Smarter Markets I Episode 25

Crossing the Bridge to Renewable Energy Part III I With Todd G.

Buchholz and Josh Crumb, Founder and CEO of Abaxx Technologies

Announcer 00:01: Welcome to Smarter Markets, a free weekly podcast featuring stories from the
entrepreneurs and icons of commodities, capital markets and technology ranting on the inadequacies
of our systems and riffing on ideas for how to solve them. Together we explore the question, "Is
capitalism in crisis? And will building Smarter Markets be the antidote?"

Todd Buchholz 0:27: Welcome to Smarter Markets, a weekly podcast that explores how financial and
technology markets can be redesigned and improved, to better serve market participants and society
as a whole. Smarter Markets is brought to you by Abaxx Technologies, and I'm Todd Buchholz, you
can follow me at @econTodd or econTodd.com.

Over the coming weeks, we will continue to examine the crisis of capitalism, and whether or not
Smarter Markets is the antidote to a more inclusive and sustainable future. My guest on this week's
episode is none other than Josh Crumb, founder and CEO of Abaxx Technologies, and Abaxx
Exchange. Josh is on a mission to re-examine our global market and technology systems so we are
able to achieve the 2030 Paris Agreement objectives ahead of schedule and be halfway to carbon
neutrality with a fully developed path to neutrality by 2029.

ESG, or environment, social and governance, presents quite possibly the single greatest market
opportunity since cloud computing. With sustainability funds on Wall Street already approaching $2
trillion. Today is the first time Josh has been interviewed on Smarter Markets and I'm delighted to bring
him into the conversation we started with Stefan Wielder and Arjun Murti over the last couple of weeks.
Josh and I will be boldly crossing the bridge to renewable energy, and an accelerated carbon neutral
future, next.

Announcer 2:11: And now back to this week's episode of Smarter Markets.

Todd Buchholz 2:18: We're coming up to fantastic energy transition discussions in the past two weeks
with Stefan Wielder. And Arjun Murti, and Josh Crumb, you're not only the third part of this series,
you're also one of the co-founders of this podcast. You are responsible for all the intelligence and all
the blather that's gone on in the last couple of weeks. Let's face it, this is the most fascinating time for
commodities for ESG, perhaps in our lifetimes!


Todd Buchholz 2:50: Just recently, we see in the commodity pits that iron ore, timber, palladium have
hit all-time highs. At the same time, the entire world is wondering, are we ever going to run out of these
sorts of commodities? Can we mind and develop such commodities without spoiling the planet? So
we've got some awfully important issues to put on the table. But I'd like to ask you, before we get
started, why is it that you got interested in creating such a podcast at this moment in time?

Josh Crumb 3:22: Maybe the best way to start to talk about the podcast is maybe give a little brief
background of my own background. I am a mining engineer originally. I've also done graduate work in
both economics, as well as political risk and international political economy. So ultimately, I guess I'm a
systems guy. I like to see how many different pieces work together.

When you're in the natural resources space, when you're developing a project, you have unbelievable
amounts of geologic and technical risk, as well as economic risks, and, of course, the political risks. So
when I think about the podcast and some of the very big energy transition themes that we'll be talking
about, through this episode and beyond. These are some very, very big multifaceted challenges that
require systems thinking across many different disciplines.

Ultimately, if we're looking at, at the goals of creating carbon neutrality globally over the next 20-30
years, this is essentially one of the biggest engineering projects of all human history. If you think about
where we're at now, with probably about 80% of our global energy needs coming from hydrocarbons,
and maybe even stepping back a little bit further; a lot of the academic research to the level of "what
makes us human" is our ability to harness external energy for our food sources and communications.

So we're really as a species trying to basically change our entire way of burning things. And change the
entire global economy at the same time. So these are enormous engineering challenges. There are
enormous political challenges. But at this point, I think this is something of the world setting out to do.
So the point of this podcast is, as an engineer I probably try to minimize my public speaking. As an
economist, I think people try to minimize listening to economists like us speak.

So, I think for me, throughout the pieces of my career, I've been very fortunate to work with people like
Jeff Curry and, and the Lundin Group and Robert Friedland. Having access to these types of networks,
I wanted to make sure that some of the smartest, some of the biggest thinkers in the world are given
the platform to have these really hard conversations.
So that's really the background of the podcast and what we're trying to do. It's not just the energy
transition, but also a lot about the technological, software and internet systems that are constantly
changing and evolving, that have a huge role to play in this energy transition. Talking about things like
digital identity and privacy. So there's all sorts of pieces to this. What we've been trying to do is build
these "little" mini-series that are trying to tackle some very big ideas and very big things and little
pieces. So that over time we can start putting these pieces together. So that's really my background as
a multi system thinker, and trying to put together a podcast similarly.

