Great to chat with Louis Potok, Founder and CEO of Recoolit! Recoolit mitigates climate change by preventing refrigerant emissions! We discussed why refrigerants are the worst greenhouse gases, why southeast asia is the epicenter for refrigerant emissions, carbon offsets and more!

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James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Louis Potok founder of Recoolit. welcome to the podcast Lewis brilliant to start. Could you tell us a little bit about Recoolit.

Louis Potok

Thank you James. It’s nice to be here. Yeah, ah so Recoolit is empowering sustainable cooling around the world. Um, cooling which is air conditioning and refrigeration are 2 of the most important inventions of the last hundred years completely changed every aspect of society like how we live where we live what we eat and more. Ah, but there’s this huge climate impact that comes from the chemicals inside those devices called refrigerants and what we cool it is doing is partnering with Ac technicians around the world to collect those harmful refrigerants preventing them from being leaked into the atmosphere and then destroying them and selling carbon offsets for the avoided emissions. So we are the software layer in that process that goes from the source device that’s being decommissioned into the hands of the Ac technician into a cylinder into a big oven to burn it up and then the data that then goes to the offset buyer. So.

James McWalter

And what drove the initial decision to start Recoolit.

Louis Potok

Yeah, so I was you know happily working as a head of data science in San Francisco at a health tech startup and felt this you know crisis of meaning is a little strong but ah, looking looking for something a little bit more um and started reading about climate change came up upon this book called project drawdown which was a. Ranking of a hundred different climate solutions in order for most important, you know, biggest impact to least and refrigerate management was number 1 um I had never heard of it and so that’s what sort of got me going in this direction. Originally first.

James McWalter

I Yeah I Echo project Routedown. It was also one of my initial sources when I was looking for what started to work on and it’s funny I feel like a lot of founders have utilized it but not many have mentioned on the podcast before. So um, I’m happy you did so but I guess like as you’re kind of. Yeah, categorizing all those you know there’s maybe probably a dozen that had similar large impacts. What drew you to that specifically I Guess right.

Louis Potok

So well refrigerants were number one on the list and honestly I basically stopped reading um you know like everything else in the top 10 felt familiar right? like I knew about solar I knew about wind and refrigerates I’d literally never heard of it was number one and so I just thought like okay, let’s look at some job postings for refrigerant startups. Um, and.

James McWalter

No none.

Louis Potok

There weren’t any. There weren’t any job postings because there weren’t any startups. There weren’t any companies really dealing with it and so as I kept looking I just kind of never went back to drawdown because it became clear so quickly that there was this huge problem that needed to be solved. Yeah.

James McWalter

And from that point to like deciding to start a company and I believe you’re a sole founder as well. Like what was that kind of process like and and the decision making that went into that.

Louis Potok

Yeah, so I spent about six months ramping up ah nights and weekends for my full-time job and that was you know, sneaking in conversations with people who knew the space who had looked at it researchers you know people in the industry just kind of getting you know, getting a basic. Sanity check that I wasn’t crazy that there wasn’t someone else doing it that my understanding of the problem was being developed. Um and at that point I wasn’t sure that starting a company was the right approach I mean the question of whether you can build a business based on solving this problem or whether it’s policy advocacy or a nonprofit still really unclear and so. Then then that brings us to November of 2019 when I qui my job decided to go full-time for what I thought would be somewhere between a few weeks and a few months ah moved to Cambodia which I thought was going to be like the epicenter of the refrigerant problem turned out. It wasn’t but kind of got deep in the ground talking to talking to the the ac technicians on the ground there.

Louis Potok

And that’s really when it just became clear that there was this huge problem that my understanding was like at this point richer than almost anybody else because I had sort of done the high-level work in the yeah conversations in the Us and been on the ground in the field. So that’s that’s really when the the pieces started getting put together for me that there was a company in the space that needed to be.

James McWalter

Um, why is there such a large discrepancy I guess between your expectations of Cambodia being the central type hub of this problem versus reality.

Louis Potok

To be created. So.

Louis Potok

Yeah I mean Southeast Asia is definitely the epicenter um in this and you know it’s hot and humid people are getting richer acs are the first thing they buy the regulations to phase out these refrigerants are pretty slow. Um. But you know what? I really was optimizing for initially was how quickly could I get a visa and like be on the ground somewhere and not be bothered and kind of wander around and not have to deal with immigration. Cambodia was great for that. Definitely the right choice there. But as I started talking to people who had built businesses in emerging markets I kept getting this consistent feedback that.

Louis Potok

Cambodia is like ridiculous because it’s just way too small and that your first market size matters a lot because going to the second market is a lot harder than you’ll expect so I ended up starting the company in Indonesia which is the fourth largest country in the world. Definitely definitely big enough.

