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Michael Liebreich

Chairman and CEO

Liebreich Associates

October 26, 2021
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Ep 48: Michael Liebreich - Chairman and CEO, Liebreich Associates
00:00 / 01:04

Bret Kugelmass
We are here today on Energy Impact with Michael Liebreich, the Chairman and CEO of Liebreich Associates, but more famously known for his startup - I don't know if it was just called New Energy Finance at the time, or more commonly now known as Bloomberg New Energy Finance - but you are an absolute legend in the space of energy information technology and now clean energy more broadly. Michael, we are so excited to have you on the show. Welcome to Energy Impact.

Michael Liebreich
Bret, you're too kind. Yes, that's right. Amazingly, just under 20 years ago, I did sit in my front room and decide to pull the trigger and found New Energy Finance, which is now of course, Bloomberg NEF.

Bret Kugelmass
Well, before we get there, I want to hear about you as an individual, where did you grow up? And how did you get into the sector to begin with?

Michael Liebreich
So, born in London in a place called Northolt, so West London, not very central. But then I grew up in West London. I'm actually West London through and through. If you know London well, you'll realize that West Londoners are very different from North Londoners or South Londoners. In fact, I've probably been in New York more often than I've been in some of those places, but I'm very much a Londoner through and through. Grew up, went to school in London. Had the great privilege and honor of being pushed incredibly hard by my parents, so despite modest means, went to a very good school and then on to Cambridge. I did engineering and, in retrospect, it was energy engineering. It wasn't called that, because Cambridge being what it is, it was just called- it was a Bachelor of Arts in engineering. That's Cambridge for you. But it was energy engineering. I did thermodynamics, fluid mechanics, mechanics, and nuclear. I then went off and did two things: a lot of business and consulting, and also a lot of skiing. And funnily enough when I- and I was a lost soul, career wise and personally in many ways, until I started New Energy Finance. And suddenly it's like, Oh, well I know why I did that, I know why I studied energy engineering, because now I'm doing this. And I know why I skied and climbed, because now I'm doing this.

Bret Kugelmass
I was about to say, you skipped over the skiing a little bit. You weren't just a casual skier?

Michael Liebreich
No, I got rather- I guess it's sort of- I guess it's my personality. I do have an obsessive compulsive side to me. So when I liked skiing, I really liked skiing. I was the kid that was up there when the lifts opened and made sure that when they shut, he was still at the top of the mountain so he got the longest run down and I did that pretty intensively. I ended up being pretty good at skiing. Through a very convoluted route - long story -ended up at the Olympics in 1992, in Albertville.

Bret Kugelmass
That's amazing. Yeah, I feel like you and I are a little bit kindred spirits that way. I actually have to be careful with my hobbies. I have to like watch myself to make sure I don't become too obsessed with them and like, remind myself, they're just a hobby, just a hobby, Bret.

Michael Liebreich
Yes, I don't really have hobbies anymore, because- for exactly that reason. So my hobby is in a sense now, the clean energy and transport transition and all of this stuff. I can kind of spend all day on Twitter, reading amazing things and getting into fights and call it work when obviously it's not work. It's also intensely enjoyable.

Bret Kugelmass
Okay, so tell me about New Energy Finance. Where were you working at the time when you decided to kind of pioneer your own thing?

Michael Liebreich
Well, in 2003, which was when I was sort of doing the prep work and diving deep into energy technologies, the reason I was doing that is that I was actually washed high and dry by the whole TMT dot-com boom bust cycle. I was actually unemployed and unemployable. And it's a funny thing, because I met the former head of the McKinsey London office a few years later, 2007, I was at the Clinton Global Initiative. And I met him and he said, Oh, Michael, you're doing so well, I see you all over the place. You always were such an entrepreneur. And I said to him, Actually, that's not strictly true. I was washed high and dry and I could not get a job, which is why I started New Energy Finance. And he said, Oh, don't be ridiculous. Nobody with your background - Cambridge engineer with first class this, that and the other, Harvard Business School Baker scholar, Olympics, McKinsey - nobody is ever unemployed with that background. And I said, You know what, walk a mile in my shoes if you say that. The dot-com boom bust and that cycle was deeply traumatic. And it left me with- my entire Rolodex was wiped out. Everything I'd worked on, everybody I'd worked with got flushed down the tubes. And initially I was all sort of pretty sparky. Well, I'll travel a bit, I'll hang out. It's been pretty intense as well. But by 2003, I'm just doing the math in my head: I'm 40 years old, I have no money built up. I basically, at one point in the dot-com boom bust, I was on paper worth $30 million, which was ridiculous, I knew. But I thought I'd get some out. I thought I'd get like 10% out and have at least some money to be able to rent a place, start a business, do something, start a family, and I ended up getting 1% out. I got literally washed up at the end of that with $300,000, a couple of 100,000 pounds, and I just was watching it disappear. So I did the obvious thing, which was start a company.

Bret Kugelmass
Yeah, I feel like that's also the classic Silicon Valley story. I mean, my formative years, my 20s, I was out there and everyone I knew was a paper millionaire and going through very similar experiences.

Michael Liebreich
Yeah, and it was very traumatic. I don't expect any- no violins, because it has all turned out so incredibly well from the founding of New Energy Finance. I find myself now in this really privileged place, both in the sense that I've had a successful business build, successful exit. I now own a lovely place here in London, big house. I've also got a ski chalet. We're going to have to talk about my flower meadow, which I've just bought. I'm doing some rewilding, my newest project, newest obsessive compulsive hobby. And more importantly, I met my wife through New Energy Finance. I've got three beautiful kids through New Energy Finance. So no violins, no sympathy. But 2001, 2002, and 2003, I was really, deeply in trouble, in terms of my career, but also psychologically. I really, really had lost a lot of self confidence.