Todd Buchholz 6:34: Clearly, you want to be on the cutting edge of all sorts of things. And hopefully,
we won't be slitting our wrists in the meantime with that edge. But just for those of us who haven't
gotten the chance to know you, I think it would be interesting to find out where you grew up. And where


are you speaking to us from today?

Josh Crumb 6:52: Well, I grew up in Colorado. So originally from Greeley, Colorado. A little secret, I'm
now telling the entire world as a mining person, I actually come from the flatlands of Colorado. So one
of my Mining Engineering colleagues early on, said that I always pretended to be a mountain man, but
I'm really a pig farmer.

Then I went to the Colorado School of Mines and after that, I have been involved in the resource
industry from lots of different angles for really the last 20 years. So started out in engineering design,
and project management and worked out at a gold mine. I traveled and lived in Russia for a while,
eventually got into the corporate side of mining with the Lundin group, and working in M&A and project
valuation all over the world.

Then just around or just after the financial crisis, I moved over to Goldman Sachs, where I was the
head of metals research and strategy under Jeff Currie. So the last couple episodes that we've had,
were actually some of my former colleagues. I was on the metal side of Jeff's team, when Stefan was
the head of oil research. Then Arjun Murray was leading the equity research at that time. So these are
two individuals that I highly respect.

I think there's really nothing I can add to the conversation of the big energy companies or the macro
economy as far as energy. What I would try to add is some of the market structure and some of the
software systems that are going to be needed during this energy transition. So, happy to talk about
some of those things as well.

Todd Buchholz 8:20: Just going back a little bit. It wasn't too many years ago, when peak oil was a
common term. And now if you do a search on Google, of the usage of that phrase, "Peak Oil" doesn't
crop up much anymore. I'm just curious if someone trained as an engineer, who's also trained in
economics, what were you thinking, those not many years ago, when so many purportedly brilliant
people were telling us that the world was running out of energy?

Josh Crumb 8:51: It's a great question. I think, again, another part of this podcast is to have these
types of conversations. I will readily admit, back in the 2006-07 days, in fact, one of the reasons I ended
up at Goldman Sachs is I predicted the global financial crisis, as well as shooting up to $150 oil. So I
had built a lot of models that predicted that and I was very, very bearish of the global economy and the
global financial system because of that.

And I guess when some of my predictions played out, that's actually how I got to know Jeff Currie and
ended up working over at Goldman. So I probably came from that a little bit more
conservative/economic thinking, "we're running out of oil." But I think something that really changed in
my worldview over the last 10 years, it was in 2011-12, the shale oil revolution. Looking at always being
skeptical about the growth rates of shale, and skeptical of broader technology senses as well.

Over the last 10 years I've come to think that there's actually a lot more hope than the thinking at the
end of every commodity cycle on the limits to growth. So Jeff Currie had a great line, he always said,


"Give an engineer enough time and enough money, and you can solve anything." Decarbonization is a
very big problem that's going to need a lot of money if we want to meet the goals, in not a lot of time.
Ultimately, I am hopeful. These are some of the things I want to talk through on this episode.

Todd Buchholz 10:34: It does seem to me that it's easy to forget how markets act. There's that saying
that the Stone Age didn't end because we ran out of stones or ran out of rocks, it was because we
found alternatives that were more efficient. In the same way, when prices go up for a particular
commodity, it creates incentives to discover and develop more or to discover and develop substitutes,
which makes this ever more complex as we get into it. Now, I wanted to get into some comments I've
heard you make regarding 2029, that not only could we achieve the Paris climate goals of 2030, and
2050. But that we could make it a mission to wrap it all up in what, eight years? Now, engineers are
supposed to be pretty practical guys. Have you left that all behind? How is this possible?

Josh Crumb 11:29: No, absolutely. I think, coming back to that hope and vision, my call for the 29ers:
what that's all about is looking back at JFK's moonshot speech. Which he actually gave in 1962.
Talking about putting this great human global engineering problem of putting a man on the moon.

It was before the end of the decade, it was very specifically, "we're going to do this by 1969." So when I
look at what's happened in the global economy over the year or two, and what's happening in upstream
industry, the acceleration and the conversations about decarbonization that we're having by the week
to organize ourselves on a global level, I think the very specific thing that I want to point out about my
view and my mission of the 29ers is this needs to be done by markets.

You mentioned the point about "nothing solves a high price, like a high price" but we need that price
signal, we need to price the externalities, we need to price the goals that we're trying to achieve. In that
way, I think the market can do all sorts of good things. So one of the other one of the other pieces of
that, and going back to the JFK speech was that this is global. Even though this was in the middle of a
very fierce Cold War Space Race, it was very specifically mentioned that this is a global challenge, and
a global mission, that we all need to be cooperating in. I think that's a big part of it as well.

In my view, we're at a time where on both sides we've gotten so political in so many ways, and when I
look at the resource industry, and look at the goals of the Paris accords. Part of it is saying, this is
absolutely impossible, we can never do this, this is the peak oil type thinking. Then on the other side,
you get to the more extreme sides of the left and they don't even want to talk about carbon neutral, they
want to just stop growth altogether.