James McWalter

And so the I guess when I think about you refrigerance I think of the us south right? I think of air conditioners in Ireland we don’t have a ton of air conditioning. The the weather is not res suitable to it. Um, and basically Ac’s enabled certain parts of the world to be inhabited. In an industrialized way in a way that just wasn’t possible pre ac and so what is I guess from the history of like Ac’s what is the kind of change in the underlying materials that have been utilized and has the development of this as technology has are there I guess more climate friendly ways of doing this and it’s just. Way more expensive to do that and that’s why Southeast Asia is so the epicenter because of that kind of forward growth and development. But.

Louis Potok

So yeah, so the history of the of refrigerance is super interesting. Um, the original refrigerants that were used in the early twentieth century were a variety of different compounds so they were using isobutane ammonia or you know, um, carbon dioxide. Even. And those devices were just like basically terrible. They were always exploding or catching on fire or corroding or leaking and poisoning people and then in the 1920 s this chemist at Dupont Invented R Twelve which is which was a cfc and that was sort of the standard refrigerant in use for the next sixty years um Mario Moina then won a nobel prize for discovering that that was destroying the ozone layer. Um, and so in the in the 80 s the un signed the Montreal protocol which phased out cfcs very quickly and led to a new generation of replacement gases known as hcfcs those then got. Baked into the protocol and were also phase out. They were no longer ozone destroying but still bad for the climate. So we’re now at hfcs and those are also going to be phased out over the next thirty years around the world but on very different timelines in different countries. So the us and the Eu are already moving in that direction and in most of the rest of the world. It’s much slower the newest generation of refrigerants. Actually interestingly some of them are going back to that first generation of natural refrigerants now that we know we’re doing a little bit more we can handle some of those downsides but there are also newer chemicals called Hfos which climate impact’s allegedly good. Although there are some questions but in theory should should solve the problem over time as yeah. Over the next thirty years as these devices are phased out.

James McWalter

Um, and so the is it a bigger issue the current level and it’s just as the the west I Guess D Hchet cscs and and the rest of the world kind of adds. Um, it’ll kind of stay flat but it’s still such a large climate effect. It’s a big issue. Or are we actually geared towards an explosion of the this is a problem just through pure economic development of these other countries.

Louis Potok

Yeah, so there’s kind of a race between those 2 forces and you know a lot of it is still to be determined part of it depends on how quickly the manufacturers can make cost-effective versions of these newer gases and devices that can handle them. But what it looks like is going to happen is there’s going to be a huge pulse over the next ten or fifteen years of devices produced with the. High global warming potential gases and we have kind of like 1 chance to capture all those emissions as they happen and then hopefully 20 years from now that problem will be solved and we can all move on to greener pastures. So.

James McWalter

Absolutely and so so you have this like idea you you go to Cambodia the market’s too small. You’re like okay Indonesia that’s that’s where it’s asked. What was the kind of next stage and in the process. Yeah.

Louis Potok

So yeah, so as I was deciding to I was back in the us at this point during the early days of covid and trying to raise money to get started sort of had clarified the idea into a for profitt startup rather than anything else another vehicle so I was looking to raise money. Looking for kind of connections in Indonesia to get started trying to get my visa in Indonesia which turned into a much bigger hassle than I had expected. Um, yeah, kind of putting all those pieces together and also starting at the time to work with a potential co-founder who I worked with for a few months and then didn’t work out in the end.

James McWalter

And so then it’ so mutu indonesia you know you you show up in the ground and as we’ve talked in the past and for the listener. Yeah Lewis and I know each other pretty well at this point from different things that we’ve been involved in but you know Indonesia is a very high energy place. It also is somewhat chaotic, especially Jakarta. Um, what were the kind of steps to starting to kind of you know, create some sort of market validation on the ground. So.

Louis Potok

Yeah, so I had it was kind of interesting I had a few months where I was waiting for them to reopen borders and like sitting in an apartment in New York and just literally messaged everyone I had ever met asking hey have you ever been to Indonesia do you know anyone there and I found some really great connections in the indonesian ac industry that way which was kind of a surprise to me. Um. So starting to talk to the hv contractors people in the energy efficiency space there people who’d worked on poll you know environmental policy there just again, really basic here’s my understanding. What’s happening. Do you think this makes sense what are going to the obstacles and some of those later turned into partners for Recoolitand some of them. It didn’t but that that was kind of the the way to get. Way that we got started I actually hired the first 2 members of our indonesian team from New York before I was before I ever set from the country and then once I was there. It was really just more of the same. You know, looking up Ac firms calling them up going door to door for the shops really exploring every segment of the market as we refined what we were doing and. Figured out how to you know, explain our partnership proposal in a way that was appealing to to folks there.