Bret Kugelmass
Yeah, questioning self worth. Yeah, absolutely. Okay. So what was the inspiration? What was the insight that you would capture that led to NEF?

Michael Liebreich
You know, it really was a sector and a thesis that that kind of chose me. Steve Jobs does this thing and the speech he gave at the graduation - I can't remember where it is, it's a famous-

Bret Kugelmass
Stanford, Stanford graduation.

Michael Liebreich
-and he talks about joining the dots in retrospect. You can only see the sense backwards. And that truly was- I started explaining it. I said, Why was I an obsessive skier and then a climber? Well, guess what, because then I can see the impacts of our modern lifestyle. You only have to go up to a glacier and you can see what's happening. Or you look down into the valleys and you can see the brown spots. But I was also an energy engineer with a good grasp of the feasible. I'm not going to fall for anybody who's got a perpetual motion machine.

Bret Kugelmass
Right, you have a physical intuition of these systems.

Michael Liebreich
Yeah, I think that's a fair- yes, I do feel I do. I think that my track record as a commentator, as an analyst, would suggest that's right. I can think through- and by the way, it's not just the thermodynamics. It's actually also a lot of it is the microeconomics. What is going to cost less later into- how much of a friend is the experience curve going to be for let's say, a fuel cell car versus a battery car, and then to finance?

Bret Kugelmass
So you can look at these systems and say, Okay, what component of it is labor versus materials moving forward in the future if we make certain assumptions about technology or manufacturing scale up. Which slice of the pie will decrease and be able to project that forward to really do kind of a holistic assessment of an energy technology potential.

Michael Liebreich
Yeah, I think that's right. And I grew up- another very important piece of my early background is that my dad was a mechanic. My mom was a nurse, my dad was a mechanic, and my early years, we were constantly having to drop the engine out of my mum's Morris Minor 1000 and change the clutch and do all that kind of stuff. So I grew up with a very physical appreciation of machinery mechanics. And then, again, very lucky and one of those other dots, one of those other Steve Jobs dots that I joined up backwards: in my first job, when I wasn't being a ski bum, my first proper job as a management consultant was with a company called Braxton Associates, later part of Deloitte and Touche, and we were calculating learning curves. And I just spent a lot of time learning rates for the most ridiculous things, including rock quarrying and cheese manufacturing and all sorts of stuff. And every sector has learning curves. So you get this sort of faith in innovation and in the innovation delivered by engineers. It just works. You see it time and time again. Then, when people say things like, Oh, well, the cost of solar has got to stop going down at some point. And you're like, Well, why? It's just sand. It's sand that becomes silicon and different sand that becomes glass. And yeah, you've got some steel, you've got some metal bashing on the racks. But there's nothing in there that says that it can't continue to go down essentially forever, but of course, slower and slower, because these things have long, long curves and so on. But yeah, there's just a few things in my background that I think gave me a little bit of a different perspective. And the other thing was that we haven't talked about yet was finance. I did a lot of finance at business school. I've done my time as a junior analyst building cash flow modeling, doing cash flow models. And then I've been in ventures. I'm a very numerical finance type person. And I think a lot of people, very few people, would have the exact set of backgrounds. There's the thermodynamics plus the mechanical engineering plus the appreciation of the environmental constraints plus the finance and the capital markets even. When I was working on, for instance, Sustainable Energy for All - this is an initiative set up by Ban Ki-moon, Secretary General at the time of the UN - and I was introduced by Kandeh Yumkella who Ban Ki-moon had asked to set up this Energy Initiative for the UN, and I was introduced at this huge conference. And this is Michael, and he knows where all the money is to finance all of this, because he knows all the venture capitalists. It's like, well, no, it's not venture capital, it's venture capital. There's private equity, there's-

Bret Kugelmass
Project equity.

Michael Liebreich
- there's project finance, there's the public markets. There's primaries, there's secondaries, there's the debt markets, debt markets, and then more debt markets. And understanding how you put that- how you put all those pieces together. Because by the way, on all of this transition, it's really important, the cost of capital is absolutely critical, right? Because clean technologies, by definition, you're not buying fuel every day. If you're buying fuel, you'd still be chucking CO2 in the air, so you're not buying fuel.

Bret Kugelmass
Right, you're weighted towards upfront costs and that's why the cost of capitalism.

Michael Liebreich
Right, exactly. So like for like, you could have a fossil fuel technology with a levelized cost and a clean energy technology with the same levelized cost. But one will be enormously more, the clean one will be enormously more capital expenditure. And so now that's really important, by the way, when you look at the current sort of energy crunch and what it might be doing to inflation and what that might ultimately do to interest rates. That's actually pretty scary stuff.

Bret Kugelmass
Wait, can you actually spell that out a little bit? I do want to get back to your story, but I think you're in a really interesting point. Give me a little bit of prediction here. What happens to- if inflation goes one way or another, how does that affect the cost of capital slash the ability to invest in energy infrastructure?