So we're in this really challenging political environment where the call is, "this is happening." If you look
at the announcements that China made late last year, about their goals for 2060. If we were taught
anything in global markets the last 10-15 years, it is when China says they want to do something, they
mobilize their economy to do it.

So if you look at China being about a third of the world's global emissions, and of those emissions,
probably 40% of that is upstream commodities, and early pieces of the supply chain. When they say
that they're going to decarbonize, or go to net zero, this is something that any holdout is really going to


get overrun at this point. The global economy, the incentives of the market, are all going to move this
direction.

I believe this is one of the greatest investment opportunities, just like it's one of the greatest engineering
opportunities of all time. We really need to get on with the thinking of, "this sounds really, really hard,
but that's why we should do it." That's where the phenomenal wealth is going to get created. Let's take
the next eight years and let's get building. That's really the mentality that I want to express with the call
to the 29ers.

Todd Buchholz 14:50: Josh, you make an excellent point about how things can become so politicized.
I remember around the time of the financial meltdown; I was deeply involved in the markets I also at the
time was a fellow at Cambridge University. I went to a meeting with faculty and we were talking about
sustainability. I realized, and this reminded me by the way of Winston Churchill's purported saying that
the US and Britain are one people separated only by a common language, what I realized in going to
Cambridge was that there was a difference in the language, when most Americans were would speak
of sustainability and sustainable growth, they were talking about growing without despoiling the planet.
But among intellectuals in the UK, and in Europe, it was not a matter of growing, without creating
pollution or climate change, it was a matter of stopping the growth, and not pursuing a higher per capita
GDP.

These issues become very thorny, and I praise your optimism in thinking and I agree with your
optimism that we can create greater growth, a higher standard of living, but do so in sustainable ways,
in which case, the planet and long-term life is better off. After all, if you look at the environmental
conditions in poor countries, compared to wealthy countries, wealthier countries have less pollution,
because we can afford to invest more in Technologies that reduce it.

You look at the Soviet Union, when it existed, it was far behind the US in wealth in GDP, per capita,
and standard of living in all sorts of ways. And it was fetid and polluted, and the water could not be
drunk, and the air could not be breathed. So I think the point you make is that there are ways, I don't
know how to design them, but markets will develop and evolve in order to capture productivity
improvements, and create a higher standard of living without necessarily making it more difficult to
breathe, and to eat, and expect the planet to survive.

Josh Crumb 17:09: Absolutely. Really, it comes down to pricing these externalities. We know there's
going to be a lot of costs. Just as the urbanization of China really in the earlier part of this millennium
created a lot of changes globally, and the costs and benefits weren't always very well thought out in
advance. So if I look at the first 10 years of this millennium and I look at the BRICS themes which were
really driven by Chinese urbanization, but also other emerging markets globally, this was a very
resource intensive time. There's a lot of disruption to the middle class of the OECD countries.

Then we had this next decade of investment around the rise of cloud and mobile, and connecting this
global middle class to the internet through handheld phones. So these were two incredible investment
trends the last 20 years, but they also create a lot of social externalities, of both environmental and
social externalities. So really building on both of those themes the next decade because we do have a


connected global planet.

This is where we really want to think about the IT infrastructure and the communication systems to
achieve these goals, now that we do have a globally connected world, and we've had a chance to think
through a lot of the social backlash and the challenges that have come with these two investment
waves. All of this is going to be heightened in this third investment cycle. So we really need to figure out
ways to be transparent, be decentralized and bring the best data forward to solve these very big issues.

Todd Buchholz 18:50: Well every once in a while, Josh, I have an urge to be blunt. So I'm going to be
blunt now. Tell me what you're thinking about China, in terms of its real goals, sincerity, in controlling
emissions and so on? Is it because the Beijing government knows that if people can't breathe, there'll
be a revolution? Is it because they think that the economy will perform better in the long term? If they
have better environmental conditions? Or, is it that they actually give a damn about the rest of the world
and whether they're creating too many externalities that make people choke? From Japan, to Seattle,
to India, on their fumes?

Josh Crumb 19:35: Yeah. So again, very big questions and very important questions. First off, this is
the point of the podcast. I'm probably not the most qualified to speak on these. But I guess my point of
the podcast is, I believe that's an excellent mini-series to go on. We will tackle that question specifically.
As Abaxx Technologies and as a sponsor of the podcast, two of the largest investors are probably one
of the biggest China bulls and one of the biggest China bears.

So we do have a very wide range of views. My personal view, I did have the opportunity back in 2007,
to have dinner with the CEO of the Chinese state grid. Which is probably one of the largest employers
in the world, probably one of the largest pieces of infrastructure, the largest set of customers in the
world. It was really a fascinating conversation. We had the conversation about is there enough copper,
what is the path of renewables?