James McWalter

And so I guess you know what? where is the process kind of today because you know obviously the the kind of longer term as you mentioned is this kind of software and data layer but just trying to figure out how those pieces fit together in a way that has never really been done before you know there’s a fair amount of kind of that upfront. I guess on the ground literally kind of machinations and so on. so yeah so I guess like if I wanted to recycle some refrigerants today in Indonesia what would the yeah the process be like.

Louis Potok

Yeah, so you would have to like get in touch with us somehow either through 1 of our sort of ah partners who sign up freelance technicians we have a couple of those or you maybe you work for an hvac contractor that’s partnered with us on a more corporate level. Um, you are you know you register on our. Hesitate to call it an app. It’s a little misleading. Let’s call it an map for now and agree that that’s a little bit of a fiction um register on our app you know, upload your kind of identity verification and then if you don’t have the equipment that you need to recover the refrigerant from that device. You schedule a pickup so you come to like a branch office. Which are basically franchises for us. We don’t run them ourselves come pick up some equipment take it to your job site fill up a cylinder with empty gas bring the cylinder back sign back in that equipment and then periodically we will come through as as Recoolitfor now and pick up those full cylinders leave empty ones for the franchise. Take those full cylinders to our warehouse consolidate them into big baker tanks and then eventually batch that gas up for destruction and send it to our destruction facility.

James McWalter

And it’s all the destruction side of things. What is the I guess the level of you know impact destruction has you know I think the people are very familiar at cotwo and other gases like methane and methane being a lot worse than co 2 as a you know. And destructive gas to from a climate change point of view like how much worse are these gases relative to those others.

Louis Potok

Yeah, so these gases are anywhere from 1300 to 2000 to up to 10000 for the older gases times worse than co 2 and so from an you know, carbon offset or carbon accounting perspective that gives you a huge amount of leeway I think I once calculated that we could drive like. One Kilogram at a time thirty miles and it would still be like under 5 % of the total emissions.

James McWalter

But then I guess what’s the process of destruction.

Louis Potok

Yeah, so destruction, you’re basically burning it up at a high temperature and you the sort of lower floor of where you want to be is a °C and that can go up to a °C for some of the plasma arcincinerators that are in use around the world. The.

Louis Potok

What’s really cool about you know what’s interesting about this is that you can do this in a wide variety of different places. It doesn’t have really stringent technical requirements. It just has to be hot enough and negative fresher so that the gas doesn’t escape before it’s burned up and the gas has to sit in at that temperature for a certain time. So 1 thing. 1 neat thing you can do is you can repurpose a cement kiln. And you can pump that gas actually into the cement oven while the cement is baking. They operate at negative pressure. Anyway, you don’t need any extra energy because the process is the cement baking is already so energy efficient. So the you know the carbon impact of destroying it is actually negligible and the offsset methodologies tell you that they just say like. Don’t even worry about the energy that’s being used there because compared to baking hundreds and hundreds of tons of cement. You’re not really changing the requirements.

James McWalter

That’s super cool and so that’s a lot of I guess on the you know the supply of how you find actually before we go further. So What are the kind of typical sources right? like are we talking you know residential buildings is it hotels or at office parks like where are I guess are you saying? That’s where. Ah, kind of a very ready kind of continuous supply of these refrigerants to be destroyed.

Louis Potok

Yeah,, we’re still early and we’ve put out Feelers and all those segments and we’ve basically seen success in all of them so we have freelance technicians that are going to a home and dealing with a single mini split unit at a time. We also have the chiller for a hotel we have and the installation of hundreds of devices in a shopping mall Complex. We’ve really dealt. Up and down that spectrum. The question of what’s going to be most efficient for us as we move forward from a unit economic perspective and you know Tac perspective is to be determined. But so far they all look promising.

James McWalter

And are they promising and so so far as like they’re like oh this is actually a revenue line for us to get you know to make some money as the business give me offloading these is it more we have to dispose of these anyways if somebody picks them up. That’s just like 1 less headache or are they also thinking about the climate impact.

Louis Potok

And for our partners. It’s a mix depending on what segment you’re dealing with so the building owners especially for things like hotels shopping malls office buildings do care about the sustainability and we are giving sort of proof of sustainable disposal to to the building Owners. For the freelance technicians it is really is mostly about the money even if they care about the environment and many do that alone is not nearly motivating enough to go through this extra hassle and acquire equipment. They don’t have for the professional Hvac firms. It’s somewhere in the middle they like to be able to tell their clients who are the building owners that they’re doing the sustainable thing but they also appreciate the ah.

James McWalter

That very good and then so that’s yeah on the kind of supply side or the acquisition supply side and then on the demand side. Um, who who’s interested in I Guess the carbon credits that are derived from this disposal.

Louis Potok

Funding that we provide. Yeah.