Michael Liebreich
Right, so another of the dots that I joined up backwards in my career is that I'm old enough to have started my career just at the back end of when inflation was a thing. My first job, when I started in exactly 1986 - '86, '87, '88 - any time you drew a chart, a time series in dollars or pounds - or euros didn't exist then - but Deutsche Marks or whatever it was, you had to deflate. You had to use- you had to adjust for inflation, because inflation in the UK peaked at 26%. In the US, it peaked at 15% in the 80s, I think late 70s, beginning of the 80s, respectively. And if you didn't adjust for that, you didn't get any sense of whether something was growing or not because it was just distorted by inflation. So I started my career when inflation was a thing. Now, for most- the last 14 years, 11 of them the federal funds rate has been 0.25% and inflation has been 2% or less. Then occasionally kind of goes up to 3%, but it comes back down fairly quickly. And we are right now, inflation in UK, euros, dollars - now you've got GB pounds - euros and dollars is around 4%. And it's still going up, right? It's clear that the energy price hikes that we're seeing are going to feed through into the economy. And you've got two other inflationary pressures going on right now. One is, if we've got tensions with China, that's going to be inflationary, because one of the things we've been doing for the last 20, 25, 30 years is just offshoring more and more to Asia. That's been an enormous deflator, because the costs of- we've been bringing in these cheap goods, cheap commodities, and so on. And that has kept prices- it's kept a lid on prices. Now, if you unwind that, if you want to have a trade war with China, you better expect some inflation in your own economy, because you're now saying, Oh, well, those sneakers, we're gonna have to pay more for them, because we're going to try and we have to get them somewhere else, probably more expensive. And the other thing is expectations. Once everybody thinks, Whoa, inflation, I'm going to ask the boss for a raise, because I'm getting hit by, horrendous energy bills, those sneakers became more expensive-

Bret Kugelmass
There's a psychological aspect of inflation.

Michael Liebreich
There's a flywheel there, once you get those expectations. Now, what does that mean? Two by two matrix - I was at McKinsey, I can do two by two matrices - inflation and interest rates. We've been in the low-low: low inflation, low interest rates. We haven't had to think about it. We are now moving into an inflationary period. It could be a year, it could be two years, it could be longer because of those expectations, that flywheel. But also we don't know what's going to happen to interest rates. We don't know what our policymakers will do. They may say, Well, a bit of inflation, but let the economy run, because we're coming out of this pandemic. And hopefully, we won't have to get to the kind of Paul Volcker moment where we really see boom, high interest rates. We don't know exactly where we're going to be on the rest of that matrix.

Bret Kugelmass
Isn't it good for energy infrastructure projects, clean energy infrastructure projects, if interest rates are low and inflation actually goes high? Because now you borrow the money and then you don't have to pay back as much in theory? Is that the idea?

Michael Liebreich
Let's put it this way. If we've got any listeners to this who have got a bunch of projects that they've financed, they need to think that through. Because if they have index linked their-

Bret Kugelmass
Right, you've got to index link your revenue, you've got to index link.

Michael Liebreich
Yeah, but if you've not index linked your revenue, you may find it hard to pass on the price increases. Yeah. And I would suggest that anybody who's got those projects should be running those scenarios right now. Because if not, their bankers are going to be doing it for them. And it might be a very unpleasant process. I mean, and that's the worry. What we might see, yes. The worrying scenario is where the central banks have to actually put the brakes on because of inflation and they have to- if we end up in a situation where those base rates have to go up 2, 3, 4% and then you see the inflation come down to, you know, back to a couple of percent, but for a while, you'll have a real interest rate that is higher than normal, higher than we've had for the last few years. Anyway, we'll get into the weeds, but the point is that I think, to really do the job of a commentator or an analyst in this space, it's kind of helpful to have- okay, we just talked about a bit of macro, as well as the finance, as well as the engineering, as well as the environmental stuff and so on. And I'll be honest, to a certain extent you've also got to have the social awareness to understand where people are coming from in terms of- right now here in London, we've got people kind of gluing themselves to roads, because it's called Insulate Britain, which is- and you've got to understand where people are coming from in terms of their desire for either social change, just transition. The Green Deal is not just about energy and engineering and finance. There's something much, much deeper from a societal perspective.

Bret Kugelmass
Yeah, from the average public person, it's a perspective, it's actually more to do with those other social issues sometimes than it is the actual energy or climate considerations.

Michael Liebreich
Well, for sure, and certainly energy is so complicated that it gets incredibly tribal. You can believe-

Bret Kugelmass
Yeah, you can always come up with a set of facts that support what you want, because it's too complex to give it an honest appraisal.

Michael Liebreich
Right? And so you could say, Nuclear is the only answer of the cause, and you can be, I don't know, Michael Shellenberger and create sort of a tissue of facts to support that. And you could create another tissue of facts that say, No, no, it's only renewables, you can be Mark Jacobson and have another tissue. And then you can have a whole other tissue that says that only fossil fuels create wealth and pull people out of poverty. And there's - I can't remember his name - there's that philosopher who- the moral case for fossil fuels. He has another tissue. And I try to avoid- I mean, I use tissues to blow my nose in. I try to be 360. I'm trying to be honest in all directions, it doesn't always work. But that's my goal in life is to have some kind of intellectual integrity and not just create these tissues.

Bret Kugelmass
Yeah, that's great. Okay, hold on, we've got to get back to your story, because I don't want to miss it. What was the product, NEF, what was the product and then walk us through the point that it was- or at least tell us how it was sold and why it was sold.

