buy a Tesla, a Fisker, or a Chevy Volt, and on and on. However, there's a pretty good chance that all those companies need to use some semiconductor components inside, so one of our investments has a breakthrough in power semiconductors in energy conversion. That is the guts inside of these electric vehicles that makes them go. It's the equivalent of the Intels of yesteryear.

Russ: Well, isn't there still gonna be a challenge. I keep hearing that there's progress being made with batteries, but not enough.

Josh: Hundred percent right. Batteries do not scale the same way that semiconductors do. So many people are familiar with Moore's Law, the idea that every two years or so you're chips get about twice as good for the same price. Or every two years you can get a same chip for half the price. Well batteries don't scale that way. Chemistry doesn't work the same way that semiconductors do, so I think that batteries are still gonna be a pretty long haul. It's pretty long timeframes between battery innovations and I think that that will still be the gaining factor for widespread adoption of electric cars.

Russ: Does Lux Capital look into battery technologies?

Josh: We looked pretty extensively and the people at Lux Research, which is a portfolio company of ours that just focuses on all these areas, they've done intensive research and they have got some of the best analytic work out there covering a few dozen companies that just make batteries for electric vehicles. And I'll tell you, it's a crowded, complicated, confusing landscape.

Russ: Okay. Now the other side of this was nuclear power. I so distinctly remember two years ago I was beginning to think and listen to smart people around me and everybody was saying, "My goodness, we have to reconsider nuclear," and you came out championing it, and it does feel like now there's sort of a groundswell acceptance. I mean am I sort of behind the curve and you see that even further down the path?

Josh: No, I think you're dead on to it. And just this past week you saw Obama and Chu come out and say, "Nuclear is gonna be one of the main things that we're gonna focus on," and that came out of the blue for most people. But you're talking about in their case, $8.6 billion of loan guarantees so that we can actually see a new nuclear plant built. We haven't seen that in 20 or 30 years, so that's significant. Now, when we looked at it from a venture capital perspective, I did the same thing as you. I spent a year, talked to 300 plus people, from secretaries of energy to environmentalists, entrepreneurs, scientists, and I said, "How does a small venture fund invest in this area? How do we take a bet on this space?" And we looked at every part of the fuel cycle. You have the front end which is people that make or mine uranium. Well, our conclusion in the analysis of that was all fraudsters and hucksters all seemly domicile to New Mexico, Nevada.

Russ: Okay.

Josh: So we said, "Let's stay away from that." Then you have, and I think this a great area for society, just not great for investors like us, modular reactors. Instead of building a huge gigawatt power plant, what if you build an array of 20 or 30 thirty-megawatt plants. And I actually think that you're seeing companies that are getting funded doing that. We decided not to do it because it turns out that the analysis, the calculus, is about $150 million and 10 years, and it's not a single turn of the technological screw. It's all bureaucratic paperwork with the Nuclear Regulatory Commission. So we said no to that. Well, what did we say yes to? It turns out that the biggest unsolved problem is, "What do you do with the waste?" And if you could solve that problem, not only would you have a huge boom domestically, but internationally as well. And you can actually solve not just the commercial reactor wastes, but it turns out we have all this nuclear waste from the Cold War making weapons. So this is a big, big deal, and we started a company. I can't say too much about it right now, it's a stealth company. But in a few months we'll announce it and I think it's gonna make a huge mark on the world.

Russ: And it's a company that attacks the solution for the waste after nuclear is used in a generator.

Josh: That's right, and I can tell you just very simply, it takes out the worst radioactive elements and then it also permanently finds a way to store them.

Russ: Cool. Why in the world though has it taken so long? I mean it seems so obvious so long ago and we're so slow to react these days it seems like.

Josh: I don't wanna be too controversial, but I think that the answer is human nature and I think it is highly politicized. I think that this was an issue that when we decided not to reprocess, and this was in the Carter Administration, we seeded nuclear technology advantage to people like France. France now produces 80 percent of their electricity from nuclear, we do about 20 percent, the world about 16 percent in total, and I think that largely it has become fear game. Now it didn't help of course that you had The China Syndrome the movie come out and then you had Three Mile Island.

Russ: Right.

Josh: Now it turns out, Three Mile Island actually was a test proof that the failure and safety mechanisms work because zero people died.

Russ: Right, right.

Josh: Now Chernobyl, certifiable disaster. But I will point out, you can't look around this county, in most countries, and look at a Russian technology that somebody would have in their household, not even a toaster oven.

Russ: (Laughter) Right.

Josh: There's only one thing that I think about Soviet-Era Russia that was actually competitive and it's because it had to compete, not domestically, inside of Russia, but outside with the U.S. and that was the MIG Fighter Jet.

Russ: Yeah. Okay. Talking with Josh Wolfe, Co-Founder and Managing Partner of Lux Capital, and we'll be back with more with Josh after this. You're listening to the BusinessMakers Show heard here and online at theBusinessMakers.com.