Louis Potok

Yeah, so carbon credits Immensely Complex. We could spend several hours digging into that we are not at this time dealing with Compliance Market Offsets. We’re dealing only with voluntary markets and individuals will sometimes buy voluntary buy offsets on the voluntary Market. We’re not really targeting those as buyers mostly at corporations that have made some kind of. Carbon Neutral or net zero commitment. Historically what they’re looking for is just stack up as many offsets as they can irregardless of regardless of quality. Um, that has thankfully and that’s been a lot of the criticism of the offset market in the past. Thankfully we’re seeing some. Early Adopters more sophisticated companies especially from the the software sector that focus really intensely on quality and be willing to pay more for it. So We’re kind of riding that wave because we believe that our offsets are as high quality as anything else on the market.

James McWalter

Um, is what I guess what does quality mean in in the context of carbon offsets.

Louis Potok

Yeah, the key question with carbon offsets is what is ah something called additionality which is what would have happened in the counterfactual. What happens if you don’t buy my offset and so for some for some categories. It’s a little unclear right? if you for a lot of avoided deforestation offsets a landowner will say hey I have this patch of forest. Want to cut it down if you buy my offsets I won’t cut it down and it’s kind of impossible to prove what they would have done. There was um so that’s where a lot of the the more questionable offsets come from for us. There’s you know it’s very clear every Ac technician in in Indonesia events refrigerant every day there’s no facility in the country that is actively collecting or destroying them. 100% if you don’t buy our offsets that gas is going into the atmosphere where it’s going to sit and increase the radiated forcing of the stratosphere and with a lot of the new carbon removal stuff you have a similar story around additionality. Um, yeah, we’re not going to turn on our direct air capture machine unless you pay us fair enough. Ah, another aspect of quality that the carbon removal stuff does not stack up quite as well or where there’s a little bit more science risk is permanence so you saw carbon out of the atmosphere you you know, collect a bunch of biomass and turn it into some denser carbon denser material. Where are you going to put it and how do you make sure that carbon doesn’t leak out, especially when you’re dealing with natural systems which are in some ways not as well understood for us. We have very very clear permanence because the gases get burned up the constituent parts. Get you know in some cases baked into the cement or are just not reactive and are not going to recombine. And get dealt with yeah as normal, normal waste would so yeah, no question for us hundred percent additionality hundred percent permanence as good as anything else out there in terms of quality.

James McWalter

And so you mentioned like the demand side like these large kind of corporate buyers. They’re starting to consider this question of quality you know and they’re starting I’m sure to be challenged on what traditionally had been some sort of greenwashing and said oh you know we’ve offset x percent of our emissions over the course of the year but if those offsets ah to your point were you know farcery offsets and then later as in the case of think of Microsoft last year the forest actually burned down and yeah, they’re very public on that you know like ah Microsoft is definitely one of the better players in this space. So there’s no like shade to run on them. But it is absolutely a factor of the nature-based solutions. You know if they are able to I guess create a balanced portfolio different types of offsets where you have maybe something more expensive but more permanent offsets being bundled maybe at on their side or by other third parties alongside other offsets. You start to be able to maybe. Point them in the direction of getting to a price of carbon in the voluntary markets that’s could get basically start moving money into the space at scale.

Louis Potok

Right? exactly and I think you know it’s really It’s really an attitude shift from how cheaply can we offset all of our emissions to how do we make sure we’re getting the best offset’s possible and then what’s the cheapest way we can do that and I’m you know I’m really. Inspired by some of the work that’s happened especially at you know Stripe Shopify Microsoft to just name a few to really really focus on quality and go above and beyond and publish everything they’re doing and all there are you know all their proposals they receive and things like that.

James McWalter

And so would you say that the larger problem right now is the demand or the supply side from it. Okay.

Louis Potok

I think it’s definitely supply constraint I think there are a lot of companies that would be happy to jump on board with high qualityal offsets if they didn’t have to pay $600 a ton to do it and so we are hoping to. We’re hoping to help solve that problem we we don’t charge $600 a ton.

James McWalter

And then so just the audience like those low lower quote unquote quality. You know, carbon offset they they’ve typically sub $10 a ton basically director capture is 600 to sometimes cluster to $2000 a ton depending if you’re an individual buyer and climbworks. But again, that’s kickstarting ah industry. Um, what’s the kind of range that you know when everything’s up and running and scalable ah that you’d love to kind of be playing in.

Louis Potok

Yeah, right now we’re in the 50 to $100 range I think we could go below that at scale as we prove out prove out everything we’re doing but it’s sort of a niche where there’s there’s not really a lot of other offsets of that combination of price and quality. So hopefully hopefully are.

Louis Potok

Quality conscious buyers will continue buying. So.

James McWalter

Absolutely and I guess what’s the kind of competitive landscape like for this is it has anybody else gone into operation drawdown and sort and and sorry this and this is a big problem since you started it a couple years ago

Louis Potok

Um, yeah I I Definitely it’s easy to tell the founding story in a way that makes it seem like I’m a massive trailblazer on the scene I didn’t invent any of this technology that you know this is in some ways in some ways. Well-trod ground and I remember when I was just starting out someone I was trying to network with sent me email saying like just do you know this is Well-trod ground advise you against it.