Michael Liebreich
When I started, I started researching it and getting into the topic area, and in a deep way in 2003. And really, the driver there was, everything I had been working on had blown up. Everybody that I- I couldn't draw on anybody for networking, because they'd all lost their jobs as well. And I'm not very good at networking from a point of weakness. I don't know what I want and I don't have anything to offer it. I like trading, but not asking for help. I'm very bad at asking for help. But what was happening was, everything I saw seemed to have something to do with energy and with some kind of a secular, a really kind of long term shift. You saw things like, discussion at the time, everybody was excited about peak oil and depletion. There was the IPCC Third Assessment Report at the time, came out in 2001. But it took me a couple of years to kind of find it. And then I was really diving deep on climate change, because it kind of resonated. And naturally, I'm a conservative and I'm not somebody who naturally sees Boogeyman round every corner, but it did- I could see that the glaciers and the weather seemed to be changing and so I got deep into that. And that's very clearly related to energy. And then there was the second Gulf War, which is clearly an energy war. I mean, we would not have- we would not be in there had Iraq not had oil, that's absolutely clear. But there were a lot of things going on even- I went climbing in Bolivia and the army and the police had had an actual shooting confrontation, because they were sort of riots and protests about whether Bolivia should sell its natural gas to the damn Yankee, to North America. And then I flew back through Brazil and they were brownouts, because the Brazilian economy - at the time under, I think it was under President Lula- - was growing so fast it couldn't meet the energy demand. And while I was there, there was this power cut, this huge- the Northeast power cut in the US. And then there was the big power cut in Europe. And these are to do with aging infrastructure and-

Bret Kugelmass
Blackouts? When you say power cut, you mean blackouts?

Michael Liebreich
Blackouts, yes. And they kind of cascaded through the systems. And so everything seemed- so on the one hand, you had all these problems, but then as a technologist, and as somebody who understood learning curves, I was looking at going well hang on a second, there's wind and there's solar and there's biomass. I knew nothing about any of that. But it did strike me that that would yield to- solar is material science, it's flat screen TVs, the same technology. Why would it not yield to improvements? So I started to- actually, and the other thing was people were talking about the hydrogen revolution at the time.

Bret Kugelmass
Still talking about it.

Michael Liebreich
They were talking about it and I sort of thought, Okay. I went back up to Cambridge and talk to some of my old profs to see whether there was anything in it and decided that it was going to be- quite quickly decided that there may be something, but it would take decades, which is broadly speaking where I am still, to a certain extent. Now it seems more concrete this time around. But what I became persuaded- well, and then what was interesting, I didn't know what business model. This just became this kind of itch that I needed to scratch to find out more and more and more. And very quickly, I realized that I knew such a small amount and yet more than most of the people I was talking to, certainly in the business community. I had friends who are-

Bret Kugelmass
Remission arbitrage time.

Michael Liebreich
Yeah, exactly. And they were investment banker friends, people I've been to business school with. And they were energy investment bankers. And you would say, So, which clean energy companies are you covering through your equity research? They'll be like, what do you mean by clean energy companies? Well, you know, people like Vestas in Denmark. Oh, Vestas, how do you spell that? Okay. And, you know, the motto of New Energy Finance in the early days was "in the land of the blind," because we were just the one-eyed man or the one-eyed man and woman and we just- we were always trying to stay months ahead.

Bret Kugelmass
So you just compiled reports or what?

Michael Liebreich
Not reports. So we started- I'm very left brained in I love data. What I did actually, even going back to late 2003, beginning of 2004, I was putting- every deal in hydrogen and fuel cells, I was trying to record it. There was a lot of venture capital activity. Even back then, there was sort of- it was the first- I guess it was the kind of tail end of the hydrogen bubble.

Bret Kugelmass
How did you collect this data, though? Where did you get those from?

Michael Liebreich
We would- I would just- Google had luckily happened.

Bret Kugelmass
Just like SEC filings and that type of stuff?

Michael Liebreich
Everything, anything, just googling around, reading the news. And it was, there was a lot of news flow. And there was actually, there was a publication I'm going to try- Fuel Cell Weekly, or something like that, Hydrogen and Fuel Cell Weekly, which is still around. Johnson Matthey had had sponsored it. And so there was lots of news flow, but it was- if you looked into, for instance, the venture capital data sets - Venture Source, Venture One, those sorts of things, where now you would look at Crunchbase or whatever - but there, all of this stuff was 10836 electrical equipment not elsewhere specified. They just- so a membrane for a fuel cell is so different from a fuel cell stack, which is so different from a fuel cell car, and yet it was all kind of lumped together. I very quickly got frustrated by just creating spreadsheets. Because one investment in one company, you might have three investors. But those three investors might have three companies that they invested in, and then you've got a law firm and you've got a banker and you got some other thing. So it clearly needed a relational database. And I went on the internet, there was a thing at the time called rentacoder.com, now called freelancer.com, and I put up a sort of secret spec, got a few people that said they were interested and gave them a bit more information, and ended up with a Polish programmer who asked really smart questions. And we built this beautiful relational database. We worked nights - he actually had a day job, I didn't meet him for about a year. He was in Warsaw, I think he worked for Johnson and Johnson during the day and for me during the night. And I paid him and it was literally a few hundred pounds, it was very little. And then, of course, it all grew in complexity and we ended up working together for many years. But we did something that was incredibly user friendly. Because of the time I'd spent in the dot-com sectors, I understood user interfaces and how important. And so what we could do, we created a system that, let's say you're talking about a startup. You'd have a page that would describe the startup. And at the bottom, you'd have these things we'd call slices. And each slice- all the slices of who are its investors, what are the funding rounds that it's done, who are its service providers, in terms of bankers and whatever who'd worked on it. Now, if you've clicked on a slice, that slice would open up, would become the page, and then it would say, Okay, so now you've got- okay, now we're looking at Kleiner Perkins - not one of the portfolio companies, you've come from the portfolio company, you clicked on the slice for it's investor, Kleiner Perkins. That was now up at the top and underneath that, you'd have all the investments that it had made in the sector, all its portfolio companies, and its team, so if you wanted to contact them, it was very easy. And I started to show this to people. Actually, my co-founder and I were either gonna start an information business or raise a fund. We were going to use this information of why would you be better as investors than anybody else? Well, look at the information we've gotten. But when people saw it, they're like, Wow, holy moly, I want access to that. I want to- that's what I want.

