Long Strange Trip: CEO to CEO with Brian Halligan
00:24:27 · Chase Lochmiller
[00:24:27] S0: Well, so the thing was is that I think externally, a lot of people thought this was a pivot for us. But internally, and if you talk to any of our investors or any of our employees that have been here for a very long time, they'll tell you that, like, this was sort of the plan all along, was this energy first approach to computing. You know, I had been doing research in AI as a quant portfolio manager. And then I was at Stanford for grad school and working in AI and doing a lot of work in computer vision and natural language processing. And I was pretty AI pilled early days. Like, when you know, I was reading things... Like like, one of the more influential things on me was actually Tim Urban had this blog called Wait But Why. And he wrote this blog. Yeah. It's great. It's fantastic. Just like everybody should go out and read that. But there were a couple pieces that were particularly influential on me. There was one that was about the path to superintelligence. And in it, he espoused this thesis that these multilayer neural networks were essentially really good nonlinear modeling mechanisms that, as they had more data and more compute, they just got better and better at modeling whatever thing that you're trying to model, whether it's natural language or computer vision or whatever it was. And so I was sort of playing that out and felt like AI was this meta science that wasn't going to improve one thing. It was going to improve everything. Right? So I had this professor at Stanford named Andrew Ng, and he has this famous saying where he says, AI is like electricity. Right? Electricity is not good for one thing. Right? If you ask someone, what what is electricity good for? It's it's not like, oh, electricity is good to, like, turn on the lights. It's like, yes, it's good at turning on the lights, and it's also good at powering my computer and my car and heating my stove and, you know, all these different things that we really take for granted with electricity. And so it's not just like one thing that, you know, that AI is good for. It's really good for everything. And and, you know, I was... I had, like, high conviction of this fairly early days. And, you know, I felt like if data and compute were the bottlenecks, ultimately compute becomes an energy problem. And when you you sort of play that out and think about that at scale...
00:26:51 · Chase Lochmiller
And and and we'd sort of seen this unfolding actually with Bitcoin mining. And so the original thesis for the business was like, find stranded energy that is otherwise being underutilized and bring a market to that stranded energy with compute. Instead of trying to bring that stranded energy to a market where it can be bought and sold, bring the market to the energy. And that's what led us to our initial stranded energy resource was natural gas that was being flared in the oil field, where oil companies were drilling for oil. They produced natural gas as a byproduct. And then absent having a pipeline, they just light it on fire. And it was this huge environmental liability. It was a waste product. They were paying money to dispose of it. It's a disaster. And it's still happening at scale today. But, you know, our solution to that was we would bring these small modular generators and these small modular data centers, and we would we would basically utilize that gas on-site and use it to power compute infrastructure, which, you know, our first monetization engine of that was Bitcoin mining, right? It was the easiest way to take energy and turn it into money. And we sort of created this great flywheel effect with the Bitcoin business. And there were definitely criticisms early days when I was like, Hey, I'm trying to do this AI cloud platform. And people were like, What are you talking about? Why are you spending any resources on that? You have this great thing. You're making all this money in Bitcoin. What are you talking about? Why would you focus on anything else? And we tried a ton of stuff, and we failed, and we screwed a bunch of stuff up in terms of building out our first AI clusters. And we're trying to figure out what the product looked like and who we were going to serve. And I called a bunch of my friends that were researchers at universities and saying, hey, do you have a use for these GPUs that I'm powering from this gas in the middle of the Bakken oil field in North Dakota? And there were just many different iterations of trying to get that business to life. But the magic moment was really the launch of ChatGPT.
00:29:02 · Chase Lochmiller
So 11/30/2022, think that was just like the moment that changed everything and just it led to all these new startups that were demanding the exact type of compute infrastructure that we had been building and the exact type of solutions that we had been building from a storage, compute, networking, etcetera. Now, I had always felt that Bitcoin and AI... And I still feel this way, that they actually go together very well because AI data centers do not consume energy in the same way that Bitcoin mining does. Bitcoin mining is very like... You can almost give it a fixed draw amount of power and say, Stay at that power level and just consume that. And it will be very flat line. And then you can move that up and down depending on demand response and what available energy is. AI has a bit more variance in terms of its overall power utilization. And you see this in certain when you're training big workloads. For inference and training, but you also have seasonality with cooling. You tend to have higher PUE during the day when you're having to run your air conditioning units and your chillers more aggressively because it's hotter than at night when you have more natural cooling. Depending on workloads that are being run on the clusters, things can ebb and flow a bit.
00:30:19 · Brian Halligan
[00:30:19] S1: Okay, but I'm going to come back to You did... So, it was it was on... You were thinking of it was an AI company all along. You made a decision to sell off what was a good business. Why didn't you just keep it? When did you broach that with the team? When did that become a good idea in your head? Did you get pushed back on it?
00:30:40 · Chase Lochmiller
[00:30:40] S0: Part of it was we had a great partner that we felt like this business we built would land in a really good home, which was NYDIG. And and, you know, I I really... Ross Stevens has become a a a good friend, you know, over the years, and I I... And Tejas Shah, who's the CEO there, you know, just deep amount of respect for that team. And we felt like they were great people that would, you know, be great stewards of this business. And they had a lot of experience within natural gas in terms of, you know, Stone Ridge has built out one of the largest natural gas businesses in The United States. And so this intersection of people that knew and had operated natural gas assets at scale and were deeply involved in the Bitcoin ecosystem, we felt like they were they were great partners for that business. But really, I I think what drove me to divest that business was really focus. And, you know, we we are doing a lot at Crusoe, and increasingly, we were doing more. And it felt like we were having to balance this tension between, do we allocate capital and resources and attention towards our Bitcoin business or against this AI infrastructure business? And and we were also getting feedback from investors where, you know, it would make the story too complex in the eye of an investor, where they would say, Okay, I love what you're doing over here on this AI business, but my firm were actually blocked from making any investments that are tied to crypto. So there were challenges to just making the business focused and making it, you know, this category defining company across vertically integrated AI infrastructure and not having the distraction of being anything related to Bitcoin. And so, you know, I am still personally a huge Bitcoin supporter and holder. And, you know, I think it's an important thing to exist for the world as a, you know, non state controlled, decentralized, digitally native, open monetary ecosystem. But it was the right thing for Crusoe to go all in on AI infrastructure.
00:32:50 · Brian Halligan
[00:32:50] S1: One thing I'm noticing about you on this call, and I've watched you in other formats, is you're very polished, Chase. Most CEOs don't have your level of polish. Is that something you learned along the way? You said you had a coach. Did your coach help you with that?