James McWalter

So sure.

James McWalter

Right.

Louis Potok

Ah, but he was looking at you know, a very small piece of the landscape which which was Well-trod ground which we’re not doing which is cfc collection in the Us. Um, so as all those old generation of gases were being phased out. There was sort of a wave of people going around looking for warehouses full of it selling Offsets. And that’s great I’m glad it happened There are companies that are still doing that still finding warehouses full of seas in the Us sometimes around the world. There’s you know some some very charismatic projects in some cases they get some good good press and we’re happy that’s happening but in terms of the continuous flow of emissions from new devices targeted at the geographies where we’re looking. Ah, really, There’s not much else happening.

James McWalter

And then actually I remember there was a some podcast actually about a fellow who drives around in the Us and and picks up and refrigerants but he doesn’t say what it’s for because there was like ah you know he’s picking it up from people who typically might not be as. Familiar or appreciative of climate change as a reason from a political point of view and so he was like pretending that he was picking up for some reason other reason.

21:57.40Louis Potok

That’s right, that’s right and you I mean there’s no reason to be so secretive like the company’s tradewater based out of Chicago they do a lot of work in the us they’re great big supporters of them. Um, we’re playing in different spaces. So in some ways. Um, yeah, so they they definitely have this this angle where they’re.

Louis Potok

Pretending that they’re not a climate company because the Ac technicians of Southern Illinois do not want to be getting into bed with a climate company. We don’t have that problem. Um, you know there’s I mean in Jakarta is sinking Jakarta’s flooding climate change is a big topic in Southeast Asia we

Louis Potok

Our our users are really happy to to be supporting our mission and happy that they have a way to get involved. Interestingly you know the government has sort of put governments are around the world funded by the un have put out kind of training modules on refrigerment collection and sort of not thought through the next steps of how do you actually incentivize it but the infrastructure in place to make sure that something happens to that refriger and where it’s collected. So in some cases people have like showed up to trainings here’s how you collect refrigerants gotten excited about it and then realize that they’re kind of on their own after that. So we actually we actually like take the next steps and and sort of implement the programs that the un doesn’t have the capacity or the interest in doing in some ways right.

James McWalter

And have you found I guess then within Indonesia generally you know are there policy elements. You have to navigate are there you know local governmental regulations. You have to navigate that are somewhat different to maybe what? what? what you were used to in previous jurisdictions.

Louis Potok

Yeah, so I’ve worked I’ve worked in some regulated industries before so it’s not my first time here but regulatory culture in every country is pretty different. Um I would say that the main kind of regulatory issues. We’ve dealt with are that refrigerance are cost in Indonesia as hazardous waste once they’ve come out of the device which. Um, the face of it does not make a lot of sense because it’s actually the same gas that was going into the device so anyone can go to the store and buy some refrigerant. Anyone can put it on the back of their motorbike and drive it home and fill it up themselves. But if once you take it out and you have the same gas in the same cylinder. You actually can’t. You you really aren’t supposed to drive it around because it’s now classified as a hazardous waste because it’s bad for the environment. So there. There are some issues and we’ve been working with the regulators there and we’ve gotten some you know little sandbox to play in where they want to see what happens with our pilots. Um, which has been you know, really great removed. A lot of uncertainty for us. But yeah, that’s that’s been the big one on the regulatory side There’s also you know coming down the line a big question for the world of how carbon offsets will be able to be treated across borders. The un has come a very very has has a very very long way to go to figure out that problem but that will be kind of another interesting regulation to keep an eye on. So.

James McWalter

Yeah, another aspect was ah so you’ve also just moved you know I believe you now spent a year living in Jakarta um, and so you don’t ah tend not to hear about a lot of kind of startups based in Jakarta coming out and actually we do actually have a fair number of founders who are working in in kind of non us s countries I do often ask. You know what is the kind of difference in terms of like building a company there versus building you know a company in the United States but in this case, you weren’t already living there. You actually moved there to start a company in a very specific way. Um, what is that experience been like right.