Bret Kugelmass
How much did people pay for it in the early days?

Michael Liebreich
So we started off trying to charge 3,000 pounds for three people to have access to this data. And very quickly - and we could talk about sort of startups and pivoting and being nimble - all these people who said, I need that, I need that, that's the tool I need. And I'd give them a password to go in and they wouldn't use it. We can see from the service statistics that they wouldn't use it. And the reason is most people are too busy to go and mine datasets. That's just not what people do. And particularly you don't do it unless you know you're going to get the answer. The great thing about Google, when you search, you know you're going to get answers in a tenth of a second. It might be right or not, but you know that there's going to be something. And so this thing, nobody- you can't see, because the bulk of the data is below the waterline. So we started a newsletter to highlight what it was that we were doing and also to gain a kind of target set of marketing leads, so we started a newsletter. Then we started another newsletter, which was the two weekly so we started to kind of news headlines first, and then we have the database, and then we had the deeper newsletter, which was the once every two weeks, called "The Briefing". And we were trying to charge- the headlines were free. That was our freemium bit. The database was 3,000 pounds for three seats. And the newsletter was 1,000 pounds for a year - these were all annual - the newsletter was 1,000 pounds. And we really- I mean, we struggled along doing that until, for the first- so we launched that in October 2004. We launched it very quickly and we had the first revenue - tiny, tiny revenues - that first- by Christmas the first year, which has been a target. In 2005, we really struggled. And then in 2006, we did two things, three things: we raised money, we brought in a little team on carbon analysis, carbon markets, and then we also created a product, which is our insight product, which we could sell for 50,000 to half a million dollars. And that was the kind of- that was the product that made the company, because-

Bret Kugelmass
What insight are people willing to pay for and how do they trust your insight?

Michael Liebreich
Well, I mean, these are all just such- this is a long time ago., this is ancient history. But it's an interesting question, at least for me. What happened was that we actually hired a sales director. I had a sales director and he couldn't sell anything and he was very disorganized, so I gave him an intern. and the intern sold more than him, so we fired the sales director, kept the intern, but we brought in another sales director, a guy called Ken Bruder, who was- and these are the things that make the company, because he looked at it and he said, Listen, you need to sell- we will never get there selling at 3,000 pounds per team. Even if they're big teams and you can get 10,000 pounds. But you guys are getting really, really smart. We were bringing in interns to enter deals on let's say offshore wind or whatever it was. And we would get inquiries from the Wall Street Journal. You know, we need to talk to somebody about offshore wind, and I'd be like, well talk to, you know, talk to Bret, he's great. They wouldn't know that Bret was the intern and then the intern would be quoted in the Wall Street Journal saying very clever things. And what Ken said was, You guys, you may not realize that what people pay for, they pay for insight. They pay for trends. They pay for understanding what the cost of solar will be in a year or in two years, because they're bidding on a project and they'll build it in two years. They want to know the forward price. Yeah, right. They'll pay for understanding which bit of the supply chain has got a bottleneck, right? You know, there is not enough cable-

Bret Kugelmass
But I'm wondering, did you come up with a standard set of insights that then you would sell out? Or did people hire you almost as a consultant to give us an insight in this sector?

Michael Liebreich
No, they tried that, and we tried to- and I sort of almost forbade the team from doing that. Because what happens is somebody says, We've decided to go into thin film solar in wherever. You can then put all your resources into helping them, but you lose track of what else is happening around the world. We were doing subscription information services. We were the everything source. And this was a huge decision that we took in about 2005 as the whole sector started to go crazy. It was like, Okay, look, do we just do a great job on wind and solar? And I said, No, because you cannot be- if anybody says I'm an expert on solar, but I don't know anything about natural gas, I don't know anything about nuclear-

Bret Kugelmass
And you don't know how those two are going to intersect in the future and exactly one or the other.

Michael Liebreich
You become a sort of idiot savant, because you're incredibly smart, but functionally useless in real life. We decided that we would do everything. And that ultimately, dragged us into smart meters - you know, the smart grid - and it dragged us into power storage, it dragged us into fracking. And that's why we went from 15 people at the end of 2015 and we went to 150 people at the end of 2018. Sorry, 15 people at the end of 2005 to 150 people at the end of 2008 when we started the sale process, or the beginning of 2009. Because, suddenly, we had to keep adding people to remain smart about all of these different sectors. So no, we-

Bret Kugelmass
Which often is more valuable, too.

Michael Liebreich
Yeah, it was, but in terms of the consultants, I set a rule for the team and I said, We will do- no more than 15% of revenue can come from events and no more than 15% from consulting. And we called consulting "applied research," because it sounded like you'd have a better multiple at the outset, because it would, and we would only use-

Bret Kugelmass
Products you can sell many times, instead of a one-off.