That's what happened 14 years ago. I don't believe the same types of conversations have been had to
the extent they were thinking about that 14-20 years ago. I had a similar conversation in 2010, with the
UK Minister of Energy and Environment, and started talking about copper mining, and they had no idea
what I was talking about.

I think there is in the culture in the planning, there is this type of thinking, but that all said, particularly
over the last five years, it was it was not only the environment, but it was also non-performing loans.
You saw a lot of central Chinese government mandates to try to rein in some of the very heavy
commodity infrastructure investments of the regions. They weren't always that successful. Now,
directionally, I think they were successful. They were still trying to solve both the non-performing loan
issues of over utilization of resource capacity, as well as the environmental issues. So again, I think this
is a very complex question for a third of the world's emissions. But I do believe it's very sincere, that
they're trying to upgrade their quality of GDP growth as well.

Todd Buchholz 21:37: Now, from the bottom-up investor point of view, environmental, social,
corporate governance, ESG has obviously become enormously interesting and popular as an


investment style, having passed about $2 trillion in assets, I guess it's one of the fastest growing trends.
What do you think is driving this? And where is it headed?

Josh Crumb 22:03: Yeah, so there's probably two or three pieces that one of it is purely the sum a lot
of papers recently, on the ability of companies that score high on ESG, to be adapting to the global
economy, managing risks better, particularly, if you look at the governance side and if we look at some
of the environmental risks of having stranded assets on the balance sheet, and some of the social risks,
that we're seeing a lot of social unrest globally. These are very big risks for companies. So not only has
the investment style really outperformed, and the company's outperformed, but also they're seen as
managing risks better.

Now, that all said, I know, just from a pure top-down macro, portfolio ESG perspective, it's still not
certain that these companies have done well, because they're ESG, or because they're more heavily
geared towards the Microsoft’s and Googles of the world, which, which obviously have very high
business margins, a lot of growth and naturally a lot of adaptation in their business model. So if you
look at an ESG basket versus the S&P 500 basket, they're not all that different in many ways. And so
that's, that's one of the parts that's happening now. And I think we need to get better at beyond just
picking well performing Silicon Valley companies to allocate capital to ultimately, we need the big
upstream resource companies as we're going through this energy transition. So we need to capitalize
them, not as dirty companies, but the companies that actually have the ability to do better, and probably
have the most impact from doing better.

Todd Buchholz 23:39: Do you think that commodity markets can be recipients of ESG dollars? And
how would you perceive that I mean, I think about British Petroleum, which tried to rebrand itself,
beyond petroleum some years ago. And now I think more sincerely is taking action in that way. At the
same time, you've got companies that seem very techie, and very ESG. friendly. And then excuse the
pun, if you look under the hood, you wonder whether buying an EV Tesla is really good for the
environment through the lifecycle, like what rare earths and precious metals have to be mined in order
to create the lithium batteries, and so on. So how do we get a more sophisticated view of ESG that
goes beyond taking a sharpie and crossing out Philip Morris or Exxon based on their behavior 20 or 50
years ago?

Josh Crumb 24:39: Absolutely. And that is, again, one of the central questions of this podcast is talking
and also giving a platform to the resource industry to really be transparent about what they're really
trying to do. So, before I answer that, the rest of that question I should probably head to a bit of the last
question as well. So beyond just the top-down portfolio, Construction trends and in risk management.
The other piece that I think is critically important is demographics. And really the mindset of the
millennial buyer. And so I was, again, very fortunate that it's kind of when I grew up and went to
university, no, I'm in that, that tweener generation between Gen X and millennial, where my youth was
fully analog and pre digital, but almost all of my university and career has been fully digital. So I've been
able to see a little bit of both, a pretty good window into both worlds, even my older brother, you really
didn't even use email until he was in his 30s.

Then my younger sister was digitally native. And so I've been very, very fortunate to be able to straddle


these two generations, and it's very clear that the more connected and more globally connected digital
generation is thinking very much about sustainability. This isn't just a consumer trend, that's driving
change, but it's also becoming particularly as millennials, really take on more senior roles in the
workplace even internally in 2007 2010, some of the first movers in the tech companies to really be
focused really on ESG some of those young change the world activists are now senior managers and
running really driving change in their organization.

So I think that's incredibly important. And so getting back to your question about what, what the
commodity industry can do again, first off, that change has also been happening within the commodity
companies. And so that, that, that generational change, and when I went to the Colorado School of
Mines, again, in the late 90s, early 2000s we had bumper stickers like Earth first we'll mine other
planets later and there was this pushback over environmentalism. But now, and I don't know the stats
off the top of my head, but I would say, there's probably more people going to the Colorado School of
Mines focused on climate science and, and being part of the solution than that kind of attitude of
fighting the greens.

Todd Buchholz 27:01: Josh, have you ever been to the diggers and dealers, big meeting and
Kalgoorlie, Australia?