Louis Potok

Yeah, it’s really interesting I don’t have a lot of comparisons of other companies that have been started in quite the same way. So we you know are founded legally established legally in the us and then I moved to Indonesia to set up our operations. There. Our ambitions are to be a global company with users in. Indonesia Thailand Vietnam Nigeria India you know any any hot emerging markets. You can name basically um, but with ah you know a distinct headquarters in the us so thinking from the start about how to how to do that is really a challenge because of course you know this isn’t just. Emerging markets each of these countries has its own very distinct business culture. Its own very distinct sort of facts on the ground that need to be dealt with um, you know, not to mention the coordination challenges of doing the same thing in multiple places. So from the start being really clear about what our company culture is going to be and how it might be different from. Normal business culture in the places we’re working has been important and I probably James and I have had some conversations about how maybe I’ve underemphasized that I love to how much I should but it’s it’s definitely something I’m keeping an eye on. Um, yeah I mean I think you know I spent 6 years working at tech startups in San Francisco and

Louis Potok

It always felt really natural to me the the culture there. Um, you know, really high openness willingness to disagree willingness to hash out disagreements in public and then everybody just goes with a thing that had the best the the person who had the best idea and you know as I’ve been working in other countries I’ve you know. To appreciate a little more how rare that is now hard you you might have to work to instantiate that culture which I value really highly as you you know are hiring people who don’t have a background in those same kinds of companies and cultures.

James McWalter

And I guess there’s like 2 levers you can pull with that right? So the first lever is around the the people you actually hire so people who tend to have that that that mindset or as close to that mindset kind of coming in and the second is like while like in the company as the company is developing. Making sure that there’s alignment on that kind of culture piece. Um I guess if you’re the way between the 2 right? Like how do you think about that weight between those 2 ways of kind of me you know building a company culture over time and not not just within Indonesia but I guess anywhere.

Louis Potok

Yeah I think I think early on it becomes more important to hire people who are already aligned with that culture than you want to have because you know one you have sort of fewer peers to influence someone into the culture that you want to build. It’s already. It’s less nascent. There’s more new process or new kind of habits that you need to develop. Ah, whereas later on once you have things more established people can learn the culture and you know grow into it if that’s not something that they that they share. Um I will say one more point on culture that’s been interesting for me is that of course we are dealing with local partners in Indonesia who of course we’re not going to change the entire Ac industry to operate like a Silicon Valley startup so we have you know sort of an impotence an impotence mismatch at our company border between how we want to operate and how our partners are used to operating and sometimes it’s actually beneficial for us to bring that border a little bit internal hire people who are a little bit more comfortable with that normal way of doing business and accept that friction internally so that we have something. With our external partners and so that’s another tradeoff that has to be considered.

James McWalter

Yeah, it makes a ton of sense I sure was playing around with a startup idea in the past that was focused on us farmers and I also come a foreign background and you know you you have to speak the language to a certain extent right? Even if you speak the same literal language. Have to be able to speak to. You know the hopes the fears and all those kind of things of those people involved because you know if people feel that they’re being talked over or talked in a way that isn’t like connecting with them directly and not just like 1 on 1 but like company messaging marketing like all those elements. Um, you can rapidly get into a situation where there’s just like this kind of vague sense of distrust over your organization.

Louis Potok

Yeah, yeah, for sure I mean in some ways you know developers selling to developers is the easiest game in town because you really like understand your users. You know what? you know what they value? um and in so in some cases that doesn’t solve the problem. The problems that you care about.

James McWalter

Um, absolutely um and I guess when you sorry this list to to to? Oh yeah, so let’s go back a little bit to the the carbon marketplace set of things and so I feel a couple years ago when. You were kind of just starting out there just really wasn’t any carbon voluntary carbon credits infrastructure at all and so now you start to have companies have come along over the last couple of years and they’re doing things like trying to aggregate different levels of supply and and and demand and all that kind of thing and. It seems because we’re so supply constrained. You’re seeing some providers of carbon credit some companies who are providing carbon credits. Try to go their own way versus work with third -party aggregators of some sort right? So um, you know you could have a marketplace where your credits are posted alongside these other maybe more or less permanent credits and then. They come from that common pool. They’ll sell it to you know the the kind of corporates of the world versus having direct relationships with the end corporates yourself. How do you think about that balance from like a long-term business model and defensibility point of view.

Louis Potok

Yeah, it’s a great question I would first just push back on your your sense of the history here. Um, and you know I wasn’t involved in this history before 2019 but my understanding of it is that there was actually a fairly robust carbon offset market in the years leading up to like 2008 2009 in the first clean tech bubble.

Louis Potok

And then sort of this long desert this crash in the market and a long desert until maybe 20162017 things started to pick back up again and if you look at transactions of the voluntary carbon market. It’s grown. You know, like 70% a year on average since 2017 but that’s from a low base compared to where it was 10 years before that. So.

Louis Potok

And I would say I think we’re rediscovering a lot of the you know financialization and business relationships and brokers that maybe existed ten years ago so hopefully we’re not making all the same mistakes we can learn a little bit but we’re also doing some things better. Um, but then I think you really got to this this fundamental tension in the carbon offset market that.

