Invest Like the Best with Patrick O'Shaughnessy
· Scott Nolan, Patrick O'Shaughnessy
[00:00:00] S1: If you want to put it in investment terms and business strategy terms, that would be it. But I think if you go back to the very beginning, it just turned out that this was the thing that was most necessary. This step of enrichment was why we didn't have the more enriched fuel that advanced reactors needed. And you realize the US had lost the ability, despite being the number one in the world during the 80s by far. It was something we were extremely good at. We completely stopped doing it. This bottleneck was going to be the bottleneck to all of nuclear energy. If you believed in advanced nuclear energy – this is the thing we had to solve. So we did it because no one was doing it. And it was extremely important and urgent. And I think that ended up corresponding to this very good entry point for the market. But I think the two are really linked. I don't think it was coincidence that if you're solving a problem that's urgent, that no one else is doing, on a small but emerging market – it will completely fit that framework. [00:00:00] S0: And then the final step is building a great enduring company. By which I mean not just a flow of cash flow, but a collection of people and a set of impacts on the country. How do you think about the most important things you can do starting now to build a great company, and what does that mean to you? You've invested in many great companies. What is a great company on top of a good product and a stream of cash flow?
· Scott Nolan
[00:00:00] S1: It comes back to the team. I think Naval has said this a bunch of times. The team you build is the company you build. And so to us, it's team DNA. We want people – we thought about where do we put the company? This was a big question at the very beginning. And you look at who you actually need on the team. And of course you need nuclear engineers, but you also need great mechanical engineers, electrical, software, chemical – every type of engineering. And so you ask yourself, well, where do we want to put the company? And it turns out the percent of the team that's nuclear engineers is single digits. We're not doing a reactor. There's actually no nuclear reactions in our process. We need to make sure that there's no nuclear reactions, but to do that, you don't need a huge number of nuclear engineers. And so there was this question of, do you go to where the nuclear engineers are, or do you go to where all those other types of engineers are? And on dimension one, the nuclear engineers, you don't need that many of. You need great ones though. Where are we going to find them? And you look at where they are in the country and they're just scattered everywhere. There's no one place to go. And so we had to go with the other option. You go to where all the other engineers are, specifically hardware, aerospace, and that's Southern California. The team DNA that we wanted to set up was this is an engineering driven company. We're not doing a science project. No new physics. No going down a multi-year R&D path that's uncertain. We need to get this operational as fast as possible. This is an engineering problem. Everything we have to do has to be thought of as engineering. We're engineering cost out of the system. We're engineering performance up. We're engineering cost of capital down. We're engineering schedule to be as tight as possible. We're even engineering our own buildings. This is taken from the Tesla playbook. Don't hire a GC and outsource everything. You lose total control. The schedule could be – it's not in your hands anymore. You need to build your own in-house engineer, procure, construct EPC firm as a team to go run your construction projects because it's one of the hardest things about this. Not just engineering, not just manufacturing, but actually the construction of millions of square feet – on schedule, on budget.
· Scott Nolan, Patrick O'Shaughnessy
And so the whole DNA of the company is oriented around a drive to deliver for the industry as quickly as we can while being safe, reliable, every other dimension you would want, subject to those constraints. Go quickly because the industry needs it. Don't have analysis paralysis. Don't deliberate over things that don't matter. Let's get a service live that can deliver for the U.S. industry. And then let's bring the cost down over time. And so everything's oriented around schedule and costs. [00:00:00] S0: How do you run the company? Like, literally your time as one of the key inputs into everything you just described happening or not. You've watched a lot of vertically integrated companies that own a process end to end do that really, really well. How are you running the thing? Like if I were to follow you around for a week, what would it look like?
· Scott Nolan
[00:00:00] S1: It changes over time. So my strong preference is internal facing. And so to really be there helping to do the work internally. Right now we're in a phase of company building and team building. And so we're rapidly hiring. So a lot of my days right now is interviewing people. I'm the last step in the interview. Then what I'm screening for is, does this person not just have the skills – which they've already been screened for at that point – but do they have the attitude of they care about this problem? They know that there's lots of places that they could work, but this may be the only place they can work on this problem in a private company. And they know that there's probably places that they could potentially go make more salary, where they could have an easier job, a more predictable schedule. But we're trying to do this mission that requires us to go as quickly as possible and to deliver before end of decade. For both the advanced reactor industry and the existing reactors on the grid, which is like 20% of our grid. And this is going to mean a lot of late nights, weekends, just working as hard as we possibly can. And is that something that they've done before? Is that something they like doing? Do they know what they're signing up for? Are they really motivated by this? Those are things I'll typically screen for, subject to everything else being already verified. And so a lot of my day right now is trying to make sure we have the right early people on the team to build the right culture, for them to then go recruit and hire the next people. And so it's the saying – it's not just the team you build is the company you build, but the early team you build is the company you build. And that's the modified Naval quote. And so right now so much of the time is spent on recruiting, interviewing, filtering, which is actually what drives a lot of my external facing stuff. We got to get the word out to the right people so they know what we're working on, they know why this is important, why this is the bottleneck to scaling nuclear and to scaling energy in the country – and why they should join our team.
· Patrick O'Shaughnessy, Scott Nolan
[00:00:00] S0: How do you reason through the, what seem to me like illogical, data-free fears that people have about nuclear in general? You started to address them earlier around just the amount of waste is actually quite small. I think it fits in this room or something, something crazy. The bad events that we can call to mind, Chernobyl and Three Mile Island, were bad, but if you dig into the data, it seems like nuclear is very safe. But these fears really do seem to be the reason why we don't have a lot more of it. What matters is reality, not the data. How would you pitch people on not being worried about these things so we can get over this problem? [00:00:00] S1: You're pointing out the difference between acute and chronic events. And I think acute events, they are very attention-worthy, people remember those. And the things that are just low-level in the background, people don't think about. [00:00:00] S0: Car crashes every day.
· Scott Nolan
[00:00:00] S1: Car crashes, all these things. You can think of it in terms of catastrophic events like that. You can think of it in terms of your health, and what are we chronically doing that's unhealthy that's taking its toll versus acute things that take their toll. I think people have a strong bias towards that, but often the right thing is to look at the data. I don't think most people find that compelling. I think the more compelling thing in nuclear for me is – think of a world in which we are not constrained by energy and we won't be constrained because we can all agree that it's good, because it's baseload. It's very affordable. It's going to bring down your rates. It's safe and it's clean. And we can debate those and we can look at the data, but let's imagine that future world in which we have all those things. I think the way to make nuclear really compelling to people is actually to check the final box, which is cost. Again, going back to why have we not had more nuclear? The schedule to bring it online for the large gigawatt-scale projects has been uncertain. The costs are often above what's projected. And when you look at the total package, it's not cheaper than coal. It's not cheaper than natural gas. It's not cheaper than hydro. So why do we want this? And I think if you told someone, okay, nuclear is safe. We can dig into that. Understood you're not interested if it's more expensive. Why would you be? But what if it's cheaper? What if your utility bill got cut in half? I think people would suddenly find that extremely compelling for something that could be tens of miles away from their house and still powering the grid.