Josh Crumb 27:08: So I actually haven't so I guess being Canadian capital markets, I spent a lot more
time in like the PDAC, but haven't been to that one?

Todd Buchholz 27:16: Well, it's a fascinating place. And I gave a keynote lecture there some years
ago. And it seems like it used to be that the highlight of going to Kalgoorlie was to explore the old,
corrugated steel brothels that had been there since the early mining days. My understanding now is
that now the bigger tourist attractions have to do with examining how to apply ESG to mining and
materials and metals. But the question I have is there anyone or any institution that is engaged in a kind
of life cycle analysis of companies and products, I gave the example of, of Tesla and asking whether an
EV car when you take into account, what goes into it, and where the energy comes from, from the
outlet into the vehicle, what the life cycle impact is environmentally.

There are other examples of you back in the 1980s or 90s. I think young parents were shamed. If they
use disposable diapers for their babies, they were told Oh, you should use cloth diapers. And then after
some time, some enterprising folks did a life cycle analysis of well, if you use cloth diapers, then the
diaper truck has to come by pick up the diapers that use gasoline, and then you bring them to some
cleaning facility that then uses soap and uses water. So by the time you're done recycling cloth diapers,
it's unclear that in fact, it's better for the environment than the disposable sort made of plastic. So
anyway, the question is, is there anyone or any institution that's looking at those sorts of analyses, to
give some guidance to ESG investors and give guidance to consumers who might also be interested?

Josh Crumb 29:02: Yes, for sure. And I guess that's the other part of the momentum that I've seen the
last particularly last six months, accelerating significantly because we do work with the global energy
industry and global LNG industry, in carbon neutral working groups we're really trying to tackle those
issues. But what I would say is, is most encouraging, is not only the coordination and communication


between the companies all working together to try to solve this, but also really thinking through what
kind of market systems and what kind of IT systems whether it's open source or open market how do
we actually bring the best information forward?

As an engineer, I've done those top-down studies, and then I've tried to apply a lot of econometrics and
engineering first principles to try to design something from the top down and do those lifecycle analysis,
and they are very useful. But what's even more useful is if you price those externalities. Let the market
coordinate better. So when I look at, what we're what we're trying to do, and with Smarter Markets, not
only in the podcast, but what we're trying to do in our company, it's really not trying to push a perfect
solution, but create market structures to allow the market to bring the best solutions and praise these
externalities through the lifecycle.

Todd Buchholz 30:21: In some past episodes of Smarter Markets, as some have talked about grading
and trading various commodities based on their ESG specifications. There may be darker versions of
copper and lighter versions, so to speak, I suppose in the world of oil, you have light, sweet and sour,
crude, and so on with different grades at different prices? What are we supposed to think of that? Is
there a viable way in which such distinctions can be made and capitalized on?

I believe so. And I think this is really where the markets headed. Again, because of the demand both
from the consumers, as well, as really executives in the supply chains, all these heavy industries, are
really, really sharpening the pencil right now on trying to account for emissions and the ESG goals.
Now back to your question, one of the problems with the commodity is, by definition, it's a commodity,
it's supposed to be fungible, it's supposed to be interchangeable with everything else. And this is a
good and a bad thing for the upstream resource industry. It's a good thing, and that, at the end of the
day, these are companies that take a lot of price risk to the top line that can be very volatile. And so by
having a more fungible liquid market, where you can sell forward and hedge your production in an
interchangeable market, that actually provides a huge benefit for the commodity producers.

So if you look at something like LNG we need something like $10 trillion in new LNG infrastructure to
meet the growth projections. But right now, without long term offtake agreements, and without really a
standard price to sell forward in the market, it's getting very difficult to capitalize these investments. So
we really need that fungibility and standard price to allow capital to transfer properly. But at the same
time, there's also going to be a very wide range of ESG scores that come along with it, what's otherwise
a fungible commodity, it's really balancing that for the upstream producer, and that you can have better
capitalization, and better risk management, if your product is Max fungible. But at the same time if you
are doing better, you should be paid for doing better. So this is the balance that we're always trying to
find. So one of the things that we've been working on, again, with what the global energy industry is
really thinking about, okay, so how do we break these into different pieces where the commodity can be
most fungible, but you can also get paid most of the things that you're doing on a marketable high ESG
score product,

Todd Buchholz 32:57: Josh, you had mentioned it and others to the issue of putting a price on carbon.
And by carbon, we're not talking about co2 canisters for SodaStream. We're talking about something
else? How do we create a price for carbon? What do people mean by that, and, and to what extent is,


federal governments have a role in determining a price on carbon.

Josh Crumb 33:22: So ultimately, I think governments are going to be very important and have been if
you if you look at the emissions trading schemes in Europe, for instance, and, and even before that,
some of the other cap and trade systems that we've had in the US this has been a very efficient market
mechanism on a regional perspective to move the industry forward. However, the problem is when
you're talking about a global market, that global coordination is going to become more and more
difficult.

