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Here's your weekly roundup of the most interesting things I've read, learned, or listened to. I write about the people and funds that can create a better world for us.
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♻️The new nuclear
In November, a group in Korea heated plasma to 100 million degrees celsius (6.5x hotter than the sun) and maintained it for 30 seconds. Two months later, a group in China heated plasma to 70 million degrees celsius (5x hotter than the sun) and maintained it for 17 minutes. Who cares? These are the precursors to limitless energy thanks to nuclear fusion.
Stepping back, what is nuclear fusion? It’s the way energy is made in the sun (and all stars). Hydrogen nuclei shoot around the molecule at such a high energy that they slam together with incredible force and fuse into heavier helium, releasing energy in the process (I’ll take my PhD now).
Nuclear energy isn’t new to us apes. It’s existed before and previous iterations are a large cause of fear for nuclear today. Nobody wants another Fukushima. But that is nuclear fission not fusion. Fission is where we take elements like the notorious plutonium or uranium and break them apart, releasing energy in the process. The byproduct of fission is the also notorious radioactive waste.
So this plasma that South Korea and China have created is built to mimic the environment inside of stars where fusion takes place. If we can generate fusion energy via plasma, the energy output of the plasma will be greater than the energy input required to heat it. In other words, literal limitless energy. And this isn’t just a science project. Companies like Commonwealth Fusion (just raised $1.8b), Helion ($577m raised), and General Fusion ($412m raised) are all working on this. The Joint European Torus recently demonstrated energy output from their plasma fusion system of 59 mW. That’s not global scale but it’s enough to power about 10,000 homes for a year, so it’s also not small potatoes.
So who is this plasma anyway? That’s the fun part. It’s water. It’s water spun until it is so dense and becomes an ionized state similar to gas. So how much water are we talking about here? Water is precious too. I’m glad you asked because this part’s also fun. The total annual production of energy on earth today could be produced by a 10ft x 10ft x 10ft cube of water. That’s not even enough water to fill most above ground pools.
And so what about the Fukushimas? Are we risking that again? Well, first thing’s first: nuclear energy causes only 0.07 deaths per terawatt hour. That’s compared to 2.82 (40x higher) of natural gas and 18.4 (262x higher) of oil. But moving that aside, no, we are not risking another Fukushima. When a fission reactor breaks down, you get a nuclear meltdown a la Fukushima. If a fusion reactor encounters any point of failure, the plasma, by nature, loses its energy almost immediately. So the reactions just…stop. We won’t be turning that water into plasma, but nothing else will happen. There are no radioactive elements involved at all.
So this is going to be amazing, but don’t start leaving all your lights on yet. The ICARE system (a consortium of 35+ nations) is on plan for a 500 mW demonstration in 2027. So it’s going to be a few years, but you better buckle up because new nuclear going to be sahweeet.
🧐What interest rate hikes?
On Thursday, I flicked through Twitter and saw that Thrive had raised $2 billion for two new funds. Then I was on LinkedIn and saw Cherry ($30m), Sequoia ($500m), Forerunner ($1b), and General Catalyst ($4.6b) have all raised new funds as well. That seemed counterintuitive to me, considering the interest rate environment we’ll be working with this year.
Why does that matter? Asset allocators like to have liquidity on hand when anticipating tough times, so when the market goes down (which can happen as a result of higher interest rates) they can be providers of liquidity (buy low) rather than sellers of liquidity (sell low). On top of that, rate hikes can throw LPs’ target allocations out of whack. If your target equity balance is 80% public/20% private and then the stock market tumbles, your public allocation is going to be worth less. Meaning you could get to 70%/30% without buying or selling any investments.
But it must not be this simple because institutional LPs are still doing this and they’re smart as 🦆. So what’s with me seeing $8bn+ in fresh money going into private markets on Thursday? Frank Rotman of QED has a hypothesis.
Rotman argues that it’s simply rational to put more money into the private markets over the public market due to the nature of the way these two types of companies act.
The technology revolution that has allowed start-ups to go from 0 to 1 - to create and distribute completely new products in completely new ways - has made them a beast that incumbents cannot deal with. Private companies have new tech stacks, more motivated teams, more motivated capital, and new ways of operating that many public companies just don’t. If you believe that new private companies overtake old public ones due in part to public inertia, stasis, and calcification, then the narrative will play out that eventually all the market cap from public companies will flow to private companies. Private companies are, by nature, more capital efficient than incumbents. The more you believe that, the more you put money into the private market now v. the public market. In doing so, you stand to reap all the benefits of ownership before these companies go public. And that’s a lot of market cap benefits to reap. Compare the value of Apple alone to every private unicorn in existence today.
So the argument may go that these LPs view illiquidity as a worthwhile price to pay for this mammoth upside of putting money into what they view as tomorrow’s Nasdaq companies. More than that, they may expect the recent rate of IPOs to continue and funds to return capital to them quicker than typical VC cycles, giving them that liquidity in the end. We’ll find out soon enough!
This stuck with me:
We can still have nice things:
Party on Wayne
— Nico
www.nicochoksi.com | @nico_in140
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