Michael Liebreich
It gave us a rule of thumb, because if it's applied research, it either uses our data sets or it causes us to do research which adds to the data sets. And that was the only time that we took those. So we were selling subscription services, overwhelmingly, but what I had thought was that you'd start, you'd have freemium, and then you'd sell a newsletter, and then you sell the database. And then eventually, you'd sell insight. And Ken was like, No, no, no, no, no. If you want to sell insight, go sell insight. My team of salespeople are going to go sell the high value thing. But to your question, why do people trust your insight? That's a really interesting one. People wouldn't buy the data, because they didn't have time to look at it. But they would be really interested in the insight and they would say, Well, how do we know? You know, I've got all these people telling us how clever they are. I've got McKinsey, I got everybody trying to sell whatever to me. How do I know that your stuff is good? And we would say, Well, have you seen our databases? And you'd show them the databases and how much data lay behind it. And they were like, Whoa, okay, that's cool, you can put that away, I'll buy the insight service. Because it's a question of- it's almost like the peacocks tail. The peacock, even if it's useless to that person, they're incredibly impressed by it. And they would buy the insight service, knowing that we had done our homework.

Bret Kugelmass
So I want to make sure that we've got time to focus on what you're doing now. But quickly, tell us what was the acquisition process like? Did you go out to market? Did they approach you? Was it just a perfect fit?

Michael Liebreich
Well, I had brought in external investors in 2006, so relatively early on. I knew I would have to create an exit for that and then I wanted an exit for myself. Through that process of being totally brutalized by the TMT boom bust, I had no money. And this was very bad. I was in my 40s and I had no money. All my friends who had been incredibly risk averse and boring coming out of business school were wealthy and successful than I am. So I always knew I was going to create an exit. I knew I was going to sell and everybody in the company did. Everybody, I mean even down to the interns, had options - the early interns, maybe not the later ones, but the early interns all had options. Some of them made tens of thousands or more at the exit. I will say that I made lots and lots of mistakes building the business. There were lots of things that I did that I could have done better, I could have moved faster, failed recruitments, et cetera. But the exit, we really, really- we nailed that. I had been flirting with a number of companies throughout and- you know, information providers that I thought would wake up to this mega trend and they would need an asset. And we were- there was only us and another company called Point Carbon that were, in any way, meaningful assets in the space from an information perspective. And so I did- and whenever I talked to one of these few big companies, I said, Look, I'll need a number that begins with a three. In other words, it's got to be more than 30 million pounds. I'd raised 4 million, so that's a big number. And they all told me I was completely mad. And I said, No, I'm not mad. This is just too early. It's very simple. And after- when the great financial crisis hit in 2008, first of all, we were a bit like - who's the actor in, I'm trying to think in- well, we're like, in one of these films where somebody has shot at the hero and then the hero doesn't know if it's been hit has to check. I'm thinking of the one with John Travolta- oh, I'm gonna sound like a real idiot on your podcast here, because I can't remember the name of the film.

Bret Kugelmass
But at least we get to know who your favorite actors are.

Michael Liebreich
Yeah, yeah, no, not my favorite, I'm blanking on his name. Anyway, never mind. It was like, the great financial crisis hits and you don't know if you've been hit or hurt. Nobody knew what was happening. And then slowly, we worked out that actually, there was a big wobble, but we got through it. We raised a bit of money and we all hit the phones doing debt collection. And that was fine, we survived. And these big information companies, they also didn't know, because they were selling to the financial sector. And then one of them called and said, Okay, we know we're fine, but we're probably not going to be growing, but your sector looks good, so we want to actually bid for you and we think we can meet the requirement, the number beginning with three. And I'm not gonna say who it was, but that was very exciting. I said, Okay, I can take that to the board. They then - am I allowed to use the word assholes?

Bret Kugelmass
Sure.

Michael Liebreich
The behaved like assholes. They behaved like assholes afterwards. They basically thought that they had the deal done and they moved on and they treated me very poorly for a month or two. And I said, Look, the hell with this. I'm going to bring in a bank and we're going to do an auction. The team is being destabilized. They know that we're selling and so we've got to go through with this, but we need help. And I brought in a bank and we then ran an auction process. And actually it was- the people who were behaving badly, they went kind of ballistic at this. They thought they had the deal all wrapped up and they never had. And so we went into a very, very professional, well-run process. And you know what? In terms of the owner, we nailed it. You could not imagine now - again, looking back, Steve Jobs joining the dots back - I cannot imagine what it would be like had we sold it to that initial bidder or to any of the other companies in that process. It has been just fantastic, to the point where, unbelievably, I'm still writing, I'm still a contributor.

Bret Kugelmass
Yeah, because you're obsessed.

Michael Liebreich
And this is like - what is it - 12 years from when I sold it and I still love the business. I still love the people. I still think that it is entirely on message in terms of supporting the transition. It's done unbelievably great work. And the other players? I mean, who is the number two to Bloomberg NEF? I don't even know. I don't even know who you'd say, you know?

Bret Kugelmass
Exactly, exactly. That's amazing. Okay, so this is a perfect segue into what you're doing now. Because clearly you love the sector. You love the sector. What's the next chapter in your life?

Michael Liebreich
Well, I don't know if I love the sector. I just, I think that you kind of- I've got to the point where I find it very- first of all, I'm very much climate change as a real thing. Is it as urgent as extinction rebellion and Greta Thunberg would like us believe? Is it going to be- does it threaten societal collapse in a decade or two? No. I mean, that's- there are all sorts of scenarios spun by all sorts of interested parties, but it is happening and it is existential in the longer term. So we have a responsibility. We are the generation that has a responsibility to deal with it. And I do also see the solutions and I think I have got the privilege from where I sit. I can see them perhaps a bit in 3D quite well. So I've got a kind of- on the one hand I guess what I'm saying is I find it very difficult if you said to me, I've got this fantastic opportunity in computer games or something. I don't think I'd be able to focus. It just doesn't feel important enough. Maybe medical science feels important enough, but I have absolutely no window into that. No knowledge.