So that's what's given rise to a voluntary market. So if you look at companies like Microsoft, and what
they've been doing in the voluntary markets to offset their emissions they didn't, they didn't wait for US
wide mandates, they just got on with that, and started doing their own accounting, and setting their own
internal prices, and working towards that. So we've been very active again, in that space as well, where
you're going to have a lot of governments doing very, very different things. And so this has given rise to
a voluntary market.

Todd Buchholz 34:20: Josh, when you have conversations with your former colleagues at Goldman
and elsewhere about these new kinds of markets that you're trying to develop and grading platforms
for, what reaction Do you get these days? There's so much news about Fang stocks about social
media, obviously, about cryptocurrency and the like, is it possible to get top talent involved in the
commodity space in financial technology?

Josh Crumb 34:55: I believe that we can. I mean first off I guess we're very proud of it. We've put it
together at Abaxx. But again, it's around us, I think it's around the mission of what we're trying to do,
both for the industry and for the markets and in helping develop these critically important price signals.
And I also probably want to touch on something that I guess as a serial entrepreneur that's really been
jumping into some very big business ideas, very big markets. one of the other things that I find, I guess,
challenging, is that over the past decade, we've seen very high centralization in our financial industry.

Now, whether we're looking at market infrastructure companies like exchanges, or of course banks,
central banks so there's been a lot of consolidation and a lot of that came out of the financial crisis,
were combined with it with an IT cycle that yes there's a lot of efficiencies and centralizing a lot of data,
but at the same time, it can kind of stifle competition. And, and so really, now we're at a point where
what should be some of our pillars of capital markets and competition are actually becoming very
oligopolistic. And I believe in creative destruction and, and entrepreneurs, that that can have the
diseconomies of scale to move into big problems. So, yes, I think it starts with the mission. And it starts
with the type of people you have. And I do believe that a lot of people want to work in fintech’s, and
startups that are going after these very big challenges.

Todd Buchholz 36:23: Well, and I think now is the time if you can't get interest at a point where so
many commodity prices are reaching all-time highs, or at least decade highs, this is the perfect storm.
And you add to that, and I actually wanted to get your views on whether Federal Reserve Board policy
will play a role in attracting interest from both from the point of view of building such platforms, but also
investor interest. Jerome Powell of the Federal Reserve Board, former colleague of mine from the


Treasury Department, seems he might as well be the spokesperson for modern monetary theory; he is
rewriting monetary theory with what some people would call it reckless abandon.

I suppose he thinks it's prudent based on the fact that the unemployment rate in the US is still around
6%. And he still thinks there's vast amounts of excess resource and supply of labor on the sidelines
that can be brought in if the economy is allowed to run hotter. At the same time, some people
legitimately I think, are worried that the risks for inflation have gone up. Traditionally, we would think of
gold as a good hedge against inflation. Now, of course, cryptocurrencies may be there, but then other
commodities, metals and the like. So what's your view of Federal Reserve Board policy, and its
possible impact on the markets that you followed so closely?

Josh Crumb 37:51: Well, this certainly is a challenging one in many ways, it has been that access to
cheap credit, that's allowed the economy to continue to grow, but don't know, I do believe there's
something unsustainable in it, in that we're developing this economy, where it's the price signals being
lost in many ways, where access to credit becomes more important than profit, particularly the smaller
scale entrepreneurial challenging companies. And so, that, to me, is problematic, as the bigger you get,
the easier you get access to cheap credit. We stifle competition in that way. So that's one issue.

Of course, you also mentioned the inflation we have these very, very big issues that that we should be
allocating capital towards, but at the same time, you see something like Dogecoin, you're going to $50
billion market cap, right, so, so the misallocation of capital, I think is very problematic, given what we
actually need to try to achieve. And we need to be very efficient with that capital with those time and
resources. And so, so again, like in my mind, that doesn't mean let's go to heavy top-down central
planning, like I actually think it's being more decentralized and allowing more competition that's going to
get there rather than relying on more and more centralized Central Bank policies.

Todd Buchholz 39:11: Joshua a few minutes ago, you helped us define commodities as fungible, a
bucket of sand should be equivalent to a bucket of sand and so on. One of the hottest buzzwords these
days is NFT's non fungible tokens. And of course, we see that Jack Dorsey at Twitter, sold his first
tweet for some ungodly amount of money. I don't know whether he gave a little bit of that to Donald
Trump, who probably helped keep Twitter alive over the last four years. But anyway, is there a world in
which commodity producers might be selling products is NFTs from a technology perspective? How
would that work?