[Aflac Commercial]

Russ: This is the BusinessMakers Show, heard here and online at theBusinessMakers.com, and continuing on with Josh Wolfe, Co-Founder and Managing Partner of Lux Capital. A little bit more in nuclear power Josh. I've heard some people say that, "My goodness, we can't go down this path so aggressively, we have no idea how much uranium exists in the world." Is that valid?

Josh: Best expert estimates actually say that we have several centuries worth of uranium and it actually comes from friendly places. So if we concern ourselves with not wanting to rely on foreign sources, it turns out that the vast majority of it is U.S., Canada, Australia, and Kazakhstan, so three of the four of those English speaking great allies. Here's a remarkable statistic though and many people I think will be shocked to hear this - one out of every ten electrons that you consume - you, no matter who you are, listener, you, me - come from Russian warheads.

Russ: My goodness.

Josh: So here's the thing.

Russ: Here in the United States?

Josh: Here in the United States. It's called megatons to megawatts.

Russ: Okay.

Josh: It's a dismantling of the Post-Cold War Weapons Program, and since 20 percent of this country's electricity comes from nuclear power and since half of our uranium that goes to fuel all of our plants comes from that program - just the math there, one out of every ten comes from Russian warheads. It's astounding.

Russ: Well that's probably a good thing isn't it?

Josh: It's a great thing.

Russ: Okay, that' good; that's good news. (Laughter)

Josh:Swords to plowshares.

Russ: Yeah. (Laughter) One other thing too about nuclear you know, when you talk about it to a lot of people they always say, "Oh yeah, my goodness, it takes 20 years and 378 approvals to build a new power plant," why can't we just change that?

Josh: Well I think that's political will and unfortunately I think in this country it still does take a long time. The first knock that you've seen on that process to make it better was this past week when you saw these loan guarantees given so that people actually have the incentive, because it is pretty expensive to build up. But you're still gonna have the bureaucratic loop holes to jump through. It's still gonna take a long time. But once you build them, they're up 95, 98, 99 percent of time. They don't need to be refueled. And it might be remarkable to know one train car worth of uranium can fuel a power plant for 80 years, whereas a coal plant needs about 80 cars a day.

Russ: Okay, now I've heard some people refer to these loan guarantees as actually being government subsidies in that the nuclear industries always relied upon government subsidies. Is that accurate?

Josh: Well I think all energy in some cases, and many of U.S. industry has relied in some case on government subsidy, but in this case the uncertainty caused by government in the regulatory and approval process has made lenders remised to actually wanna lend. If you remove that as a barrier, as an obstacle, as a risk, lenders will lend, plants will get built, people will get clean, cheap, zero carbon electricity.

Russ: Okay, well zero carbon seems to be kind of an interesting political element to enter into the discussion too because I think it was the environmentalists that first didn't like nuclear. Now it seems like they do like it. But speaking of environmentalists, I also remember two years ago we talked about climate change and your position then seemed like was that you know, "Let's go ahead and say that it is happening and that man is causing it. It's still a problem because you think that it's a 100 year problem and it's competing for capital and talent away from 10 and 20 year problems to cure cancer and cure aids." I think you still hold to that position today right?

Josh: I do and I feel slightly vindicated in that people a lot smarter and a hell of a lot richer than me, Bill Gates, has said much of the similar thing, that you do have a zero sum of time, attention, and capital, and talent that can be dedicated and invested in something. And I do believe global warming is real, climate change is real, man is contributing to it, however it is a 100 year problem that can be solved in 50 years. And with things that are today politically and popular alike - nuclear power, electrification of vehicles as opposed to things that are 10 or 20 year problems that need to be solved in 5 or 10, and those are things like cancer, heart disease, Alzheimer's, and growing poverty around the world.

Russ: Alright. So how do you feel about Cap-and-Trade?

Josh: Cap-and-Trade to me is likely to be the equivalent of a Moody's and SNP rating agencies of subprime debt. What I mean by that is I think that there is a carbon con-game going, I think that people are conjuring credits out of thin air, and I think that many years from now - you can mark my words on this, this is gonna be my controversial statement of the month with you.

Russ: Okay.

Josh: - that you will see a debacle, a disaster caused by all of this conjuring of carbon credits out of thin air by these carbon accountants that are trying to say that such-and-such company has the ability to do credits for Cap-and-Trade.

Russ: Okay. Interesting. You always say something profound here that's stays with me till - (Laughter)

Josh: I don't know if it's profound, but it's certainly controversial.

Russ: I think it is. Let's say this. Let's say that leaders of the world were listening to this interview right now and they decided, "Wow, this guy Josh Wolfe's pretty smart. Let's just go ahead and make him Science Czar for the world and let's go ahead and incorporate energy under that, that responsibility of that title. What would you do?

Josh: Well I would do exactly what we're doing in our fund which is you know, allocating capitals as rationally as possible to what is really low probability but high impact outcomes - positive outcomes, and that would be nuclear, it would be electric cars, it would be energy efficiency, but there's a contrary interview there to hold to. Just to expound on the energy efficiency piece, if we actually as a country wanna reduce our energy use, making things more efficient is not the way to do it.