Louis Potok

Is maybe just totally unresolvable which is that everybody wants one ton of carbon to be the same as another ton of carbon right? We want them to be commensurable. We want to be able to say I didn’t you know I emitted this one ton and the the ton that I can get from re-cool it or from anybody else’s the exact same thing and. You know it’s kind of challenging to say that because first of all people care about things like co-benefits so you know there are plenty of good reasons to save rainforests besides the carbon that’s in them right? Biodiversity indigenous land rights so on and so forth. Um, so there’s already kind of an issue there. There’s already a sense from the the corporate buyer side that what they want is. In some sense more like a story than a rigorous accounting of Tons. Um, and you see different approaches to that playing out in the market. So there are some you know there are people who are like in commodities trading who now you know you’re selling a ton of nickel you’re selling a ton of zinc now you just move to the carbon markets and you do exactly the same approach and it’s it’s purely commodified. Um.

Louis Potok

You also have really sort of bespoke approaches where you sell to a specific buyer directly from the project you give them tons of information about what that project was and you hope that the buyer values sort of that package over just the number of tons that you can provide and quality. Really gets wrapped up in that second and that second approach so for us it’s it’s really more about that second one at least until there’s a shift in the overall market where quality is valued where the things that we do and that you know the digital audit trail that our software is capturing about this whole process that proves you know beyond a shadow of a doubt how additional our offsets are we want. Buyers that appreciate that that aren’t just letting it getting commodified away and put in a package with a bunch of forestry offsets that don’t have any of those same evidence behind them.

James McWalter

And I guess we saw a extreme version of that with the rise and I guess nearity fall of Klima Dao and and some of the other elements and and you went into a you know a digital um traceability and so on which a lot of people have basically translated that to mean a blockchain and not a. You know a postgres state database with which just so that you do a unique identifier column. So how do you think about? you know the the big blockchain push and carbon credits. Specifically you know is that something you guys want to engage in or ah run away kind of like.

Louis Potok

Well I have yeah have to say like I am going to get called not going to make it on Twitter after this exchange because I I really do not think that there’s much of a value I mean I think the blockcha and blockchain can solve some problems or improve some things in some ways but I don’t think it’s touching the really fundamental questions. Um, that.

Louis Potok

You know I I was sort of skeptical of the web 3 climate stuff for a while and then I spent a week getting really deep in it trying to see if there was something that I had missed and I sort of concluded. You know the benefits that we will talk about with blockchain applied to carbon credits is democratizing access to carbon finance for the masses like basically normal people can make money trading derivatives. Carbon offsets and like if that’s what you care about? great. Go ahead and do it that is not something I care about that is not the problem I want to solve. Um, you know in in Blockchain world. They talk about the oracle problem which is that anything that happens on blockchain on on a blockchain is traceable and verifiable.

Louis Potok

But if you care about some real-world Activity somebody has to put that real-world activity on the blockchain and how do you do that in a way that makes sure that that real-world activity happens and is the thing you wanted and that is the core problem of carbon offsets and that is that problem remains whether you’re trading those carbon offsets in a postgres database or on the blockchain. So.

James McWalter

I yeah we’re we’re pretty aligned in that you know I I do go my own little cycles of this where I’ll be like I’m definitely missing something and I will do a bit of a like a deep dive and it’s it’s just connectedcted to the startup I’m working on day to day right now. Anyways. But. I think the the financialization assetization piece is like the key piece. It’s like if you want to slice up some asset in lots and lots of different ways and trade those or exchange those in various ways I think Blockchain is quite interesting and so I can see if if you were trying to create a you know. Ah, the mortgage-backed security of carbon where you have different tranches of permanence and all those kind of things I think Blockchain is as good a way of doing that as as anything else, but we definitely had Nbs like mortgagebacked securities pre-blockchain as well. So like there are some ways of doing that. But I think what the other aspect of of the kind of crypto blockchain space. And carbon credits again I guess embodied by what could happen with k cleidow and and for those not familiar klimanow is a carbon credits exchange at one point was worth $1000000000 and is lost about 98% of value since last August so in the last let’s say seven or eight months a lot of that was because they had no supply that wasn’t of high enough quality and so they had done this incredible job of capturing demand or some sort of demand true nor ordinary retail crypto charitys of various types but then figuring out the supply side and so I think that aggregation of the demand side on the retail side. I think that is interesting within the kind of crypto universe web three world but yet to your point the actual underlying technology doesn’t really solve anything because we at the end we do care about what happens in the real world.

Louis Potok

Yeah I mean you know I can think of ways to apply blockchain to climate to carbon offsets that add a little bit of value I mean if you think of you know going on your mortgage back to securities analogy right? If you think about. Ah, more structured role for ratiding agencies to play and reputation and people being able to buy. Yeah these sort of portfolios of different quality offsets. Well you know in an explicit and legible way like great that’s fine. But I don’t see that work happening and to me that’s fundamentally less important than creating the quality officesets in the first place because it is a supply constrain market. So. That’s why I sort of have landed on that.