Josh Crumb 39:52: I do believe so. Absolutely. I mean ultimately, what the NFT is, is it's a type of
smart contract. It's the first furthering the path of digitization and so when I talk about a fungible
commodity, there's if you look at it as an example, and that's the copper supply chain. So again, that
elemi copper is meant to be the most fungible form of copper, and it trades a very, very efficient system
traded on the LMA, or the Shanghai futures exchange. But at the same time, that intermediate product,
the crude copper product before you get to the elemi, a copper concentrate isn't so fungible, right, it's
going to have all sorts of different quality blends, locations of big and bulky. And so at the end of the
day that that copper concentrate is not as fungible as that copper cathode.

And that's just talking about technical specs, again, now you add environmental specs, and you're


going to see another wide range of marketability of a crude commodity product. And so ultimately, I
think what is going to happen is that we are going to design NFT structures, that more and more
information can be captured at the earliest stages of the resource project. And I would say even before
the copper concentrate you look at actually copper metal in the ground I believe there's a system in the
future, where we can track and trace that that resource, not only in new exploration models of geology,
through NFT's pre-selling a royalty or right on the, the copper in the ground, and then that right, tracking
all the way through the supply chain. So we know the ESG scores, we know the quality. So I think that
that smart contract mechanism is going to be very important in the future.

Todd Buchholz 41:37: How important or how valuable can blockchain be in these sorts of things. And
when I say important, I had a conversation with the CEO of one of the major railroads. And we were
talking about blockchain. And of course, we've all read and heard about how it could be valuable
because the next time there is a Mad Cow break out. If we had adapted to blockchain, we could more
easily identify the source and we hear about how blockchain can be used for the provenance of artwork
and so on. What is the market failure today, that creates the opportunity for blockchain and
commodities? What's not right, that needs to be repaired? Or where there is a huge opportunity?

Josh Crumb 42:22: Well, I think it's a huge opportunity, because what it is, and I try to break it down
beyond just the buzzword of a blockchain. What is it specifically? What are the aspects of it that are
going to revolutionize the way we trade? And for me, it's, it's two pieces, it's digital identity, self-
sovereign identity, and then it's the actual open permissionless data store, an actual database that's
encrypted and secured, but everybody's accessing the same information. And so there's a lot of
efficiencies in bringing these like, highly centralized data systems together.

And so what we have today is, again trending towards these larger oligopolies that have access to the
most data, but they're still not necessarily interchangeable with each other, to solve the coordination
problems that we need to solve to meet these very big goals over the next 10-20 years, we can't just
assume that everyone's going to centralize their databases into one cloud platform with the best AI,
right, we're not just going to move the entire world on to AWS, and have all the perfect data running
through that system. at the end of the day whether it's for regulatory reasons, competition there's going
to be data structures everywhere. And so what we want to do is design the protocol layer, not
necessarily where the application is, we want to design a protocol that allows everybody the right
incentives to bring their data to market, while still keeping it secure, for reasons that they may need,
whether it's for bargaining reasons, or for regulatory reasons.

We need encrypted and secure node data where we're not just centralizing it all in the hands of one
player being a government or a very large tech company. And so what the blockchain does specifically
that allows us to solve that coordination problem is this decentralized data store tied to a very strong
identity internet and so this is a system that we've been investing in significantly because we think it
has an ability to solve problems. these market coordination problems globally.

Todd Buchholz 44:20: What not Josh, as long as we have you on the air today one of the world's
foremost experts in metals and mining. I wanted to ask you about what goes into IE V's and battery
technology because we see copper prices palladium prices lithium and so on, being driven by housing


demand as well as Evie demand. There's so much copper in cars and homes these days. Well, let me
put it this way. Are you seeing some new potential replacements for the lithium batteries that power
Evie use and if do will they be using different kinds of rare earths in metals, then the sort that go into
production today?

Josh Crumb 45:10: This is a problem again. Better pricing is going to help us solve a lot of these
issues. But yeah, I mean, a lot of these metals will end up constantly engineering and re-engineering
based on the volatility of different commodity prices. You look at it, even a product like cobalt, it
probably would have been used a lot more than it is today. Now, even before this Evie revolution, if it
wasn't so volatile, and only have a small source of supply, 1520 years ago, this is where we're trying to
create commodity markets that are more fungible, so that we can have a better forward-looking view to
make the right investments in the right metals is very important.

No, again, ultimately, I don't believe there's a shortage of any of these metals, base metals or precious
metals. And in fact, if you look, geologically what you typically have in most of these metals is a very flat
supply curve just from a first principles perspective, you're the types of mineralization, that is the
fundamental cost structure of different types of mineralization. So, there's always going to be a very low
on the cost curve, because it's got very high grades, or has many different polymetallic revenue inputs
so those things never set the price, those things are going to be profitable, and really any scenario. But
if you look across most geologic curves they're actually very flat on a global scale.

So ultimately, what it comes down to is its politics. And these are very large developments. So when
you're, when it takes 1015 years to get a mining project off the ground, there's a lot of risks upfront that
you need to be aware of. So having the best price signals, and being able to capitalize those projects
early is very important. So there's never a shortage of minerals below the ground. It's usually the
political and economics above the ground that becomes the problem.