Russ: Right.

Josh: And we've talked about this in the past, but it's really important that people understand that any time you make something more efficient, you actually make it cheaper. And if you make it cheaper, that individual device might use less energy, but the end result, it's called Jevons paradox - I wish I would have came up with it myself - is that more energy gets used. Take any example you want. Refrigerators - more efficient that they were 20 years ago. What happened? Now you have one in your dorm room, in your business, in your garage. You keep one for drinking beer downstairs and food upstairs. They have expedientially increased and in totality they use more energy.

Computers, the same thing. Computer are 100 times, not 1,000 times more efficient than they were 10, 20 years ago. We have expedientially more computers and many people have more of them. Same thing with automobiles and on and on and on. The more efficient you make something, guaranteed over time, more energy will get used. If you actually wanna reduce energy, since that's a global goal, you should actually make our devises more inefficient. Easy analogy here, if I put you on a high-speed data connection, optical network, and you and I could do this interview on Skype from Oslo to New York, we would use it all day long. It would be super cheap and easy and we'd have a high-speed connection. If I put you on a 56K Broad Modem they used to use in like 1991, you'd pull your hair out and never use it. So if you want usage and utility to go up, you make something efficient. If you want it to go down, you make it inefficient. It is the greatest paradox and most of our pundits and politicians get it wrong.

Russ: Right. Well that paradox almost kind of leads one to think that, "Golly, we're on a collision course." I mean, with energy demand skyrocketing and population continuing to grow, boy it's gonna be tough for you to lead the world, isn't it.

Josh: I gotta think though that leading me with that question because this malthusian idea I have to still refer to a great man who has passed, Julian Simon, who said that, "No matter what shortage we have, the ultimate resource that is inexhaustible is human ingenuity," and that's really what we do. We find geniuses, we find the inventors. As they say, "The best way to predict the future is to invent it," and we allocate capital to them. But I don't believe, even with population growth and scarcity, that we won't invent our ways around it.

Russ: I'm talking with Josh Wolfe, Co-Founder and Managing Partner of Lux Capital, and we'll be back with more with him after this. You're listening to the BusinessMakers Show, heard here and online at theBusinessMakers.com'

[Aflac Commercial]

Russ: This is the BusinessMakers Show, heard here and online at theBusinessMakers.com, and continuing on with Josh Wolfe, Co-Founder and Managing Partner of Lux Capital. Well Josh, sometimes I worry these days about particularly here in the United States, the focus on not having enough scientists, enough people focused on physics and math, and in fact I heard you in a speech one time make this statement, "We get what we celebrate." That is so profound. (Laughter) It's why we do the BusinessMakers Show. But tell us your thoughts about that.

Josh: I mean I think that's absolutely right. I mean the show that you do celebrating entrepreneurs, celebrating scientists, celebrating inventors, investors, I think that's the epitome of what the country needs. And when you think about this statement that I make which is, "As a culture, you get what you celebrate," when you look, be it at inner cities or the country as a whole, if we're celebrating athletes and entertainers - and particularly where I grew up in Coney Island, Brooklyn, if you're celebrating basketball players and rappers, the odds of being either are infinitely low. The odds of failure, very high. If instead you can flood the zone as you do with scientists, entrepreneurs, engineers, inventors, you skew the odds favorably. That is the way that technology has gone, it is the way that the economy has gone, it is the way that the world is going, and I do believe, whether it's businesses or countries, capital goes where it's welcome and stays where it's well treated. So we have to have that human capital here on our shores, and that means you have to celebrate the educators, the scientists, the entrepreneurs.

Russ: Okay. Let's imagine then for a second that somehow we captured the attention of a high school senior that really aspires to go out and make a difference, that aspires to be an innovator and an entrepreneur, what sort of general advice would you give her or him?

Josh: So I would say at least three things. The first is be a life-long learner, be curious. You have to, as an extension of this point, read as widely and as veraciously as you can. It is just so important to be able to reach into different people's disciplines and get the big ideas and be able to draw from them. Second thing I would say is make sure that you have passion. You have to be able in the face of adversity to be able to just plow through that wall, and I think that's one of the critical features of an entrepreneur is just persistence and passion and not taking no for an answer. Third thing I would say is always embrace the role of what I call randomness and optionality. You just never know. Some of the greatest things in my life and some of the worst things in my life have happened from random things, Ex-post-facto, after the fact. I can always explain it at some nice linear chain of events, but the truth is a priority beforehand, you never know. Meet everybody, talk to everybody, be humble, be adventurous, be passionate, and be persistent.

Russ: Josh, I really appreciate you giving us some more of your time.

Josh: Thank you. Great to be here Russ.

Russ: And keep doing what you do. You've been listening to Josh Wolfe, the Co-Founder and Managing Partner of Lux Capital. And this is the BusinessMakers Show, heard here and online at theBusinessMakers.com.