Bret Kugelmass
And energy touches everyone.

Michael Liebreich
Exactly, so it feels important and I feel like I've got a good vantage point, so this is what I'm going to do the rest of my career. I have some advisory roles. I'm on the advisory board for Equinor, the Norwegian energy company, formerly Statoil, but now broad energy company, one of the leaders in offshore wind in the world.

Bret Kugelmass
Huge company. This is no small company.

Michael Liebreich
No, a huge company. And a really cool company to work with, I will say, because they're so deeply committed to their business and to doing things right. It's a pleasure to work with them. And I also advise a bank called SDCL, Sustainable Development Capital, which is one of the world's biggest investors in energy efficiency and a company that I think you're going to be hearing a lot about - you maybe should get the CEO John Redfern on here - which is Eavor, and that's closed loop geothermal. Geothermal is the dog that's never barked from the perspective of the transition. And there are lots of reasons for that and I think that Eavor has a good chance of having ticked all of those reasons off, so I work with them.

Bret Kugelmass
Okay, great. We'd love to get in touch with them. When you say close to geothermal, at what scale? Is this home scale, industrial scale?

Michael Liebreich
No, no, this is high enthalpy. This is deep. This is drilling down 3, 4, 5 kilometers deep and generating electricity, all industrial scale heat. It's big scale, very scalable. With the right tailwind on drilling costs, this could be the third leg of the stool after wind and solar, in terms of modern renewables. Obviously, you're gonna have- so you have hydro, wind, solar, and closed-loop geothermal, that could get you very deep decarbonisation in most energy markets of the world.

Bret Kugelmass
Can I ask you a question on that? If it's something like geothermal, which could be baseload, and if it's a super deep stuff, which means you do it everywhere, what is your intersection lens into the future say about why not just that? Why would you need solar and wind if you had a baseload that you can put anywhere?

Michael Liebreich
I think - and you should definitely quiz John Redfern on this - I think it's going to be more expensive than wind and solar. We're looking at $10 a megawatt-hour in a good location for wind and solar, so the challenge becomes do as much of that as you can integrate news, but you still need to keep the lights on when it's not windy and it's not sunny. And batteries are fine for overnight. They may be fine for two days, but they're gonna get really expensive when you go out, when you push out longer than that. And so you're gonna have to create a portfolio, there's no question.

Bret Kugelmass
And where do you see nuclear fitting into the mix?

Michael Liebreich
I think that Eavor, in a way, competes with nuclear, because it is that kind of dispatch where it likes to run a load. You can load follow, but you can only load follow so far.

Bret Kugelmass
So your criticism against the geothermal, though, was simply a cost one. What I'm often confused by is, in the nuclear sector, it had the reverse learning curve. If you just rewind back to the 60s, it was as cheap as the cheapest solar and wind is today,

Michael Liebreich
By the way, geothermal, traditional geothermal has other strikes against it. You can only do it in certain places. And then, of course, there's a lot of talk about enhanced geothermal, which is fracking. And then you've got all of the issues, not just social acceptance, but also of risk. As soon as you have risk in a project, your cost of capital is going out. And as soon as that happens, you're in a different cost point. The nice thing about Eavor and closed-loop is it's a manufacturing process. It's just how far, how fast can you drill? And can you get those drilling costs down? And if you can, then you can hit, ultimately, whatever cost point you want if you're prepared to do enough of it. Nuclear had a different issue, the reverse learning curve, largely- I think it's, to be quite honest, I think it's wrong to say it has inherently got a reverse learning curve.

Bret Kugelmass
I agree.

Michael Liebreich
That doesn't make any sense. You still have learning and the problem is, if you're building one of these huge Olkiluoto, Vogtle, Hinkley, C, Flamanville, those nuclear power stations, how many are you going to build in your career? Three? Five? And so it's very difficult to encapsulate learning. And of course, what happened also is that nuclear then had a real escalator in terms of the safety requirements, for obvious reasons. But, you've gotten to the point where it's a bit like the $800 hammer from NASA, where there's no- it's just expensive because it's expensive. There's regulation around pressure vessels that even apply to technologies of new nuclear technologies that don't have pressure vessels. And it's just become ridiculous and it needs to be straightened out. I mean, on nuclear, I'm a big fan of keeping existing nuclear running and trying to do small modular- a nuclear technology that is number one, "walk away safe". Walk away safe means something bad happens, you don't need the generators to keep running or whatever. It is safe, even with no human intervention. And then also modular and smaller, so that you can really, maybe make it in a shipyard and then you can capture learning over time.

Bret Kugelmass
Your insight is dead on. I mean, it seems like a lot of the problems can be solved just by making it smaller. You can have a reduced risk envelope. You can capture those learning curves and make it more of a manufactured product, just by making it smaller, even without any crazy breakthrough in technology.

Michael Liebreich
Right, and it would parallel, I think, in some industries, like the steel industry- huge steel. They kind of disappeared up their own complexities. And then you have mini mills, and suddenly the industry can be more flexible and make higher quality product. There are always-

Bret Kugelmass
Classic Clayton Christensen.