James McWalter

Um, and what’s I guess what’s the next year to 2 years for recola look like.

Louis Potok

Yeah, yeah, so we’ve you know where we’ve come so far is that we kind of checked off every box once we’ve signed up a bunch of users. We’ve collected a bunch of refrigerant. We’ve destroyed our first batch or it’s actually scheduled for destruction next week yes we can. We can get into that.

James McWalter

Congrats I Know that was long time coming.

37:40.30

Louis Potok

Another time like another few hours session. Um, and we’ve we’ve sold a small number of offsets from that first batch as as a presale. So the next year two are really about scaling that out within Indonesia um, the island of Java is a third the size of California and has 4 times the population. So we have a lot of air conditioners to handle. Um, just without.

Louis Potok

Going too far from our office in Jakarta and hopefully within about 18 months we will be ready to start looking at that next wave of countries and doing it in a way that doesn’t involve me waiting for a visa for five months but hopefully a little bit more of a scalable approach that uses the software that we’ve built for Indonesia as ah as a sort of the beachhead. And to support all that growth within Indonesia for the next eighteen months we’re actually fundraising right now.

James McWalter

Not’s very very exciting and I guess because you you know it’s somewhat isolating I tried to solo found for a bit. You’ve been kind of sofounding now and again a country where you don’t have the kind of local language know and local language. But aha is just one of like a thousand languages ah that you have and. And Java and so on. Um, what are you done to I guess yeah, stay connected to the startup community other entrepreneurs that kind of thing. Um, yeah.

Louis Potok

Yeah, definitely the most helpful thing has been I have 2 different kind of small group sessions with other climate tech founders. Obviously thank you for the leading question James as as one of my one of my comrades in one of those as.

James McWalter

Yeah, the Zell Lewis and I know each other we we we we? Yeah, we have a climate masterwinds the 2 of us are 1 other person. So yeah.

Louis Potok

That’s right? So it’s it’s yeah, it’s like a great combination of strategic advice coaching therapy and it’s it’s you know I’ve so I’ve one for my kind of us climate tech focus and one of southeast asia founders and so that’s been really really helpful. It’s hard to imagine having. Really gone anywhere without those but a lot of it is just seeking out people who can provide advice and you know you find these people who you look at their Linkedin and they just seem like anybody else in the world and then you get on a call with them for some really tactical reason and they are you know, like fully present really helpful. Give you the the emotional support that maybe you need in that moment. Um, you know with the the sort of emotional aspect I definitely like underrated going into it and has been a huge component of of what it takes to to even have come this far.

James McWalter

Yeah, and I think one of the the bits that I took from what you said there is if you if you show some vulnerability like people are very open to also showing their vulnerability and like you you have that kind of shared connection with people you know like we’re very much in a world where everybody is you know Hashtag killing us. But. I think there’s there’s definitely more and more of a ah ah there are more forums for people to be open about not not just the hard Bitts but the the victories like all the little bits like I’m not just saying. It’s all all a drag because it’s not like there are fantastic moments every day as well. But like being kind of that that open very and and people more more people are connecting that to. Kind of a more positive-s some general kind of attitude and yeah people are very connective and I think in general the climate is founder space are just climate not just founders but climate service space in general like is incredibly open to helping each other in ways that is pretty unique to. 2 of right now and long may it continue.

Louis Potok

Yeah, yeah, absolutely I’ve been blown away dozens of times by the immense like generosity and kindness of people that I’ve only just met you know in some of these relationships now stretching on for years. So if you are already doing that great if you are you know if you need that in your life. Go find it. It’s out there. Yeah.

James McWalter

So absolutely well Louis Potok I’ve really enjoyed the conversation before we finish is there anything I should have asked you about but did not is your opportunity to ask to say about raising if you ought.

Louis Potok

It’s a wonderful thing that.

Louis Potok

I Don’t think so um, you know, sort of yeah yeah, so right? So you you should have asked me what do I need from your listeners. How can your listeners support our journey to empower sustainable cooling. There are two ways one is that we are fundraising now. So if you are in the climate tech investing scene.

James McWalter

Yes.

Louis Potok

Ah, would love to talk to any of you. My email is probably in the show notes and if it’s not you can search me on Lewis but yeah, great. Um, and the second is that we are starting to get more serious about selling offsets from that first batch of destruction that I mentioned so if you work at a company that is trying to achieve carbon neutral or net zero claims.

James McWalter

They will. They will be yeah.

Louis Potok

Um, and you want some super high quality offsets with a really interesting story and a bunch of photos of Ac technicians in the field on a rooftop in Jakarta you can also hit me up for that and I would love to talk with you about how we can help that.

James McWalter

Absolutely and we’ll add all that to the show notes. Thank you very much Louis Potok.

Louis Potok

So yeah, thanks. James this was great.

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