Todd Buchholz 46:56: That brings up an interesting point, because when I, when I was a kid, I loved
maps, and I'd look at maps, Atlas of the world, and there was still a Soviet Union then. And some of the
pages of the Atlas would show you the natural resources. And the US, of course, was rich in wheat and
other sorts of things. And the Soviet Union with Ukraine was rich in wheat. But the Soviet seemed to
have so many metals, including bauxite.

I had no idea what bauxite was when I was seven years old. But I was concerned that it was like going
to be the kryptonite, if there ever was a battle between the US and the Soviet Union. Thankfully, there
was not a battle between the US and the Soviet Union. If you Google, where are rare earths or rare
metals today, you will come up with a chart that shows China at the top. My question, is it that China
has vastly more than other countries, including the US under the surface?

Or is it that they've tapped into it and created the reserves? Do they have different environmental
standards? Because quite often, you hear some people say, well, if we become too Evie oriented, for
instance, we will become too beholden to the Chinese, as if that's the only place that you can get some
of these rare metals. So set a straight Is that correct? Or is it wrong? How do we look at this?


Josh Crumb 48:18: Yeah, so it really is the integrated supply chain that matters, it's not always just the
resource, again some minerals we'll have as a natural resource, strategic advantages if you talk about
Russia in the nickel complex, and Norilsk. This is a geologic anomaly that feeds a lot of the world's
nickel and palladium. We have these geologic anomalies in many different commodities. But again, that
doesn't really set the marginal cost that's really just the base supply of a lot of these minerals.

But really the challenge in supply chains going forward in this great electrification of the global economy
towards more renewables getting off of that 80% of hydrocarbons, and moving that more towards
electric electrification, it's going to be so metal intensive. And one of the big problems is not actually the
upstream part. It's really the smelters and refiners, and that's really a place that China has really
dominated over the last 20 years. So even if we did want to mine more rare earths deposits, we don't
have the processing and the midstream production. And I would say a lot of that has to do with
environmental policies. Now people just don't want those types of processing in their backyard. And
that's been an issue. And so if I look at specifically what's happening in China, particularly going back to
their 2016, decarbonization goals, I actually believe that China will be will start being a net exporter of
things like steel, and some of the more intermediate commodities that we've relied on over the last 20
years because of some of these goals because they want to upgrade their environment.

So if we've now got some industries with 60 -70% consolidation or more of that midstream production
smelting and refining, nothing happening in China and then they switch to not wanting to be an exporter
anymore. This is going to become very problematic for a lot of the EV goals of many other countries.
And so this I do believe is a big issue is that we just have not been building many smelters and refiners
in our backyard the last few years.

Todd Buchholz 50:20: Josh, earlier you had mentioned the bumper sticker at the Colorado School of
mining if you don't mind the earth first and other planets later. This question of decarbonization also
brings up the question of how much land it takes to put up enough solar panels and enough windmills. I
saw a chart recently that showed that per kilowatt hour, it might be 30 times as much land needed for
solar. As for a more conventional plant, do you think that's going to become an important issue? Or do
you think we've caught enough sunny fields and unoccupied places in the states that it will not be a
major obstacle to decarbonization?

Josh Crumb 51:06: I think it will be a big obstacle because of the politics of land, and I would also add
water there. Most of these resources, it's not really a question of absolute scarcity a lot of times it
comes down to land and water, those are the biggest pieces of the politics. Again, if we're trying to
project what we have today and try to scale it moving from 80% hydrocarbon and, and in a much
smaller piece and renewables to try to flip that around. what happened even over the last few years,
which have been incredible and bringing down the costs of solar and wind, projecting that whole thing
at scale, I don't think is yet achievable, and land and water and metals and smelting is going to be a big
part of that.

Todd Buchholz 51:49: We hope you enjoyed this week's episode of Smarter Markets, featuring Josh
Crum, founder and CEO of Abaxx. Next Saturday, I will hand the microphone back to my co-host,
Michelle Dennedy, as she explores the role of digital innovation in advancing the ESG economy. Over


the course of a five-part mini-series. Michelle's first guest of the series is Gajen Kandiah, CEO of
Hitachi Vantara.

Gajen leads Hitachi Vantara’s 11,000 employees with a focus on leveraging the company's digital
infrastructure, software and services to meet the business and cultural transformational needs of his
clients and help them contribute to the advancement of a more inclusive and sustainable future.
Listeners, please help us get the word out about Smarter Markets.

Your ratings and reviews on Spotify, Apple podcasts, and other podcast platforms mean the world to
us, as does your help spreading the word about Smarter Markets via social media and word of mouth.
On behalf of Abaxx Technologies on Todd Buchholz. I look forward to joining you again on Saturday
June 26, after the conclusion of Michelle's much anticipated five-part series

Announcer 53:15: That concludes this week's episode of Smarter Markets. For free episode
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