Michael Liebreich
Yeah, right. But then you get other industries where scale is the only thing. So if you want to be running container ships, just bigger is cheaper and it's as simple as that. But yeah, so just coming back to the other things that I'm doing, I do still- I write for Bloomberg. I also, amazingly, they don't tell you this in your school careers- your school careers officers don't tell you that, actually, being a paid speaker is a thing. And so, in a way, I'm in the entertainment industry a little bit and I go around keynote conferences.

Bret Kugelmass
Good to know that my audience just got you for free.

Michael Liebreich
Yeah, no, this was a promotional item, absolutely. And then now, what I am also doing, I do some angel investing. And I've just set up a platform called Ecopragma Capital with a business school buddy and another friend who's a financial maven. And what we're trying to do with Ecopragma Capital is just put more structure around- I see so many opportunities. I have never seen so many investment opportunities and they come to me on a daily basis. It's everything from the magic molecule to the magic way of making steel or hydrogen - not using electrolysis, but using photocatalysis - all the way up to two gigawatts of solar in Greece, or two gigawatts of electrolysis in Western Australia. And I see this firehose of opportunities and I talk to all these investors, but I don't have a platform to structure, to map A onto B. And so that's what we're doing. And we've just sort of gotten started and testing a few hypotheses.

Bret Kugelmass
Pragma? The pragma in Ecopragma: is that pragmatic?

Michael Liebreich
Yes.

Bret Kugelmass
Amazing. Yeah, I love it already. I love it.

Michael Liebreich
There's just two- but like I say, I don't build tissues of things. I'm interested in pragmatism. We've got to get this job done in terms of the climate and in terms of- and it's not just that. There's air quality. There's all sorts of reasons to love this stuff. Air quality-

Bret Kugelmass
Energy poverty, yeah.

Michael Liebreich
There are just more elegant solutions. It's as simple as that. There are more elegant solutions. But if you start being ideological about whatever it is, then you're lost and so eco, yes, we've got to solve these problems, but pragma we're going to do it using methodologies familiar to the capital markets, in ways that don't break the laws of physics - like some of these flying aircraft things. We've got a whole bunch of stuff that's going to come down with a bump in the next few years. There's a bunch of SPACs that are based on things that just break the laws of physics, so that's not pragma.

Bret Kugelmass
And then what form is this taking place? Is it an advisory? A fund? Consultancy? What is Ecopragma?

Michael Liebreich
We're going to start- we kind of have to start with advisory, because none of us, with the three of us have never -we're not a proven team. If we'd spun out of a VC, we'd be able to just raise money quite easily, I think, with our capabilities. So we've got the skills, but we don't have that kind of- if you're a fund placement agency, all they do is they go down and they check the box. How's this team work together? What is its record, and so on. And we can't tick those. So we're talking to a few platforms that we might work with to join forces and a few family offices that might anchor us and give us a blind pool to invest. But the most likely is we're just going to get started and we're just going to do stuff. And if we do smart stuff, good things will happen.

Bret Kugelmass
Yeah, kind of like earlier in your career with New Energy Finance. Amazing.

Michael Liebreich
You've got to get- so three times in my life I've just left a job not knowing what I'm going to do and things like that. Okay, just create value, good things will happen. But it's scary as anything. This is less scary, because we're all experienced and have got a bit more of a buffer here, but that's what we're doing.

Bret Kugelmass
Michael, this has been an amazing conversation. I feel like I could talk to you for hours on any one of these topics that we just barely grazed the surface on. So I hope we can continue it into the future. Are there any final notes you'd like to leave our audience on or any way that they can find you? I know you've got a podcast. Do you want to talk about that for a second?

Michael Liebreich
Oh, yes. Yeah, we've got to talk about that, because I need to give a plug. I'm coming- this is my promotional thing. I'm not even promoting what I'm supposed to be promoting.

Bret Kugelmass
I remembered though.

Michael Liebreich
So I have a podcast called "Cleaning Up," which is my lockdown project - actually, I've got a few lockdown projects, that's one of them - and it is really just me talking to people, these extraordinary leaders that I've met and interacted with during the last nearly 20 years now. And it's been just an incredible cast. You've had- your opening episode was Steven Chu, so he graced me with a really nice session on Cleaning Up. I also had Ernie Moniz. I got the first conversation with Ernie Moniz after the Biden election, when he was actually still in the frame for potential Secretary of Energy again, which didn't happen, but I talked to him about Iran, all sorts. I had Christiana Figueres, who headed up the UNFCC for the Paris agreements. Actually, I've interviewed four or five people who were key players in the Paris Agreement. Most recently - it's just about to come out - Todd Stern, the US negotiator, but also Laurence Tubiana, the French negotiator, Amber Rudd, the British negotiator, and so on. So we got the- but also then Tony Blair, had a session with Tony Blair, and Tony Abbott, the Australian Prime Minister who actually got rid of the carbon tax in Australia and set back climate action by a few years there. And is now- I'm on the UK Board of Trade, I'm an advisor to the Board of Trade with Tony Abbott. And so we talked about all of these green trends and I think it's a fascinating conversation. So Cleaning Up. And when you ask, How can people find me? That's the wrong question, Bret. The question, to be honest, is how can people possibly avoid me? Because I'm out there in so many different platforms.

Bret Kugelmass
Yeah, that's great. Okay, well, we'll come up with a better question. Maybe how people can help you or how you can help people. I'm sure either will work.

Michael Liebreich
And look, the easiest way to find me is probably on Twitter. I've got a big mouth and I get into all sorts of fights.

Bret Kugelmass
Love it. Love it. Okay, awesome. Michael Liebreich. Thank you again. It's been awesome.

Michael Liebreich
Bret, thank you very much. It's been a great pleasure.

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