Sachin and Adam
00:37:49 · Zach Dell
[00:37:49] S0: it's inherent in the business model. Yeah. Right? So let's say, you know, this is your home. Right? And I'm just gonna, like, make this stupid simple for sake of argument. Like, this is a money machine that we put on your home. Right? And the money machine generates money. And we can take some of the money out of the money machine and we can like give it to you. Right? That's how we do it. Right? So the the battery is is is a money machine. It's it's a it's an infrastructure asset. It is a It is a technology. It's an efficiency box, right? And that efficiency box is creating efficiency by time shifting electricity, charging when price of power is low, discharging when price of power is high. Said differently in other words, charging when demand is low, discharging when demand is high, right? Load balancing the power grid. And because you are sharing your space with us, you're giving access to your meter. We are going to cut you in on the deal. We're going to help you save money by sharing this money machine, sharing this money box with you in the form of lower prices. Right? And that is that is the business model and the lower cost we can get this money machine in the ground all the way to the factory and how we manufacture it, to how we install it, to how we acquire you the customer, to how we support you in your customer journey. The more profitable the money machine is, the more money we can share with you, the more effective we can make the customer, the the the customer offering. Right? So we are eyes wide open about the fact that we're in a commodity business. I think that people try to, obfuscate that sometimes. Right? It's like electricity is a commodity. Again, no sexy electrons. I say this all the time. Right? Like we're in a cost structure game. It's like, why are we building factory one? Why are we building factory two? Like, because we have to drive costs down. We have to have a cost advantage. Why'd you raise a billion dollars? Because we have to get big fast. We have to drive our costs down. Like we are going to compete on cost. Right? And if we can't be the most affordable and reliable electricity provider in the world, like we are going to lose, but we're not going to lose because we are going to be that provider and we're going to do it through vertical integration and technology because that's the only way to do it.
00:39:54 · Adam Miller
[00:39:54] S2: This may be a stupid question but when you're moving from a centralized grid to a decentralized grid, if let's say theoretically every home in America had base power right now, would there still be this arbitrage in the margin you own in in selling the energy?
00:40:10 · Zach Dell
[00:40:10] S0: Well, if every home in America had base, which that sounds like an amazing future and I hope we get there, you would increase our capacity for power consumption. And so the amount of load that would come online would be massive. Yeah. Right? Because you would basically increase the the utilization, the capacity factor of those lines and you would create availability or headroom on the substations, on the circuits, on the transmission infrastructure to add more load. Yeah. Right? So what people kind of forget is these are markets, right? Supply and demand. And when you add more capacity to a system, your capacity to consume on that system goes up and you can you can generate more or you can you can consume more. Right? And so we can do, you know, said differently, we deploy a bunch of capacity, capacity prices go down, a bunch of demand shows up, we start using more power, that's super awesome for humanity, like all the data points to that leads to amazing outcomes for humanity. More demand comes, we need more supply. Yeah. Right? So I think there's a world where we deploy batteries to a massive amount of the households in America And, for some amount of time, capacity prices go down because a bunch of capacity comes online and then it's... Like I said, it's a market, it's supply demand. Right? So once the the supply comes, the demand catches back up and and vice versa. And I think, you know, it'll be very hard for us at the limit to catch up with the demand. As we drive price, it's kind of this Jevons paradox, that people like to talk about in AI where it's like, we add a shit ton of supply, prices go down, like demand's coming. Right? Demand comes like crazy, prices go back up, supply comes back online, prices go back down.
00:41:47 · Adam Miller, Sachin
[00:41:47] S2: And if you look at the businesses of any of these market makers with, you know, basically perfectly priced things, there's a lot of... They're they're amazing cash printing businesses. So there's, an analogy there in, like, traditional business. [00:41:59] S1: Exactly. Mhmm. Said before that you can make money through demand and supply imbalances. So what risks are you actually exposed to? Is there something else here about energy prices where if they spike dramatically that you could be losing money? From the way it sounded, it sounds like you just print cash either way.
00:42:18 · Zach Dell
[00:42:18] S0: I'll say this. I think that the way that we think about capitalizing the company and positioning the company is not how can we squeeze out x amount of profit this quarter or this year And how can we build a business that is strong for decades and is strong through busts and, and booms? Right? And, energy is highly cyclical. Right? It's a commodity market and there are, you know, boom years and bust years. And you really want to be in a strong position to capitalize, to play offense when when, you know, others are playing defense, play defense when others are playing offense and, you know, be able to have the op option and opportunity to, you know, be aggressive and pull back and play the game. Right? And so if you look at a lot of the players in the space, certainly the undercapitalized players, they have to take these kind of bets. So like, we're gonna load up over here and hope this happens and if it does, then we'll go here and if it doesn't, you know, we all go home. Right? Not how we run the company. Right? We we capitalize and plan the company to be in a position of strength no matter what the market cycle is. And we can talk about the nitty gritty of our long position and our short position and how we hedge those things out and how we think about that. But the broader point is we believe that, we need to be around for decades, and we need to have a balance sheet that can set us up to be around for decades, and we really want to be able to be, you know, fearful when others are greedy and greedy when others are fearful. Right? And that's kinda... I I apologize for the, like, high level y answer, but that that really is the truth is like we wanna be positioned around all kinds of market cycles, and, know, be winning in the boom and, you know, be... You know, everyone will lose in the in the best years, right, in some in some ways, but we're gonna lose less than others and be in a position to go, you know, snap up some of the competition and, do some creative things when when when that time comes.
00:44:10 · Adam Miller, Sachin
[00:44:10] S2: What does the world look like in ten years if you kind [00:44:12] S1: of achieve your vision?